New Boss Same as the Old Boss: Powell Is Closer to Schumer than Trump
Jerome Powell will take the reins of the Federal Reserve next year. After all the speculation about big changes at the Fed with Trump in the White House, it appears the new boss is pretty much the same as the old boss.
So much for draining the swamp. Powell is a swamp creature. As Peter Schiff pointed out, “He 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.”
In an article published on the Mises Institute blog, Ryan McMaken expanded on this theme, echoing Hunter Lewis who said Powell is more like Chuck Schumer than Donald Trump.
Hunter Lewis‘s op-ed at Foxnews today explains how Trump’s new nominee for the Fed Chairmanship, Jerome Powell, is anything but a departure from business as usual. Lewis begins by comparing Powell’s appointment to that of Ben Bernanke:
By nominating Jerome Powell as chairman of the Federal Reserve, President Trump is elevating a nominal Republican but also an Obama administration appointee to the chairmanship of our nation’s central bank. Many consider the chairmanship to be the second-most powerful position in the U.S. government.
This is not the first time something similar has happened. In 2006 President George W. Bush appointed Ben Bernanke, also a nominal Republican at the time, who on leaving the Federal Reserve registered as a Democrat.
No wonder that Democratic Sens. Chuck Schumer of New York and John Kerry of Massachusetts publicly rejoiced when Bernanke was appointed. They correctly surmised that he was closer to them philosophically than to President Bush.
Democrats should be equally pleased about the Powell nomination. This puts someone in charge of the Federal Reserve who is more aligned philosophically with Schumer than with President Trump.
Lewis then goes into some history of the Fed’s enthusiasm for “non-traditional” monetary policy which is designed primarily to help Wall Street and Washington, DC. The crash itself had been triggered in part by Fed policy:
The trigger for the Crash was the chairman’s stubborn refusal to reconsider the imposition of “mark to market” accounting on U.S. banks. This form of accounting reflects the current market value of assets and liabilities. Steve Forbes accurately identified “mark to market” regulations as “mark to make believe.” They were guaranteed to make the entire banking system insolvent.
When Bernanke finally relented and announced the termination of “mark to market” the stock market bottomed only a few days later and thereafter soared as more easy money was poured in. These policies, cheered on by the Democrats, represented true trickle-down economics. They helped those already rich, not the poor or the middle class.
During the Crash, Bernanke devised a novel monetary policy that was remarkably unsupported either by economic evidence or theory. Federal Reserve economists acknowledged that they could not model it. The stated purpose was to protect Main Street, although it was obvious that Wall Street and not Main Street was being bailed out. What was not so obvious was that the real intention was to rescue a tottering federal government debt system.
Hunter concludes by noting that Powell is merely a continuation of the current monetary status quo:
On the Federal Reserve, Powell has been a “good soldier.” He never voted against the wishes of either Bernanke or Yellen. He vigorously opposed legislation proposed by Rep. Ron Paul, R-Texas, and his son, Sen. Rand Paul, R-Ky., to audit the Federal Reserve.
The Paul legislation would have penetrated some of the secrecy of the Federal Reserve, which finances itself “off-budget” with newly created money, notwithstanding the Constitution’s requirement that government spending be approved by Congress.
Powell can be relied on to oppose any reform of the Federal Reserve or any reconsideration of the Bernanke system, despite the dismal record of the U.S. economy since the Crash. Powell was reportedly favored by current Treasury Secretary Steve Mnuchin, who earlier worked for Goldman Sachs and liberal financier and donor George Soros.
Powell Has Long Hated Fed Reform
For further evidence of Powell’s position on Fed reform, we need look no further than his official comments on “Audit the Fed” legislation:
Audit the Fed also risks inserting the Congress directly into monetary policy decisionmaking, reversing decades of deliberate effort by the Congress to insulate the Fed from political pressure in carrying out its day-to-day duties. Indeed, some advocates of the bill have expressed support for complete elimination of the Federal Reserve. Long experience, in the United States and in other advanced economies, has demonstrated that monetary policy is most successful when decisions are rendered independent of influence by elected officials. As recent U.S. history has shown, elected officials have often pushed for easier policies that serve short-term political interests, at the expense of higher inflation and damage to the long-term health and stability of the economy.
Powell goes on to repeat the usual orthodoxy pushed by central bankers which pushes the myth of Fed independence, and the idea that the Fed is a non-political organization. In short, Powell believes the Fed does only excellent work, and no reform is warranted at all.
Powell is nothing more than the usual sort of central banker.
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