Thursday, March 23, 2017

Politico - What Trump Could Do To The Federal Reserve

Here is the best summary I have found so far on how President Trump may deal with the issues we cover here that relate to monetary system change. This Politico article offers 4 alternative ways Trump may shape the Federal Reserve. Number Three is the one they suggest is most likely which agrees with what we said here earlier in this blog article. Below are some excerpts.


"What happens when President Donald Trump gets his hands on the Fed?

It’s the question gripping the economic world these days. Though not as big a headline as immigration policy or his cabinet picks, Trump has a chance to appoint a new person to nearly every top Fed job over the next two years—a power not afforded most presidents, and with very high stakes. The Fed’s decisions can ripple through the economy, making mortgages more expensive, causing mining companies to reduce investment in new machinery and preventing retail stores from hiring new workers.

Given the president’s tendency to take advice from a very close circle, experts have started casting a wary eye on just who’s in Trump’s immediate orbit—and what they think about the Federal Reserve. What they’re seeing suggests that Trump has the potential to bring more dramatic changes to the Fed than any president since at least Ronald Reagan."

. . . . .

"So, what will Fed policy look like under the Trump administration? As on so many other issues, Trump’s own views are nearly impossible to determine. 

. . . . .

Here are four possibilities:"

. . . . .  (skip to #3)

3. A rules-based approach to monetary policy.

"The most likely reform for the central bank goes by the technical term “rules-based.” This means that instead of the Fed setting its benchmark interest rate on the judgment of its policy-making committee, it would do so according to a specific rule. The most famous proposed rule comes from Stanford economist John Taylor­—it’s known as the Taylor Rule—and incorporates changes to inflation, growth and other economic indicators. "

My added comments: The full article talks about those around Trump who favor a gold based monetary system and takes the idea seriously. It goes on to suggest that the most likely change at the Fed would be to move to a rule based system which is consistent with what we said in our earlier blog article here. Time will tell.

Added notes: Dr. Judy Shelton offers a Twitter comment on the Politico article here and Jim Rickards offers his own Twitter comment here. Dr. Shelton also offers comments on Fed monetary policy here on Bloomberg and this interesting tweet suggesting we should "consider a modern gold standard". Jim Rickards writes his own article on how Trump can control the Fed and Dr. Shelton comments on that here.

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