President Donald Trump said Friday he would announce his choice for the next leader of the U.S. central bank “sometime next week,” and said he has “somebody very specific in mind,” as reported by the Wall Street Journal.
We know the pick will be fantastic because everything Trump does is fantastic.
“It will be a person who hopefully will do a fantastic job,” Mr. Trump said in a video posted to Instagram on Friday, adding, “I think everybody will be very impressed.”
Count me among the unimpressed, no matter who Trump chooses.
Conservative Hounds Howling
The speculation shift from Taylor to Powell has the conservatives hounds howling that Powell did not act to prevent the financial crisis and that he will not hike fast enough.
“I’m particularly concerned about how we effectively unwind this balance sheet, and John Taylor more than any other candidate is well positioned to do that,” said U.S. Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee. “Jerome Powell, I don’t know, but I have my concerns.”
Mr. Taylor, meanwhile, is facing questions about whether he would follow his own mathematical formula for setting interest rates—dubbed the Taylor Rule—if he becomes chairman. Under the rule , short-term interest rates would be around 3.5% now, compared with the Fed benchmark federal-funds rate’s current range between 1% and 1.25%, according to Michael Feroli, chief U.S. economist at J.P. Morgan.
Mr. Taylor’s supporters have said he wouldn’t be so rigid as his arguments might suggest, with some saying he would be less likely than Mr. Powell to raise interest rates to curb inflation that could stem from GOP tax cuts.
Reason to be Unimpressed
The idea that one can set interest rates via mathematical formula is ludicrous. But let’s assume otherwise. If so, we should fire the whole lot of Fed governors and follow the rule.
The rule cannot possibly work because among other things inflation cannot be properly measured. Even if inflation could be measured, actual home prices are not in the formula.
Finally, the idea that a group of people with a proven track record of blowing asset bubbles will do anything other than the same thing, is silly in and of itself.
Mike “Mish” Shedlock
Medex_Man: got it in one.
What Trump seems slow to grasp is that the Fed can only screw up monetary conditions (its not clear the FOMC has the knowledge and experience to fix monetary problems). The USA faces FISCAL problems, that cannot be papered over with debt and financial alchemy (aka Fed cr@p).
The fiscal situation is that taxes are already choking the economy. Obamacare is choking the economy. Regulations are choking the economy. Wars that solve nothing and never end are sucking up valuable resources that are needed back home. If the feds raise taxes, it will crush the economy; if they don’t balance spending, debt levels are already crushing the economy and crowding out productive investments.
Obamacare must get repealed, the US economy cannot afford it (whether we could afford health care is a different question, we definitely can’t afford obamafraud). The size and scope of the federal government must be slashed — spending must be DRASTICALLY cut across the board.
The swamp knows this. They aren’t going to surrender their privileged lifestyle voluntarily.
“Ok RonJ Why didn’t you say the financial crisis could have been prevented…” Because “… the conservatives hounds howling that Powell did not act to prevent the financial crisis…” was what i was responding to. With what i said previously above, Powell had no way of preventing what happened. When Glass Steagall was dismantled, only one republican senator, Shelby, voted against it. Greenspan took the lending standard to ZERO. He shut down Brooksley Borne on derivatives. The rating agencies called junk mortgage debt AAA and the SEC gave leverage waivers to the Big Five investment banks, allowing them to take advantage of the situation, until leverage increased losses, when the market turned down, crashing them all. Anyone who warned of anything was ignored in the rush to create a record housing bubble.
mish -good summation.The positive is that irrespective of who ,it will not be a train smash.
@hmk — the case remains open. No one has been prosecuted as yet. The “official” story is that it was a random mugging gone wrong — police can’t prosecute when they don’t have a suspect. The unofficial story is that his body was found with lots of valuables still there, and the DNC had a lot of motive to silence him. That doesn’t refute the official story completely, but the official story quite simply makes no sense at all. Given all the other crimes the DNC did commit, Seth Rich’s murder seems very suspicious. Even if lacky Comey decided not to prosecute the DNC, and even if AG Lynch was busy having secret tarmack meetings with defendent Bill — that doesn’t make the DNC innocent, it just discredits the FBI and DoJ. And BTW, both the official story and the alternate stories say Rich was murdered (by muggers or by DNC). Please stop claiming that one unproven story is a conspiracy unless you acknowledge that the official story is also unproven and makes no sense. BTW — the parents haven’t accepted any story, they only admitted their son was murdered and the guilty (whomever they might be) are unlikely to see justice.
