Federal Reserve

Trump Wants to Name Political Loyalists to Federal Reserve Board

Fed governors like Herman Cain or Stephen Moore are likely to want to goose short term apparent prosperity to help the president politically. That's a bad idea.

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In the past couple of weeks, President Donald Trump is reported to have settled on two choices for open seats on the Federal Reserve Board of Governors: former Club for Growth president and Heritage Foundation economic policy analyst Stephen Moore, and former Godfather's pizza boss and 2012 GOP presidential hopeful Herman Cain. Cain from 1989-96 served in various capacities, including chairman of the board, with the Federal Reserve Bank of Kansas City, though Cain doubters argue such positions are more honorary for local business leaders than proving any monetary policy savvy.

redbubble.com

Neither Cain nor Moore are technically trained academic economists, which alarms many, although, as has been argued by former Federal Reserve Bank of Dallas analyst Danielle DiMartino Booth, board members with more varied real-world experience might be useful voices in central bank decision-making.

It is less lack of academic/technical training that's disturbing as the clear sense that both men are being appointed not for expertise but for team-playing loyalty to Trump. Cain has recently been running a pro-Trump political action committee, America Fighting Back; Moore was a former Trump economic adviser during his 2016 campaign.

The president is on record as not caring about any long-term debt troubles as he believes he'll have gotten out of Dodge by the time the world stops wanting to loan the U.S. government money. That doesn't mean that he doesn't want the Federal Reserve to keep the interest costs on his books right now as low as possible, and he's said that out loud plenty. Trump doubtless believes Cain and Moore have heard him and will react accordingly.

Trump himself used to understand the bubbly dangers of constant low-interest rate policy from the Fed, as did Cain, who used to love the gold standard for its very power to keep short-term political priorities out of our money.

For his part, Moore had been for higher interest rates in 2008 when Obama was president for fear of the inflationary dangers of constant low rates. Yet in the Trump era he was so mad at current Fed chair Jerome Powell for his interest rate hikes he called for him to resign and is on record thinking interest rates should shrink, not rise, right now. That can't help but make you think attitudes toward the president and not cold economic analysis drive his monetary policy beliefs.

While the links between Fed interest rate policy policy and the money supply are complex and much-argued, the general theory Moore is working under is that lower interest rates will help goose employment and asset values in the short term, which is good for Trump.

Prior to Cain and Moore, most Fed-watchers didn't see previous Trump appointees as just out to prop up the president's desire to sell positive economic performance to voters. Decisions made just to make short-term indicators look good risk future bubble-bursting collapses. It would be saying too much to pretend these sorts of appointments are some unprecedented blow at an imagined previously completely unpoliticized Fed, but it still isn't promising for intelligent long-term decision-making from the body.

Any Trump nominee must be confirmed by the Senate, and for what it's worth Utah's Republican Sen. Mitt Romney is already publicly down on Cain and ambivalent about Moore, hoping for, as he told Politico, "someone…outside of the political world…an economic leader not a partisan leader."

When Trump does eventually fill those two seats, six of the Board's seven members will be Trump appointees. Fed Board members serve single nonrenewable 14-year terms. Decisions about interest rate movements are made by the Federal Open Market Committee, a 12-member body including all seven of the Board of Governors. The most recent announcements from the Fed have them intending to keep their interest rate target steady for the rest of the year at 2.25 to 2.5.

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  1. End the Fed?

    1. Or at least legalize competing currencies.

      1. You mean like the Canadian dollar, the Euro, the Swiss Franc, the Japanese yen, and the Mexican peso?

        There are plenty of competing currencies, and whenever anything goes wrong in the world, the world floods into U.S. dollar denominated assets as a safe harbor–and it’s been that way consistently since at least the Asian flu circa 1997.

        Let’s not let theory cloud our view of observed facts.

        1. I would hope that many of us here have done very well with bitcoin…….

          1. Many do well selling meth too. Doesnt make it a long term venture.

        2. Ken, you’ve got a problem there. If you can’t use theory to tell you what the facts are, then you have to find another source. And for a lot of folks commenting here, Fox News and talk radio are the only sources they trust.

          1. You are so funny omg. Oh wait. I meant ignorant.

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  2. Is this unusual? I honestly don’t know.

    1. Herman Cain is about as qualified to make decisions about rate increases as Tony.

      The market makes wild swings based on whether it thinks the Fed is likely to hike rates or cut them, and any statement anyone on the board makes can send it into a tailspin.

