In Donald Trump's first four years as president, he will not only choose three judges for the Supreme Court, he'll also pick five of the seven members on the Fed Board of Governors. It would be impossible to overstate the effect this is going to have on the nation's economic future. With both houses of Congress firmly in the GOP's grip, we could see the most powerful central bank in the world transformed into a purely political institution that follows the diktats of one man.
Critics may think that is a vast improvement over the present situation in which the Fed conceals its allegiance to the giant Wall Street investment banks behind a public relations cloud of "independence," but the idea of one man controlling the price of the world's reserve currency and, thus, the price of financial assets and commodities across the globe, is equally disturbing.
Already we have seen how the Fed's determination to enrich its constituents has resulted in one titanic asset-price bubble after the other. Imagine if that power was entrusted to just one individual who could be tempted to use that authority to shape economic events in a way that enhanced and perpetuated his own political power. Even so, after seven years of a policy-induced Depression that has increased inequality to levels not seen since the Gilded Age, we think it is high-time that the president use his power to choose the members who will bring the bank back under government control. Here's more background from the LA Times:
"Donald Trump leveled unprecedented criticism at the Federal Reserve during the campaign. As president, he could get to quickly reshape it ... Trump will have the opportunity to appoint as many as five new members to the seven-person Fed Board of Governors during his first year and a half in office. That includes a new chairperson to replace Janet L. Yellen, whose term expires in early 2018...
Trump hammered Yellen in the final months of the (presidential) campaign, accusing her of keeping the benchmark rate 'artificially low' to help fellow Democrats President Obama and Hillary Clinton.
"'I think she is very political and to a certain extent, I think she should be ashamed of herself.' Trump told CNBC in mid-September. At the first presidential debate two weeks later, he declared that 'the Fed is being more political than Hillary Clinton.'
"And Trump's final campaign video included images of the Fed and Yellen, casting her has part of the 'political establishment' that has 'bled our country dry....'
"'Never before have we had an incoming president not just criticize how Fed policy has been executed ... but accuse the Fed chair of undermining the institution by being in political cahoots with his opponent and the White House,' (James) Pethokoukis said. 'We're off the grid into uncharted territory.'" (Trump hammered the Federal Reserve as a candidate. As president, he could quickly reshape it, LA Times)
We can safely assume that the Supreme Court is going to reflect Trump's corporate-friendly laissez-faire attitude towards big business; the question is: What can we expect from the Central Bank once it becomes the White House's flunky?
That's hard to say, mainly because Trump frequently espouses two seemingly contradictory views at the same time.
What do I mean by that?
I mean, that on the one hand, Trump is a big cheerleader for non-interventionist, free market capitalism, but on the other, he is a committed right-wing populist who seems to thrive on the support of the masses, which is clear when he things like this:
"You know who gets hurt the most (by Yellen's easy money policies)? The people that went through 40 years of their life and saved a hundred dollars every week (in the bank)...They worked all their lives to save and now what happens is they're being forced into an inflated stock market and at some point they'll get wiped out."
So, how will Trump's populism shape his views on who should or should not be a member of the Fed?
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