The Fed went off the rails years ago, but they still have a bit of sense and realize it is time to start raising rates.
Trump is a nut.
He is attacking the Fed demanding more cheap money to goose the markets. It will only get worse because the stock market is due for a correction. The Fed as inflated another stock bubble and everyone knows it.
The central bank has not been subject to public political pressure like this in its history. There has largely been a bipartisan consensus that the Fed should go nuts with the presses from time to time. Nixon pressured Burns hard to goose the aggregates, but this was hidden from public view.
This is 19th century politicking. People used to have monetary policy positions (for reasons you may not know but that is another topic).
The election of 1896 was interesting. Republicans were an inflationist party since the Civil War. The Democrats were hard money, but the crank inflationist Bryan took control (not unlike Trump) of the party. McKinley adopted a sound money policy under pressure from big money, and got some Bourbon Democrat votes.
Trump is going to come out like Andrew Jackson. The lightweight academics at the Fed are not ready to go up against that. Maybe a Jamie Dimon type will step up after he is done riding this wave.
Today, there is no sound money political movement to speak of. There will be no voice of reason to challenge Trump on his insanity. Rand Paul and a few others may die on their sword, but I don’t see anything stopping him. The opposition is a bunch of sanctimonious hysterics concerned about conspiracies and sideshows. This is the real deal folks. An economic crisis is coming sooner or later. How do you think the players will respond?
Tweeting at them isn’t much of a source of pressure.
I’m not entirely sure what the relationship is between the Fed and the Executive Branch, but I get the sense that outside of appointing the Chairman, the President (and everyone else) is expected to leave them alone.
I suspect that if Trump tried to somehow circumvent that, the Senate would come down on him like a ton of bricks. If there’s one thing you don’t muck with, when you’re generally known to be an idiot, it’s the Fed.
The Board of Governors will blow him off and keep on doing whatever they want to do. They don’t work for him. He can’t fire them. They don’t need his approval to execute monetary policy. Congress doesn’t even provide their budget so there’s no Executive Branch ability to screw around with the money allocated by Congress.
Trump is the hungry tiger. The Board of Governors are visitors at the zoo on the other side of the bars.
OTOH he may start off a push from the rabid base to press their Congresspeople for legislation to have the Fed subordinated to the Executive. Considering the large segment of the Hard Right Wing who since the start seem to have despised the very idea of a central bank, and the segments of the right-bubbled public who view the Fed through a prism of conspiracy theory, they could very well make life a headache for the money people.
At the very least he now has a convenient scapegoat for when the boom ends and the next bust comes, if not a Democratic Congress.
Too many words and too boring to really get much attention with the wailing masses on the right. Unless it can be expressed on a bumper sticker or gives a hard shot to the amygdala I don’t think you are going to raise popular outrage. If congress is going to take action on this its going to be from the donor side wanting to keep making short term and short sided gains, and assuming that either they can get out before the whole thing collapses or else get bailed out or ideally both.
The masses will be clamoring for government action as they always do. I fear the academics at the Fed do not have the disposition for Trump style national politics. Trump will succeed in turning this into a bumper sticker. He is a skilled manipulator of the masses.
I don’t think the Republican senate has enough sound money stalwarts to do battle with Trump over this. The Democrats? They will make noises about Fed independence and corruption of institutions but nobody cares about principle in an economic crisis. The banks will once again go to the government with their hand out, and cheap money will be among their demands I don’t see where the big push back will come from. There will be no Ned-Beatty-in-Network style talk from the bankers.
It’s also worth noting that Trump is basically now a lame duck President. He’s stopped making big news simply because everyone is too tired of him and he’s about to have half of Congress unwilling to give any consideration at all to any of his stupid shit.
The Adminstration is starting to actually have some small, quasi-reasonable accomplishments and Trump can’t even get any real recognition for it that isn’t the social equivalent of a pat on the head.
Obviously Trump will do everything he can to maintain the spotlight, even if it means trashing the whole Executive branch, but I think (I think) that Congress can and will hem him in on that and that we’ll basically not notice.
It means they have no real-world experience, that they’ve never turned in a hard day’s work and looked back, tired but proud, at the results of their labor, like Trump once saw his landscaper doing.
We think (or hope) that adults in the White House are keeping the short orange finger away from the nuclear button; the adults are probably also trying to keep that finger away from the monetary button. Careful FedRes policy has maintained American prosperity for 40 years (even the huge credit crisis of 2008 caused only a relatively brief setback) and I think almost everyone appreciates that and wants it to continue.
This smart pro-business FedRes policy has been one of two pillars of American monetary power, and thus the stability of the world economy. The other pillar is the dollar’s inherent strength as a reserve currency, and the huge global reach of American economic, cultural and military power.
Trump seeks to attack both these pillars. He may not be able to usurp FedRes independence, but he can — and has — attack(ed) the dollar without FedRes cooperation. His tariff wars and obnoxious talk are reducing respect for America and the American dollar. The GOP decision to run up treasury debt dramatically creates pressure on the dollar to inflate or be devalued. (I asked one of SDMB’s top GOP supporters to name any economist who supported the tax cut — HD was unable to come up with a single name.)
Some years ago, when McConnell was trying to force Obama’s government to fail, there was talk of Obama minting a trillion-dollar platinum coin to bypass Congress. This idea was booed down by D and R alike. Trump and the present GOP may well decide to bypass the Fed with some silly mechanism like a trillion-dollar coin. 38% of the country would cheer. Certainly the Congress which put an hysterical hyper-partisan drunkard on the Supreme Court would have no objection.
First off, Trump is smart. I know we don’t like to think so and for a long time I didn’t believe it myself, but it’s true. Amoral and narcissistic, but smart. He recognizes that humanity is base and addicted to ‘bread and circuses’ and he exploits that like a freaking surgeon. He recognizes that rules are just things that we say and that they can be bent and twisted or even broken to get what he wants. That has actually led to quite a few successes from his point of view.
Because he is smart, I think that he fully recognizes what Fed non-independence would do. He doesn’t want his assets completely devalued and the dollar not the world currency. He also recognizes that the bull market wasn’t going to last forever, so he is looking for a scapegoat. I fully expect him to rail against the Fed and talk about how horrible it is and how it’s destroying the wonderful economy that he built. I also fully expect him to do nothing about it of substance and complain that ‘the swamp’ has his hands tied. The Feds independence is too valuable to him for him to screw with it, so he might complain, but it’s virtue signalling to his base rather than notice of intent.
Trump is a genius in his own respects, and that is true. But outside of his very narrow genius, he ain’t smart. Compared to Trump Jr., yes, he’s smart. But that’s not a meaningful statement.
He’s not smart in terms of actual governing, but he’s damn smart when it comes to using the levers of power.
I agree with the OP: Trump’s gladiator politics will pressure institutions such as the Fed to bend, and he can blame the Fed when the economy goes south. That’ll become another one of his conspiracy theories: I was doing so well and then the deep state, globalists at the Fed undercut me.
It might seem like lunacy, but the federal reserve could actually be abolished. Yes, it would be economic suicide, but we’re now at a point where public trust in institutions is extraordinarily low, and populism is the political trend of this decade. There are millions of people who permanently lost faith in the so-called experts after the crash of 2008 and see the Fed as a convenient target. Obviously, we’re nowhere near talk of abolition now, but it’s in the realm of the possible under the right circumstances. If Trump can successfully lay blame at the Fed’s doorstep, he could exert enough pressure on the fed that they could be bullied into making decisions that are more political than rational.