In the election run-up, Donald Trump both praised and criticized higher interest rates, multiple times each way.
So what the heck does Trump want?
The only thing we are reasonably sure of is Trump prefers businessmen and women running the country instead of academics.
Conflicting Views
- Nov. 3, 2015: “Janet Yellen should have raised the rates. She’s not doing it because the Obama administration and the president doesn’t want her to.”
- May 5, 2016 to CNBC: “I am a low interest-rate person. If we raise interest rates and if the dollar starts getting too strong, we’re going to have some very major problems.
- May 9, 2016: To The Wall Street Journal: “If interest rates went up, our economy is not doing well at all. And it’s going to hurt the economy very badly. If interest rates went up, it would be a disaster.”
- Sept. 5, 2016: Asked about a potential rate increase in September, Mr. Trump said: “They’re keeping the rates down so that everything else doesn’t go down. We have a very false economy. “At some point the rates are going to have to change. The only thing that is strong is the artificial stock market.”
- Sept. 12, 2016: “The people that were hurt the worst (by low rates) are people that saved their money all their lives and thought they would live off their interests and those people are getting just absolutely creamed…. The interest rates are kept down by President Obama.” “It’s a tremendous problem for the country and we are talking about rates that are practically at zero.
Is that clear or what?
I am open to suggestions, but I believe the average person just might side with “or what?”
The Trump Fed
From the above statements, one would have to be a mind-reader or an insider to know what Trump wants.
His statements are so conflicting, I propose Trump does not know himself what he wants.
Academics Out?
Yet, President Trump Will Be Able to Recast the Fed by Filling Vacancies. So speculation as to what will the “Trump Fed” look like is on.
President Donald Trump will be able to recast the Federal Reserve by filling three or more vacancies on its seven-member board of governors and is leaning toward candidates with banking and financial world experience rather than academic economists.
So far, his team is prioritizing the search for candidates to fill the role of vice chairman for supervision and a seat for someone with a community banking background, as required by law. His team has interviewed several candidates, including financial executives with experience in government, according to people familiar with the matter.
David Nason, an executive at General Electric’s financing arm and former Treasury Department official during the 2008 financial crisis, emerged as a leading candidate in recent weeks to be the vice chairman for supervision, though Mr. Trump’s team has also interviewed other candidates, the people said. The position was created by the 2010 Dodd-Frank law, but the Obama administration never named anyone to fill it.
Other potential candidates the administration has considered include former ATT Corp. Chief Executive John Allison, and Rep. French Hill (R., Ark.), a former banker just re-elected to his second House term, these people said. Mr. Hill said in a recent radio interview he hasn’t had any conversations with the Trump administration.
A White House spokeswoman declined to comment.
Such choices would mark a departure from the trend of recent decades, when most Fed officials were economists, many with extensive experience in academia or the central bank. It could usher in a return to the Fed’s earliest years, when bankers, lawyers, and other businesspeople had a much larger presence.
Mr. Trump has so far relied primarily on business and financial executives to help shape his economic policy, rather than economists. He hasn’t appointed anyone to the White House Council of Economic Advisers, which is typically filled by academic economists, and his top economic adviser, National Economic Council Director Gary Cohn, was a top executive at Goldman Sachs Corp.
If Mr. Trump doesn’t renominate Ms. Yellen and Mr. Fischer to their current positions, they wouldn’t have to leave the board. Ms. Yellen’s term as governor expires in January 2024, and she hasn’t ruled out staying in that seat beyond her term at the helm. Mr. Fischer’s term as governor expires in January 2020, and he hasn’t commented publicly on his future at the Fed.
The last time a Fed chairman stayed on the board after losing the top job was during the Truman administration.
Good Riddance
Getting rid of academics like Ben Bernanke and Janet Yellen is a step in the right direction, but only a small one.
Trump needs to audit the Fed, then end it.
The idea that a group of economic or business wizards can divine the correct interest rate is central planning madness.
If one proposed the Fed should set the price of orange juice, nearly the entire world would be in shock. Yet, I propose it’s harder to set interest rates correctly.
The results speak for themselves: We have had asset bubble after asset bubble coupled with a shrinking middle class.
Mike “Mish” Shedlock
Trump needs to audit the Fed, then end it. Mish
The problem with the FED is its authority to create fiat for the private sector (e.g. Open Market Purchases) and that only depository institutions in the private sector may have accounts there.
