Trump’s Politicization Of The Federal Reserve

Admittedly this is not a sexy topic.  But it is a most important one.

From the start of the Trump Administration there has been an attempt to politicize the Federal Reserve.  This week that zeal went into overdrive.   The names of two of Trump’s vocal supporters, Stephen Moore and Herman Cain, were talked about as being named to the board of governors.  Placing partisan faces on the board is yet another attempt to undermine a national institution that will ratchet up verbal heat while also potentially causing harm to the economy.

The needed independence of the Fed from partisanship, or the whims of a president, is something that is baked into the national DNA.  The logic for such a separation goes without saying.  History shows that the work of the Fed is not to do the expedient thing, which would be the tactic taken by politicians or their handlers.

There is a huge gulf between highly competent economists who drill down into data, from most elected officials who would never be able to master anything more difficult than a graph of their polling numbers. The Fed members see data as it plays out in a vast network of world financial institutions while making sure the best actions are taken for our national economic growth.  Politicians see only the next election, but fed members play for the long term, well after the next election.  Where we are today, just in relation to the dollar, underscores the vital role these members play.  As I write the dollar is strong and that is due to the judicious and non-political nature of the Federal Reserve.

We must keep it that way.

On the opposite side of this debate would be Trump’s appointments of two people with flawed reputations.  The antics from Trump show why we have cause for concern.  How many verbal take-downs has Fed Chair Jerome Powell been forced to endure?  And he was Trump’s choice!  The Fed is no more a place for Trump to dictate his whims, than is the Attorney General to be his personal attorney.   I understand that Trump was not schooled in civics, but for the sake of the nation the brakes need to be applied on his reckless behavior.

Rand Paul Vs. The Federal Reserve

See we live here in reality….and Rand Paul lives waaaayyyyy up there.

But Paul could face a significant challenge if he emerges from Iowa with a legitimate shot at the Republican nomination. Because experts say he gets many of his arguments about the Fed flat wrong. And the establishment wing of the GOP — backed by piles of Wall Street money — views Paul’s approach to the Fed as dangerous and irresponsible.

“He seems to have a poor understanding of what’s actually on the Fed balance sheet and how the bank operates,” said James Pethokoukis, a scholar at the conservative American Enterprise Institute. “And if you don’t have a firm grip on one of your signature issues, people eventually are going to doubt other things you have to say.”

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Another element of the case against Rand Paul’s view of the Fed is that his critiques of its policies threatening runaway inflation and crushing the dollar have been wrong. “If people are prepared to carry money to the grocery store in a wheel barrel, that may be coming,” Paul warned on the Glenn Beck radio show in 2011. “What I worry about is the Weimar Republic, I worry about 1923 in Germany. When they destroyed the currency, they elected Hitler. I don’t want something like that to happen in our country.”

Instead, in the ensuing years, inflation declined and the dollar strengthened to the point that it is actually damaging to U.S. exporters. And academic research shows that the more political pressure a central bank faces, the more inflation rises, the thing Paul says he worries about the most.

Aside from boosting his cred among libertarian voters, Paul is also using the anti-Fed campaign to raise small-dollar donations online.

A “moneybomb” drive accompanying Paul’s recent Iowa speech has raised about $90,000 so far (short of the initial $150,000 goal that the team was supposed to hit by Feb. 9, it appears, though representatives for the senator wouldn’t confirm any details about the initiative, including the total money raised by the effort). They also did not respond to a request for comment on the substance of Fed experts’ critiques, instead directing those questions to a pro-audit writer.

Matt Strawn, a former chairman of the Iowa GOP, said that so far, the only people in the state who are deeply attuned to this issue are the libertarian-oriented Republicans Paul is trying to excite.

Ron Paul Shows Racist Colors In Washington Hearing

Hat tip to James

This is not the first time I have posted on the truly ugly side of Congressman Ron Paul.  That Ron Paul is a despicable racist is without question.  That Paul is now allowed to showcase that racism from a leadership position in the Republican House of Representatives is maddening.

Ron Paul is chairman of a House subcommittee overseeing the Federal Reserve.  Anyone who has listened to Paul speak for five minutes about the Fed knows he should be on medication.  When you mention the Federal Reserve one can see the ‘black helicopters’ start to fly in the head of Ron Paul.

The problem is that Ron Paul has a problem with anything that is black.

Which leads me to the Civil War……and would you believe back to the hearing that Paul chaired.

Stick with me.

At one point, when Paul opened up the hearing to questions from committee members, Rep. Lacy Clay (D-Mo.) directly took on DiLorenzo for his membership in the League of the South, an organization that has been designated by the Southern Poverty Law Center as a “neo-Confederate” hate group advocating for Southern secession.

