I'm trying to find something redeeming about this crop of Republicans but have yet to find it. Words fail in trying to describe their awfulness. They used to be sane: Bush 41 raised taxes. Bernanke, a life-long Republican, renounced his party membership, as did Colin Powell. Eisenhower invested in the highway system. Greenspan at least admitted his worldview as wrong. Nixon tried to expand healthcare for millions. Yet whites increasingly vote for them, arguing they are against 10 million illegal immigrants sufficiently to destroy the economy and take away their own healthcare. It's sickening to watch.
7
Credentials and understanding monetary policy will not matter to Trump. The only qualifications that matter is being a loyal lapdog, whispering "Yes, my sweet dark prince" into his ear every now and then, coax his frail ego by telling him how great he is, and be willing to be thrown under the bus or attacked if things do not go his way.
6
This is a terrifying thought. I had been wondering for a while how long Janet Yellen could hold the fort, and it seems like the barbarians are now at the gates. God help us all.
6
It'll all come out in the warsh.
PLEASE do NOT suggest that someone is more powerful than the president, Mr. Krugman. You know what happens when Mr. Trump hears that! Twitter's stock value - and character numbers - just keeps rising!
3
The swamp creatures of the Trump administration including Trump's family will no doubt plunder the Fed and the Treasury on their way out the door.
9
I figure that for maximum cataclysmic effect and to cause maximum anguish to Democrats he'll choose Arthur Laffer. As in all his cabinet appointments, the prize goes to the most incompetent person available.
3
Trump thrives in chaos because he knows he is the dumbest guy in any room and mayhem allows him to hide his abject ignorance. Picking complete losers for every Cabinet position has allowed Trump to hide his stupidity.
7
October 6, 2017
Outsource the professional manpower advisers on as needed platform in the new era of flying by the seat of your pants - Why build great sophisticated depth and breath to an agency that more often than not is challenged for its collections of fact findings and personalities that are without question questioned for their contributions. Government by fiat and by brute instinctual nature of a grand demagogue like couture for all is right with Trump's manifesto for making America great forever and ever. The trust of our electorate and its spirit for judgment is equal to the political spirit of the zeitgeist and here we are - no covering the facts and persons of interest that are with massive qualification to contribute to the solutions when in fact Trump's team is all about knowing the outcome is construction the rule of his Atlantic city casino deliverance gamble with the safety of our republic - All bets are for my money on a great come back for a Hillary Clinton takeover for the natural business and ruling of systematic state of affairs by qualified bureaucratic prowess for keeping our light of liberty true and as an admired worldwide brand the our way of collective burden sharing the right and smart way and not the con artist ego that is playing dice with our way of life - that will be the real triumph for we the people and of the people of grace and virtues fibers of mind and soul.
1
We are doomed to a government where smart people are disparaged and those who are toadies and often ignorant of their issues are appointed. Trump is vile, incurious and happy to throw sand in the gears.
7
Krugman gets almost all of this correct, but makes one glaring error. He claims that if for the Fed Trump would appoint someone "smart, knowledgeable and honest" it would be the first time he had done so. Actually, Trump has among hundreds of appointments named three such people, all former generals.
So, Professor Krugman, please tell us. Who are the best economists among former generals?
1
Donald Trump knows nothing about any policy area, least of all economics. His understanding stops with scams and devices to shield his income from taxes and his money laundering from scrutiny; with his certainty that all trade deals signed before he took office were bad for U.S. interests; and with the belief that all economic indicators must be good in his presidency and were bad in Obama's. That's not a basis for a rational selection of the Fed chair. But the election of Trump, aided as it was by Putin, was not a rational choice. Part of America voted to experiment with a scam artist, con man, and sexual predator as its president. The whole country and the world must live with the consequences and hope that this dark period of history will be mitigated and its worst aberrations resisted by people of good will and understanding.
2
Don't even give him the idea (to him an ego-enhancing distinction) that the government will get "Trumpified." This branding of policy is precisely what he wants to hear, even from critics. Just talk Republican. Even represent him as a category 5 hurricane is giving him too much power. Just avoid the power (whether misguided or not) metaphors. Diffuse the conversation into Republican Party in general. This is not about rational discussion at this point. I thought you may have already realized that. So keep up your rational analysis on your end but watch how you frame it, lest it be counterproductive in the end.
"Donald Trump has, in short, been like a Category 5 hurricane sweeping through the U.S. government, leaving devastation in his wake."
The sad reality is that most people are unconcerned about a calamity brought on by president Trump's irrational behavior. So far nothing has happened. Obamacare is till limping along. Tax-cuts for the rich may not materialize. But as Bush-43 with Dick Chaney did repeats itself, it would be disastrous, for generations.
Many, like me may not realize a calamity brought on by wrong fed-policies. Since Ben Bernanke with Hank Paulson magically prevented a second Great Depression despite Paul Ryan et al's sabotaging, doesn't mean a horrific financial calamity could not visit upon us if the fed policy went in the wrong direction.
2
What's past is prologue. DJT is threatening military action (again, as of today) against North Korea, threatening to tear up the Iran nuclear deal, has trashed agencies left and right, and is now going to get his grubby paws on US monetary policy. This is a nightmare that has no end . . .
1
Krugman (like Yellen) fails to address the plight of seniors dependent on interest income. These people have seen a significant reduction in disposable income. I will pay more attention to him when he includes this in his analysis and says if he thinks we must be sacrificed in order to have a huge monetary base.
The Fed doesn’t print money, the treasury does. The increase in the monetary base, as opposed to the monetary supply was from the increased reserves that the banks were required to maintain with the Fed. QE consisted of using those funds to buy US securities keeping bond yields low.
To me the most salient facts are: #45 knows nothing about economics. #45 always picks people loyal to him personally as his primary criterion. #45 picks people whose primary policy goal is to destroy any semblance of anything Obama ever did and whose secondary goal is to destroy the organization they are supposed to lead. The GOP Congress will go along with anything #45 says when it comes to appointments. Paul Ryan will continue to be either Congress' number one two-faced hypocrite if he actually does understand economics or Congress' number one most ignorant person in power if he truly does believe his own line of economic drivel; I can't really tell which it is. The new Fed chairman— or the continuing one— will need a spine of steel to chart a reasonable course.
2
Oh, please, please, PLEEEEZE, President Trump! Just give us ONE MORE Real Estate Bubble and crash.
I promise not to waste it.
1
For about the past 2 months, when I get up, I get on-line and head for the Times or ? with hopes that the headlines will read TRUMP IS DEAD. when those are not the headlines, about anything else, I frankly DGAS. I've had it with the do-nothing congress. THEY hold the power to make the nation great again--but they won't do it. Their AGENDA is all that matters, and while I would like to see a much harder push by the media to embarras these fools and get them to act, when that doesn't happen IJDGAS. It is just a lot of wasted time typing and writing about solutions that will never happen. Hope no longer springs eternal. IT IS DEAD like I wish trump to be.
1
Trump is a stone cold textbook narcissistic; that is widely understood. Thus he doesn't like be told what to do or to be countermanded. The government has regulated his casinos, building operations, golf courses etc. Perhaps all this government destruction is payback and nothing more complicated. To gut the government so it cannot touch anyone like him. To allow commercial animal spirits run wild in the streets, as they did on 2008 resulting in calamity.
1
"...they’ll insist that it be someone who has been wrong about everything for the past decade."
Hey, if they follow that formula no doubt you'll be their first choice for Yellen's seat.
There is no reason for the congressional GOP to appoint someone like Warsh now. It's not like the republicans want inflation or high unemployment. And the last thing they want now is a deficit scold, given that they are about to blow a hole in the budget.
I think he is wrong. And my opinion is a valid as Dr Krugman's; I don't like Trump is not a reasoned argument.
1
Our problem is that our president tweets his policy proposals and thinks that is sufficient. His supporters in Congress and in the state houses have the same nano-term perspective. Those that do want to achieve something just grab as much as they can, as fast as they can, while they can. They don’t do their homework—even something as simple as counting the votes for a bill—and push witless ideas forward. They propose legislation that will only benefit themselves and their one-percenter patrons. Their feckless approach will turn every success into failure, every working system into a machine of harm, and saddle generations with the poisoned fruits of their labors.
1
I was curiously disappointed you failed to assess the performance of Greenspan who while being in charge during the relatively prosperous 90's ultimately exposed his right-wing partisanship by supporting the Bush tax cuts in lieu of reducing the debt and doing something meaningful about healthcare.
The analogy about Trump being a category 5 hurricane sweeping through the US government is an appropriate one. A more apt question, however, is, ""knowing this, why are we seemingly watching this happen rather than taking action to stop this madness." I was appalled to learn from the PBS piece on Vietnam that the government was aware and had proof that Nixon had committed treason to win the presidency and yet refused to expose this before the election. We have yet to determine whether Trump did something similar but we know for a fact that he is ill-prepared, inept and psychologically incapable of leading this country and yet the powers that be around him continue to allow this fiasco to continue. Is there a red-line and how much damage must the country sustain before we are rid him. The one good news of his presence is that he has laid bare the utter rediculousness of the Repupican orthodoxy of the last 40 years. They will either have to change or follow Trump into the abyss.
12
Bernanke was part of the problem. Only for the people but for the rich and monopolistic corporation getting 0% interest while we the people got stuck with larger interest debt.
1
You would almost think there is a malicious intelligence behind Trump's single-handed desire to destroy all government agencies! Then again, single-minded doesn't work with a mindless President and Congress itself is abetting the whole process by approving these people who have made no secret of their opposition to the agencies they are appointed to run.
Congress: Oversight is your most important role. Our corrupt President is now coyly saying "It might be the calm before the storm," and what better disruption would there be (and distraction from his own investigation) than creating a war.
The Fed's monetary policy options have decreased in flexibility in recent years. If even the technocrat Janet Yellen is mystified by what's up with the interplay between monetary policy and the standard economic indicators like inflation and employment, you have to wonder just what difference any individual chair would make. True, steadiness and reason in a crisis are important, but there would be plenty of input from all around at such a time. This sounds like political alarmism. Professor Krugman has transformed himself from an economist into a political ideologue.
"... about to get Trumpified..." It will. Because Janet Yellen was an Obama appointee. It would be extraordinary if Trump didn't appoint someone else for this very reason.
3
Trump's base wants to believe each and every one of them that they are the main character in an Ayn Rand novel that is independent of the need for social support of any kind, despite their reliance on Social Security, Medicare, unemployment compensation among other less obvious benefits That things should be left without any control or moderation as government supplies is an anathema to them. Thus we see out of control capitalism and shooters who care for no one but themselves. It takes a village of interdependent people to create a working society, but Trump and his minions seem to think that chaos will naturally create the works make our society most productive.
4
Paul Ryan and other Republicans in 2008-16 wanted higher interest rates and no QE because these policies would slow down the recovery and hurt Obama. Now they want higher interest rates to benefit the banks. Warsh is a lawyer and a banker, not an economist. We need Yellen, Summers, Krugman, or Stiglitz as head of the Fed.
7
Most Republicans today agree with St Reagan that government is always the problem, never the solution. Given that cherished belief wouldn't they want to prove Reagan's axiom by appointing incompetent stewards to the various government agencies. The military would be the only exception.
6
This is somewhat of a non sequitor to your column today, but it is on my mind...
I am sure you have read Capital by Piketty in which he documents the inexorable march to inequality inherent in our economic system Why not do an article, which will update an op-ed piece in the NYT back in 2014? I believe the article was written by a graduate student. The point of the article was on job creation and the wages paid. I believe that at the time 60% of all jobs created paid under $15 per hour. Hence, our robust economic boom. A follow-up by you and your student researchers might be edifying. All the best, Dave
Dave
3
"Now, I don’t know who Trump will actually pick to head the Federal Reserve. It might actually end up being someone smart, knowledgeable and honest. Hey, there’s a first time for everything."
Classic!
3
re: Kevin Warsh
"He warned about inflation in the midst of global economic collapse"
Krugman is letting this guy off way too easy by just mentioning these comments in passing. Between spring and fall of 2008 Warsh repeatedly stated that inflation was the looming risk. You can see the dates and quotes if you Google him.
He was so far off base and so wrong that the statements border on insanity. Based on any conventional wisdom or examination of the actual DEFLATION that followed massive economic contractions historically he might as well have been saying "the sky is green".
Based on his "analysis" Warsh is disqualified from being in the running for any central banking position of any kind forever.
14
Virtually everything Trump does is political and beneficial to him personally. His cabinet is full of people who supported him during the election, whether competent to lead their agencies or not. So his choice for Federal Reserve chair will be likewise. It's anyone's guess who it will be, but you can be sure it will be someone who his says things his shrinking minority of voters will like.
6
An important thing to note is that Krugman has not been as nice to Bernanke in a work, like, End this Depression Now! In the passages pertaining to the American response towards the Great Recession, he concluded that measures taken like QE, mortgage relief and upping the money supply was insufficient, thus dragging on the economic recovery process far longer than necessary. Krugman reasons that this response is so lackadaisical is that Chairman Bernanke was absorbed into the ‘Fed-Borg’, resulting in a lack of risk-taking and more modest proposals to fight the recession.
That said, I don’t think Krugman is being a hypocrite in being more gentle towards his former Princeton colleague in this post. For whatever misgivings he had for Bernanke’s time as Fed Chairman, he does accept the fact that his diagnosis of the ailing economy was accurate, buoyed by his studies of the ‘Lost Decade’ that visited Japan in the 1990s. And it’s not like Bernanke was the only person to be blamed here. Then-President Obama also incurred Krugman’s ire for the equally-insufficient stimulus package. What he is worried about is that the potential successor to Chairman Yellen won’t even be able (or willing, if you are on the cynical side) to accurately understand what led to the next economic crash (should it come). Then, even a solution that pushes a floundering economy in the right direction (albeit not very far) might not be on the table.
5
Even though it matters little what anyone would say in this commentary, I think the tendency will be to appoint someone who agrees to weaken the regulatory framework for money and banking. Remember the GOP believes we have too much regulation -- and they hate Dodd-Frank -- it will be eviscerated for sure.
For now, we don't have anything close to a serious crisis to deal with, but I suspect with the continued disregard of the threat of global warming and what that will do such as we have experienced from the recent hurricanes, we can expect some major economic dislocations, with the potential for a monetary panic. What we have to watch for is the Fed's loss of independence. I no longer worry about the political affiliations of the Federal Reserve Members, thanks to Chairman Bernanke.
We are beginning to make the shift to solar for new electricity generating capacity and there are many announcements that electric motors, batteries, and recharging stations for public transportation and personal vehicles are being produced in greater quantities and the use of electric transport is accelerating. There will be a need for more credit to make the shift. Without sufficient credit it can be very destabilizing.
So I am hopeful that the next chairman will have a strong background in economic history with a running knowledge of emerging technology trends. Most of all,the Fed must have a Chairman who can articulate the realities of the US and Global economy to the Congress.
4
I hear Ben Stein’s available. Or Art Laffer. Or better yet, Steve Moore! Then we can have a fake economist to go with our fake president!
Joe Stiglitz, where are you?? We need you!
3
Next head of the Fed? May we narrow our quess list to identified Fed haters and the last person with political aspirations, after Rick Perry, to have performed badly in sequins, before millions, with absolutely zero knowledge of the department?
3
There is only one choice, really. Jared Kushner.
Dr. Krugman I take you to suggest that Trump is financially invested in the degradation of the US government in its authority and integrity. Yet, I find it even more noteworthy that you point out, perhaps as a result of Trump's strategic indiffference, he defers to this GOP Congress to appoint their apparatchiks and to frame the policy skids that will ensure that degradation.
2
Yellen or Powell may be the best choices. Krugman doesn't mention Powell.
Bernanke was on the Board prior to the last crash, and then Chair.
He dealt with the recovery, but didn't seem particularly aware of the issues that caused the crash while he was on the Board.
Fed funds rate was raised several times before the crash, when, in retrospect
raising interest rates may not have been the ideal monetary policy immediately before the crash. Its hard to say what role Bernanke played in monetary issues that led up to the crash. It is a matter of some controversy.
When you look at Republcan's record on fiscal policy over the last 45 years or so, the way they've run up debt, recklessly cut revenue while increasing spending, and blamed it all on Democrats, you know that they must not be allowed to take the Fed over too. Imagine Republican monetary policy - we'd be Weimar Republic Germany or current-day Venezuela for currency. Republican's fondness for "magic asterisks" in fiscal policy analysis would carry over to the analysis of monetary policy decisions... and the entire world's economy would crater. Perhaps the gold bugs will end up being right after all.
2
People only miss the government when they need it.
Trump and the GOP extremists are turning our nation into
a plutocracy.
6
I am a big fan of Dr. Krugman, but I do have one request. I would like him to see that every time he says things like "Donald Trump has, in short, been like a Category 5 hurricane sweeping through the U.S. government, leaving devastation in his wake" a significant number of people cheer. A hurricane is precisely what the government needed, they would say. And, having been neglected, misled, and exploited across multiple administrations from both the left and the right, they would have a point.
The day that Dr. Krugman brings his command of economics and his extraordinary talent as a writer to bear on this point, the discussion will finally move forward.
1
What created the collapse and how was the Fed involved and to what end? If Mr. Krugman would kindly answer that, I'd have a better feel for his real credibility.
I believe Chairwoman Yellin’s four-year term ends on February 3, 2018. Will any indictments be issued to members of the Trump administration from the efforts of Special Counsel Mueller prior to February? For example, indictments related to money laundering, FARA, RICO, etc. If so, would those indictments weaken President Trump’s ability to obtain Congressional approval of his nominees?
5
The Fed entered uncharted water when it decided to generate unprecedented amounts of money,
As Buttonwood noted, Oct 2017, "the next financial crisis might be triggered by the Central Banks"
Unless the Fed safely unwinds its unprecedented $ $ T position is too early to state "Bernanke and Yellen did a superb job."
http://www.economist.com/topics/central-banking
1
Janet Yellin, and Obama appointee is a goner for sure.
Given that Trump has the demeanor of a 2 year old, I would urge the press to avoid any recommendations or nods of approval for any potentially qualified candidates. Trump. will. not. be. told what to do and is willing to act purely out of spite.
Or maybe he's just a spoiled rich guy who's used to be treated like a king.
5
Krugman: "The Fed, which sets monetary policy, is by far our most important economic agency; its chairwoman (or chairman) is arguably the most powerful economic official in the world, more than the president himself."
This is an interesting admission by Krugman. The Fed chair is a very powerful person. And she's unelected and able to make decisions without accountability to any other branch of government or to voters.
Money is power. The Fed has the ability to create money without oversight and direct it wherever it chooses--that is, to banks who lend it at interest. Imagine having this power, to create money out of thin air...
The Fed is run by unelected bankers. The President and Congress come hat in hand to bankers for the money they need to run the government, and, as such, are at the mercy of these bankers. The borrower is slave to the lender. That's the way the old Paul Warburg designed the system a century ago.
It doesn't have to be this way, but you won't hear about alternative ways to run a monetary system from the global media. Why? Because the bankers bought up the media to make sure you don't.
1
What Paul Krugman leaves out:
John Taylor , one of the leading candidate for the job is a distinguished Professor of Economics at Stanford University, whose research profoundly impacted economic theory and policy. To cite Bern Bernanke : Taylor's “influence on monetary theory and policy has been profound" and Janet Yellen Taylor's work “has affected the way policymakers and economists analyze the economy and approach monetary policy."
Unlike Prof. Krugman, whose research expertise is geographic economics, Taylor has background in monetary policy
As an expert in monetary policy, Anna Schwarts (A monetary history of the United States), noted, "Paul Krugman is a respected trade theorist. But he does not speak authoritatively on subjects on which he has no expertise. Monetary economics is not his field of expertise. "
1
Remind me what your expertise is? Because I keep seeing Krugman turning out to be right more than anyone else. Not always, but he sure beats the odds. You?
4
I think the next crisis is almost upon us. Can we actually handle any more? The stock market is cruising to new highs with no underlying reason and very shortly a huge sell off will ensue. If Janet Yellen is there I have no doubt this will be handled well. If the Republican Party is involved in the selection, as they were with the Cabinet members, it will be dangerous for our economy and other countries economies as well.
5
When integrity and intelligence are both undermined, either separately or especially in combination, we have an administration like the present one. It seems that there are fewer and fewer adults to protect us, and disaster looms.
3
Hmmm...a really smart woman appointed by Obama...what do you think her chances are?
14
all is well. Mnuchin has personally verified the gold in Fort Knox is safe.
8
It's looking more and more like Randian "philosophy" will have to be proven as the destructive and cruel bunk it is in real life. Tragic.
2
Every single action this administration has taken has been to enrich the ''family'' and all of its backers in various forms. It is going to be years and years before we untangle all of the deals and policy adjustments that directly enriched them.
By that time I doubt anyone will be left around to pay back the theft.
4
Yet another example of the Republican Party's rapid move toward political and economic extremism.
5
I started to read the comments as I usually do, when I abruptly stopped and realized there was no point because... WE ARE DOOMED!
7
Hoping for our president to follow the "norms" is like hoping hurricanes will miss the Caribbean islands. He has ignored the political norms since he announced his candidacy. He could not even follow the norms during the presidential debates, choosing to stalk Hillary around the stage. And don't even get me started about his tax returns, his rambling speeches, his tweeting, his attacks on the news media and his prodigious lying. He is always ignoring what decent politicians have done for 240 years.
I'm sure he will do the same with the Fed. So much the worse for our country.
7
The money supply is based on the estimated needs of the economy and the asset values contained therein. When the real estate bubble burst a huge amount of "money" in the form of asset value just went 'poof' like a little puff of smoke. So to keep things flowing the Fed injected liquidity into the markets and we are seeing the results of that. Now if real estate or some other bubble again forms then it is time to deflate the liquidity in the markets to keep it under control. That's what is happening when they raise interest rates. The tools are broad and therefore crude and take a long time to take effect. The current run up we are having now is due to the policies that were put in place a few years ago and so far Trump has done nothing big that has stopped that process. But it could happen and then there will be a rout from the markets and it won't be pretty. I keep a bigger proportion of my portfolio in cash than I'd like for this very reason.
3
After seeing Trump's news conference display yesterday, I fear The Fed may be moot. The visuals were striking. Trump at a long table surrounded by "his Generals". Trump threatening to shred yet another multi-country treaty, this one with Iran aiming to prevent nuclear war. Trump later making a statement about "the calm before the storm". Trump tweeting that Tillerson is wasting his time with North Korea, that Trump will do what needs to be done! Trump is a Category 5 hurricane blasting across the World. No country will trust the USA in future negotiations. Trump has no understanding of history, and likely thinks Robert McNamara is doing a great job! Neither he or "his Generals" have learned McNamara's lessons. I fear that, in their arrogance, Trump and "his Generals" playing their hard driving game of chicken, and hair trigger tendencies will provoke nuclear war.
2
Trump's statement about eliminating PR's 87 billion dollar debt needs to be adjusted. I would suggest a number of activities. One tabulate all the money shorted by various investment firms and have it returned to PR. The second suggestion is to see, during or after the rehab issue, that the Fed employ quantitative easing to the government of PR. Succeeding at eliminating the debt may keep Yellin on board. Though printing more money would solve many of the world's problems if done right, like Venezuela. I would suggest that the Fed be given the responsibility of controlling and revitalizing its and many others' economies.
Printing more money can eliminate the debt and protect people's investment. But that's not macho.
This sounds like a real approaching nightmare. Term ex piers in Feb of 2018. Do We have any kind of idea or program to make sure that one of the ding bats does not get into this chair?
Time is short.
1
There's no definition for Trumpism. The definition is put fraudsters, confidence men and downright thieves into the most important government positions and watch as they cripple or shut down the departments and agencies and pocket the money.
The result is called BANANA REPUBLIC, but worse because we don't even produce bananas! But then with global warming we may start banana plantations for the poor citizens who voted for Trump to toil in.
3
You neglected to mention morons, imbeciles, and those out of touch, and out-to-lunch. Betsey DeVos, for example.
4
You're right, I did forget. :)
1
Well Paul, I don't disagree, but I also don't care. Those of us smart enough will take cover upon such an appointment. When it kick sthe next recession into full gear, I guess he can blame it all on Obama and Yellen for not raising rates sooner.
The Trumpification of America.
John Nichols just wrote “Horsemen of the Trumpocalypse: A Field Guide to the Most Dangerous People in America”. See cspan video.
He discussed the truth about the key officials who wield power over our institutions while Trump tweets.
4
One reason that I like to look at the NYT and read the columns and comments is that you read the thoughts of intelligent people. I often don't agree with what is said but usually the person expressing a thought is knowledgeable and rational.
A problem with our friends on the right is that many are poorly educated and many are ignorant of common general knowledge. A perfect example is trump. Listen to him talk about government and foreign/defense policy. Apparently he never watches the world news or reads a newspaper.
Actually trump is the best example of someone who combines ignorance and arrogance. So on the topic of the Fed -- probably the best thing he could do would be to reappoint Chairman Yellen. But when you have ignorance and arrogance working together, anything might happen.
8
"Will Trump Trumpify the Fed?
That is too much to ask but let's hope :)
1
Judicious argument there. Thanks!
Yeah, that's what we need another financial crash, and that will make America great again just like when the Depression era was great.
6
We can rightfully blame Trump for his unwise policies and label them with a new word which is not yet in the American English dictionaries -- Trumpism -- a word full of noxious implications.
How did Trump get to the White House? The people put him there. Are the people absolutely foolish or do they just suffer from a fanatic zeal for failed ideologies? The entire GOP is full of ideologues who mindlessly keep pushing ideas that have failed in the past and will fail again.
A genuine democracy is possible only when the citizens make well informed, rational, and responsible decisions encapsuled in their votes. This did not happen in the 2016 election cycle.
Populism took over. The candidate’s lack of governing skill was dismissed.
9
"How did Trump get to the White House? The people put him there."
Are we really sure it is as simple an explanation as the above?
3
"... The people put him there."
Um, no. The Electoral College put him there; the people voted for Hillary Clinton.
5
Who controls the Electoral College? The people. It is in their power to change the composition of the college. Until then, the people are directly or indirectly responsible for who becomes President.
If there is someone from Trump's base out there who gets what Dr. Krugman is trying to explain here, then please have th decency to re-examine your values. Please.
12
It's likely that whomever trump chooses won't have to wait for the next financial crisis, because they will be the cause of it. The current theme of the trump administration is to overturn, undo, and destroy everything Obama did during his tenure. So, tanking the global economy is just one more thing for trump to 'accomplish' by undoing the Obama Fed.
105
Undoing whatever happened under Obama: for example, unwinding the bonds on the Fed's balance sheet....in a big hurry. A complete disaster.
Sounds about par for the course for the Trump administration.
4
But do we really want the Federal Reserve run by another faith-based myth inspired technocrat like, dare I say it, Paul Krugman? What is the evidence that Bernanke (and later Yellen) were effective in resolving the financial crisis of 2008 or in promoting the limp recovery of the following eight years? Very little!
Start at the beginning? Why did the banks need saving and who saved them? The value of the banks' mortgage portfolios had crashed. Accounting wise, when those portfolios were marked to market the banks were insolvent, and investors were wise to avoid them. They were the walking dead. So who turned the situation around? The Fed? No; it was the Financial Accounting Standards Board (FASB) which changed the rules on mark-to-market in March 2009 and formally, on April 9, 2009. Suddenly, the banks were no longer insolvent. Banking crisis resolved.
It is true that the Fed's willingness to buy (and thus stand behind) whatever junk MBSs the banks and other investors owned reassured the mortgage market, lowered mortgage rates, and promoted refinancing which did add consumer demand to the economy. Where consumer demand should have been created by infrastructure, education, and research and development investing (fiscal policy), the Fed stepped in and allowed Ayn Rand demagogues to control the conversation.
Overall, Bernanke's Fed's contribution to the recovery is a myth, and quantitative easing was, politically, harmful.
3
I dont get this at all. Consumer demand was dead in the water, yes. And fiscal policy could have helped a great deal. But fiscal policy would come from Congress, where Republicans were able to stymie just about all except the initial stimulus bill. And that too they managed to hold down to a low enough level that they could argue afterward "See, the stimulus didnt help much."
And who are the Ayn Randers that the Fed allowed in? The ones I know are the Ryans and their ilk
4
Trump will not pick someone who is smart and honest---let's begin there. It will either be one of his Wall Street hacks or Jared Kushner.
2
The stock market cannot go up indefinitely. A correction is coming, perhaps a deep plunge of 20, 30 even 50% or more. Markets turn violently - when it's over, it's over, investors panic and get trampled at the exits. A Trumpified Fed will nicely set the stage for another financial crisis. Count on a Trump-appointed Fed chairman to do exactly the wrong thing, as PK recounts here. Perhaps only when they see their retirement accounts decimated will Republican voters finally turn on GOP voodoo economics but don't count on it - they'll probably blame it on Mexicans, or Muslims, or transgender students. This is a desperately sick culture and the American empire is in steep decline, as the rest of the world watches in horror. Make America great again - hilarious.
151
I totally agree. Beautifully articulated, John. I am elderly, so I won't have to endure what will surely be unspeakable suffering for 99.99% of the world's population in the not so distant future. What boggles my mind is that people continue to have children, when they must know how miserable their lives will be.
1
"It seems safe to assume that Trump himself understands nothing about monetary policy"
The last three words are clearly redundant. Perhaps the author is paid by the word.
8
Not redundant, superfluous.
2
Doc - how you did not mention Warsh's primary qualification - son-in-law to Trump BFF and fellow Whartonite Ron Lauder - is beyond my imagination!
9
Yes, professor, we must prepare for the worst. There is nothing more dangerous than an ignoramus who believes he is the world's greatest expert on everything. The frightened and frightening child in the white house is a clear and present danger to the security of the United States. In so many ways.
7
Sorry to be cynical this morning, but you can lay the responsibility at the feet of the American people.
Trump was clear. He would be unpredictable. His track record also demonstrated he would be irresponsible and reckless. The American electorate got exactly what it bargained for.
And please, don't remind me about that 3 million extra votes for Hillary. Sorry, but with such a clown as an adversary, 3 million extra votes is strictly nothing. It shouldn't even have been close.
Folks, it is time to grow up. If you keep getting your news from FauxNews and listen to political hacks that masquerade as experts, you deserve what you are getting now. Too bad for the rest of us trapped with you in that boat.
19
The people voted for Hillary. The states, some through voter-suppression perhaps aided by Russian mischief at various polling sites, voted for Trump.
1
Smart, knowledgeable, and honest? From this species?
1
The Clintons, Bush/Cheney, Obama and Bernanke did wonderful things for the 1% and the Banks and themselves but nothing for us folks who aren't rich.
This is why Trump got elected: Things are still really bad for working people and the leaders of both parties seem totally unaware of how bad it still is.
One thing I can say for old Ben Bernanke, he is a better economist and human being that whoever Trump will put in there.
6
And by the time Trump is removed, things will be even worse, and us folks who aren't rich will be even less rich.
8
I like to share these Paul Krugman columns, so I'll share this one, though it isn't that interesting to me. Too technical an economic topic? Perhaps, but I feel the weakness is that it doesn't say enough about the technical and economic threats of a highly partisan appointment recommended by the #BolshevikRepublicans. The column spends a lot of time with #PresidentTweety's track record of picking losers and incompetents and worse for important jobs, so at this point that part seems to go without saying.
I guess I'd have liked to see speculation on how Trump thinks he can avoid destroying his own assets if he tanks the entire economy. Oh wait. I forgot that Trump's so-called assets are just laundry receipts for dirty rubles. Most of them aren't even Putin's, since the money laundering started long before Putin was a major factor.
— feeling deTrumpified.
2
There's "trumpify" -- a new entry in the lexicon. And there is also "trumped-up." According to the Merriam-Webster dictionary, it means: "fraudulently concocted; spurious," as in "trumped-up charges." The entry notes: "First Known Use: 1728." This pre-dates the US Constitution! (no surprise). Was there any mention of a specific policy towards the Federal Reserve in Trump's Neo-Nihilist platform beyond making it GRRRReat again? Will Tony the Tiger be able to fill Janet Yellen's shoes? (nope).
knowing what we know about Trump and his puppetmasters, it is crystal clear that Warsh will get the job. High time for Americans to start paying 4-5% interest to Chinese, Korean, Taiwanese, Singaporean, German and Scandinavian excess savings, several trillion dollars currently and growing each year, that are sloshing around in the system, at a time they get zero or negative rates elsewhere. It will be a really interesting economic experiment. What happens when the equilibrium nominal interest rate is 2% and some rich arrogant idiot who doesn't even have an economics degree decides to pay 5%, because "The Fed's credibility is important and inflation must be just around he corner, any time now, I tell ya"?
4
The Fed Chair is as important as a SCOTUS choice. Oh woe are we!
5
At least the Fed Chair is not a lifetime appointment.
1
Presumably you mean will we continue to pay private shareholders - that is, the owners of the Fed - yes readers, as this columnist well knows. the US Treasury pays interest to the FED for every dollar they create out of thin air. Every one of you with a paycheck that withholds federal income taxes is paying that interest, as that is the purpose of the withholding method engineered by the globalist Wilson - an adherant to Sanger's eugenics notions btw - in 1913. We are played for suckers, kept in the dark by useful apparachicks like this columnist, driven apart by false wedge issues, and rapidly being railroaded into a future feudal new world order where corporations are the kings and working drones the serfs.
4
I suggest - before you comment - you learn how the world's largest economy actually functions and rely less on your conspiracy theories.
4
Not so fast, jwh, but if you do not understand that control of a nations wealth results in iron fisted control of its masses, then I suggest it is you who needs to delve into the reasoning behind the creation of the Fed.
