After settling the question of whether or not Federal Reserve Board Chairman Jay Powell would be renominated for another term as Chairman, President Biden has gone on to nominate further candidates to fill the remaining empty positions on the Fed’s Board of Governors. Just as expected, his choices were designed to appeal to the woke wing of the Democratic Party, with his three candidates including two women and two black people. How might these new Governors affect the conduct of monetary policy?
Biden’s Choices Raising Eyebrows
One of Biden’s more curious choices is his nomination of Sarah Bloom Raskin. Raskin had previously served as a Fed Governor from 2010 to 2014 before being nominated to become Deputy Treasury Secretary by President Obama. Only twice before have former Governors been reappointed to the Board (Bernanke and Yellen). Otherwise it’s highly unusual for someone to be reappointed after a previous resignation.
Raskin is being appointed as Vice Chairman for Supervision, a role that would have her leading the Fed’s efforts at bank regulation and oversight. And if her name rings a bell, that’s because her husband, Rep. Jamie Raskin (D-MD) is a Member of Congress who led the second impeachment trial against President Trump.
That right there should give you some indication of her political views. And the fact that Biden is nominating someone whose husband played such a prominent anti-Trump role certainly raises some questions. Raskin’s background, too, isn’t in economics but rather in law, like Chairman Powell. That might make her a good choice when it comes to the nitty gritty of bank regulation, but it doesn’t inspire confidence that she’ll be tough on inflation.
Remember too that her first stint as a Fed Governor came during the era of quantitative easing (QE), Raskin was a solid yes vote for every monetary policy decision that Bernanke and the Fed made. She’s not going to rock the boat, so don’t expect her to fight loose monetary policy.
Biden’s next pick is Philip Jefferson, currently a professor at Davidson College in North Carolina. Jefferson was formerly the President of the National Economic Association, the nation’s association for black economists. A native of Washington, DC, Jefferson’s background isn’t anything out of the ordinary as far as Fed officials go.
Jefferson was formerly a research economist at the Fed’s Board of Governors, so we can assume that his monetary policy views are going to be in line with conventional Keynesian orthodoxy. Most of his writings that are publicly available deal with the study of poverty and unemployment, including the effects of monetary policy on unemployment. This makes it clear that Biden is trying to cater to the left wing of the Democratic Party, those who believe that Fed policy is a major driver of income inequality.
Of course, we know that Fed policy is a major driver of inequality, and that it traditionally has enriched Wall Street and Washington elites at the expense of the rest of America. But the solution is to end that monetary policy. More likely than not, Jefferson is from a school that posits that the Fed should engage in proactive policies that result in more equitable asset distribution, hardly something that the Fed should be doing.
Biden’s final pick is Lisa Cook, a black woman who is a professor at Michigan State University and a member of the board of the Federal Reserve Bank of Chicago. Perhaps most importantly, one of Cook’s PhD advisors at UC Berkeley was Barry Eichengreen, one of the most prominent academic opponents of the gold standard.
Eichengreen’s work on the gold standard was published in 1992 and is entitled Golden Fetters: The Gold Standard and the Great Depression. His argument is one that has become a standard one in academia today, namely that the fetters of the gold standard bound the hands of monetary authorities and contributed to the severity of the Great Depression.
Of course, the obvious retort to Eichengreen is that the “gold standard” that existed in the interwar era was no longer the classical gold standard, but rather the bastardized gold exchange standard that had been created to allow the facade of the gold standard while still allowing governments and central banks to increase their control over the monetary system.
Cook received her PhD in economics from Berkeley in 1997, only five years after Eichengreen published his book. Is it possible that she assisted him with his research on the book? At any rate, the fact that she comes from that faculty tree doesn’t bode well for her decisions on monetary policy. Neither does the fact that her other advisor was David Romer, himself a prominent New Keynesian economist and student of former Fed Vice Chairman Stanley Fischer.
What Will Biden’s Fed Do?
We’ll have to see whether Biden’s Fed picks result in an actual Fed focus on using monetary policy to supposedly combat poverty, or whether Biden is just paying lip service to the leftist activists from the AOC wing of the party whom he needs to placate. Two minority picks for the Board of Governors is hardly going to alter Fed policy. But if they come along with increased pressure from the White House for a change in policy, it could indicate a new area of focus for the Fed.
In any case, Biden’s Fed picks don’t look to be the types who will look skeptically at increased monetary intervention. Their pedigrees are fully Keynesian, so don’t be surprised if they end up supporting loose monetary policy in the future. If you hoped that Biden would appoint some hawks who would help fight inflation, you’re probably going to be disappointed in his recent picks.
What Does This Mean for You?
If you have savings and investments that are at risk of losing money to inflation, the future makeup of the Fed could affect you. If anything, Biden’s Fed nominees will likely be more open to accommodative monetary policy than many of Trump’s later picks. One of the tragedies of Trump’s tenure is that he wasn’t more aggressive in filling open slots on the Fed’s Board, and that he didn’t push harder to get people like Judy Shelton confirmed to the Fed.
What Biden is telegraphing here is not that he’s keen on fighting inflation. If anything, the fight against inflation will be short-lived. Instead, Biden is signaling that the future Fed will be as accommodative as ever, if not more so, but that the recipients of the Fed’s largesse may be different. Rest assured, you and your savings and investments likely won’t be among the benefits of the Fed’s monetary policy.
With the writing on the wall that the Fed will likely ease just as much as ever, now is the time to start thinking about how to protect your savings and investments. Many thousands of investors have already started doing that, choosing to protect their wealth with gold and silver.
Gold and silver have a long track record of protecting wealth, especially through times of economic turmoil and financial crisis. The worse things get, the better gold and silver seem to perform. During the 1970s stagflation, gold and silver’s average annualized gains were over 30%. And in the aftermath of the 2008 financial crisis gold nearly tripled in price while silver more than quintupled.
With a gold IRA or silver IRA, you can even protect your existing retirement savings with physical gold and silver coins or bars while still enjoying the same tax advantages as your current retirement accounts. And you can fund these precious metals IRAs by rolling over or transferring assets from your existing 401(k), 403(b), IRA, TSP, or similar accounts tax-free.
Don’t wait for the Fed to destroy the value of your hard-earned savings before you start protecting your portfolio. Call the precious metals experts at Goldco today to learn more about how gold and silver can help safeguard your savings.