It’s the Fed’s independence – not its monetary policy – that drives Trump crazy

The Federal Reserve Building.
The Federal Reserve Building.

Donald Trump’s recent string of insults directed at the Federal Reserve are at first blush about monetary policy.

But they actually have more to do with his inability to grasp – not to mention appreciate – the value of any government institution that is insulated from political manipulation.

For Trump to call the Fed “loco” and “wild” isn’t just psychological projection – though it more assuredly is that. The big takeaway is how angry he is that the agency isn’t doing what he wants.

It’s highly reminiscent of Trump’s continued fury that the Department of Justice has not been willing to launch criminal investigations of his political opponents on his say-so. Attorney General Jeff Sessions has repeatedly earned Trump’s ire for failing to protect him from special counsel Robert Mueller, leading Trump to complain last month that “I don’t have an attorney general,.”

Trump has also famously challenged intelligence assessments that don’t comport to his views.

Now, Trump is trash-talking the Fed. “The problem that I have is with the Fed. The Fed is going wild,” he said Wednesday night, complaining that interest rates are too high. “The Fed is going loco, and there’s no reason for them to do it. I’m not happy about it.”

“And I think I know about it better than they do. Believe me,” he told reporters on Thursday morning.

Top economic advisor Larry Kudlow tried to wave off Trump’s comments about the Fed, saying “The president says a lot of things. He has a lot of fun.”

And there’s some truth to that. Trump was mostly blowing off steam; he isn’t actually doing anything to back up his talk.

Sure, Trump would be happier if the Fed lowered interest rates to heat up the economy even more (especially between now and the midterms). But contrary to some inside-the-beltway pearl clutching, the Fed is so completely dominated by inflation-averse representatives of the financial industry that we are not even remotely on the brink of turning into a hyperinflationary banana republic.

And consider that Trump’s one Fed nominee awaiting confirmation, Marvin Goodfriend, is a well-known inflation hawk – as is the man Trump chose to become chairman, Jerome Powell.

Washington Post columnist Catherine Rampell expressed concern that Trump is breaking with precedent: “[F[or the most part, for the past several decades, administrations have maintained a policy of not commenting on monetary policy. They understood that raising even the specter of a compromised Fed was just too risky,” she wrote.

But the problem isn’t that Trump said something. It’s not even what he said – progressives also criticize the Fed for being so focused on limiting inflation instead of, say, helping the job market.  For instance, the Center for Economic and Policy Research’s Dean Baker writes that Trump is actually correct that the Fed is too concerned about inflation. “In this context it is perfectly reasonable for politicians to criticize the conduct of monetary policy,” Baker wrote.

The problem is why Trump said what he said.

Kevin Warsh, a former Fed governor who Trump interviewed at length for the top post last year. told Politico in May that Trump did not appear to see the advantage of an agency making decisions in the best long-term interests of the country rather than the bidding of the president.

“In some sense,” Warsh said, “the broader notion of an independent agency, that’s probably not an obvious feature to the president.”

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