The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

mano-a-mano

12/20/2018

Fighting is easy.  Walking away from a fight is difficult.

The Federal Reserve is a creature of Congress and can be terminated whenever Congress chooses.  Fortunately, Congress recognizes that independent economic guidance cannot come from either the Executive or Legislative branches of government.  After all, somebody has to guide the economy who cares more about the economy than the latest polls.

In September, I wrote that the Fed needed to suspend their interest rate increases.  I figured eight increases was all the economy needed for a while.  However, I didn’t know that Trump was about to tweet the same thing . . . loudly and often . . . like every schoolyard bully.

While Trump was correct, he put the Fed Chairman Powell into a difficult mano-a-mano position.  If Powell paused, he would appear to be have been bullied by Trump, compromising the independence of the Fed.  If Powell did not pause, he would be “spitting in the face” of the President.  How could he win?  The question is why did Trump put Powell into such a lose-lose position?

Fighting is easy.  Walking away from a fight is difficult.  Preventing a fight is smart.

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