“The speculation shift from Taylor to Powell has the conservatives hounds howling that Powell did not act to prevent the financial crisis and that he will not hike fast enough.” There was no preventing the financial crisis. Glass Steagall repeal and the Commodity Futures “Modernization” Act had been passed. 10,000 appraisers petitioned the government over appraisal fraud, which the government did nothing about. In 2004, the Big Five investment banks were given leverage waivers by the SEC. In September 2004, the FBI warned congress about massive mortgage fraud. Nothing was done about that either.
Whatever happened with the Seth Rich thing. There was a conspiracy theory on that but the parents seem content with the current govt explanation of the event. I would think that if it was a hit job the parents would be all over it demanding justice.
And Hilary remains a fugitive from justice… along with former AG Lynch, disgraced FBI director Comey, DNC chair Wasserman, whomever the DNC hired to kill Seth Rich, and a gaggle of Clinton aids. Democratic party USED TO represent the middle class, but under the Clinton / Obama regimes, the DNC is nothing but an organized crime syndicate
Meanwhile — Obama’s IRS has now officially admitted that they did EXACTLY the same things the Nixon IRS did… abusing the IRS’s authority to target Obama’s political adversaries. Time for liberals to admit that Obama is as crooked as Nixon!!!!
link to foxnews.com
Mish — “The idea that one can set interest rates via mathematical formula is ludicrous.”
And yet, that rule has a better track record than all academics. If the rule is ludicrous, the humans are even less qualified
Mish — “The idea that one can set interest rates via mathematical formula is ludicrous.”
Throughout the Volcker and most of the Greenspan era, the Taylor rule was spot on target. Putting the USA back on the Taylor rule wouldn’t be such a bad thing, and any “rule” would definitely be better than a bunch of idiots sitting around a table making up nonsense.
Mish still keeps dancing around the big issue, which is that Bernanke was a complete failure. More of Bernanke’s arbitrary rate setting aimed at appeasing corrupt politicians is just going to make things worse and worse and worse.
For all the endless debt bullsh!t under Bernanke and Yellen, is the average middle class citizen better off? Did their paycheck keep up with their cost of living? Its a truism that their paycheck did not keep up with their debt levels nor with the national debt.
Its time to admit that that debt growth is not economic growth, and the status quo isn’t working for most of the country — even the idiots who voted for the criminal fell behind under Bush / Obama’s debt binge. Bernanke is a stupid fool who should not be teaching students, and sure as hell should not be mis-managing a real economy. Ditto for all his fellow neo-Keynesians. They obviously don’t know what they are doing.
The Taylor rule is not perfect, but its much better than any of the morons mismanaging the FOMC for the last 18 years.
Mish is probably right that the Fed can’t really fix anything, but Bernanke proved the Fed can make things a lot worse for most people. Ban all Keynesians from infecting students’ minds, and keep them FAR away from real world positions.
My view is that Trump will declare the FED as the source of instability, and the main enabler of bubbles, then close down the FED, and replace it with TIBOR (Trump interbank offer rate) which will mirror LIBOR. /sarc
I don’t think we’re addressing the real driver. Treasury debt service costs $380 Billion annually at these artificially reduced interest rates (and they are artificially reduced, as the Fed loans money to the carry trade at reduced rates which then flows directly into Treasury bond purchases…with a profit going to the investment banks) . Increases in the “funds rate” directly impact the borrowing costs of the Fed….which has $20 Trillion to finance. That directly affects the costs of government and the deficit…which threatens the re election of Congressmen who otherwise would be required to rein in government spending….which would cause them to be thrown out of their jobs.
Exactly. What would be your ideal mechanism for interest rate price discovery? How would the marketplace determine the price level for interest rates without the wizards at the fed?