Recently, the overview of Walsh as the Chair of the Federal Reserve has greatly increased. Let's first revisit this in-depth interview that Walsh had at the Hoover Institution in May this year:

Key points of the interview:

Returning to the core mission:

The Federal Reserve has deviated from its core mission of maintaining price stability, exhibiting 'institutional drift', and must undergo reforms to regain credibility.

Inflation is a Choice:

Walsh bluntly stated that inflation is not an accident caused by Putin or supply chains, but rather a 'choice' of the Federal Reserve. The central bank has the full capability to determine price levels by controlling the money supply.

'Fix rather than Revolution' for the Federal Reserve:

Regarding the future of the Federal Reserve, he advocates for 'Restoration' rather than 'Revolution'—preserving its core framework but eliminating the erroneous policies of the past decade rather than completely overturning it. The core of the reform is to reduce its balance sheet, which is as high as $7 trillion, thereby curbing inflation, which in turn may create space for lowering interest rates, and lowering rates is more important for the real economy.

Severe criticism of normalized Quantitative Easing (QE):

He supports the emergency infusion during the 2008 crisis (QE1), but strongly opposes the continued printing of money during stable economic periods (such as QE2, QE3, and the post-pandemic period), believing that this is not only ineffective but also fosters asset bubbles. He believes this breaks the original understanding of 'withdrawing after the crisis ends' and resigned in protest.

Pragmatic Monetarism:

Walsh proposed a unique path: controlling inflation by reducing the balance sheet (QT), thereby creating space for lowering interest rates.

Federal Reserve 'overstepping its mission':

Walsh believes that the Federal Reserve has transformed from the 'lender of last resort' for the banking system to an omnipresent 'first intervener', and this overreach must stop.

Distinct Roles for the Federal Reserve and Treasury:

He calls for the Treasury and the Federal Reserve to reach a new agreement like in 1951, clearly defining their respective boundaries: the Federal Reserve is responsible for interest rates, and the Treasury is responsible for fiscal accounts, to avoid role confusion.

Collusion between Fiscal and Monetary Policy:

He pointed out that the Federal Reserve's purchase of government bonds (fiscal dominance) indirectly encourages Congress's unchecked fiscal spending, resulting in a surge in U.S. debt.

Optimistic about U.S. Productivity and AI:

Despite criticizing the policies, he is extremely optimistic about the U.S. economic outlook, believing that AI and deregulation will bring about a productivity explosion similar to that of the 1980s.