The Swamp Wins: Trump Expected To Nominate Powell To Replace Yellen

Authored by Tho Bishop via The Mises Institute,

In the end Donald Trump will get what he wanted, a “low interest rate person” who also happened to be a “Republican.”

Jerome Powell is expected to replace Janet Yellen in an announcement later this week. If so, this means Trump will ensure that, while the stationary at the Eccles Building will change, the monetary policy guiding it likely will not.

The fact that, in naming Powell, Trump is picking an Obama-appointed Fed Governor for his most important nominations is itself quite fitting. While we have long known that bad monetary policy is bipartisan, Powell’s nomination serves as a particularly useful illustration of how little has changed in Washington since the Bush Administration.

Of course, just as Trump received his loudest applause from Washington for doing his best impersonation of his two predecessors, the President is already being praised for making a “grown up” decision when it comes to the Fed. While his awareness optics likely prevented him from ever truly considering reappointing Janet Yellen –—the preferred choice of the DC and NY — Powell’s nomination ensures that Trump’s scathing criticism of the monetary orthodox has been predictably discarded alongside a number of his most exciting campaign promises.  

Now we will see how else Trump squanders his historic opportunity to rearrange the Fed.

The administration has signaled that its plans to form a policy consensus with its remaining Fed choices - as opposed to opening FOMC meetings into some truly spirited debate.

This likely means that John Allison, whose resume as head of BB&T during the financial crisis and an admirer of Mises and Hayek made him the best fit for Candidate Trump’s rhetoric, is unlikely to be seriously considered for anything. Of course given the dangerous world the Fed finds itself in, it’s likely for the best that Allison emulates the example of Ludwig von Mises who, when offered a prestigious bank position in the 1929, famously said, “a great crash is coming, and I don’t want my name in any way connected with it.”

Going forward, it will be interesting to see how Republicans in the House and Senate proceed. For years now, House Financial Services Committee Chairman Jeb Hensarling has been pushing Fed reform which would have included requiring the Fed to adopted rule-based monetary policy. While this would have complimented the nomination of John Taylor or Kevin Warsh, Powell has made it clear that he opposes such limits being placed on the Fed.

Going forward, we should expect to see the Fed continue its tediously slow normalization of its balance sheet – what George Selgin has cleverly dubbed Operation SNAIL. Whether the Fed continues with its projected interest rate hike in December may itself depend on Congress. The legislature’s knack for kicking the budgetary can down the road as led to yet another “fiscal cliff” scenario at the end of the year.

While we can be ensured that outcome will be more spending (and more debt), the bout of yet another round of arbitrary drama may give the Fed enough of an excuse to follow their lead and hold off until 2018. 

 

Comments

Herd Redirecti… TuPhat Wed, 11/01/2017 - 12:29 Permalink

Jesuit educated... Jerome H Powell. (of course Trump has his share of Jesuit education and connections as well)"In 2013, Powell made a speech regarding financial regulation and ending "too big to fail".[15] In April 2017, he took over oversight of the "too big too fail" banks.[16]"Says it all, really."Powell has been a skeptic of round 3 of quantitative easing, initiated in 2012, although he did vote in favor of implementation.""In 2017, Powell reported that he had a net worth of between $19.7 million and $55 million, making him the richest member of the Federal Reserve Board of Governors.[2][3]"Donated to McCain in 2008."From 1997 to 2005, Powell was a partner at The Carlyle Group, where he founded and led the Industrial Group within the Carlyle U.S. Buyout Fund.[8][12]"His wife is Elissa Leonard, who works as a Producer in Film and Television.I am just going to go out on a limb and say there is a lot that screams "CRYPTO!" here.  Of course, Ignatius Loyola, founder of the Jesuits was a crypto-Jew.

In reply to by TuPhat

inhibi nope-1004 Wed, 11/01/2017 - 11:41 Permalink

Exactly. Does anyone, anyone at all, have any hope that they would actually be fiscally conservative? They already tasted the deliciousness of free money. They aint goin back - imagine Them having to work again for a profit, risk their OWN skin, not just watch a stock/put/option/realstate go up or down - which they bought using the free money siphoned to them by the Fed/BB.This era shouldnt be called the 'Silicon Age' but the 'Silly Age' - a group of chimps dancing around a pile of money, watching a screen of numbers going up and down, while the rest of the world burns around them.

In reply to by nope-1004

Mementoil NugginFuts Wed, 11/01/2017 - 11:16 Permalink

A "low interest kind of guy" is going to be "the grownup choice" for a Fed chair, until it won't...Just wait and see what happens when inflation finally picks up, and the Fed has not intention of fighting it.By the way - has anyone noticed that crude oil just had a golden cross the other day?Stagflation, here we come!

In reply to by NugginFuts

Billy the Poet caconhma Wed, 11/01/2017 - 11:00 Permalink

I continue to be impressed by the naivete of some people around here. It's as if they believe that the American political process is a crucible in which the most qualified and honorable citizens can rise to lead the nation.  Guess what? That's not how it works at all and so if you try to judge Trump or anyone else by that standard then you're going to sound foolish. PS -- Don't just downvote. Explain why you think that the American political process is or can be as pure as the driven snow.

In reply to by caconhma

Billy the Poet Bryan Wed, 11/01/2017 - 11:45 Permalink

This atheist agrees. Never thought I'd be sad to see the withering away of organized religion but the void left behind is malignant. Some, like the Unitarians, tried to let the magic go while retaining the morality of religion but not enough folks followed that example.Most Christian morality is reasonable in my opinion and can stand on that merit alone. That's a personal choice and I have no problem with those who express a more traditional position. But the loss of faith accompanied by the rejection of morality seems like tossing out the baby with the bath water to me.

In reply to by Bryan

Billy the Poet Anon2017 Wed, 11/01/2017 - 13:03 Permalink

I don't see 2010 as some bright line in American politics. There also seems to be something amiss about the premise that money has no place in politics despite the fact that politics is almost exclusively a game of redistributing money from some parties to other parties.If you want to take money out of politics then go all the way and make redistribution illegal.

In reply to by Anon2017

Eyes Opened Billy the Poet Wed, 11/01/2017 - 17:18 Permalink

''If you want to take money out of politics then go all the way and make redistribution illegal." Now you are slingin the baby out with the bath water...Hillary spent a BILLION dollahs .... think about that for a moment... most went to the media.... put a halt to that & you will see changes.As for the whole "re-distribution" thing ?? TOTAL TRANSPARENCY will do a lot to see changes here too... But... we all know it ain't ever gonna fly... turkeys & christmas & all that...

In reply to by Billy the Poet