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Another Swamp Creature to Head the Fed

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Trump said he was going to drain the swamp.

Apparently, the drain is clogged.

Trump picked another swamp creature to chair the Federal Reserve. Jerome Powell got the nod to replace Janet Yellen when her term as Fed chair ends in February. As Tho Bishop at the Mises Institute put it, “this means Trump will ensure that, while the stationary at the Eccles Building will change, the monetary policy guiding it likely will not.”

Powell already sits on the Federal Reserve Board of Governors. He’s a Republican, so that’s different. But he was also an Obama appointee to the Fed board. That’s not so different. The D.C. establishment praised Trump for making a “grown-up” decision. That tells you everything you need to know. As Bishop said, Trump has gone with the swampy status quo.

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.”

Peter Schiff echoed the same theme in his most recent podcast, saying as far as he’s concerned, Trump could have just as well left Yellen in place.

[Powell] has pretty much voted in lockstep with Janet Yellen the entire time she has chaired the Fed. The only real difference between the two is party affiliation. Powell is affiliated with the Republican Party, even though he was nominated to be on the Fed by Barack Obama. So, obviously not that strong a Republican if he was acceptable to Barack Obama.”

More troubling is the fact that Powell exhibits many of the characteristics Trump criticized Yellen for during the presidential campaign. Candidate-Trump accused the Fed chair of being political, of taking actions meant to make Obama and Hillary Clinton look good, and of blowing up a “big, fat, ugly bubble.” That’s why many people voted Trump. They thought they were getting an anti-establishment president. They believed he was going to drain the swamp. As Peter points out – that’s not happening.

The water level in the swamp is not going down at all with the nomination of Jerome Powell … Trump doesn’t want to change the game. He wants to keep playing the game.”

Back in August, Peter talked about the “Yellen put” and how it might have expired. Well, now we have the “Powell put” to replace it.

He wanted somebody who would be as political for him as Janet Yellen was for Obama, so he went with Jerome Powell – an insider, a yes-man, somebody who is going to fancy himself a member of the Trump team, and who will do whatever Trump wants to try to put a band-aid on this economy to get him reelected. He’s going to be political. He’s going to keep interest rates artificially low. If the stock market starts to tank, don’t worry because now the Fed has got his back. We got that put back. We got the Powell put. The Powell put is here even if the Yellen put expired because she wasn’t a Trump fan. You know that we’re going to get a brand new put with Powell, and he’s going to keep the market up if it means cutting rates to zero – going negative so-be-it. QE four – no problem. Let’s get it ready, right? He is the yes-man Trump wants.”

Interestingly, Powell does not have a degree in economics. You might think that’s a plus. After all, Bernanke and Yellen both have PhDs in economics. In other words, they were indoctrinated in Keynesianism. But as Peter points out, Powell is still part of the club.

He’s hung out with these guys long enough that he’s probably picked up a lot of their nonsense. So, I assume he has all the same failures when it comes to understanding economics as Yellen and Bernanke.”

In other words, the new boss is pretty much the same as the old boss. We can expect the same brand of interventionist monetary policy to continue into the future.

Trump had an opportunity to actually change things. He had a chance to make a move that could have truly drained the swamp. He talked the talk during the campaign. Peter noted Trump even talked about the gold standard as a candidate. But President Trump isn’t the same as candidate Trump.

I mean, there’s no gold standard when it comes to Jerome Powell. This is business as usual, Keynesian money printing, bubble blowing, QE, ZERP – all this stuff is going to continue, which means for Trump voters, the pain is going to continue.”

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