Federal Reserve 'boneheads' emerge from Trump era unscathed

[webfact]

Analysis-

Federal Reserve 'boneheads' emerge from Trump era unscathed

By Howard Schneider

 

FILE PHOTO: U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Board Chairman Jerome Powell testify during a Senate's Committee on Banking, Housing, and Urban Affairs hearing examining the quarterly CARES Act report to Congress, in Washington, DC, U.S., September 24, 2020. Drew Angerer/Pool

 

WASHINGTON (Reuters) - "Boneheads." "Pathetic." An "enemy" of the United States. President Donald Trump was often vicious in his critique of the U.S. Federal Reserve, bashing the central bank governors' monetary policy decisions with tweets and verbal barbs, while trying to stack its board with cronies.

 

In the end, the guard-rails mostly held. The Fed on Wednesday concludes the last Federal Open Market Committee meeting with Trump in the White House. The bank has avoided the sort of reputational damage suffered by many federal agencies, like the Centers for Disease Control or the Environmental Protection Agency, where politics seemed to gain a foothold over technical expertise and original mission.

 

Trump's presence was surely felt, perhaps most notably through Fed moves to relax financial regulation.

But it was not, however, all of what the president intended.

 

"RAISING RATES - REALLY?"

Trump broke many conventions as president, and his handling of the Fed, which is self-funded and makes monetary policy decisions independent of the White House, was no different.

 

Just a few months after appointing Jerome Powell as chair in November of 2017, Trump made it clear he was, unlike his predecessors, willing to talk bluntly about what he wanted from the central bank. What he wanted was zero or even negative interest rates, aggressive bond buying and soaring stock markets to back his boasts that the U.S. economy was the strongest ever.

 

"Debt coming due & we are raising rates - Really?," Trump said on Twitter on July 20, 2018, an early taste of his regular critiques of Fed policy and personnel during his presidency.

 

Some of the comments rattled Fed officials, in particular when Trump compared Powell to Chinese leader Xi Jinping, and asked, "My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?"

 

But notably through 2017 and 2018, the Fed continued with interest rate hikes as it deemed appropriate, given the strong economy and low unemployment, even as Trump threatened publicly to "demote" or fire Powell.

 

STRONGER ECONOMY, HIGHER RATES

The rate hikes, including four under Powell in 2018, were actually a bit of a compliment to Trump. It may be hard to recall during the pandemic recession, but during his first two years in office, the economy experienced a "Trump bump" as tax cuts and an unexpected gusher of federal deficit spending led to faster growth than Fed officials expected.

 

The rate increases, a matter of still-intense debate among policymakers and analysts, were the Fed's way of keeping up with a possibly accelerating economy.

 

Then just as Trump's policy had given, so it began taking away. The administration's intensifying trade war, along with the impact of higher interest rates, began to slow the economy in late 2018. By early 2019, Powell began a high-profile pivot away from monetary tightening and toward an effort to keep the recovery on track.

 

That meant Trump eventually got the very rate cuts he demanded - but partly because he'd thrown sand into the gears of global commerce.

 

NEVER TRUMP'S FED

Washington politics, nonetheless, forced the Fed into some uncomfortable positions.

 

The Treasury Department's recent order to shut down a slate of Fed pandemic lending programs, over the Fed's objections, showed a central bank drawn deeper into politics, said George Washington University political science professor and Fed historian Sarah Binder.

 

"They are just in a highly partisan, highly competitive, fraught political environment and it is hard to insulate," Binder said.

 

The Treasury decision, announced days after Trump lost the November presidential election, was criticized by President-elect Joe Biden's team as "deeply irresponsible" given the millions of Americans still out of work.

 

Although "partisanship is pushing at the door of the Fed," Binder said, "it has not seeped in, in a crass legislative sort of way.”

 

Perhaps the most notable oddity: As much as Trump hated the central bank, he himself named the key players. Four of the five Fed governors responsible for policy in the Trump era, including Powell, were handpicked by the president for their current roles.

 

Just as Supreme Court justices can disappoint their patrons, this was never fully Trump's Fed. His choices in particular of Powell, Vice Chair Richard Clarida, and Vice Chair for Supervision Randall Quarles were shaped by Wall Street veterans in the administration like Treasury Secretary Stephen Mnuchin and former economic adviser Gary Cohn.

