Back in late January / early February, President Trump was rattling his cage with his cries for lower interest rates from the Federal Reserve, in the belief that such an action would rev up an economy that was sputtering, as the news stylists like to say. As Fed chair Powell’s term was coming to an end, Trump nominated a new chairman, Kevin Warsh, with the obvious hopes that Warsh would reverse the Fed’s policy of higher interest rates, which was in place in hopes of controlling inflation.
Into this interlude I’ll insert an old memory of running across a piece of spam – not email, but real life paper mail – that promised that President Bush, that’s #1, not #2, would be re-elected because Fed chairman Alan Greenspan would ensure a roaring economy for Bush. And this would hike up certain stocks, and you should buy them, yada yada.
President Bush, for the record, was not re-elected; instead, the rascally Bill Clinton won the election. Fed chairmen are independent of the President for a reason, and that’s to formulate monetary policies that benefits the nation – not necessarily the President.
Back to the story, Fed chairman Warsh ran his first meeting yesterday, 17 June, and did not dictate the lower interest rates Trump demands. Indeed, he doesn’t appear to have tried:
Warsh deflected repeated questions about why the Fed held rates while so many officials signaled hikes ahead, citing his opposition to “forward guidance.” The decision to hold was unanimous, and the Fed didn’t consider hikes at its meeting, he said. [WaPo]
And for those betting on lower interest rates at the next meeting?
Nine of the 19 officials who participate in Fed policy meetings penciled in at least one rate increase by the end of the year, up from zero in March, when most Fed officials still anticipated cutting rates.
The Fed is an example of distributed design, the hallmark of which are decisions made not by a central authority, but by the responsible local, or autonomous, node. The isolation serves to mitigate the influence of non-germane factors on the decision-making process, even in the face of stacking the deck, to use an old euphemism for sometimes illegal manipulation of starting conditions and complexities. Trump selected Warsh as Warsh is known to favor lowering interest rates in general, but Warsh did not come through.
But, and more importantly, this is yet another loss for President Trump, blatant evidence that he doesn’t understand how American government, politics, and economics works, and that he’s convinced that he does.
He shouldn’t listen to himself.
While I don’t expect this particular failure to be followed immediately by him being chased out of office, it is certainly another brick in the wall – and it’s very hard to know when MAGA will reform itself and realize that its only way back to respectability will be via participating in the removal of Trump from office. It’s best to think about this in a time series of probabilities; as it becomes clear that Trump’s War may have resulted in an Iranian victory, as many conservatives have begun to mention, I expect the probability of Trump leaving office, probably on a Trump airliner heading out of the country, will jump.
And then comes the rebuilding of our politics phase, as his minions, both in the White House and in Congress, start having to make decisions about policy.
