- Trump will have the opportunity to fashion the central bank in the image he would like as he has four vacancies to fill on the board of governors
- The result could be a more politicized Fed.
President Donald Trump has multiple reasons as to why he should take control of the Federal Reserve. He will do so both because he can and because his broader policies argue that he should do so.
The president is anti-overregulating American industry. The Fed is a leader in pushing stringent regulation on the nation. By raising interest rates and stopping the growth in the money supply it stands in the way of further growth in the American economy. more …
Opinion: I have never believed that a group of Keynesian Harvard elitists who never held a job in the real world should be given the power to control the banking system by controlling short term interest rates.
I do believe, however, that if not for the Federal Reserve, the US economy would have fallen into a depression in 2008. Unfortunately, that is what should have happened.
Every president beginning with Jimmy Carter to George Bush supported the notion that all Americans should own houses. To that end, the Community Reinvestment Act of 1977 (Jimmy Carter) and revised in 1995 (Bill Clinton) pressured banks to loan money to buy homes to families with little or no means of ability to pay them off.
Good loans and toxic loans were packaged into US Government Agency Mortgage bonds and sold to banks and investors all over the world. The plan fell apart in 2008-9 and a severe recession and bordering on a depression gripped the world.
Enter the Federal Reserve who devised a plan to bail out too big to fail banks by creating money out of thin air to buy back toxic mortgage bonds, drive interest rates zero, and allow dishonest politicians to brag about saving the economy. It was then, and is now, a lie.
Debt was created in an unprecedented scale and now that the financial markets are riding a sugar high, the Federal Reserve wants to raise interest rates to pay back the debt.
I have no idea if Donald Trump can navigate this. I have always believed that the best way to manage interest rates is to let the market decide. If rates are too high, business will borrow less and interest rates will go down, and vice versa. Markets are more efficient than men, making the Fed a dangerous institution.
If the president gets this wrong and and artificially holds down interest rates for two long for political expediency, the depression we should have had in 2008 will be much worse since US debt has more than doubled since then.
And when the US economy gets a head cold, the global enonomy gets pneumonia.