Ep 18 June 28, 2019
CLP Topic: Economic Growth Policy
Title: Trump’s Fed Dilemma
Our podcast today provides an analysis of Trump’s Fed dilemma of how he can inject a measure of democratic consent into a political institution created by Congress, in 1913, to operate independent of constitutional authority.
Since 2008, the Fed has consistently mismanaged the national financial system by artificially keeping interest rates too low, for too long, which has caused a long-term structural distortion in the capital markets.
By manipulating interest rates, the Fed has set up the boom-bust business cycle, that begins with rampant asset speculation, not authentic economic growth.
Trump’s immediate dilemma is caused because Trump wants stable monetary policy to promote domestic economic growth, and the current Fed Chairman wants to raise interest rates to stabilize global financial markets.
Trump stated,
"Despite a Federal Reserve that doesn't know what it is doing... we are on course to have one of the best Months of June in US history. Now they stick, like a stubborn child when we need rate cuts & easing, to make up for what other countries are doing against us. Blew it!"
The longer term dilemma for Trump, and all middle class Americans, is that the Fed Chairman sees his job as stabilizing global financial markets, not promoting domestic national economic growth.
The Fed’s intent to shift attention to global markets is best seen after the crash of 2008. The Fed paid foreign and domestic banks $1.7 trillion to keep them afloat.
Nothing in the Constitution, or the Fed’s 1913 legal authority, prohibits the Fed from squandering American tax money money on foreign corporations and banks.
The combination of quantitative easing and corporate bailouts, in 2008, is a microcosm of Trump’s bigger Fed dilemma. Trump wants to Make America Great and the Fed wants to make the global economy great, for global financial elites.
Our analysis today places Trump’s dilemma into the analytical framework of James Buchanan’s theory of public choice, and argues that the major flaw in the entire Fed system, since its creation, is that its secret operations are disconnected from the consent of the governed.
Buchanan argues that the nation needs a “constitutional money system,” that clearly defines the mission of the Fed, and places its actions under legitimate constitutional authority.
The Fed’s behavior of rewarding banks, since 2008, is exactly the outcome predicted by Buchanan, when a tiny coterie of insider elites aim to improve the welfare of the global economy by central planning.
The operation of the Fed is called “global corporatism,” where privileged elites make decisions in secret, aimed at rewarding themselves, and their global crony capitalist friends.
Trump’s immediate decision about replacing the current Chairman will not correct the long-term institutional defects of the financial system that rewards Wall St. bankers at the expense of the American middle class.
I am Laurie Thomas Vass, and this is the copyrighted Citizen Liberty Party News Network podcast for June 27, 2019.
Our podcast today is under the CLP topic category Economic Growth, and is titled, Trump’s Fed Dilemma
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