Donald Trump wants a Federal Reserve chairperson who will cut rates, which are currently 4.5 per cent, to 1 per cent.
Delusional? Perhaps, but this is Trumpworld.
Trump isn’t the first president to pressure the Fed. In 1965 Lyndon Johnson told William McChesney Martin his rate hike was “despicable”.
Richard Nixon successfully leant on Arthur Burns to ease policy before the 1972 election, driving short-term growth but long-term inflation.
Unlike his predecessors, however, Trump applies pressure in public, calling Fed chief Jerome Powell everything from “very average mentally” to a “moron”.
Trump’s rants about 1 per cent interest rates are alarming economist Justin Wolfers. He sees echoes of Turkey’s Recep Tayyip Erdogan, another authoritarian populist who favoured low rates over sound economics, with predictably ruinous results.
“That movie was Turkey,” says Wolfers, who fears “an American sequel.”
Trump wants Powell to resign. Powell can refuse, but he obviously won’t be reappointed when his term ends next May.
Nevertheless, Trump’s problem is finding a replacement who both looks the part and will follow the script. The Wall Street Journal says Trump was impressed by Kevin Warsh’s hair and appearance when interviewing him in 2017, but thought him too young-looking.
Warsh, back in contention, says zero rates lead to “very bad economic outcomes”, so he is hardly the pliable dove Trump wants.
Another contender, former World Bank president David Malpass, wants cuts, but Trump has reportedly cooled on him, doubting whether Malpass is telegenic enough for the job.
The ideal candidate, it seems, must promise cheap money and good lighting.
