For decades the Federal Reserve System has tried to resist every attempt at greater transparency and heightened Congressional oversight by claiming that it is “independent.” If Congress were to take a closer look at what the Fed is doing, the Fed avers, it would jeopardize the Fed’s ability to operate effectively and would unnecessarily and inappropriately politicize monetary policy. Yet now we have former New York Fed President Bill Dudley publicly recommending that Fed Chairman Jay Powell take action to possibly prevent President Trump’s re-election. Is his way of thinking indicative of the mindset of other Federal Reserve policymakers?
On the one hand, Dudley’s statements were shocking in the sense that neither current nor former Federal Reserve officials ever publicly wade into issues of politics. Just about every time they’re asked a question about political issues, or fiscal issues, they kick the can down the road or refer back to the responsibilities of Congress and the President. So Dudley’s open willingness to urge the Fed to get active in countering the President was unusual.
But on the other hand Dudley just reaffirmed what many people knew or suspected all along, that the Fed, far from being the apolitical agency it likes to think it is, is actively working to rig the economy at the right times to achieve political aims. Most times the Fed acts at the behest of the President to game the economy and achieve re-election. Arthur Burns was famous for this, as he was asked why he goosed the economy to get Nixon re-elected but not Ford. His response? Nixon asked him to do so but Ford didn’t. But now we have the prospect of a Federal Reserve actively working against the President, its ostensible boss, to prevent his re-election.
When President Trump first accused the Fed and the media of trying to create a recession in order to keep him from getting re-elected, the reaction in the mainstream media was one of incredulity. The possibility that the Fed might be trying to sink Trump’s 2020 chances was seen as absolutely ludicrous. Yet Dudley’s recent comments make it clear that not only is it conceivable that the Fed could try to do something like that, but that it might even be actively trying to counteract Trump. Per Dudley: “Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks – including the risk of losing the next election.”
That kind of brinksmanship at the top means that the rest of us are treated as pawns in this power struggle between the President and the Fed. And that means that average Americans will be the ones losing out as a result of the Fed’s policies, whether it decides to support the President or not.
If the Fed tries to send the economy into recession to sink Trump’s re-election chances, Main Street suffers. And if it tries to lower interest rates even further, savers and investors will once again feel the pinch as they struggle to find sound investment opportunities.
That’s why so many investors are flocking to gold and silver, hoping to benefit from the safe haven that the precious metals provide. So far this year they’re up nearly 20%, and they have a lot more to go. If you’re worried about the direction of the economy and looking to keep your retirement assets safe and secure, it’s time to start thinking about investing in gold and silver today.