Let’s fix that so the population does not continue to be limited to physical fiat, bills and coins, or else have to work though private banks.
“End the FED” should instead be “End government privileges for depository institutions.”
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“Trump needs to audit the Fed, then end it”
Yup! I cannot agree more. But does Trump or anyone else have the ba*** to do it.
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Nope.I’m sure he doesn’t. Instead,
“His team has interviewed several candidates, including financial executives with experience in government,…. ”
And then, he and his dittohead army will be just as surprised this time too. When again, like every.other.single.time.before, it turns out the ones who benefit by Fed actions are….., tah-dah, whaddayathink? ……..
.
.
Financial Executives and the Government!
.
.
Wow, surprise, surprise! Who could possibly have guessed?
With everyone else just paying more and more.
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Trump to Fill at Least Three Fed Positions: But what Would a Ron Paul Fed Look Like?
Dead with no pulse.
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At the very least…
With those who take their job seriously as defenders of a sound dollar.
No more debasement, no more cheap money for electing the preferred candidates.
No more buying trash.
No more QEs, twists, etc.
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You mean an economy unreliant on BS to cover up problems.?
Having to cope with cycles?
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All I’ve heard from Trump on the campaign trail re: the Fed is hawkish statements. However, now that he is in office, will he still have the same hawkish opinions? Does he want the Fed to tighten early and cause an economic collapse on his watch? I doubt it.
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Perfect agreement
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http://www.forbes.com/sites/johntharvey/2017/02/14/scoring-president-trumps-economics/2/#2f7ec3a4288e
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YEP !! NO MORE PROFESSORS who just THINK they know the the hell works! Get some REAL businessmen/women who actually have experience in something besides writing books and reading other books written by other writers. Practical experience, anyone??!!
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Nobody has practical experience setting the interest rate.
There are plenty of banking people in central banks now, and they are not different than academics, except that they invariably side with the rich more overtly.
Businessmen in politics generally do not work out. Politics is the art of compromise, businesses are top down heirarchies. In society you cannot cut costs by moving production elsewhere, or getting rid of people. In government, making a profit would mean taxing even more and giving it to those you favor.
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The one thing the fed was originally set up for is to provide liquidity in times of crisis to prevent systemic meltdown/liquidity crisis. I think this function should remain intact. The other mandates, i.e. price stability, employment should be left to free market capitalism. What I don’t understand is how would the marketplace go about setting interest rates without the fed?
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The Fed has just two mandates. One is to control the money supply and Two is to achieve full employment. One is tricky and Two is ignored by the Fed today.
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Controlling employment, with an open economy, laughable if 100% employment targeted.
Crash hourly wages and it’s possible, perhaps. Looks like that might have been the approach?
Education is critical. Ignore education, target full employment, you get low wage economy with shrinking middle class – Bingo.
Gov needs to target educational/skill attainment across the country. Rates won’t do that no matter what.
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2% unemployment is considered full employment. It was de rigeur to have “full” employment throughout the West after WW2 and it lasted until Neo-liberal ideas took over before 1980. This was the heyday of cheap energy. Oil at 100/1 extraction. After 1965 it began to change as the energy equation soured. It’s down to 9/1 now I hear. Not good!
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How did lenders & borrowers agree on interest rates before 1913; before the Fed? The late 19th century and early 20th century were the period of the greatest American prosperity.
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It was also a period with protectionism. Most taxes came from import duties instead of income taxes. And it was the time the trusts were reigned it. It certainly wasn’t the libertarian neo-liberal laissez faire paradise that people like to think. And there was plenty of poverty and desparation. And bonded labor. It’s good to know exactly what you are wishing for.
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left alone it already does. Fed just pretends to set rates. Although the past decade Fed did interfere nicely, but no need for Fed to set rates.
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Whatever Trump does, it can’t be worse than the present Fed.
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Trump and Putin have something else in common… double-mindedness.
At least Putin’s eagle has double-heads.
.
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Trump moved a portrait of Andrew Jackson [who made war with the bankers] into the oval office… maybe that is a sign…
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Very interesting Atossa. Jackson won the war against the banksters and just about completely eliminated the national debt – the only time in US history that was ever done.
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Although generally a Trump supporter, he shows no inclination towards fiscal responsibility, sound money or what we would call Austrian Economics. There is reason for pessimism on the topic of him reforming the FED.
