With all due respect, I’m not entirely sure why a nominally libertarian outlet like The UnPopulist is defending the existence of the Federal Reserve in the first place; even Milton Friedman opposed its existence (cf. his 1995 or 1996 Reason interview).
As Jeff Tiedrich has noted, the unsung villains of the Current Unpleasantness are probably the producers of The Apprentice, who catapulted a largely failing business man to fame by portraying him as a veritable business genius and selling that version to millions of gullible rubes.
The logic was simple, even if deeply flawed...Trump was a business man and Trump was very rich so Trump must be a very good business man. It ignored the facts that one doesn't have to have any special acumen or intelligence or even work ethic to be rich (inheritance is remarkably insensitive to all three); that being a real estate developer is not necessarily the same as being a business man; that what success Trump had enjoyed was usually due to luck, bullying, and cheating; and that Trump was a serial failure apparently specializing in bankruptcy.
Now the self-described Very Stable Genius wants to personally steer our monetary policy. I've already questioned whether being a successful real estate developer makes one a business genius; now we have to ask whether being a business genius is remotely related to understanding monetary policy. I don't see that as assured at all, and remember, there's no evidence whatsoever that Trump is a business genius.
Even if you assume that the Fed should try to manipulate the economy through monetary policy (and I think a credible argument could be made against, or at least to limit, that) and you assume the Fed should take tactical direction from politicians (who inevitably will have an event horizon no further out than the next election), to return to Tiedrich's description--why on earth would anyone want monetary policy determined by an imbecile with the attention span of a coked-up squirrel?
This article doesn't explain what authority a President would presumably have to peremptorily remove members of the Fed's governing board. The President can no more do that than remove members of the Supreme Court.
My understanding is that the President, whoever he is, doesn't have the authority to remove the Fed chairman. If Trump tried, there would be a court case and an immediate injunction. There's no way he could remove Powell. All he could do is not reappoint him.
I'm sure there are conservative lawyers who are ready to write briefs making the case that the president has the constitutional power to remove the Fed chair. Whether Trump will try to do it is an open question. He may succeed in getting more compliant governors and bending the Fed to his will. But the risk is real that he'll try, and with this Supreme Court, the risk is real that he will succeed.
That sounds naive to me. It is by no means certain that the SC would rule in Powell's favor. What authority a POTUS has to fire the fed chair is unclear and has never been legally tested. In any case, Trump could make Powell's life so miserable, he could resign on his own.
If you want to make a bet about whether Trump will try and make Powell's life miserable if Powell tries to raise interest rates (regardless of whether Trump succeeds or not), you are on. I have no idea how the courts would rule if a POTUS's authority were tested legally so I don't have your level of certitude that it would go for or against Trump, as I already said. I I also don't know how Powell would react to Trump's attacks. Maybe he'd go on the counteroffensive; maybe he won't. Hence I qualified my statements very carefully with "could make" "could resign" "by no means certain." But I congratulate you on your Delphic powers :)
Steve, an excellent piece on a critical topic. But as a businessperson often trying to persuade my right-leaning peers on this topic, I'm afraid you don't address the counterargument they always make, and which keeps their ears closed. In sum: "'The system' didn't let him do it last time, it won't next time. The guardrails will hold. Next topic".
In my view, the difference is that the GOP in general, and the remaining Senate conference in particular, is far more "pure" now -- owned, controlled, and subservient to Trump and his movement to an extent it was not it made Trump back off last time. All the brakes will be off next time, and he knows it.
But maybe you have a different answer? In any event, I think the piece would be much more persuasive to those not already convinced if it addressed this objection.
He will have more extreme and irresponsible people around him, because he's already gone through the less extreme and more responsible ones. He's also learned how much more he can get away with and retain the support of Republicans, those in office and those in the rank and file, than anyone ever imagined. Being returned to office after his indictments, conviction and two impeachments can only embolden him.
This time around Trump has nothing to fear. What are they going to do, impeach him?
He’ll test his power early by ignoring a court decision and/or giving a preemptive pardon to anyone who violates it. This will set the stage for future, more aggressive uses of power.
He did this in 2017 and 2018. He gave pardons to Joe Arpaio and Dinesh D’Souza, and didn’t follow the normal protocol for granting them. This served to let Paul Manafort and Roger Stone know that if they kept their mouths shut during the Mueller investigation, he would pardon them.
