Should the Federal Reserve hold back on trying to avoid a recession? Bill Dudley, a former Federal Reserve member from New York, thinks that’s exactly what the Fed should do.
In his recent column for Bloomberg, Dudley proposed the Federal Reserve not lower interest rates to help an economy at the tail end of a long economic expansion and stifled by four years of Fed rate hikes as well as “the trade war” with China.
His reasoning is absolutely chilling:
“Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives.”
Bill Dudley’s Rational Totalitarianism
The intent is undeniable. Dudley thinks the Federal Reserve should allow the economy to slide into a recession in order to hurt Donald Trump’s chances of winning re-election. For a supposedly apolitical institution, that sounds like an awfully politically motivated position.
But Dudley has much more on his mind than simply not cutting interest rates. His pronouncements belie his allegiance to the “global economy,” not America’s. With this attitude, Dudley is on the exact same wavelength as the Chinese Communist Party (CCP) which stated in its security committee: “It is not permissible for Trump to win the 2020 election.”
Whose side are you on here, Bill?
The Bill Dudley/CCP outlook has a very undemocratic and elitist stench about it. For a Federal Reserve man (which is as elite as one can get) to side with the world’s most criminal and totalitarian regime ought to prompt some very disturbing questions in the minds of Americans.
For example, where would Bill Dudley get the idea that the Federal Reserve has the right, the responsibility, and the power to determine who should or should not be president of the United States?
Why does Dudley think it would be legal for the nation’s central bankers to materially influence an election?
The Federal Reserve Mandate
It’s useful to recall why the Federal Reserve actually exists. Congress established three objectives for the independent central bank of the United States: maximize employment, keep prices stable (that is, control inflation), and moderate long-term interest rates. The first two are considered the Fed’s actual mandate, the third one a side-product.
Assuming the Federal Reserve has more or less met those responsibilities at this point in time, there should be little for it to do except to ensure that monetary policy supports their mandate. Paradoxically though, much of the credit for the Fed achieving the two objectives of maximum employment and stable prices, must go to Trump’s economic policies. Even with little or no assistance from the Fed, unemployment is at record lows and consumer price inflation is minimal.
Is Dudley’s Complaint Valid?
But let’s not dismiss Dudley’s fears out of hand and let’s take a look at his big concerns one at a time. Does Trump’s reelection really “present a threat the United States and the global economy?”
As far as the U.S. economy goes, it’s doing better today than it has done in the past two decades. Trump’s deregulation and tax cuts have unshackled the U.S. economy. We’re at full employment, wages have begun to rise after stagnating for 20 years, and small businesses have exploded.
With regard to the trade war with China, Dudley has a point, at least in the short term. China’s boycott of agricultural and farm purchases from the U.S. – especially from states that support Trump – is definitely hurting them. In 2018, the U.S. exported $9.1 billion of farm produce to China. In 2017, those exports were $19.5 billion.
What’s more, the trade war with China isn’t proving to be as effective as the administration had hoped in attracting China-based U.S. manufacturers back to the United States. At least, not yet. Most manufacturers that have left China are moving to other lower wage nations such as Taiwan, Vietnam and Mexico.
For the very short term, then, Dudley is right about Trump’s trade war, with the important qualification that the sectors hurt in the trade represent a very small part of the U.S. economy as a whole. More importantly, these facts may change, if or when new trade agreements between the United States and the U.K, the E.U. and even China, are accomplished.
In addition, $10 billion worth of export losses—as painful as they may be to the individuals and companies affected—do seem like a small price to pay in dealing with a hostile trade player bent on exploiting America as much as possible before finally overtaking it as the leading nation of the world.
So where was Bill Dudley and the Fed’s deep concern over U.S. unemployment when Washington’s trade deals with China were hollowing out the American manufacturing base, leading to massive levels of unemployment in the United States? Didn’t that interfere with the Federal Reserve mandate?
And why weren’t Dudley and his former Federal Reserve colleagues writing articles calling for Clinton, Bush, or Obama to be one-term presidents when this was happening?
Trump Tries to Preserve American Power
As far as global trade is concerned, Trump’s trade war with China is much more than soybeans and trade imbalances. Trump is engaging in a strategic effort to maintain American economic, technological and military pre-eminence in the world against a very aggressive and illiberal regime that is challenging international legal norms, abusing the international trade and financial systems, has become a virtual totalitarian state and has murdered—so far—up to 70 million of its own people.
Mr. Dudley is aware of all of these facts, of course. He just doesn’t care. Actually, it’s worse than indifference. Dudley’s globalist, and therefore anti-American, viewpoint paints a sinister picture of where his allegiances truly lie. His support for globalism is an overt endorsement of China, and vice versa.
Apparently, Dudley needs to be reminded that the Federal Reserve’s mandate does not extend beyond the borders of the United States. Nor does it extend to directing American foreign policy.
The Federal Reserve is Far Too Independent
What about Dudley’s beef that Trump is a threat to “the independence of the Federal Reserve?” As a privately-owned corporation, the Fed is quite independent. But Dudley’s concern is valid, albeit from an opposite perspective.
Can America’s elections, legal, and financial systems, not to mention its constitution, withstand a central bank that is so powerful, independent and aloof that it answers to no one and feels empowered, if not entitled, to control the political future of the country?
The simple fact that Dudley’s proposal for the Federal Reserve to actively seek to control the outcome of the country’s presidential election shows the Fed is up to its neck in conflicts of interest. Clearly its top priority is to maintain its position of power rather than support the objectives of the country it supposedly serves, and those of its duly elected president.
Will the Federal Reserve bankers throw the economy into recession to defeat Trump in 2020?
But whether they do so or not, the eye-opening news here is they think that they can.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.