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Let's not forget the poorly-timed tax bill last December ... the economy was humming along fairly well and didn't need 'stimulus' at this time. Gods help us when the next financial crisis occurs....
… on Trump and the Fed. The thing here is to keep two concepts separate. You can believe that the Fed is raising rates too quickly, as I do, and also believe that weighing in the way Trump has is very, very bad. Now, the Fed isn't "loco": it's raising rates more or less in line with what it should do if it wants to keep inflation at around 2%. The problem is that the 2% target is almost surely too low: the Fed should actually let inflation rise above that level. 2% was supposed to be high enough that the economy would hardly ever hit the zero lower bound -- but given what happened after 2008, it clearly wasn't. So the Fed should let the expansion go on. But that's not where Trump is coming from; he just doesn't want the Fed raining on his parade. And letting the short-term political interests of the strongman drive monetary policy is a well-known danger --- it's what's going on in Turkey. So the Fed isn't a sacred body that mustn't be criticized. Indeed, it's OK for elected officials to weigh in on monetary policy. But such criticism is legit only if it isn't nakedly driven by self-interest. And everything Trump does is naked self-interest. Monetary doves may well be right …. But Trump is making the best case around for Fed independence, even when the Fed may be wrong.
I have a feeling it really isn’t about Powell or the Fed at all. Trump is effective (with his base) only when attacking some outside “enemy.” The enemies list is long. Powell happens to have replaced whomever last week’s was. I won’t recite them all. I’ll merely suggest that without some “enemy” (real or imagined) to spew venom upon he’s but an empty suit in front of his base.
Imagine one of those “rallies” in which he says:
“Folks, our nation’s finally on the right track. I’m pleased to report that our governmental agencies and other public institutions are now operating effectively and doing a superb job promoting the public interest. I’d like to thank all hard working Americans and their elected officials for making this success possible.”
@davidmoran - That’s an excellent excerpt from Krugman you posted above. I was earlier considering taking it from the sublime (Krugman) to the ridiculous by (possibly) posting a question along the lines of:
Should the President of the United States set interest rates and determine monetary policy?
Comments
If the market goes up, he claims credit.
If the market goes down, he blames the Fed. Or Hillary. Or something, anything other than himself.
Need I say more?
Let's not forget the poorly-timed tax bill last December ... the economy was humming along fairly well and didn't need 'stimulus' at this time. Gods help us when the next financial crisis occurs....
… on Trump and the Fed. The thing here is to keep two concepts separate. You can believe that the Fed is raising rates too quickly, as I do, and also believe that weighing in the way Trump has is very, very bad. Now, the Fed isn't "loco": it's raising rates more or less in line with what it should do if it wants to keep inflation at around 2%.
The problem is that the 2% target is almost surely too low: the Fed should actually let inflation rise above that level. 2% was supposed to be high enough that the economy would hardly ever hit the zero lower bound -- but given what happened after 2008, it clearly wasn't. So the Fed should let the expansion go on.
But that's not where Trump is coming from; he just doesn't want the Fed raining on his parade. And letting the short-term political interests of the strongman drive monetary policy is a well-known danger --- it's what's going on in Turkey.
So the Fed isn't a sacred body that mustn't be criticized. Indeed, it's OK for elected officials to weigh in on monetary policy. But such criticism is legit only if it isn't nakedly driven by self-interest. And everything Trump does is naked self-interest. Monetary doves may well be right …. But Trump is making the best case around for Fed independence, even when the Fed may be wrong.
Imagine one of those “rallies” in which he says:
“Folks, our nation’s finally on the right track. I’m pleased to report that our governmental agencies and other public institutions are now operating effectively and doing a superb job promoting the public interest. I’d like to thank all hard working Americans and their elected officials for making this success possible.”
That would empty the house in a hurry.
Should the President of the United States set interest rates and determine monetary policy?
@hank- +1
https://www.bloomberg.com/view/articles/2018-10-12/stock-selloff-trump-s-partly-to-blame?srnd=premium