Which is exactly what he did.
In the case of Powell or any other nominally independent official, he could fire him, then when it’s overturned in court he’ll direct someone to lock him out of the office and revoke his badge.
You're living in an economy that has been wholly bankrupted in 4 years by the current administration. Had Trump been in power (and not politically opposed in his last year of presidency by Democrats) the economy wouldn't be here. The national debt rises by $1Trillion every 3 months. Are you sure you have your eye on the correct ball?
“In the past, they argue, what drove debt was largely due to national emergencies, whether wars, economic disasters, or other constrained singular events. That is no longer the case. The foundation points to “our aging baby-boom generation, rising healthcare costs, and a tax system that does not bring in enough money to pay for what the government has promised its citizens,” they wrote.
And the ACA has helped 40M with health care costs which are astronomical and rising; not because of the ACA but because efforts to improve it have been stymied by republicans(no new taxes or preferably no taxes, period), Social Security again with the taxes thing and last, but not least, Felon 34/45’s tax cut for his buddies because, again, they don’t like taxes. When your sole aim is to shrink the government so it’s possible to drown it in a bathtub(not my words but good ol’ boy Grover Norquist’s), of course it will cost to service the debt we have. Bushlight put his wars on the national(Chinese)credit card. Obama came along and finally added that to our real debt. He pulled us out of Bush’s folly then along comes the felon and blows our debt all to hell again with his idiotic tax cut and his horrible handling of the damn pandemic. And if it was you that mentioned Friedman at some point, I’m not a fan. So get off my ass about taxes, the debt and the deficit. If republicans would actually fund the country instead of its throat, we could get a handle on things you seem to be getting gray over.
Wow, you should really get that Trump Derangement Syndrome looked at because it's probably creating hypertension.
Fund the country?
Don't you mean fund people to stay at home and drink beer while having their rent paid over the pandemic, fund illegals to live on your dime, fund other countries to go to war in the US' interests and fund citizen's debts who don't feel like paying for it?
Amazing all the expenses that are swept under the rug.
You probably also think a man who can't speak a sentence, walk a straight line or think cohesively is actually running things. Good job.
I think you want to yell at someone else since I didn't mention Friedman.
I don't defend Trump's intentions here but it is quite laughable to claim that the Fed is Independent and done a good job of taming inflation (USD purchasing power has decreased about 96% since the Fed's inception and $1 then is more than $30 today). The Fed has and does very much work with and for expanding the control of government (whether it be a D or an R POTUS at any time).
There is a reason Milei would like to do away with Argentina's Central Bank. And there is a reason that every Central Banker in the world (as well as nearly everyone in every government in the world) is rooting against him. (He is very unlikely to succeed in his goal given how embedded Central Banks are, but we can dream!)
Unfortunately love of tariffs and at least dislike of immigrants is bipartisan nowadays. So is the belief that the regulatory state is the answer to all that ails us. We're well-positioned for another Great Depression.
Lol. The idea that the Fed has somehow ‘kept inflation in check’ in the U.S. is laughable, & can only come from someone who actually has no ‘knowledge of basic economics’ vs the businessmen this author attacks. More TDS masquerading as serious ‘analysis’.
People who mistakenly blamed fiscal deficits (often only Biden's deficits, not Trump's larger deficits) for inflation in 2021-23 may under a hypothetical Trump II Administration be vindicated in their attribution. With an independent central bank that targets inflation, deficits do not matter; they are offset by other central bank policies, especially increase in interest rates. If Trump II prevents the Fed from raising interest rates in response, for example, to his desire to extend the "Tax Cuts for the Rich and Deficits Ac of 2017," the resulting deficit WILL cause inflation.
A further irony is that the Fed, in an attempt to fend off explicit control by Trump II, could dissemble and claim still to be acting according to Flexible Average Inflation Targeting, undermining its credibility and further muddying public understanding of the relation of monetary policy and inflation.
I think the article was light on what Trump might do. One thing Trump wants to do is cut taxes, which if he has a Republican Congress is doable. He will also spend more because that makes him more loved by his base and adjacent folks. He needs that support to bully Republicans to do his bidding. Net result is deficits go up, which is what happened during his first term.
Higher deficits and rate cuts show produce expectations of future inflation which should manifest as actual inflation through the expectations channel. Actual rising inflation could result in Trump hearing a lot of calls from allies that the Fed needs to hike. So maybe he turns on a dime and starts pushing for higher rates. Such unpredictable behavior would not be out of character for Trump.
Uncertainty is the bane of markets. SO maybe we see a market decline that will send Trump into a tizzy. With more rhetorical reversals, the sense of uncertainty will rise higher and the markets. Trump might stop responding to events and let the Fed deal with it on their own. But this might lead to Trump capitulated to the Fed talk which he might not abide, leading to another course shift and pressure being reapplied to the Fed. Or he might continue to react to events and not leave the Fed alone.
With any luck this will collide with the developing recession and give us another financial crisis. Should this happen, then maybe events can play out where in order to avoid a threat of hyperinflation we get a collapse of the financial system. This is something urgently needed to resolve decades of economic mismanagement. We could have addressed with problem years ago with just a stock market crash and recession, but we did not because the Fed kept intervening created more debt to resolve the potential instability. The only way we can get out of this ever deeper hole is to put a chaotic actor into the policy forming loop.
With all due respect, I’m not entirely sure why a nominally libertarian outlet like The UnPopulist is defending the existence of the Federal Reserve in the first place; even Milton Friedman opposed its existence (cf. his 1995 or 1996 Reason interview).
We are not a libertarian outfit, even if some of us came out of, and retain ties to, the libertarian tradition.
As Jeff Tiedrich has noted, the unsung villains of the Current Unpleasantness are probably the producers of The Apprentice, who catapulted a largely failing business man to fame by portraying him as a veritable business genius and selling that version to millions of gullible rubes.
The logic was simple, even if deeply flawed...Trump was a business man and Trump was very rich so Trump must be a very good business man. It ignored the facts that one doesn't have to have any special acumen or intelligence or even work ethic to be rich (inheritance is remarkably insensitive to all three); that being a real estate developer is not necessarily the same as being a business man; that what success Trump had enjoyed was usually due to luck, bullying, and cheating; and that Trump was a serial failure apparently specializing in bankruptcy.
Now the self-described Very Stable Genius wants to personally steer our monetary policy. I've already questioned whether being a successful real estate developer makes one a business genius; now we have to ask whether being a business genius is remotely related to understanding monetary policy. I don't see that as assured at all, and remember, there's no evidence whatsoever that Trump is a business genius.
Even if you assume that the Fed should try to manipulate the economy through monetary policy (and I think a credible argument could be made against, or at least to limit, that) and you assume the Fed should take tactical direction from politicians (who inevitably will have an event horizon no further out than the next election), to return to Tiedrich's description--why on earth would anyone want monetary policy determined by an imbecile with the attention span of a coked-up squirrel?
This article doesn't explain what authority a President would presumably have to peremptorily remove members of the Fed's governing board. The President can no more do that than remove members of the Supreme Court.
My understanding is that the President, whoever he is, doesn't have the authority to remove the Fed chairman. If Trump tried, there would be a court case and an immediate injunction. There's no way he could remove Powell. All he could do is not reappoint him.
That issue has not been resolved, as these articles explain:
https://www.nytimes.com/2019/06/20/us/politics/trump-fed-chairman-powell.htmlhttps://www.wsj.com/articles/can-the-president-fire-the-fed-chairman-1534886552?st=kqwwfck6ah1mm53&reflink=desktopwebshare_permalink
I'm sure there are conservative lawyers who are ready to write briefs making the case that the president has the constitutional power to remove the Fed chair. Whether Trump will try to do it is an open question. He may succeed in getting more compliant governors and bending the Fed to his will. But the risk is real that he'll try, and with this Supreme Court, the risk is real that he will succeed.
I think you need to insert a space or line break between your URLs.
That sounds naive to me. It is by no means certain that the SC would rule in Powell's favor. What authority a POTUS has to fire the fed chair is unclear and has never been legally tested. In any case, Trump could make Powell's life so miserable, he could resign on his own.
Since you think I'm naive, I've got a suggestion: we make a bet. Of course, for it to be applicable, Trump has to get elected.
Here's the bet: If Trump is president, Powell stays in until his term is done or until he dies, whichever comes first.
