Move Over, Nero
I’ve gone from thinking there is no way the Federal Reserve would allow Trump’s tweets and criticism to affect the monetary policy. Then came the question and answer period after the last Federal Open Market Committee (FOMC) gathering. I’m not so sure Jay Powell & Company aren’t letting emotions overrule guidelines and stated goals.
Making this conundrum even more complicated is the Bloomberg op-ed written by former NY Fed President William Dudley.
He is asking his former colleagues not to make any monetary policy moves that would aid President Trump in the trade war with China. He makes the case that it’s not in the “realm” of the Federal Reserve, which is supposed to only focus on stable prices and maximum employment. He considers the trade fight to be like government spending.
Dudley calls the fight a “manufactured disaster-in-the-making,” saying it keeps undermining business and consumer confidence. Yet, on the same day, we got the August Consumer Confidence report, which saw the highest present conditions level since November 2000. And the day after, we learned via the Durable Goods report that business investments had grown three consecutive months into July.
Be that as it may, Dudley thinks the Fed should let a worst-case outcome happen because that would absolve them of any blame. The same Fed that pumped four trillion dollars into the economy and established countless additional measures to bail out banks and certain businesses should be above the political fray.
If Dudley is right about a potential disaster, he is suggesting the Fed ignore prices and employment and just watch it all burn to the ground to prove they are independent. This wouldn’t be staying above the political fray - it would be playing the violin.
It’s also a de facto acknowledgment of what most folks already knew. The Fed is here to support big banks and big businesses during times of crisis, even if they are the authors of their misfortunes.
However, Dudley says the Fed should break out the violins and fiddles as Main Street starts to go broke. How do we know this kind of thinking isn’t already guiding the Fed? I hope it’s not, or all would be lost.
Add a Comment!
Products & Services |
In The Media |
About Us |
All Rights Reserved.