The Fed – “Independent” and “Non Political” – Joins The Resistance

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Former Fed Vice Chair William Dudley, perhaps the next Fed Grandee, has stripped the veil, the WSJ reports. Most of us have read about or seen on TV former chairs of the Federal Reserve defending the central bank’s independence and foreswearing all political intentions.

“But then,” as the WSJ asks, “what are we to make of former Fed monetary Vice Chair William Dudley’s view that the Fed should help defeat President Trump in 2020?”

An Extraordinary Message

“Officials could state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions,” asserts Mr. Dudley.

The Fed Is an Agent of Democratic Party

Shouldn’t monetary policy focus be on prices rather than on trade? “But Mr. Dudley seems to be saying the Fed should do nothing to assist the economy even if it heads into recession. Then he goes further and essentially says the Fed should join The Resistance.”

“There’s even an argument that the election itself falls within the Fed’s purview,” Mr. Dudley continues. “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.”

“Wow”

These columns wondered if Mr. Dudley was politically motivated while he was at the Fed:

• favoring bond buying to finance Barack Obama ’s deficit spending
• urging the Fed to intervene in markets to boost housing
• keeping interest rates low for as long as possible

And now here Mr. Dudley is confirming that he views the Fed as an agent of the Democratic Party.

As one reader of the WSJ notes, the Fed has not been independent since the Fed existed. “The only difference between Trump and previous presidents is Trump says out loud what the others said behind closed doors.”