Source: Wall Street News
Trump's dissatisfaction with Powell has become public.
On Thursday, Trump attacked Powell three times, saying that he was "always too late and wrong", accusing him of "playing politics" and "being too bad", and once again put pressure on Powell to cut interest rates, believing that Powell "should have lowered interest rates like the European Central Bank" and called on Powell to "leave office as soon as possible".
As Trump's dissatisfaction with Powell grows, former Federal Reserve Board member Warsh has once again become the focus of public opinion as his favorite candidate for the next Federal Reserve Chairman.
Warsh, who is favored by Trump, is not the first time to enter the public eye. As early as 2017, Trump had considered nominating Warsh before appointing Powell. But his background is controversial. As the son-in-law of the heir to Estee Lauder, Warsh has almost no orthodox economics background and has repeatedly misjudged the market and the economy during the financial crisis.
As for Trump's tariffs, Warsh believes that the impact on inflation is "small and one-off", and may even be offset by the deflationary effects of deregulation and spending cuts.
It is worth noting that Warsh himself does not want to take office early. He persuaded Trump not to remove Powell and advocated that he should complete his term.
01 Three times a day, Trump advocated that Powell leave as soon as possible
On Thursday morning, Eastern Time on the 17th, Trump posted on social media:
Always too late and wrong” Federal Reserve Chairman Jerome Powell released a report yesterday, which was another typical and complete "chaos"!
Powell should have lowered interest rates like the European Central Bank, but he should definitely lower them now. The sooner Powell leaves, the better!
During the midday trading session of the U.S. stock market on Thursday, Trump called out Powell twice again.
Trump said, I don't think Powell is doing his job well. If I ask him to, he will have to leave. Powell makes me unhappy. He is always slow to act.
Trump accused Powell of manipulating politics and said he was terrible.U.S. interest rates have risen and interest rates should be suppressed. Powell should cut interest rates. Trump Trump also compared it to Europe, saying that Europe was cutting interest rates.
A few minutes later, Trump "blasted" Powell again, saying that the Fed should cut interest rates, which the Fed owed to the American people. Powell will face great political pressure.
Trump said that the only good thing Powell can do is to cut interest rates. If Europe cuts interest rates and the Fed does nothing, it will put the United States at a disadvantage. Costs are falling and inflation in the United States is minimal.
Trump's remarks are obviously a response to Powell's hawkish statement last night. On Wednesday, Trump reiterated what Powell said more than a week ago, saying that the Fed "is fully capable of waiting until (the situation) is clearer and then considering adjusting our policy stance. "Powell believes that Trump's policies such as tariffs have made the economy face high uncertainty, and the Fed must avoid tariffs that push up inflation for a long time." In fact, Trump has long been dissatisfied with Powell. Trump feels that Powell is "half a beat slower" and "too slow to act" in fighting inflation. He has repeatedly urged interest rate cuts on social media and asked Powell to "hurry up." 02 The U.S. Supreme Court's ruling may affect Powell's tenure. On Monday, the White House heard rumors of a "change of leadership" at the Federal Reserve. U.S. Treasury Secretary Benson said that he and Trump "have been considering" the next Fed chairman and plan to start interviewing potential candidates in the fall. These remarks have reignited speculation about changes in the Fed's leadership. Well-known financial analyst Jim Bianco believes that Powell may face two fates: either being directly dismissed by Trump or being sidelined, because the nominees of Powell's successor can make speeches to weaken his authority.
It is worth noting that in May this year, a ruling by the US Supreme Court may become a "black swan" event this summer. Trump's administration is preparing to ask the Supreme Court to dismiss two senior officials of federal agencies.
Some analysts pointed out that the final judgment of this case is a test of "whether Trump has the right to dismiss Federal Reserve Chairman Powell"-although the current Federal Reserve Act stipulates that there must be "legitimate reasons" to dismiss the Federal Reserve Chairman, if the Supreme Court overturns the precedent of the "Humphrey's Executor" case, it will undoubtedly greatly weaken this protective barrier and open the door for the president to interfere in the operation of the Federal Reserve.
In other words, by changing the legal rules, Trump may be able to "easily" dismiss the Federal Reserve Chairman in the future.
When asked about the political threats facing the position of Federal Reserve Chairman on Wednesday, Powell said that the independence of the Federal Reserve is granted by US law and the government cannot dismiss Federal Reserve officials without reason. He said: "Our (Federal Reserve) independence is a legal issue. ”
Powell said that the Fed will continue to do its job and will not be influenced by politics. No matter what kind of political pressure it faces, the Fed will do its job well.
03 "The next Fed chairman" Warsh opposed to replacing Powell in advance
On Thursday, media reported that Trump has been privately discussing the possibility of dismissing Powell before the end of his term in recent months, and is considering replacing Warsh (Kevin) Warsh is the successor to Powell. Warsh himself is said to have persuaded Trump not to remove Powell and advocated that he should complete his term.
The media said that the two continued to communicate until February this year, and other people in the White House still suggested to Trump to remove Powell in early March. According to people familiar with the matter, he has not yet made a final decision on whether to remove Powell before the end of his term next year.
Who is Warsh? Unlike former Fed chairmen such as Powell and Yellen, Warsh is not an economist, and his personal background is quite controversial.
As a lawyer, Warsh worked at Morgan Stanley until 2002, and then joined the Bush administration to hold a mid-level economic position. In 2006, he was appointed as a member of the Federal Reserve Board and left office in 2011.
In 2017, a report in Truthout described Warsh's road to success as "marrying into a wealthy family and the art of step-by-step promotion." The report pointed out that Warsh's father-in-law is billionaire Ronald Lauder, heir to the Estee Lauder cosmetics empire and a major Republican donor.
The report criticized Warsh for "misjudging almost everything" during his tenure as a Fed governor.
In a speech in March 2007, when the real estate bubble was already shrinking rapidly and financial markets were becoming increasingly turbulent, Warsh was still touting the explosive growth of credit default swaps and other derivative instruments, failing to foresee the problems that would arise in these poorly regulated markets over the next year and a half.
And after the crisis, Warsh prematurely worried about inflation and opposed measures to stimulate the economy.
In October 2008, when the U.S. economy was on the brink of collapse, Warsh was against
He failed to recognize the severity of the recession and the consequences of mass unemployment, an attitude that lasted until 2009. In September of that year, before unemployment peaked, Warsh was already worried about the need to reverse the stimulus provided by the Fed to the economy to prevent a resurgence of inflation.
At the time, Warsh continued to oppose the Fed's efforts to stimulate the economy and continued to express concerns about inflation until he resigned in early 2011.
What does "next Fed Chairman" Warsh think of Trump's tariffs and the Fed's approach to inflation?
In a commentary published in the Wall Street Journal in January this year, Warsh made it clear that the inflationary effect of tariff policies may be far less than the deflationary effect of deregulation and spending cuts. He pointed out that trade accounts for only about 25% of US GDP, and Trump's proposed 10% general tariff will only have a "small, one-time" impact on the overall price level.
Warsh also believes that the Fed should not attribute inflation to the new crown epidemic, the conflict between Russia and Ukraine, or the upcoming Trump tariffs, and pointed out that inflation actually stems from "excessive government spending and excessive central bank printing of money."
Warsh questioned the Fed officials' predictions on political policies. In particular, he pointed out that when Fed officials predicted that Trump's tariff policy would push up inflation, they ignored the full impact of other potential policies.
Catherine
Weatherly
Kikyo
Alex
Anais