Trump Nominates Jerome Powell as Federal Reserve Chair

[vanguard96]

It was telling when even Marketplace on NPR - a general supporter of the market status quo - is criticizing the Fed essentially saying they don't understand the role of inflation. Why then the whole 2% assumption?

https://www.marketplace.org/2017/10/20/economy/fed-might-not-have-inflation-all-figured-out

I don't particularly take it as 'reassuring' like the guest on this segment that they admit a lack of understanding but still consider to act upon it as a part of the Fed's mission of controlling money supply and balancing the economy/employment.

The Fed's mission has not been fundamentally changed based on the considerable lessons from 2008 - they still have the same overall mission - and the beneficiaries of the current low rate system are corporations and wealthy investors. Trump of course appreciates this mission and status quo despite his 2016 bromides about the debt bubble and the Fed's role in it as a member of this class of institutional investors, hedge fund managers, and big business moguls.

[vanguard96]

It was telling when even Marketplace on NPR - a general supporter of the market status quo - is criticizing the Fed essentially saying they don't understand the role of inflation. Why then the whole 2% assumption?

https://www.marketplace.org/2017/10/20/economy/fed-might-not-have-inflation-all-figured-out

I don't particularly take it as 'reassuring' like the guest on this segment that they admit a lack of understanding but still consider to act upon it as a part of the Fed's mission of controlling money supply and balancing the economy/employment.

The Fed's mission has not been fundamentally changed based on the considerable lessons from 2008 - they still have the same overall mission - and the beneficiaries of the current low rate system are corporations and wealthy investors. Trump of course appreciates this mission and status quo despite his 2016 bromides about the debt bubble and the Fed's role in it as a member of this class of institutional investors, hedge fund managers, and big business moguls.

The reason inflation is staying below 2% is obvious. The Fed says that 2% inflation is a target but acts like 2% inflation is a ceiling, which means they're *really* targeting inflation somewhere below 2%, and the market is pricing itself accordingly.

The question of 2% is just a piece of the overall picture. Of course I am coming at it from a different POV than a lot of people here - and to me the statements don't sound very reassuring to main street small-scale investors. Surely, Trump & others think that low interest rates will be the recipe for re-election.

An outsider candidate is Stanford University professor and former George W. Bush administration Treasury official John Taylor. Professor Taylor is a leading advocate of a “rules-based” monetary policy. Advocates of forcing the Fed to follow specific rules say this will bring stability and predictability to monetary policy.

Again I think they are missing the whole point.

[vanguard96]

Neel Kashkari is uniquely qualified for this role.

I'd say that being uniquely qualified involves having an economics PhD (and he's a bit too young imo), but he'd be an acceptable choice. I'm not really sure who I back. John Taylor is uniquely qualified, but he's too hawkish. Warsh doesn't have an economics PhD and was terribly wrong about inflation in 2008-2010, Powell doesn't have an economic PhD either and Yellen is a bit too dovish. In the end I suppose I'd support reappointing Yellen (as she is extremely qualified) or appointing Powell (he doesn't have an economics PhD but he's worked at the Fed for years and the Fed has tons of PhD economists anyway). The Fed balance sheet should be reduced, but not as fast as Warsh or Taylor want (but preferably a little faster than Yellen wants).

Good take. Real damage can be done to the economy by raising rates too quickly and seems like Yellen or Powell would take a reasonable tactic on rates. I'm with you that Yellen is probably a smidge slow on her rate of raising rates, but I also firmly believe in maintaining continuity at the Fed for a period of time maintain the stability of markets. If I could bet on it, I'd put money on Powell, but obviously my preference is Yellen.

What will you do with your screen name when she leaves?

#EndTheFed

[vanguard96]

He will be similarly cautious in terms of raising rates but reportedly friendlier to the big banks.

That's not very good.

[vanguard96]

He will be similarly cautious in terms of raising rates but reportedly friendlier to the big banks.

That's not very good.

I still maintain Neel Kashkari, Larry Lindsey, or R. Glenn Hubbard would have been better.

Despite being a Republican, Trump ended up nominating an Obama-era Fed appointee who is the closest to the Yellen mold. It's a sign that there's really very little difference in the post-election view of the two parties.