$100. Even odds.
Deal, Shikha?
If you want to make a bet about whether Trump will try and make Powell's life miserable if Powell tries to raise interest rates (regardless of whether Trump succeeds or not), you are on. I have no idea how the courts would rule if a POTUS's authority were tested legally so I don't have your level of certitude that it would go for or against Trump, as I already said. I I also don't know how Powell would react to Trump's attacks. Maybe he'd go on the counteroffensive; maybe he won't. Hence I qualified my statements very carefully with "could make" "could resign" "by no means certain." But I congratulate you on your Delphic powers :)
I'll think about it so that we can have a well-defined bet.
Steve, an excellent piece on a critical topic. But as a businessperson often trying to persuade my right-leaning peers on this topic, I'm afraid you don't address the counterargument they always make, and which keeps their ears closed. In sum: "'The system' didn't let him do it last time, it won't next time. The guardrails will hold. Next topic".
In my view, the difference is that the GOP in general, and the remaining Senate conference in particular, is far more "pure" now -- owned, controlled, and subservient to Trump and his movement to an extent it was not it made Trump back off last time. All the brakes will be off next time, and he knows it.
But maybe you have a different answer? In any event, I think the piece would be much more persuasive to those not already convinced if it addressed this objection.
Thanks for the piece.
He will have more extreme and irresponsible people around him, because he's already gone through the less extreme and more responsible ones. He's also learned how much more he can get away with and retain the support of Republicans, those in office and those in the rank and file, than anyone ever imagined. Being returned to office after his indictments, conviction and two impeachments can only embolden him.
This time around Trump has nothing to fear. What are they going to do, impeach him?
He’ll test his power early by ignoring a court decision and/or giving a preemptive pardon to anyone who violates it. This will set the stage for future, more aggressive uses of power.
He did this in 2017 and 2018. He gave pardons to Joe Arpaio and Dinesh D’Souza, and didn’t follow the normal protocol for granting them. This served to let Paul Manafort and Roger Stone know that if they kept their mouths shut during the Mueller investigation, he would pardon them.
Which is exactly what he did.
In the case of Powell or any other nominally independent official, he could fire him, then when it’s overturned in court he’ll direct someone to lock him out of the office and revoke his badge.
After all, what are you gonna do? Impeach him?
If Felon 34/45 bankrupted casinos, imagine what he could do with our economy. If that doesn’t give you nightmares, you’re in a cult.
You're living in an economy that has been wholly bankrupted in 4 years by the current administration. Had Trump been in power (and not politically opposed in his last year of presidency by Democrats) the economy wouldn't be here. The national debt rises by $1Trillion every 3 months. Are you sure you have your eye on the correct ball?
Sources to that effect please.
Or this:
In the last quarter of 2023, the amount crossed a monumental threshold of $1 trillion every three months. It is only getting higher.
https://www.forbes.com/sites/eriksherman/2024/05/30/the-us-sailed-past-1-t-quarterly-interest-on-the-public-debt/
From your own Forbes article:
“In the past, they argue, what drove debt was largely due to national emergencies, whether wars, economic disasters, or other constrained singular events. That is no longer the case. The foundation points to “our aging baby-boom generation, rising healthcare costs, and a tax system that does not bring in enough money to pay for what the government has promised its citizens,” they wrote.
And the ACA has helped 40M with health care costs which are astronomical and rising; not because of the ACA but because efforts to improve it have been stymied by republicans(no new taxes or preferably no taxes, period), Social Security again with the taxes thing and last, but not least, Felon 34/45’s tax cut for his buddies because, again, they don’t like taxes. When your sole aim is to shrink the government so it’s possible to drown it in a bathtub(not my words but good ol’ boy Grover Norquist’s), of course it will cost to service the debt we have. Bushlight put his wars on the national(Chinese)credit card. Obama came along and finally added that to our real debt. He pulled us out of Bush’s folly then along comes the felon and blows our debt all to hell again with his idiotic tax cut and his horrible handling of the damn pandemic. And if it was you that mentioned Friedman at some point, I’m not a fan. So get off my ass about taxes, the debt and the deficit. If republicans would actually fund the country instead of its throat, we could get a handle on things you seem to be getting gray over.
Wow, you should really get that Trump Derangement Syndrome looked at because it's probably creating hypertension.