 

Their appointments were made initially with an eye toward keeping markets confident and loosening financial industry regulation - arguably Trump's clearest win at the central bank.

 

After Trump's anger at the Fed peaked in late 2018 and 2019, the approach shifted. He began considering more partisan figures like the late pizza-chain executive Herman Cain and 2016 campaign economic adviser Judy Shelton for the Fed board.

 

Those appointments arguably could have corroded the Fed's standing and independence. But none made it through the full nomination and congressional confirmation process.

 

A second Trump term would have given him the chance to name a new chair. Now that choice will be President-elect Joe Biden's, when Powell's term ends in February 2022, 12 months after Trump's own term expires.

 

(Reporting by Howard Schneider; Additional reporting by Ann Saphir; editing by Heather Timmons and Dan Grebler)

 

-- © Copyright Reuters 2020-12-17

 

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[TopDeadSenter]

1 minute ago, webfact said:

The bank has avoided the sort of reputational damage suffered by many federal agencies, like the Centers for Disease Control or the Environmental Protection Agency, where politics seemed to gain a foothold over technical expertise and original mission.

Which explains why BTC has gone from under $6k this year to way over $20k today. Investors trust the Fed so much they dump real money and buy a mysterious digital asset and call it a safe haven! When they say safe haven, they mean safe from QE and the Fed. Sometimes the evidence right in front of people's faces do not tally with what they say.

[placeholder]

4 minutes ago, TopDeadSenter said:

Which explains why BTC has gone from under $6k this year to way over $20k today. Investors trust the Fed so much they dump real money and buy a mysterious digital asset and call it a safe haven! When they say safe haven, they mean safe from QE and the Fed. Sometimes the evidence right in front of people's faces do not tally with what they say.

Because the current weakness of the dollar has nothing to do with America's poor response to the pandemic? Or the fact the Americans are buying more from the Chinese than ever before?  Despite the fact that the renminbi is higher than it's been in over 2 years? Isn't a decrease in the dollar supposed to make America more competitive in exports and the Chinese less? 

[Walker88]

44 minutes ago, TopDeadSenter said:

Which explains why BTC has gone from under $6k this year to way over $20k today. Investors trust the Fed so much they dump real money and buy a mysterious digital asset and call it a safe haven! When they say safe haven, they mean safe from QE and the Fed. Sometimes the evidence right in front of people's faces do not tally with what they say.

A worldwide pandemic, a faltering US position in the world due to the world's concern about the absurdity of 45, and maybe that additional $7,000,000,000,000 in US National Debt under 45 (a 36% increase over the $19.4 trillion 45 inherited from the first 44 POTUSs combined) had something to do with BTC's rise.

 

Certainly only a foolish person sides in economic or fiscal policy with a guy who put together six bankruptcies and blew through a half billion plus in inheritance and allowance.

[placeholder]

But, to be back Trump, a practice I hate to indulge in, he was right to castigate the Feds for raising interest rates. There was absolutely no sign of rising inflation to justify it. And the Feds ultimately did back down.

Edited December 17, 2020 by placeholder

[onthedarkside]

A post that selectively edited and mischaracterized comments from Joe Biden on China, without providing any attribution or source for the quotes, has been removed along with numerous replies. Also follow-on off-topic posts relating to Trump Organization investments in Indonesia.

 

A reminder, the topic here is:

 

Federal Reserve 'boneheads' emerge from Trump era unscathed

[Jeffr2]

6 hours ago, placeholder said:

But, to be back Trump, a practice I hate to indulge in, he was right to castigate the Feds for raising interest rates. There was absolutely no sign of rising inflation to justify it. And the Feds ultimately did back down.

I'm no expert on this, but have read many rather derogatory articles about the Fed. 

[HappyinNE]

I am no fan of the FED.  It should never have been formed and in my opinion should be eliminated.  However following the "Don't Fight The Fed" philosophy I am very long in Thai Baht Gold as well as starting purchasing Bitcoin.  The dollar will tank and therefore in comparison the Thai Baht Currency will be stronger.

