Former Senior Fed Official Urges Monetary Policy to Defeat Trump in 2020

by Stephen Lendman (stephenlendman.org - Home - Stephen Lendman)

Both extremist right wings of the US war party threaten everyone everywhere.

Trump and hardliners surrounding him exceed the worst of their predecessors — undemocratic Dems the lesser of two evils at this time.

Trump's unlikely to be resolved trade war with China, damaging the US and global economy, heightening chances of a stiff recession in the coming months or next year, got former New York Fed president/economist Bill Dudley to urge Fed chairman Jay Powell and board of governors to use monetary policy to prevent a second Trump term.

From 2009 - 2018, Dudley served as vice chairman of the Fed's Open Market Committee, its rate-setting body.

DJT is hostile toward Powell for not cutting (already way too low) interest rates more sharply.

Last Friday, he tweeted: "who is our bigger enemy, Jay Powell or Chairman Xi?" At the same time, he called the Fed "weak" under Powell's stewardship.

Separately he said: "Do I want (Powell) to resign? Let me put it this way: If he did, I wouldn't stop him."

Last week, Powell angered Trump, saying the Fed shouldn't wage his trade war with China. "Setting trade policy is the business of Congress and the (Executive), not that of the Fed," adding:

"While monetary policy is a powerful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade."

Last Friday, Dudley said the Fed should "refuse to play along" with Trump's trade war by cutting interest rates further, adding:

Trump's "trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook."

"Central bank officials face a choice: enable (Trump) to continue down a disastrous path of trade war escalation, or send a clear signal that if (he) does so,(he), not the Fed, will bear the risks — including the risk of losing the next election."

"Trump's reelection arguably presents a threat to the US and global economy, to the Fed's independence, and its ability to achieve its employment and inflation objectives."

"If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020."

The Fed "could state explicitly that the central bank won't bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions."

A Fed spokeswoman responded to Dudley's remarks, falsely saying "(p)olitical considerations play absolutely no role" in policymaking.

The Fed isn't federal. It's owned, operated and controlled by major Wall Street banks, serving corporate interests and the nation's super-rich, dismissive of the public welfare.

In theory, the Fed was established to stabilize the economy, smooth out the business cycle, manage a healthy, sustainable growth rate, and maintain stable prices. 

It failed dismally, its policies creating boom and bust cycles. It's responsible for the eroded standard of living of most Americans.

Under the Fed, privileged Americans never had things better, most others exploited so they can benefit.

Since quantitative easing (QE — money printing madness by the Fed) began during the 2008-09 financial crisis, followed by the great GOP 2017 tax cut heist, corporations used the windfall for speculative excess, executive pay increases and bonuses, stock buybacks to raise valuations, mergers and acquisitions to reduce competition, dividends to shareholders, and offshore activities, including stashing trillions of dollars in tax havens.

It didn't go for productive investments to stimulate economic growth and jobs creation, what's been lacking in the US for years.

Instead of a virtual cycle of prosperity lifting all boats equitably, rock-bottom interest rates, QE, and tax cuts for the rich created an enormous wealth gap, matching or exceeding the roaring 20s and earlier age of the robber barons — democracy for the privileged few alone.

Interest rates are rock-bottom, the Fed funds rate between 2 - 2.25%, more cuts likely coming, perhaps going negative for the first time in US history if a severe economic downturn occurs.

Despite the national debt exceeding GDP, there's no restraint on Fed money printing madness, QE likely coming if the economy turns south.

Despite the Fed's negative-sounding response to Dudley's suggestion, it's unclear whether the Open Market Committee (meaning Wall Street) may try to engineer Trump's electoral defeat next year.

It may depend on if his trade war escalates, driving the US and global economy into a protracted downturn.

It'll be a while to see how things play out.

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My newest book as editor and contributor is titled "Flashpoint in Ukraine: How the US Drive for Hegemony Risks WW III."

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