Clay then rattled off a list of some of DiLorenzo’s articles, including “More Lies about the Civil War,” “In Defense of Sedition,” and “The First Dictator-President,” which examines “how Lincoln’s myth has corrupted America.”

“After reviewing your work and the so-called methods you employ, I still cannot understand you being invited to testify today on the unemployment crisis, but I do know that I have no questions for you,” Clay concluded.

 The reason a racist was called to testify is because there was a racist chairing the committee.   The League of the South called slavery “God-ordained” and described segregation as necessary to the racial “integrity”. 

There was no reason that DiLorenzo should have been at the congressional hearing to speak about job creation and the unemployment rate.  He claims to be an economist but instead is best known for his life’s work of rewriting the history of the Civil War and Lincoln’s role in it.  DiLorenzo was at the hearing to make a point about the volume of hate that we can come to expect with the vile Ron Paul in charge of this subcommittee.

Question is how will the GOP, who hopes to court more of the black vote, deal with the in-your-face racism of Ron Paul?

President Bush Acted Like A Potted Plant In Week Of Financial Chaos

It was been a week that historians will write about.  The Federal Reserve took on new roles and responsibilities that will alter the economic landscape, for better or for worse.  It is far too early to know.  While the major players at the Treasury Department, and the Federal Reserve were spending sleepless days and nights trying to cope with the mounting financial crises, there was a noticeable absence from the President.  He was as visible this week to calm a nation, as he was visible while in the military.  The President was nowhere to be found except for a brief stint at a podium where he read a few scripted and meaningless sentences.

What America needed of course was what FDR had supplied the nation in time of financial turmoil.  A calming voice that explained exactly what was happening, and how the federal government was in charge, and what actions were being taken to insure that the problem could be contained.  However, there was no public appearances by Bush that allowed for his words to better enlighten the nation about the very complicated affairs with Wall Street, and the powerful players in our nation’s financial circles.

If was as if President Bush was being blind to the very facts that were in front of him.  Much like President Hoover who could never quite grasp the enormity of the problem, so Bush seems unwilling to face the hard facts.  The lack of long over-due regulations, the very type that John McCain has long fought, are the core reasons why we are in this historic mess. 

It is remarkable how out of touch Presidents can be, and how detached they can be with the problems that mount.  President Hoover never saw a “Hooverville” until 1932 and never spoke with anyone in the front line of the economic war.   This week when the nation was reeling from a fretful day of massive uncertainty President Bush was in a tux and eating lobster in the White House.

That evening, after the stock market had nose-dived, with the Dow Jones industrial average falling more than 500 points, Mr. Bush, his wife Laura and more than 100 of their guests dined on Maine lobster and ginger-scented lamb during a state dinner in the African leader’s honor. Then, in their tuxedos and ball gowns they repaired to the Rose Garden to watch actors from Disney’s musical “The Lion King” perform a medley of songs under the cool, dark Washington sky. 

While state dinners are important on many levels, and I have no problem with any part of it, I do think that time should have been made for a chat by Bush with the American people.  Even though Bush has extremely unfavorable ratings, he still must gather some sense and pretend to lead the nation, even if only to explain what was happening on his watch.

Leadership is something that has been reduced to a joke in this White House, and this past week we have seen this to be true.  Seems like Bush’s paycheck should be reduced for being nothing more than a potted plant while Wall Street crumbled.

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Will Feds Have Ample Financial Reserves For Future Obligations?

This can’t be good.

The Fed’s balance sheet, moreover, is being stretched in ways that seemed unimaginable one year ago. As recently as last summer, the central bank’s entire vault of reserves — about $800 billion at the time — was in Treasury securities.

By last week, the Fed’s holdings of unencumbered Treasuries had dwindled to just over $300 billion. Much of the rest of its assets were in the form of loans to banks and investment banks, which had pledged riskier securities as collateral.

In a sign of how short the Fed’s available reserves had become, the Treasury Department sold tens of billions of dollars of special “supplementary” Treasury bills on Wednesday to provide the Fed with extra cash. The Treasury sold $40 billion of the new securities on Wednesday morning and will sell $60 billion more on Thursday. More money-raising is sure to follow.

“The Fed is very stretched, and that’s why they’ve asked the Treasury to go ahead with these proposals,” said Lou Crandall, chief economist at Wrightson ICAP and a longtime analyst of the Fed’s market operations. “You don’t want the market wondering whether the Fed has enough reserves to handle the next supplicant.”

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