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It cracks me up that so many people expect Trump to swoop in like the Green Hornet and cure all our societal ills with a snap of his fingers. These problems took years and decades to develop and crystallize. If Trump just fixes the healthcare, illegal immigration and offshoring of jobs crises in his first 4 years in office I’ll be as happy as a pig in slop.
Don’t forget. Trump has the entire establishment working against him. Look at how the Ninth Circuit unfairly screwed him. The overlords will try to block him at every turn. Trump is facing headwinds no other modern President before him faced.
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“Trump is facing headwinds no other modern President before him faced.”
Donald’s worst headwind is the Mainscream Media, I have never seen it spin everything so negatively against a president, not even Nixon. I suppose they are getting back at him for calling out their fake news. One thing nobody has accused Donald of is being too subtle.
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I would be happy even if he just achieves one thing: winding down the war. Just heard it again this week on MSM and from various senators: “We are at war”. Which is news to me. Can’t recall congress declaring any wars.
If Trump winds down the wars (he actually wants to expand the military budget), gets rid of the intelligence community (costs more than Russia spends on defense), makes the military produce actual audits, does something about the spy and police state, and introduces electoral and campaign financing reforms, it would open the route to a whole lot of other positive changes. If not, American society well remain captured by secret private interests for who politics is just kibuki theater.
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Trump needs to introduce more diversity into FED. Then keep it as a lender of last resort, take away the power to set interest rates.
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First off, the president can nominate people for the Fed board. Congress is the only entity that can end it. That is a more difficult hurdle to get past. Perhaps Christmas eve 2017 …
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John Allison was CEO of BBT, not ATT.
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You do not have to end the FED right away. Start by trimming its sails and allowing more free market competition. For instance, re-legalize Bills of Trade to compete for business credit and interest rate functions like in pre-FED days. Even allow private money, like the legal tender precious metal coins and notes once issued by private banks and states. Also, “modify” Obama’s Dodd-Franks stuff like stationing the inane and redundant consumer protection agency at the FED by moving it elsewhere and downsizing it before it becomes a “forever” bureaucracy.
Fact is, we are stuck with FED Politburo central planning for the foreseeable future. If we want to eventually do without the FED, we first need to re-establish pre-FED alternatives like Bills of Trade, private coinage, etc. The FED central planning functions first need to become unnecessary, and stuff like consumer protection policy and job growth has to be moved out. Abolishment is a great end goal, but without some intermediate steps to lay the groundwork it will never happen. If not Trump and now, then it will be another 100 years. FED nominees from Trump need to be voices of persuasion on the inside advocating for these intermediate steps.
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Would make my day if Trump and Congress could get together and end the dual mandate that the Fed is obligated to follow and instead return them to a simpler role which is lender of last resort and keeping inflation low. The Fed should not be targeting GDP which they can’t while targeting inflation at the same time. There are a lot better ways to promote growth of the American economy and they don’t involve the Federal Reserve.
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End the Fed mantra again. But please answer this question, where will you place the bank oversight function? Another Federal Government Agency to handle this function. No thank you. We are tryng to drain the swamp not make it larger.
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Many great societies fell long before there was the fed. Force short term-limits, then the power that makes bribes and blackmail profitable gets minimized, and the chance of a balance budget Amendment becomes real. It is the ability of the money center banks to sell Congress’ debt (political promises) that makes them indespensible to politicians.
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Trump is like any of us. He will give his honest opinion on anything. Often his opinions conflict when you ask specific questions such as effect on interest rates. Then when we get more educated on the subject our opinion changes. Nothing wrong with that.
Mish you are right. As of now I am not sure Trump knows what he wants himself when it comes to the Fed.
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“Janet Yellen … not doing it because … the president doesn’t want her to.”
He’s got the cart driving the horse.
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Mish, the Fed will never be dissolved. It is a pipe dream to think otherwise.
The shrinking middle class is a goal. As the middle class disappears, the upper class gets wealthier in relative purchasing power. After all, wealth is relative is it not? If an entire class of potential bidders of goods and services disappear, does that not make the wealthy wealthier? This has always been an unstated policy objective that benefits the Bourgeoisie.
The Fed has succeeded in getting the masses to believe their false definitions of inflation and to lure unsuspecting money into captive 401k plans in exchange for tax deferral.
Looking forward to the next decade+ of economic stagnation and near zero interest rates.
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