Over the past year, a lot of ostensibly smart people have steadfastly refused to admit that if push comes to shove, Donald Trump can probably figure out a way to demote Jerome Powell.
It’s not quite clear what makes that such a difficult proposition for people to accept, considering the fact that Trump has said and done innumerable things far more flagrant than demoting a central banker since ascending to the Oval Office. We are, after all, talking about the same man who strode up the podium at the UN General Assembly on September 19, 2017, and threatened to wipe out North Korea with a nuclear bomb citing, quote, “little rocket man’s suicide mission”.
Somehow, we’re supposed to believe that’s a guy who would hesitate to demote (not “fire”, mind you) a technocrat because doing so would create poor optics.
Count us skeptical.
Anyway, one clear sign that those who insist Trump can’t demote Powell are either wrong or else underestimating the White House’s penchant for flouting the law, is that the president’s advisers continue to say things like “Yes I believe [Powell’s job] is safe”.
That’s what Larry Kudlow told Kelly Evans at CNBC’s “Capital Exchange” event in D.C. on Tuesday. Here is the clip:
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Now, for one thing, that isn’t very convincing. “I would say, at the present time, yeah, he’s safe”, somehow doesn’t inspire a lot of confidence, especially given everything Trump has said about Powell over the past six days, let alone the past six months.
But beyond that, the important thing to keep in mind is that if “the law is clear” (as Powell and the Fed itself have said about the prospect of Jay not finishing his term), then it makes no sense for Kudlow to say that Powell’s “job is safe”. That is, if “the law is clear” and the administration intends to follow the law, then the answer to questions like that posed by Evans should everywhere and always be something along the lines of: “We couldn’t remove him if we wanted to, Kelly, so his job is ‘safe’ by default”.
The bottom line is that while Powell’s seat at the table might be safe, his chairmanship is most assuredly not, and if you listen to the rest of Kudlow’s comments on the subject, the entire conversation with Evans revolves around who wants to be Fed chair, which is an odd way to segue into an assurance that Powell’s position is safe.
In any event, US equities were shaky all day Tuesday on the eve of Powell’s testimony on Capitol Hill, where lawmakers will almost invariably ask how he’s holding up in the face of what can very fairly be described as a character assassination attempt being perpetrated by the actual President of the United States.
The longer version of Kudlow’s comments can be found below – to Larry’s credit, it’s actually pretty funny/jovial for a change. There’s even an exchange where everyone imagines that “Mario D.” might end up running US monetary policy.
Kudlow: Fed Chair Powell’s job is safe ‘at the present time’ from CNBC.
A little early tp ponder ,but… if Hair-on-fire is defeated and a Democrat is elected. Which, if any, of Trump’s cabinet would be asked to participate in the handing over of the reins so the new people could come up to speed on where the specific department is currently at?
The Fed operates by vote, correct? If Trump fires or demotes Powell, and if (big if) the courts uphold it, the Senate will probably refuse to confirm a fruitcake. Someone at least reasonably credentialed is likely to be the next Fed Chairman. The rest of the voting members will probably push harder for the Fed’s independence. Damage will be done to the Fed as an institution and to market confidence. I’m not convinced the Fed will obediently deliver multiple cuts just because Powell gets demoted.
Trump wins both ways: Powell will succumb to pressure from the rest of the world, and from Wall Street and even Main Street, and lower rates. And Powell still takes the fall if the economy under performs. Trump wants , no NEEDS, Powell to stay.
Is it just me that thinks that Jellen looks smarter each day that goes by?
Oh, Trump does stuff he can’t do all the time. He flouts nepotism laws, he disregards the Hatch Act, broke the law in bypassing the chain of command in the Consumer Affairs Protection Agency, has one person run multiple offices at the same time, replaced Constitutional Officers with people not confirmed by the Senate, destroyed the independence of the Justice Department, turned the Senate into a majoritarian Privy Council, spends money on projects not funded by Congress, unilaterally imposes taxes on anything he wants on national security grounds, declares everything else a national emergency, criminalized civil misdemeanors, ignored torture prohibitions, installed concentration camps, did witness tampering on Twitter, ignores pardon protocols, obstructs justice, doesn’t faithfully execute the laws,…