Why President Trump Will Fumigate The Fed

Tyler Durden's picture

Submitted by Tommy Behnke via The Mises Institute,

Starting in January, President-elect Donald Trump will have a unique opportunity to pack the Federal Reserve with hard money officials.

There are currently two open Board of Governors seats, which will most likely not be filled before the end of President Obama’s tenure. Additionally, both Chair Janet Yellen and Vice-Chair Stanley Fischer’s terms will be up by 2018. Crunch the numbers and you will see that Trump has the opportunity to replace a majority of the Board of Governors and a third of the FOMC with monetary policy hawks during his presidency.

Call me crazy, but assuming that the Republican-controlled House and Senate stands behind him, I believe that Trump just may shock the financial world by shifting this country’s monetary policy in a more hawkish direction.

Yes, this is a guy that cheered on the Fed’s easy-money policies in the years before the Great Recession. And yes, Trump did say in May that he is still a “low interest rate person” who will appoint another dove to head the Federal Reserve. Why in the world, then, am I arguing that the Trump administration might possibly install more hawkish members to the central bank?

Repeated Anti-Fed Campaign Rhetoric

For one, Trump’s occasional dovish comments do not match the passion and enthusiasm of his repeated hawkish campaign trail rhetoric. For the past year, the president-elect has been railing against the “false economy” that the Fed has created, as well as the political influence that runs rampant throughout the central bank.

Perhaps Trump’s most scathing attack on the institution came last October, when he insinuated that Fed actions are crippling the middle class without creating any type of benefit to the economy at large.

“[Chairwoman Yellen] is keeping the economy going, barely,” he said. “You know who gets hurt the most [by her easy money policies]? The people that went through 40 years of their life and saved a hundred dollars every week [in the bank].” He then paused and shook his head for added effect before adding: “They worked all their lives to save and now what happens is they’re being forced into an inflated stock market and at some point they’ll get wiped out.”

These anti-Fed talking points were recycled often on the campaign trail. In September, Trump attacked the Fed for putting us in a “big, fat, ugly bubble” and for keeping rates artificially low for political purposes, points that he again repeated in the first presidential debate. The business mogul has also promised to audit the Fed within the first 100 days of his administration and even included a criticism of the central bank in a recent online video ad.

Sound Money Economic Advisers

Team Trump’s economic advisers paint an even more optimistic picture of his future monetary policy. Some of today’s most reasonable mainstream economic voices are included in his inner circle. These names include David Malpass of Encima Global, who co-signed a letter with Jim Grant opposing the Fed’s “inflationary” and “distortive” quantitative easing program; John Paulson of Paulson & Co., who made billions from shorting the housing market before the Great Recession; Andy Beal, a self-described "libertarian kind of guy" who blames the Fed for the credit crisis; and the Heritage Foundation’s Stephen Moore, who told CSIN in 2012 that he is a “very severe critic” of the Fed’s “incredibly easy-money policies policies of the past decade.”

While none of Trump’s economic advisers are by any means Austrians, they are far more hawkish than most of Presidents Bush and Obama’s past economic advisers. Ian Shepherdson, chief economist at Pantheon Macroeconomics, has even said that these advisers are pushing Trump to nominate two “hard money” candidates to fill the Fed’s current vacancies.

“A core view of many Trump advisors is that the extended period of emergency policy settings has promoted a bubble in the stock market, depressing the incomes of savers, scared the public and encouraged capital misallocation,” Shepherdson told Market Watch. “Right now, these are minority views on the Fed policymaking committee, but Trump appointees are likely to shift the needle.”

The Mike Pence Factor

Perhaps the best news for Austrians is that reports have indicated Trump may make his running mate the “most powerful vice president in history.” This is good news, because Mike Pence is one of the more hawkish voices in the modern Republican Party.
 
While in Congress, Pence expressed regular concern that the Fed was deteriorating the value of the dollar. He introduced legislation to end the dual mandate and even talked up a return to the gold standard.
 
In a high-profile 2010 speech to the Detroit Economic Club, Pence remarked that “while there is no guarantee that [the Fed’s bond-buying] will succeed in reducing unemployment, it is near certain that the value of the dollar will be diluted.” He then went on to say that “the time has come to have a debate over gold and the proper role it should play in our nation’s monetary affairs,” because “a pro-growth agenda begins with sound monetary policy.”

Conclusion

Trump’s election has given hard money advocates the most hope in over 30 years that our nation’s failed monetary policy will be reformed. Mixed with the current hawkish wave that is already percolating in the veins of some FOMC members, Trump’s future appointments can have a huge impact on the central bank’s immediate decision-making. One can only hope that the president-elect will stick to his guns and do the right thing. Regardless of what he does, however, it will surely be a step ahead of what the Hillary Clinton rubber dove stamp would have brought to the trading desks.

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thesonandheir's picture

Just audit the fucker first

wee-weed up's picture

Don't fumigate it - abolish it!

Stackers's picture

Jim Grant for Fed President !

Amalgamated Tang's picture

Turd Furguson for FED President.

SomethingSomethingDarkSide's picture

Rend and Tear, leave no Keynesian prisoners.

 

Scott Hunsader for SEC/CFTC Chair!

Hal n back's picture

Excuse me, we are running 1.5 trillion of increased debt now and Trump will add another 1 trilion at least.

This is not hawkish. This is a gamble, big one, that they can kick start the economy.

lonnng's picture
lonnng (not verified) Hal n back Nov 14, 2016 12:05 AM

Why Trump WILL NOT touch the Fed.
http://bit.ly/2fhGqif

Mano-A-Mano's picture
Mano-A-Mano (not verified) lonnng Nov 14, 2016 12:06 AM

Fed=Zionist=Trump Love

techies-r-us's picture
techies-r-us (not verified) Mano-A-Mano Nov 14, 2016 12:07 AM

Makes sense.

philipat's picture


SPAM ALERT:
Do not open the fake links. Lonnng has now taken over as Spammer-in Chief now that Yippee Kiyay has been banned. This serial spammer previously known as: mofio, santafe, Aristotle of Greece, Gargoyle, bleu, oops, lance-a-lot, Loftie, toro, Yippee Kiyay, lonnng, letsit, Mano-A-Mano, techies-r-us, beauticelli, stizazz, Nekoti, SumTing Wong, Adullam, jcaz (some still active for talking to himself) and others. He seems to have more accounts than all other ZH members combined.
Beats me why The Tylers don’t just block his IP?

 

Yes We Can. But Lets Not.'s picture

Remember, Trump, you kept pussy out of the WH, so ya can't now be a pussy in the WH.

Balls to the wall for four years.

Mazzy's picture

He will have to go all-out in order to survive, just like any other strongman who's country is tearing apart at the seams.

scm's picture

END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED END the FED

Unknown User's picture

Just mint the trillion dollar commemorative coins. That will make the Fed irrelevant.

tmosley's picture

You seem very hopeful for a cuckold.

Did you finally hit rock bottom?

Dugald's picture

 

An avenue of sharp stakes would be better......

BullyBearish's picture

As long as private central bankers can print money out of thin air...NOTHING will ever change

 

END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed

END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed

END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed

END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed END the fed

francis_the_wonder_hamster's picture

Absolutely.  The question is whether the fallout is remotely politically palatable.  The steps that go along with Ending the Fed are massibely deflationary.  It's a result I can live with but the short and medium term pain for many might not be so bearable.

Raffie's picture

Hang'em high for what they have done.

knukles's picture

Regardless of one's political, social or economic orientations, the folks at the Fed since Volcker have been bad juju.
Place needs to be scrubbed clean.

nmewn's picture

But but but...what about the war & welfare...would this mean taxpayers would actually have to pay for the war & welfare for a "change"?! ;-)

logicalman's picture

Without the wars, there'd b plenty for everyone.

Look at the numbers - not including what the Penatagon  "can't account for" and most people's worries would be over.

francis_the_wonder_hamster's picture

Plenty for everyone?  You have heard of entitlements and the unspoken boogeyman of massive municipal pension obligations that will NEVER be affordable?

