Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold – “Make Me Feel Good…Tell Me Anything” - 25th Sept 18
Sector Rotation Continues. Bullish for Stocks - 25th Sept 18
Whose Trillion is it Anyway? US Federal Government Shocker! - 25th Sept 18
Focus on the Stock Market’s Price Action and Ignore the Failed Hindenburg Omen - 25th Sept 18
5 Problems All Restaurant Owners Will Face - 25th Sept 18
Gold Price Trend Forecast 2018 - Video - 25th Sept 18
How the US Dollar Penalizes Emerging Asia - 24th Sep18
Stock Market Macro/Macro View: Waves and Cycles Part II - 24th Sep18
DJIA Makes New High  - 24th Sep18
Gold Price Trend Forecast 2018 - 24th Sep18
The Stock Market Has Been Exceptionally Strong this September. What’s Next for Q4 2018 - 24th Sep18
Gold / US Dollar Inverse Trend Relationship Video - 23rd Sep 18
US and Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade - 23rd Sep 18
Gerald Celente Warns Fed May Bring Down the Economy, Crash Markets - 23rd Sep 18
Top 3 Side Jobs for Day Traders - 23rd Sep 18
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB

Market Oracle FREE Newsletter

Trading Any Market

How Trump Can Bring Outside-the-Box Thinking to Bear on the Fed

Interest-Rates / US Interest Rates Dec 08, 2016 - 12:28 PM GMT

By: MoneyMetals

Interest-Rates

President-elect Donald Trump will soon have the opportunity to put his stamp on the Federal Reserve. And that is making the elite body of central bankers nervous.

On the campaign trail, Trump harangued Fed chair Janet Yellen for pumping up financial markets with cheap money – accusing the Obama appointee of being politically motivated.


Trump also called for the Federal Reserve to be audited.

The Fed operates in secret, creates inflation, and bails out Wall Street.

Fed officials worry the Trump presidency represents a unique threat to the Fed’s closely guarded “independence.” Sound money proponents, meanwhile, are hopeful that some long overdue reforms of the monetary system could begin to take shape.

The first item on the new president’s Fed agenda will be to appoint two members to the Board of Governors. The seven-seat Board currently has two vacancies that can be filled immediately.

The Board of Governors exerts direct influence over monetary policy and can push the Fed chair toward adopting a consensus opinion.

Trump Can Appoint Two New Fed Members Now and Replace Yellen Soon

Janet Yellen is likely to stay on as the public head of the Fed at least until her term expires in February 2018. (Trump could potentially ask her to step down, but he cannot unilaterally fire her.) The president-elect has previously indicated he intends to replace Yellen with a Republican. However, Trump’s appointments for Treasury and Commerce Secretary, Steven Mnuchin and Wilbur Ross, muddied the waters by recently praising Yellen’s job performance.

Mnuchin, a Goldman Sachs alumnus, and Ross, a billionaire investor, have benefited from the easy money policies of Yellen and her predecessors. The values of financial assets get artificially propped up by the Fed’s injections of stimulus into the financial system.

Wall Street isn’t interested in overturning the current monetary order. It is interested in making sure its interests continue to be served by it.

The incoming president’s job is to represent the interests of ordinary Americans. Trump ran a populist campaign that drew heavy support from the South and from “flyover country.” These regions have historically been under-represented in the media, in government, and in the financial system.

Northeast elites continue to wield outsized power. That certainly holds true within the Federal Reserve itself. Since 1996, 80% of Fed governors have come from the East Coast, according to an analysis by Yale Law & Policy Review. Worse, nearly all ascribe to the Keynesian interventionist school of economics of inflation, debt, and government stimulus.

A narrow groupthink pervades within the Fed. President-elect Trump could change that by injecting some fresh, outside-the-box thinking into the Board of Governors through his two upcoming appointments. Then in 2018, he could replace Fed chair Yellen and Vice Chairman Stanley Fischer to potentially give the central bank a new ideological character.

Congress Can Rein in the Fed with Audits and the “Taylor Rule”

The Republican Congress will also have the opportunity to put its stamp on the direction of monetary policy. Senator Rand Paul and Representative Thomas Massie will try to push the Federal Reserve Transparency Act through Congress for President Trump’s signature. The bill to audit the Fed will face partisan roadblocks in the closely divided Senate, however.

Other measures to reform the monetary system could be taken up. Alabama Republican Senator Richard Shelby proposes a commission to overhaul the structure of the Federal Reserve.

Congress could also move to limit the Fed’s authority over interest rates by imposing a rules-based formula. The so-called Taylor Rule would spell out specific criteria for the Fed to follow in making policy decisions.

One advocate of this approach is Trump economic adviser Stephen Moore. Something like a Taylor Rule that incorporates gold or commodity-based benchmarks would be a significant step toward a sounder dollar.

Congress Can Remove the Fed Mandate Used to Excuse Loose Money

At present, the Fed’s so-called “dual mandate” gives policymakers a ready rationale to expand the currency supply whenever they judge employment data to be subpar. While other central banks are tasked with the single objective of price stability, the Fed also has the job of pursuing “maximum employment,” and that has been its biggest excuse for maintaining loose monetary policy.

It wasn’t always this way. In 1977, Congress amended the Federal Reserve Act to broaden the central bank’s public mandate: "The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."

The new Congress could amend the Federal Reserve Act to take away the dual mandate and instruct monetary planners to pursue the single objective of stable prices. But the political reality is that a Republican administration that rode into power on a platform of bringing back jobs won’t want to see any potential tools for promoting job growth eliminated on its watch.

If Donald Trump appoints the right people to the Fed, they could enact pro-sound money reforms internally – perhaps even after he leaves office.

Trump met with Former BB&T CEO and sound money advocate John Allison while evaluating candidates for Treasury Secretary. Allison has indicated he’d also consider serving as the next Fed chairman. As an opponent of central planning and a proponent of free-market economics and gold, he would bring the sort of “outside the box” perspective needed to reform the Fed.

Major monetary reforms won’t happen overnight. Let’s face it: The system is rigged to resist change. But it is not impervious to change!

If a strong-willed leader who knows something about beating rigged systems pushes for change, then it can happen. And if the public pressures their representatives in Congress to get behind bills to audit and reform the Fed, then grassroots Americans can begin to wield influence in political territory that entrenched Wall Street and banking interests have heretofore claimed as theirs.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2016 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules