Bill Dudley Shocker: Ex-NY Fed President Urges Fed's Powell To Prevent Trump Re-election
Tue, 08/27/2019 - 08:49
At the start of August, we explained how - by scapegoating the global economy for the Fed's July 31 rate cut - the central bank had now trapped itself, having certified before the world that any further escalations in Trump's trade war are effectively a justification for more rate cuts. Whether this was Powell's intention is unclear, although as we said at the time, "it certainly means that Trump is now de facto in charge of the Fed's monetary policy by way of US foreign policy, and it also means that as BofA wrote, "the Fed is unintentionally underwriting the trade war."
Here, the only thing one can perhaps add is that the Fed may very well be intentionally underwriting Trump's trade war. In either case, as Bank of America's chief economist Michelle Meyer said, such a circular framework is a problem for many reasons, and as the bank admits, it is worried about an adverse feedback loop where the trade war hinders economic growth, therefore prompting additional Fed easing, which in turn allows for greater trade war escalation.
Fast forward to today, when in what in retrospect may be seen as a watershed moment in exposing just how "political" the Federal Reserve always has been despite repeated lies by various officials claiming otherwise, none other than former Goldman chief economist and the former head of the NY Fed, Bill Dudley, after looking at the chart above and having realized that the Fed is underwriting Trump's trade war, made a "modest proposal" in a Bloomberg op-ed in which he advised Powell to take a political stand against enabling Trump's trade war, and potentially go so far as to push the economy into a recession to prevent Trump from getting reelected!