[placeholder]

12 minutes ago, HappyinNE said:

I am no fan of the FED.  It should never have been formed and in my opinion should be eliminated.  However following the "Don't Fight The Fed" philosophy I am very long in Thai Baht Gold as well as starting purchasing Bitcoin.  The dollar will tank and therefore in comparison the Thai Baht Currency will be stronger.

It seems we've been hearing predictions about the collapse of the dollar almost as long as we've been hearing predictions about the imminent arrival of Jesus. And just like the Son of God's arrival, only a few crackpots ever actually put a a close date on it. And when they do, they're invariably proven wrong.

[Bluespunk]

8 hours ago, webfact said:

After Trump's anger at the Fed peaked in late 2018 and 2019, the approach shifted. He began considering more partisan figures like the late pizza-chain executive Herman Cain and 2016 campaign economic adviser Judy Shelton for the Fed board.

 

Those appointments arguably could have corroded the Fed's standing and independence. But none made it through the full nomination and congressional confirmation process.

Hallelujah 

[blazes]

1 hour ago, placeholder said:

It seems we've been hearing predictions about the collapse of the dollar almost as long as we've been hearing predictions about the imminent arrival of Jesus. And just like the Son of God's arrival, only a few crackpots ever actually put a a close date on it. And when they do, they're invariably proven wrong.

 

Of course, it all depends what you mean by "collapse".  This graph (below) suggests that the dollar is well into collapse mode, having plummeted on the DXY from 92 to 89 in the last month.

So, as a willing 'crackpot', I will offer the date December 17, 2020 as a signal of the dollar's collapse....

https://www.marketwatch.com/investing/index/dxy

[TopDeadSenter]

1 hour ago, placeholder said:

It seems we've been hearing predictions about the collapse of the dollar almost as long as we've been hearing predictions about the imminent arrival of Jesus. And just like the Son of God's arrival, only a few crackpots ever actually put a a close date on it. And when they do, they're invariably proven wrong.

If losing 99% of its purchasing power since 1913 is not considered a collapse, how much would it need to sink further for you to consider it a collapse?

 

 

https://schiffgold.com/wp-content/uploads/2015/09/purchasing-power-of-dollar-1913-2011.jpg

 

[stevenl]

1 minute ago, TopDeadSenter said:

If losing 99% of its purchasing power since 1913 is not considered a collapse, how much would it need to sink further for you to consider it a collapse?

 

 

https://schiffgold.com/wp-content/uploads/2015/09/purchasing-power-of-dollar-1913-2011.jpg

 

How have other currencies fared?

[John Drake]

The Fed pumped somewhere between $6 and $8 trillion into the hands of the one percent and saw the poverty rate go from 9 percent to almost 12 percent. Billionaires, meanwhile, became almost $2 trillion wealthier this year. American workers are in food lines about to be evicted from their shops and businesses, while the Fed is buying Apple bonds so Tim Cook can use the money for more stock buybacks to increase his EPS and stock price. Oh, yes. Jerome Powell has $128 million in an ETF that depends on the stock market going higher. No conflict of interest, there! And all the damn fools are arguing over Trump and Biden, while those at the top steal them blind.

[John Drake]

9 hours ago, placeholder said:

There was absolutely no sign of rising inflation to justify it.

 

Look up hedonic adjustment. The government has been playing with inflation numbers since the 1980s when they decided to substitute chicken for beef and told everybody that there was no increase in food prices.

[Jeffr2]

1 hour ago, HappyinNE said:

I am no fan of the FED.  It should never have been formed and in my opinion should be eliminated.  However following the "Don't Fight The Fed" philosophy I am very long in Thai Baht Gold as well as starting purchasing Bitcoin.  The dollar will tank and therefore in comparison the Thai Baht Currency will be stronger.

I've been hearing the dollar will tank for the past 40 years.  Hasn't happened yet.  And for sure won't be done in by Bitcoin.

[Jeffr2]

13 minutes ago, TopDeadSenter said:

If losing 99% of its purchasing power since 1913 is not considered a collapse, how much would it need to sink further for you to consider it a collapse?