      No, it is not usual to put people on the board of the Fed when the market has zero confidence in them.

      Herman Cain’s only qualifications are that he’s loyal to Trump. That isn’t a qualification in anyone’s book except Donald Trump’s. He’s making the economy a secondary concern to his reelection, and that is not a presidential thing to do at all.

      1. Cain is an experienced business man who has served, even in an honorary role, on the federal reserve Bank in Kansas City. I would say his qualifications are a bit more than you stated. In fact, when you rely to heavily on academics and technocrats, you create an echo chamber. Real world experience could actually be beneficial. But but Trump, I know.

        1. The only qualification that matters to Trump is that Herman Cain is loyal to Trump–and that is also the most important thing that makes him unqualified to sit on the Fed board.

          1. okay you hate Trump. This is of course quite original .. I am not sure why Trump is less qualified to run the country than say the mixed race Chicago community activists (who never made payroll), or the dimwitted son of a former president who ran a baseball team in name only. I don’t care for Trump as a person but some of his instincts have been right and he has actually done much better than the feckless twit who last occupied the WH. Certainly an improvement over the POS that was the alternative. Yet I have a felling progressives like you would had preferred HRC…how sad..

            1. “okay you hate Trump”

              I gotta give it to you Ken, you are probably the only person that gets accused of being a Trump water carrier one day and a Trump hater the next.

              Probably means you try to tell it like it is.

          2. Ken Shultz|4.4.19 @ 6:59PM|#
            “The only qualification that matters to Trump is that Herman Cain is loyal to Trump-”

            I’ll accept that as your opinion; your cite is missing

        2. If you paid attention at all in the R’s primary back in 2012 you saw that he was a walking embarrassment.

          Maybe he will bring his “9-9-9!” policy into the fed and make everything multiples of 9. Sometimes policy has to be more clever than a little Caesars commercial.

          1. He used to run Godfather’s Pizza, IIRC their slogal was “the pizza you can’t refuse.”

            Now he’s going to run the currency you can’t refuse!

      2. Seriously Ken?
        Perhaps you should actually look at Cain’s qualifications before making shit pronouncements. Truly sad that you place politics ahead of actual education and experience.

        BTW: If one has only been in academia with no practical experience then one isn’t qualified for the position either.

  3. The only likely thing standing between Trump and reelection at this point is the threat of a recession, and it makes sense from that standpoint, but . . . holy shit.

    I used to get so sick of Ron Paul and his supporters whining about what amounts to the independence of the Fed–they’re so unaccountable!

    The only thing worse than an unaccountable Fed is one that answers to elected politicians. Trump found a way around the Fed’s independence? Lord have mercy.

    The only thing worse than Trump is every Democrat in the primaries.

    1. ron paul supporters whine about the fed because it’s a central bank that sets interest rates like a soviet commissariat instead of letting the market do it. Because ron paul supporters are generally libertarian, this is a consistent stance to take.

      1. Markets are superior to politicians’ decisions because they’re independent of politicians making decisions. Reforming the Fed would not make it more independent. The number of people in Congress who would reform the Fed so that Congress had even less influence over it is so small it doesn’t even matter. The only reason they would reform it is to gain more influence over it.

        Milton Friedman was absolutely right. The answer to what we should do with the Fed is, ‘I think we should get rid of the Fed, but since we all know Congress will never do that, it should remain as independent as possible’. We’re lucky the Fed is as unaccountable as it is. If it were more accountable, it would be worse. Accountability is influence.

        Most of Ron Paul’s arguments are political posturing, much like his laughable vote against NAFTA in the name of free trade. Because Ron Paul took a position isn’t as good reason to do anything.

        1. Milton Friedman’s argument is a practical concession, or at least how you present it.

          Ron Paul’s supporters wanted the fed to be audited, not for it to be controlled by congress.

          You seem to be confusing accountability with independence. They are not mutually exclusive.

          “Most of Ron Paul’s arguments are political posturing” – no, he’s an Austrian economist. This is their #1 issue. Not because of Ron paul, but because of Mises and Hayek, and Rothbard, although i’m not a big fan of Rothbard.

          I don’t think Ron paul was a saint, he caved on immigration to appease the alt right. He let Lew Rockwell do some race baiting in the 90s for his campaign as well. Lew Rockwell sucks.. However, to suggest that auditing the fed is the same as letting congress set interest rates is well…i think you follow me.

          1. “You seem to be confusing accountability with independence. They are not mutually exclusive.”

