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FX MONETARY POLICIES


gold standard, and Trump suggested on the campaign trail that he approved of a gold-backed currency.


But a gold standard is the ultimate in tight money – keeping money in limited supply tied to gold – and today Trump seems to want to return to the low-interest policies of former Fed Chair Yellen.


Janet Jerome


Powell, Trump’s r e pl a c eme n t pick, has been called “Yellen without Yellen,” a dovish alternative in acceptable Republican dress. Tat’s what the president evidently thought he was getting, but in his October 24th Wall Street Journal interview, Trump said of Powell, “he was supposed to be a low-interest-rate guy. It’s turned out that he’s not.” Te president complained:


"[E]very time we do something great, he raises the interest rates. . . . Tat means we pay more on debt and we slow down the economy, both bad things. . . . I mean, we had a case where he raised interest rates right before we have a bond offering. So you have a bond offering and you have somebody raising interest rates, so you end up


44 FX TRADER MAGAZINE January - March 2019


paying more on the bonds. . . . To me it doesn’t make sense. "


Trump acknowledged the independence of the Fed and its chairman but said, “I’m allowed to say what I think. . . . I think he’s making a mistake.”


Vinik observed:


"Te Federal Reserve is, by definition, not independent. Unlike the Supreme Court, the central bank is a creation of Congress and is accountable to lawmakers on Capitol Hill. It can be changed—or abolished—by Congress as well. And to pretend it’s not—to treat the Fed as an entity totally removed from American p o l i t i c s — also


leaves us


powerless to talk about the ways it might be improved.


. . . Te long tradition deference


of to


the Fed’s policy independence can even pose


Presidential Impropriety or a Needed Debate?


In a November 2016 article in Politico titled “Donald Trump Isn’t Crazy to Attack the Fed,” Danny Vinik agreed with that contention. Trump, who is not a stickler for consistency, was then criticizing Fed Chair Janet Yellen for keeping interest rates too low. Vinik said that while he disagreed with Trump’s interpretation of events, he agreed that the president should be allowed to talk about Fed policy.


a risk: It creates an environment in which any critique of the Fed is seen as out of line, including the idea of reforming how it works."


Vinik quoted Andrew Levin, a Dartmouth economist and twenty- year veteran of the Fed, who published a set of recommended central bank reforms in conjunction with the Center for Popular Democracy’s Fed Up campaign in 2016. One goal was to make the Federal Open Market Committee, which sets Fed policy,


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