TuPhat's picture

Municipal pension obligations have nothing to do with the federal government.  They are municipal (city) obligations.  Entitlements are not real.  Do you have a contract that says the government owes you something for nothing?  Didn't think so. 

francis_the_wonder_hamster's picture

When the states become insolvent, what then?  They can't print money.  They'll need a bailout and even if there were the political will for that, there ain't enough helicopter money in the world to cover this one.

If you let those pensions settle in bankruptcy court and get negotiated down like they should be (until Obama screwed 240 years of contract law with the GM bankruptcy), you'll put a very large portion of the economy out on their a$$es.  That's fine as those pensions are a joke, but the economic damage (real estate prices, etc) are going to be devastating.

That's why there's not "plenty to go around" or whatever the term was in the original post I responded to.

logicalman's picture

Without the wars, there'd b plenty for everyone.

Look at the numbers - not including what the Penatagon  "can't account for" and most people's worries would be over.

shovelhead's picture

Jeez, that could dent their popularity a bit if you couldn't just put it on the tab.

NihilistZerO___'s picture

Ron Paul for Secretary of the Treasury... Fuck it

HardlyZero's picture

Nigel Farage is also in town.  He has a gold touch.

WillyGroper's picture

shit, dissolve it & give it to the treasury where it belongs.

billwilson2's picture

Mises off in dreamland again.

Donald will do as he is told. There will be no real change.

 

mahershalalhashbaz's picture

Correct! Too many necks, not enough lamposts!

truthynesslover's picture

LOL!!

 

Im sure Jamie Diamon will get right on that......the delusion keep on coming....

Uzda Farce's picture
Uzda Farce (not verified) Nov 13, 2016 9:38 PM

Trump "advisors" John Paulson and David Malpass are members of the Rockefeller/CFR. Paulson is a CFR director. Every member of the current Fed board of governors and every Fed chairman since WW2 has been a CFR member.

Also: Stanley Fischer, Jacob Lew, Hank Paulson, Tim Geithner, Larry Summers, Robert Rubin, Lloyd Blankfein, Jamie Dimon, Laurence Fink and George Soros. Rubin and Geithner are also CFR directors. See member lists at cfr dot org.

https://www.federalreserve.gov/aboutthefed/default.htm

http://www.cfr.org/about/people/board_of_directors.html

cigarEngineer's picture

Nah. I think Trump is a debt guy and he is happy with 0% interest so he can borrow and go empire-building, just like any other CEO.

jamesmmu's picture

wow, 10yr yield just up 2%. bond implosion? Will trump gonna audit the Fed? No more QE?

daveO's picture

A buyer's strike by the FED in order to take down the markets b4 Trump enters office. Yuuge QE coming next year.

Latitude25's picture

Hopefully this will happen.  It's exactly why I voted for him

jamesmmu's picture

If Ron Paul not on board = nothing is going to change

Sizzurp's picture

You can't have hard money without massive devaluation, otherwise you will be paying back all that debt and unfunded liabilities with very expensive dollars.  You would probably have to re-price gold to 30k.  Easiest way out is to just have the Fed buy back all debt at a fixed price, then forgive it. Go hard money after that. 

caesium's picture

The only thing Trump knows is how to default. He should do that. A crashed dollar is more effective than a trade war with China and building a wall. The jobs will come back also. Next up, tax land and not labor. This 1% trickle down mechanism has failed. He should also take a salary for being president.

AViewFromDublin's picture

End the Fed and bring back the Greenbacks!

Stormtrooper's picture

No, not Greenbacks.  Bring back the Continental.

mojojojo's picture

This is one of the more interesting things to me. Monetary policy, the FED, gold. Audit the FED, IRS, Pentagon etc.

lolmao500's picture

Send Krugman, Bernanke, Dimon, Geithner and Yellen to prison first.

Goldilocks's picture

When You Wish Upon A Star - sung by Jiminy Cricket (Cliff Edwards)
http://www.youtube.com/watch?v=HKh6XxYbbIc (3:23)

shovelhead's picture

You need some cheering up.

Obama's going to sing this at Trumps inauguration.

https://www.youtube.com/watch?v=6bWyhj7siEY