This is the second post we’ve dedicated to Bill Dudley’s rather bold Bloomberg Opinion piece published Tuesday.
The first post recaps how we reached a point where one of the biggest names in US monetary policy felt compelled to openly call on his former colleagues to rebuke a sitting US president.
We’ve written voluminously about the subject before, and those who want a summary of the rationale behind Dudley’s remarks (along with a flow chart) are encouraged to read our initial take, linked below.
Bill Dudley Has Some Advice For The Fed: Tell President Trump He’s On His Own
But in addition to forcefully making many of the points analysts and economists have been making for the better part of a year, Dudley goes out on a limb and openly calls for Jerome Powell and the Fed to orchestrate Trump’s ouster.
You can understand why we thought that deserves a dedicated, separate post. Here is the quote from Dudley:
There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. 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.
That is as close to calling on the Fed to engineer the overthrow of the man in the Oval Office as it gets and, because Trump is everywhere and always his own worst enemy when it comes to giving his critics figurative ammunition, Dudley’s reasoning is rock-solid.
The Fed’s mandate is clearly in jeopardy, and with it, the fate of the US economy and the financial well-being of all Americans.
In addition to that, there’s a very good argument to be made that Trump represents a clear and present danger to the economic fate of the entire world.
(Earlier this month, former chairs Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen called on the White House to cease and desist from assailing the Fed.)
It’s been said on several occasions since Trump began attacking the Fed 13 months ago that the one person with the power to summarily boot the president from 1600 Penn. is Jerome Powell.
On Tuesday, Bill Dudley called on the Fed chair to wield that power.
(An abridged history of Trump’s Fed attacks via Goldman – updated through early August)
He could have phrased it differently but essentially the independence of a central bank was thought of by the Germans in order to prevent political meddling and misuse of the printing press by the government, which btw is exactly what trumpolini is asking for. Basically he is asking for the FED to cut rates and stimulate the economy, which he says is the best ever, so his reelection chances are all but secured. In this Dudley is absolutely correct in his meaning, the FED can basically do this by being data dependent which in US lags the rest of the world for about 6 months or so. However if the FED where to do this out of political motives as Dudley’s paragraph taken literally seems to suggest than it is a dangerous precedent.
Stupid comment by Dudley…….FED needs to stay out of politics.
we avoided editorializing around it too much here because this is one that’s going to get a lot of attention and I wanted to keep it some semblance of neutral. but generally speaking, i agree that Dudley should have left out the paragraph about the election. the rest of the Op-Ed is fine (and accurate) but that part is probably too much
Probably
Oops, feel free to delete that earlier comment, not used to this platform yet.
Why would Dudley ever feel compelled to even make such an asinine comment? This will only fuel the flame, he should know better. Is this really where we want to go? I vehemently disagree, as should every reasonable person, that the Fed should now add election targeting to its official mandate. It is wrong to attempt to influence an election outcome, whether that be because Donald Trump is waging a misguided trade war or because President Bernie Sanders decides to try and nationalize our electricity grid.
This is wrong on so many levels, terrible judgement.
Perhaps Trump needed the reminder of why the politicization of the Fed is a problem.
It is very unusual for someone in Dudley’s position to even imitate that the Fed should try to influence elections. He surely knew it was unusual, and understood all the reasons why, yet he did it anyway. Why?
yeah, that’s the real question here, isn’t it? I mean, if this were something he said off-the-cuff on a panel discussion or something, it would be easier to dismiss (or at least to explain), but he actually sat down and wrote this. presumably everyone at the Fed (past and present) knew it was coming out. It’s like “ok, here’s what we’re gonna have to do if the president doesn’t lay off”. like a blueprint or something
You said it yourself, several times.
“Two roads diverged in a yellow wood.”
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.
H, what does it mean?
Fed officially trying to distance itself… e-mailed statement:
““The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role,””
The Fed should not be trying to help Trump get re-elected. That’s Putin’s domain/turf.
This issue points out a critical flaw in the system of Capitalism,,,, The question is do you want to be ruled by an oligarch masquerading as a populist or in the alternative an unelected Banking Cartel.??. A third alternative is the electoral process by means of referendoms .Problem with choice three is that the populace is too distracted to make choices in complex matters which routinely occur and there is no guarantee of consensus on anything..Currently things are at a Historic Crisis point so I guess I’ll read H….who at least realizes a neutral stance can keep the rhetoric civil…
People don’t always get the government they want, but they do get the government they deserve.
Alternative 3, Referendum, was tried in the U.K. and they got BREXIT. There is not always wisdom of the masses.
The key challenge here is to consider market performance, e.g., is the trump base better off today than they were 3 yeas ago and has the volatility helped their mutual funds (if they have those)? In the bigger picture, how will the majority o Americans react if they have weak returns? And, will those groups blame trump or the Fed for weaponizing markets with ambushing realtime disruptive tweets that are manipulative?
Trump voters are anti-Hollywood, anti msnbc and cnn, anti PC, anti any news anchor that has TDS. They will vote for Trump, even cutting off their nose to spite their face. To watch all of the dire looks on the faces of all the commentators with TDS will be just priceless to them.
So many of the Trump base are hard working, paycheck to paycheck living folks. They get by, one way or another no matter who is in the White House. The election is just one way to add some excitement in their lives.
My intent is not to be derogatory toward any of them. (I know many of them and understand them quite well) This is what scaramucci had said for the first few years after the election, before he got religion.
There were 90 million eligible voters who didn’t vote for trump or clinton in 2016, so those are most likely the people to make the biggest impact in the next election; it’s possible that group is just as polarized, but do they care? It’s said people vote with pocketbooks …
Trumps policies have been better for his Oligarc and Billionaire friends and donors. His worry about the stock market is about them and his family’s wealth. Most blue collar Americans (and those Scaramucci grew up with) do not own stocks and haven’t been helped by his tax cuts, attacks against medicare, etc.
If the Fed is guided solely by it’s congressional mandate is that not part of the problem. The fact that there is no Senatorial oversight to put Trump back on track leaves a void where the Fed is damned no matter what it does??
At some point, a bully needs to be punched in the face, especially when he thinks you would never have the nerve to do it. Dudley is the perfect mouthpiece for this message (being retired from the job). And the current Fed officials can all protect themselves with the vanilla, party line that they’re staying out of politics and focusing on employment and inflation. But the message gets delivered to its intended audience. The Fed can inflict pain too, if necessary, so back the f*ck off @sshole…