            Yes, accountability and independence are mutually exclusive. You cannot be both accountable to politicians and independent of politicians.

            Ron Paul is a politician. The NAFTA vote was an excellent example. He laid out a pro-free trade argument on principle against NAFTA, but it had nothing to do with principle and everything to do with Ross Perot eating his political lunch in Texas. Now there are libertarians who oppose free trade agreements that make international trade more free–because they aren’t completely free? They’re just aping this Texan because they want to believe in something principled. Their intentions are good but so what if they’re actually arguing against more free trade in the name of free markets?

            Rand Paul’s opposition to ObamaCare reform was even worse. The bill he voted against would have cut $772 billion from Medicaid–the first time Medicaid funding would have been cut ever. Let’s face it, Rand Paul’s motivation was to protect Kentucky, a major beneficiary of Medicaid amid a raging opioid crisis that hit Kentucky especially hard.

            1. Politicians are not to be trusted, libertarian politicians even more so. Politicians aren’t about principle, they’re about getting reelected. That’s the way it should be. Libertarian politicians can’t do much about Congress if they can’t get elected. The point is that we should never mistake their political posturing for principle. Refusing to cut $772 billion from a socialist redistribution program on principle is something only a politician could get away with.

              Don’t believe that accountability for the Fed can be anything but a means to influence either.

            2. “You cannot be both accountable to politicians and independent of politicians.” – because you say so? The fed is held accountable to it’s goal of stabilizing employment and price level, while independently getting to choose how to achieve said goal.

              I don’t care about Ron Paul. He’s old. I was just pointing out that his supporters are consistent in their drive to audit and end the fed.

              I care about Rand Paul even less. Ron Paul was kinda libertarian. Rand Paul is kinda not at all.

        2. I agree that said I don’t fault Trump for wanting a more loyal FED head.

        3. I agree that said I don’t fault Trump for wanting a more loyal FED head.

      2. I like Ron Paul. It’s like JP, or Turning Point; they basically make sense but they are too obvious and direct, making them easy targets for MSM/lefty smiting and smearing, so publications like Reason or sometimes National Review try to play along with the scoffing and frowning, afraid they’ll be impugned and labeled as “alt-right” or “far right” by their more well connected, and well protected peers at larger, more influential publications.

        1. Is Reason part of the Koch brother’s sphere of influence? My understanding is that Ed Krane and Rothbard had a falling out/disagreement – leaving the Austrian Libertarians with the Mises Institute and the Friedmanite more mainstream libertarians with Cato, Reason, and the LP.

          1. None of that matters anymore. I have Murray Rothbard’s embalmed corpse displayed in a climate-controlled glass case in my basement, opposite my shrine to Nikita Khrushchev. I am intellectually 100% consistent.

            1. I just mean that the Cato people are ok with a central bank with free floating fiat currency. I believe that was Friedman’s position. Whereas the mises people are all about burning the fed to the ground, despite their internal 100% reserve vs free banker war.

              And that this schism is why they still don’t support each other. Reason seemed critical or Ron Paul in 2016 whereas the Mises Institute acts like he’s Messiah.

              At least that’s my observation. Personally, I value the Austrians, but besides one or two of their folks, they’re idiots outside of dry economic theory (I don’t always agree with them, but their viewpoint is valuable to me). And a bunch of their writers have this huge, almost quasi neo Confederate view of the civil war. That’s not gonna win many hearts and minds.

              1. Was there an attempt at communicating anything other than ‘I follow libertarian disagreements’ in there?

                1. Sevo: No? What’s your point? Surely you’re not suggesting that discussing popular libertarian disagreements is inappropriate on a libertarian comment board….

              2. No, I don’t think that’s not the root of the schism. The root of the schism is cultural: insularism vs. pluralism.

                As for banking, the problem with 100% reserve banking is that it would almost certainly not arise on the free market. So a 100% reserve position is actually anti-market.

                1. the problem with 100% reserve banking is that it would almost certainly not arise on the free market

                  Why is that? I think that market discipline would ensure that only banks which follow 100% reserve banking would have a chance at survival. Bank runs would take care of the cheaters.

                  1. Thank you for joining in. This is a proper libertarian discussion

                2. Hey I’m gonna pass on the banking debate. I love it, am fascinated by it, but still don’t feel like I have a firm enough opinion worth defending on the interwebs. It does seem like 100% reserve standards haven’t arisen naturally in the past.

                  What do you mean by insularism vs pluralism?

            2. Crusty Juggler: you made me laugh so hard, I almost peed my Ayn Rand pajamas.

      3. ron paul supporters whine about the fed because it’s a central bank that sets interest rates like a soviet commissariat instead of letting the market do it

        That you think this is what the Fed does just helps to illustrate why no one should take your opinion seriously.

    2. “The only thing worse than an unaccountable Fed is one that answers to elected politicians.”

      The Deep State endorses this message. I don’t.

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  4. Utah’s Republican Sen. Mitt Romney is already publicly down on Cain

    CURSE of CAIN

    Mormon bigot.

    1. who cares what the feckless Senator thinks or says.. he is really a nothing burger.

  5. In the over 30 years since I began my graduate studies in economics and started paying serious attention to such things, the two worst appointments to the Board of Governors have undoubtedly been Lawrence Lindsey and Kevin Warsh. Both of them look like Paul Volcker in comparison to Cain or Moore.

    1. +1

      It’s an embarrassment.

      Any argument I make for Trump in 2020 will be in spite of him doing this.

    2. Trump just wants someone to keep the punch bowl spiked and the printing presses running to avoid a recession before 2020.

    3. Seriously? Why is Moore a bad pick? Oh I get it because Trump is behind him. Why are progressive Libertarians even bother to pretend that they are nothing more than shills for Soros.

      1. Seriously? Because Moore is a political activist/pundit with no background in banking or in economic policy-making of any kind, and because his past pronouncements on monetary policy have shown his strong preference for subordinating sound policy to the political needs of his party at the moment. These facts have been widely reported.

  6. Herman Cain

    You know what other leader was bat-shit crazy?

      1. Couldn’t have been too crazy: his grain silos are still standing after all this time.

        1. Which means that his grain silos were over-engineered: he used up too much capital, his ROI was the pits.

          1. I hope this is sarcasm

            1. Well, DenverJ said that Amenhotep II couldn’t have been too crazy; from a free market (economic) viewpoint, he was wasting resources like crazy.

    1. Thelonius Monk?

    2. Ludwig II of Bavaria?

  7. What about what Jimmy Carter did?

    1. Which is what? Appoint a disastrous Fed Chairman in Miller

  8. Cain from 1989-96 served in various capacities, including chairman of the board, with the Federal Reserve Bank of Kansas City, though Cain doubters argue such positions are more honorary for local business leaders than proving any monetary policy savvy.

    Good to know what sort of Top Men we’ve got rubber-stamping overseeing the decisions of day-to-day management. I guess there’s at least one area government does things just the same as the private sector. I wonder where else we’ve got things like civilian review boards that are merely fig leaves disguising the truth about who’s really in charge?

  9. “board members with more varied real-world experience might be useful voices in central bank decision-making.”

    I know a plumber who’s pretty good at doing addition and subtraction in his head. JFC.

  10. Oh, no!!!

    No president has ever named a political loyalist to a position ever before.

    And they’re probably all Russian bots anyway.

    1. *slaps you*

      Pull yourself together man. The independent fed is the only thing keeping this shitshow from turning into a fuckstorm.

      1. Your belief in an institution keeping society together is more farcical than most religions. Feds fuck up far more than they get right. Recoveries last far longer under the fed than they did prior because they do not allow markets to correct.

        1. Well that’s a bunch of horseshit.

          1. Well, that a plain assertion without any supporting argument, and as such useless.

            1. I’m guessing you’ve never looked at a graph comparing historical recessions. They’ve been lasting longer, and longer, and longer. And since the 80’s the recoveries have become pretty pathetic, too.

              1. That graph doesn’t make a causal relationship between the existence of the fed and longer recessions. If we included years before the fed, you could make a very credible claim that its existence led to fewer depressions. From the perspective of mainstream economics, it’s bad economic policy (from Republicans) that has made it more difficult for the economy to moderate.

            2. It’s common knowledge for people who have studied even basic economics. The charts are there for you to educate yourself if you ever chose to break free of the cycle of ignorance. Brett even provided one.

          2. and exactly why? Again the socialist speaks and nothing ineligible comes out.

  11. “Neither Cain nor Moore are technically trained academic economists, which alarms many, ”

    You mean the ones who believe government spending creates a multiplier greater than 1? The ones who predicted a 2017 recession because of trump? Dear God. How will the feds survive.

    1. ^ Yeah: “technically trained academic economists” is a bug, not a feature.

      1. Maybe. It’s not like he’s a heterodox economics professor. He was a pizza delivery CEO and failed candidate. Just because he’s not a Paul Krugman disciple, doesn’t mean he’s a good idea.