Fund the country?
Don't you mean fund people to stay at home and drink beer while having their rent paid over the pandemic, fund illegals to live on your dime, fund other countries to go to war in the US' interests and fund citizen's debts who don't feel like paying for it?
Amazing all the expenses that are swept under the rug.
You probably also think a man who can't speak a sentence, walk a straight line or think cohesively is actually running things. Good job.
I think you want to yell at someone else since I didn't mention Friedman.
Also, you're welcome for the sources. ;-)
Yep. You’ve got me nailed. I hate the effing SOB and sincerely hope he drops dead. Now, are you happy?
You need a source to prove that the national debt is rising by $1Trillion every 3 months? Just Google it. Or you can look at this:
https://www.usdebtclock.org/
I don't defend Trump's intentions here but it is quite laughable to claim that the Fed is Independent and done a good job of taming inflation (USD purchasing power has decreased about 96% since the Fed's inception and $1 then is more than $30 today). The Fed has and does very much work with and for expanding the control of government (whether it be a D or an R POTUS at any time).
There is a reason Milei would like to do away with Argentina's Central Bank. And there is a reason that every Central Banker in the world (as well as nearly everyone in every government in the world) is rooting against him. (He is very unlikely to succeed in his goal given how embedded Central Banks are, but we can dream!)
Unfortunately love of tariffs and at least dislike of immigrants is bipartisan nowadays. So is the belief that the regulatory state is the answer to all that ails us. We're well-positioned for another Great Depression.
Lol. The idea that the Fed has somehow ‘kept inflation in check’ in the U.S. is laughable, & can only come from someone who actually has no ‘knowledge of basic economics’ vs the businessmen this author attacks. More TDS masquerading as serious ‘analysis’.
Actually, Steve, you've understated what LBJ did. LBJ physically assaulted Martin, as Sebastian Mallaby pointed out in his book on Greenspan. Here's the link: https://mises.org/mises-wire/when-lbj-assaulted-fed-chairman
I refer you to tonight’s HCR Substack post. There are others but hers is just the latest.
There are ironies here.
People who mistakenly blamed fiscal deficits (often only Biden's deficits, not Trump's larger deficits) for inflation in 2021-23 may under a hypothetical Trump II Administration be vindicated in their attribution. With an independent central bank that targets inflation, deficits do not matter; they are offset by other central bank policies, especially increase in interest rates. If Trump II prevents the Fed from raising interest rates in response, for example, to his desire to extend the "Tax Cuts for the Rich and Deficits Ac of 2017," the resulting deficit WILL cause inflation.
A further irony is that the Fed, in an attempt to fend off explicit control by Trump II, could dissemble and claim still to be acting according to Flexible Average Inflation Targeting, undermining its credibility and further muddying public understanding of the relation of monetary policy and inflation.
I think the article was light on what Trump might do. One thing Trump wants to do is cut taxes, which if he has a Republican Congress is doable. He will also spend more because that makes him more loved by his base and adjacent folks. He needs that support to bully Republicans to do his bidding. Net result is deficits go up, which is what happened during his first term.
Higher deficits and rate cuts show produce expectations of future inflation which should manifest as actual inflation through the expectations channel. Actual rising inflation could result in Trump hearing a lot of calls from allies that the Fed needs to hike. So maybe he turns on a dime and starts pushing for higher rates. Such unpredictable behavior would not be out of character for Trump.
Uncertainty is the bane of markets. SO maybe we see a market decline that will send Trump into a tizzy. With more rhetorical reversals, the sense of uncertainty will rise higher and the markets. Trump might stop responding to events and let the Fed deal with it on their own. But this might lead to Trump capitulated to the Fed talk which he might not abide, leading to another course shift and pressure being reapplied to the Fed. Or he might continue to react to events and not leave the Fed alone.
With any luck this will collide with the developing recession and give us another financial crisis. Should this happen, then maybe events can play out where in order to avoid a threat of hyperinflation we get a collapse of the financial system. This is something urgently needed to resolve decades of economic mismanagement. We could have addressed with problem years ago with just a stock market crash and recession, but we did not because the Fed kept intervening created more debt to resolve the potential instability. The only way we can get out of this ever deeper hole is to put a chaotic actor into the policy forming loop.