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Old December 11th, 2017, 10:20 AM   #1
RNG
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The perils of a political Federal Reserve

There is an interesting article on the BBC site this morning about the Fed. The thumbnail sketch (link below) is as follows:

Although the Fed is supposed to be independent of the government, the head is appointed by the president. So ...

Quote:
Mr Nixon made no secret of his belief that Mr Burns should follow his directives, even though the head of the Fed is supposed to be free of political influence.

"I respect his independence," said US President Richard Nixon. "However, I hope that independently he will conclude that my views are the ones that should be followed."
The situation was that the US economy was on the brink of an inflation run because of the post war economic boom getting overheated. But the cure was higher interest rates that would potentially harm his re-election chances. His "wishes" prevailed and though he was reelected, the strategy caused the following bust.

Quote:
At the president's behest, Mr Burns cut interest rates just when they should have been increased, leading to a US economic boom ahead of the 1972 election.

While it helped get Mr Nixon re-elected, that boom then transformed into a toxic combination of stagnant economic growth and rampant inflation - also known as "stagflation" - that took decades to bring under control. (Mr Burns also served under presidents Ford and Carter until he stepped down from the Fed in 1978.)
Fast forward to today. All the W. Bush and Obama stimulus, a growing US economy, a growing world economy are all doing the same things. And very much against tradition, the Republican President is replacing the Fed chairperson.

Quote:
"You'd like to make your own mark," Mr Trump said in November, response to a question about why he did not intend to re-appoint Ms Yellen.
The reporter then asks questions like, why did the Republican President appoint a banker rather than an economist, the usual choice for that position?

Does the fact that the Republican President has large amounts of outstanding loans mean he very much wants to squelch the interest rate increases that most knowledgeable people know are needed to prevent another big run of inflation?

An interesting read.

The perils of a political Federal Reserve - BBC News
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Old December 11th, 2017, 02:06 PM   #2
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Quote:
Originally Posted by RNG View Post
There is an interesting article on the BBC site this morning about the Fed. The thumbnail sketch (link below) is as follows:

Although the Fed is supposed to be independent of the government, the head is appointed by the president. So ...



The situation was that the US economy was on the brink of an inflation run because of the post war economic boom getting overheated. But the cure was higher interest rates that would potentially harm his re-election chances. His "wishes" prevailed and though he was reelected, the strategy caused the following bust.



Fast forward to today. All the W. Bush and Obama stimulus, a growing US economy, a growing world economy are all doing the same things. And very much against tradition, the Republican President is replacing the Fed chairperson.



The reporter then asks questions like, why did the Republican President appoint a banker rather than an economist, the usual choice for that position?

Does the fact that the Republican President has large amounts of outstanding loans mean he very much wants to squelch the interest rate increases that most knowledgeable people know are needed to prevent another big run of inflation?

An interesting read.

The perils of a political Federal Reserve - BBC News
It would be naive to think that any POTUS has appointed a Fed Chair that would be independent and not do his bidding.

The POTUS also appoints the Board of Governors.

You can't buy inflation these days, there is no danger of that, deflation is a bigger danger.
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Old December 11th, 2017, 02:46 PM   #3
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The Federal Reserve System was never meant to be as it is. It does not answer to the Government at all, the Government answers to it. If you have an inquiring mind look up The Jekyll Island meeting, it is where the Federal Reserve sprang from.
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Old December 11th, 2017, 02:55 PM   #4
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Originally Posted by Libertine View Post
It would be naive to think that any POTUS has appointed a Fed Chair that would be independent and not do his bidding.

The POTUS also appoints the Board of Governors.

You can't buy inflation these days, there is no danger of that, deflation is a bigger danger.
People who actually know something about economics totally disagree with you.

https://www.economist.com/news/finan...andon-phillips

https://www.bloomberg.com/news/artic...lation-outlook
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