        1. You’ve become a parody of an idiot. There is a reason that the old idiom that those who cant, teach. I still remember going back to my masters in engineering after 10 years in industry. There were times the professor was asking me to tall about the concepts because he and the text weren’t right. Academics work based on theory based on many assumptions. Their theories are only as good as their assumptions. Their assumptions are generally trash.

          E.B. Box, considered one of the fathers of modeling systems, has a great quote…. all models are wrong, some are useful. Academics believe their models are right. That is where they fail.

      2. “technically trained academic economists” = “Deep State Top Men”

  12. When Brian Doherty is calling for credentialed experts to oversee the scientific central planning of our economy you know how far Reason has fallen.

    1. Well put. The central banks aren’t about any kind of free market.

    2. Another “progressive libertarian” to go with Shikha.

    3. thank you for pointing this out

    4. Yes I can’t figure this out. What happened to this magazine? Did George Soros buy it?

  13. I’m still irrationally pissed that angry Republican primary voters nominated Donald Trump instead of Herman Cain, if they really wanted an entertaining businessman as president. Can you imagine how spectacular a Herman Cain presidency would have been?! All of the entertainment Trump provides without the douchebaggery.

    1. Ya, it would have been fun to get more uzebekkibekkibekki-stan-stan comments from him. Though admittedly, I think that is basically on par for the level of intelligence and gravitas orange retard brings to the table, so maybe it isnt much different.

  14. Trump Wants to Name Political Loyalists to Federal Reserve Board

    AND?

  15. Let me get this straight: You’re complaining that a president nominates to a board those loyal to him? Because that means they won’t be technocrats, which are what we apparently really need, because technocrats are a self-perpetuating caste cut out for this kind of work? And also that Trump isn’t doing to the Fed what only Congress is allowed to do?

  16. Academically trained economists are as useless as tits on a bull.

    Jerome Powell claims that the function of the Fed is to find the “neutral interest rate”, i.e. the rate that neither stimulates nor stymies economic growth. Interest rates are the price of money and in the absence of a true market for money, it is literally impossible to know what that magic rate is.

    The act of putting a price control on the cost of money blinds economists to the real loan market. If you control the price of milk then how do you know what price will be best for both farmers and consumers? The decision ends up being made politically, either by farm lobbyists or consumer lobbyists.

    The Fed’s economists claim that they base the interest rate on facts, but at best, they base the rate on fantasies, the most fantastic of which is the one where the Fed is all knowing and all powerful. At worst, the rates are determined by bankers and political pressures.

    Moore and Cain will have no greater or lesser capacities for economic prognostication than any one of the other deluded “economists” on the Fed. You could substitute the Magic 8-Ball for any or all of them.

  17. Federal Reserve Bank of Kansas City
    Cain served as chairman of the board of the Federal Reserve Bank of Kansas City Omaha Branch from January 1, 1989, to December 31, 1991.[10] He became a member of the board of directors of the Federal Reserve Bank of Kansas City in 1992.[10] He served as deputy chairman from January 1, 1992, to December 31, 1994, and then as its chairman until August 19, 1996,[10] when he resigned to become active in national politics.[39]

    More: http://web.archive.org/web/201……26.11.pdf

  18. Oh my god! Trump wants to do what every other President has done!

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  20. It strikes me as somewhat humorous that during the 2016 campaign, Trump attacked the Fed and claimed that they were holding interest rates low to boost the economy for Obama/Clinton. Then, once elected, he howled that their raising of rates was going to stall his economy and more recently has called for the lowering of rates to boost growth. So, apparently he is no longer concerned about the gigantic bubble that he said they were creating under Obama. And the nomination of Moore/Cain is part of the push to keep the Fed from raising rates or at least try to retard the rate of the increases. And while I like both Moore and Cain, I would rather see the Fed be a bit more hawkish than they currently are since we do not seem likely to get rid of them soon. Really, we should implement some other mechanism to control rates, but they still have too much other power at the Fed.

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  22. Well, Herman Cain was the chairman of the Federal Reserve bank in Kansas City, served on its board for several years after that, successfully salvaged a company from insolvency as a CEO, and served as the CEO of the National Restaurant Association. And he’s a critic of the same policies that Reason criticized. But sure, write him off as a “loyalist” and act as if appointing some academic to the spot is a better choice.

    It’s really rather pathetic how far left Reason has moved since the 2016 election. Is the D.C. cocktail circuit really that important to you?

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