 

 

https://schiffgold.com/wp-content/uploads/2015/09/purchasing-power-of-dollar-1913-2011.jpg

 

Look at the Euro.  Amazing, eh?

https://www.statista.com/statistics/1055948/value-euro-since-2000/

[Lacessit]

There' something ironic about Trump handpicking people he thought would toe his line in the Fed and the Supreme Court, only to see them reject his demands. Check out Bill Barr as well.

Perhaps he's not as smart a people selector as he thinks he is.

[Lacessit]

1 minute ago, Jeffr2 said:

Look at the Euro.  Amazing, eh?

https://www.statista.com/statistics/1055948/value-euro-since-2000/

I understand it's called a race to the bottom.

[oompie69]

20 minutes ago, TopDeadSenter said:

If losing 99% of its purchasing power since 1913 is not considered a collapse, how much would it need to sink further for you to consider it a collapse?

 

 

https://schiffgold.com/wp-content/uploads/2015/09/purchasing-power-of-dollar-1913-2011.jpg

 

I would rather call it a prolonged steady downward trend rather than a collapse .  And the growth in foreign debt should show the mirror image of this graph.

[Jeffr2]

17 minutes ago, Lacessit said:

I understand it's called a race to the bottom.

It's called inflation....

[placeholder]

37 minutes ago, TopDeadSenter said:

If losing 99% of its purchasing power since 1913 is not considered a collapse, how much would it need to sink further for you to consider it a collapse?

 

 

https://schiffgold.com/wp-content/uploads/2015/09/purchasing-power-of-dollar-1913-2011.jpg

 

Whatever the accuracy  of that chart and since it comes via Peter Schiff it's going to exaggerate), you're basing it on a fundamental misunderstanding of what a dollar is. A dollar is not like a share of stock.A dollar is purely a unit of value measuring current purchasing power.. So, for the sake of argument, let's say that the figure you've posted s correct. But let's also posit that the average person now earns 200 of them for every 1 dollar he or she used to earn. So in real dollars he or should would be earning twice as much. In fact, the multiple is far greater as we can see what the average American possesses now versus 1913.  In fact until somewhere around 1980 workers earning kept ahead of inflation. 

Edited December 17, 2020 by placeholder

[TallGuyJohninBKK]

1 hour ago, blazes said:

 

Of course, it all depends what you mean by "collapse".  This graph (below) suggests that the dollar is well into collapse mode, having plummeted on the DXY from 92 to 89 in the last month.

So, as a willing 'crackpot', I will offer the date December 17, 2020 as a signal of the dollar's collapse....

https://www.marketwatch.com/investing/index/dxy

 

Does this graph from your source linked above show a collapse in historical terms? I don't think so.

 

 

Edited December 17, 2020 by TallGuyJohninBKK

[blazes]

25 minutes ago, TallGuyJohninBKK said:

 

Does this graph from your source linked above show a collapse in historical terms? I don't think so.

 

 

 

I consider a move from 125 down to 75 a 'collapse'.  That covers the Nasdaq crash and Iraq war down to the 2008 financial crisis.

I would amend my earlier opinion, and assert that we are only at the beginning of the collapse.

[placeholder]

2 minutes ago, blazes said:

 

I consider a move from 125 down to 75 a 'collapse'.  That covers the Nasdaq crash and Iraq war down to the 2008 financial crisis.

I would amend my earlier opinion, and assert that we are only at the beginning of the collapse.

regardless of how many dollars you have today vs. then?

[TallGuyJohninBKK]

2 hours ago, blazes said:

 

I consider a move from 125 down to 75 a 'collapse'.  That covers the Nasdaq crash and Iraq war down to the 2008 financial crisis.

I would amend my earlier opinion, and assert that we are only at the beginning of the collapse.

 

The point of my post above being... the long-term chart for the source you linked above pretty much shows the point where we're at right now being pretty much an average mid-point terrain for where the values have been for that entire 30+ year period down, with lots of ups and downs along the way.  That's not a collapse.

 

These two below, I might call collapses:

    

 

But 2020+ thus far, no:

 

Edited December 17, 2020 by TallGuyJohninBKK

[Pique Dard]

it's time for trump to leave office. he's more useful on a golf course