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FX MONETARY POLICIES


of further growth in the American economy.”


Bove noted that in the second quarter of 2018, the growth in the money supply (M2) was


zero.


Why? He blamed “the tightest monetary policy since


Paul


Volcker, whose policies in the mid-1980s led to back-to-back recessions.” The Fed has raised interest


rates


seven times, with five more scheduled, while it


is shrinking


its balance sheet by $40 billion per month, soon to be $50 billion per month.


place by Trump."


Those seven, along with five federal district bank presidents, compose the Federal Open Market Committee,


control, however, means more than appointing new Board members. It means “nationalizing” the central bank, making it a public utility responsive to the needs of the public and the economy. And that means modifying the Federal Reserve Act to change the Fed’s mandate and tools.


The History of Central Bank Independence


Ever since the 1970s, the Fed and other central banks


have


Returning the Fed to Treasury control means “nationalizing” the central bank, responsive to the needs of the public and the economy


How could the president take control? Bove explained:


"Te Board of Governors of the Federal Reserve


is required to have seven


members. It has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are awaiting confirmation by the Senate. Aſter these two are put on the Fed’s board, the president will then nominate two more to follow them. In essence, it is possible that six of the seven Board members will be put in


46 FX TRADER MAGAZINE October - December 2018


which sets monetary policy; and one of those district bank presidents, Minnesota Fed head Neel Kashkari, is already arguing against further rate increases. Bove concluded:


"The president can and will take control of the Fed. It may be recalled when the law was written creating the Federal Reserve the secretary of the Treasury was designated as the head of the Federal Reserve. We are going to return to that era."


Returning the Fed to Treasury


insisted on their independence from political control. But a c c o r d i n g to


Timothy C a n o v a ,


Professor of Law and Public Finance at Nova Southeastern University, independence has really come to mean a central bank that has been captured by very large banking interests. It might be independent of oversight by politicians, but it is not a neutral arbiter. Tis has not always been the case. During the period coming out of the Great Depression, says Canova, the Fed as a practical matter was not independent but took its marching orders from the White House and the Treasury; and that period was the most successful in


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