Donald Trump & His Threat to “Fed Independence”
AT A GLANCE
• Once “Trump’s guy,” Fed chairman Jerome Powell is now persona non grata.
• The Fed is an engine of inflation that debases the currency and fuels the boom-bust cycle.
• “Fed independence” is a red herring used to justify unaccountability.
• Based on the Fed’s figures, it’s hard to justify monetary easing, which Trump is demanding.
Ever since Donald Trump’s first presidential administration, his Establishment critics have left little to the imagination when describing the allegedly unprecedented threat that his actions pose to the fate of our Republic. In the wake of such hyperbole — including charges that President Trump was literally taking orders from the Kremlin — it is difficult for the average citizen to evaluate more esoteric accusations involving the conduct of monetary policy. Specifically, Trump’s recent demands that Fed Chairman Jerome Powell resign, and his attempted removal of Fed Governor Lisa Cook, have renewed a stream of claims that Trump’s “bullying” will distort financial markets and hamper the central bank’s ability to steer the economy.
In the present article, I’ll give some historical context and theoretical framework to help the reader assess these accusations. As we’ll see, the critics are right that Trump is trying to influence monetary policy in a way that is at odds with the official narrative. Yet that official narrative is itself bogus; governments create central banks for the same reason any power center wants to control the money. In this sense, Trump’s actual sin is his transparency in his motivations. The myth of “Fed independence” largely serves to dupe the public into believing technocratic experts are in charge, when in reality the Fed has wrecked the dollar and spawned even worse boom-bust cycles since it has come on the scene.
Trump’s Long-running Feud With the Fed
Unlike the previous two Federal Reserve chairs (Ben Bernanke and Janet Yellen), who held Ph.D.s and built careers in academia, Jerome Powell earned his Juris Doctor at Georgetown and then spent decades in various roles in investment banking (as well as at the U.S. Treasury in the George H.W. Bush administration). He was initially nominated in late 2011 to the Federal Reserve’s seven-member Board of Governors by President Barack Obama, and took office in 2012. Ironically, it was President Trump himself who first nominated Powell in 2017 to become the chairman of the Board of Governors, replacing Janet Yellen; he actually became Fed chair in February 2018. After his initial four-year term, he was reappointed under President Joe Biden in 2022 after facing down hostility from some Democrats, including Senator Elizabeth Warren (D-Mass.), who had called him a “dangerous man” for allegedly loosening banking regulations during his first term.
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