Trump’s attack on the Federal Reserve threatens credibility

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The writer is a distinguished colleague of residency at the Brookings Institute, former Federal Reserve, former Secretary of the Treasury

The claim of US President Donald Trump that he “launched” the ruler of the Federal Reserve, Lisa Cook, “for the reason” is not only illegal. It is very dangerous.

It represents a direct attempt to politicize the Federal Reserve Bank, intimidate its leadership and bend the monetary policy of the will of the president. This procedure threatens to end the independence of the Federal Reserve – and with it, the credibility of the monetary policy of the United States at home and abroad.

The law is clear: It serves the federal reserve rulers specifically for 14 years, so they cannot be tossed aside by the presidents who hate their opinions or who seek their loyalty. Remove “for the cause” is intended for poor behavior. “The accusations” are not a reason.

Cook has carried out its integrity – the weight of evidence and the vote for the policies designed to achieve the double federal reserves to stabilize prices and the maximum employment. In order for Trump to call the reason here is a fantasy. It is an excuse to justify the seizure of authoritarian power.

This is not related to the Federal Reserve Governor. It is about intimidation. By targeting Cook, Trump sends a chilling message to each member of the Federal Reserve and to the Presidents of the Regional Reserve Bank who participate in the Federal Open Market Committee: express the dispute with the views of the president and you are the next.

Such threats can suffocate these federal reserve leaders in their duty to present sincere, professional and independent views on the monetary policy of the public. It can change voting behavior. This will transform an institution famous for its independence and its strong record from achievement to a puppet stage for presidential whims and priorities.

Currently, one of the Trump administration’s main priorities is to reduce interest rates significantly to reduce the cost of the US government debt service, which is 37 Triton. The consequences may be disastrous.

History provides a hot lesson: It follows chaos when leaders pick up their central banks and force them to buy government debts or reduce interest rates to keep debt service expenses. Germany in the twenties of the twentieth century, Hungary after World War II. Likewise, Argentina and Turkey recently – the names change, but the story is the same.

Central banks provide higher inflation, volatile growth and weakening of currencies. Such a road cannot be beneficial to the United States. We have taken this road once before: during World War II, when the Federal Reserve was forced to raise interest rates to help the treasury financing the war. The result was high inflation.

In 1951, the Federal Reserve and the Treasury reached an agreement. The Federal Reserve will then focus on the stability of prices and the maximum employment. Since that time, these have been its goals, as Congress imposed by law.

The credibility of the Federal Reserve in formulating a responsible monetary policy that supports global confidence in dollars and securities, which is widely considered the most secure assets in the world. They support the American economy.

If the markets believe that the federal reserve hand is guided by political orders, then every decision of the interest rate will lose credibility. Inflationes can become undesterated. The accuracy of the dollar will be displayed as a backup currency in the world. Investors and allies alike conclude that the United States no longer has an independent central bank.

We were throwing one of the greatest assets of the economy in our country. Ironically, this strategy will not even succeed in reducing interest rates in the long run. The exact opposite. Uply interest rates are likely to rise due to high inflation expectations.

Trump’s attempt to dismiss Cook should meet anger, not ignoring. Congress must defend the independence of the Federal Reserve. Courts must strike this illegal play of power. The financial community must raise its voice against the direct attack on the credibility of the dollar itself.

The independence of the federal reserve is not some of the technocratic. It is the basis for economic stability and global leadership. Trump’s efforts to destroy him to achieve reckless, cheerful and unburled personal gains.