The Fed, and the stability it attempts to maintain, for the .01%ters, was created to protect the wealthy from loosing their shirts, when their policies of beggaring everyone else's finances blows up.
This recent Great Recession, was every bit as difficult for the people, as was the Great Depression, and much more so in many instances, and as you likely are well aware of, the entire debacle can be laid squarely at the feet of the Big Banks, the same banks which were enabled by a Fed which exists to do their bidding.
Sure, in accommodating the heartless money lenders, some mediocre benefit washes over the people, promoting a deliberately engineered and entirely false sense of normalcy and wellbeing, paving the way for the latest continuing rape and pillage of the masses.
Conspiracy theory indeed; in today's world, jwh, thanks to the speed with which information is disseminated, billions are a lot more aware, and wiser, than their masters fully comprehend, or want.
1
Trump won't appoint anyone until he routinely contacts Putin for his choice. All of Trump's appointments seem to fit Putin's wishes to a tee. Trump is Putin's best cloaked agent for disrupting the Western world.
2
Donald John Trump is the primary puppet dummy Siberian President of KGB/FSN Czar wannabe Russian President Vladimir Vladimirovich Putin. Putin is malignly intent upon making the Federal Reserve work for Trump's corrupt craven personal and family profitable temporary occupation of the Oval Office of our White House. Thus guaranteeing Trump fealty to the Russian Bear and the red, white and blue flag flying over the Kremlin.
If only Vladimir Putin were motivated to share with the American people what he knows about the contents of Trump's personal and family income tax returns and business records then we would know what motivates Trump.
According to some Trump is a synonym for "moron" and "dotard". What about "traitor" or "thief"?
5
I wouldn't trust Trump to hire a competent ditch digger, let alone the Treasury Secretary.
6
The Fed is already a vehemently despised vehicle for income inequality and bankster supremacy. The thought of what an even worse Fed from covfefe can be terrifies me to the core.
1
Your description of the actions of Trump and his Cabinet members in bringing about a dismantling of various segments of the U.S. economy almost makes it appear that there is a plan to destroy America as we know it. Oh wait, that is the plan of Putin and Bannon!
4
Well, Russell, it certainly WAS Trumps intent to dismantle the bureaucracy that has hijacked the rights of The People to a government that is responsive to the will of The People.
If that means a dismantling of some of the powers that the Federal Reserve has arrogated, then more power to him.
It is ironic that Dr. Krugman, a vocal critique of Mr. Bernanke when he was Fed Chairman, is now praising Bernanke as one of the saviors of the United States and its financial system.
But then again, the only matters that Dr. Krugman seems to be consistent is his belief in his self-righteousness.
"intent to dismantle the bureaucracy that has hijacked the rights of The People to a government that is responsive to the will of The People"
lol
I repeat: anyone who did not vote for Hillary gets what they deserve. The Trump crime family will take what they can, the rest of the working class US gets poison in the air and water, no health care help, and higher taxes. Thank you deplorables, Putin, Jill Stein and Benie Sanders.
3
I think that one of the lessons of the years since the crisis is that interest rates are somewhat besides the point or more specifically, the FED could save us from a 1929 type disaster, butt it could not provide a recovery that was not glacial and unequal. The FED only can control rates and the amount of money in banks. As a crude analogy, it can fill the lake (add money), and bring the horse to the lake (low rates), but it can't get it to drink. After 2008, people who are not wealthy are loathe to borrow and banks are gun shy about lending to them.
Even more important, businesses are not borrowing to expand because people do not have enough money to buy what they would produce. We have just have 2 studies that showed if the typical American family had a real emergency & had to come up with some money, they couldn't do it. One said the half the people couldn't come up with $400 & the other that 2/3rds couldn't find $1,000.
The FED cannot get the money to where is is needed, to where it would be useful. We can define how useful a dollar is by the frequency it changes hands in domestic commerce. Economists call this "velocity." Since the crisis, the velocity of money has been plunging. https://fredblog.stlouisfed.org/2016/04/a-plodding-dollar-the-recent-dec...
The only way we can get money to the people who will spend it and not speculate with it is thru federal spending. And if we just tax the money back out of the private sector, it doesn't help.
3
The one choosing the Chair of the Fed
Is a man who is sick in the head.
Let's hope he take pains
To listen to Keynes
Cause, in the long run, we're sure to be dead.
4
Paul Krugman,
Why don't you sit down somewhere and debate Paul Ryan on stage for crying out loud, or do it on C-Span. It's time you had an open, public conversation with Ryan, and he with you, about the US economy, inflation, rates, and the future... Dare him to sit down with you.
3
The difference between Dr. Krugman and Speaker Ryan is that Dr. Krugman has never been accountable for his proposals.
1
The Owl: rYAN is accountable????? He is a moron, who espouses Ayn Rand! (Ayn Rand: Another hypocrite, who, when elderly and sick, tried to milk the government for as much as she could. She just didn't want POOR people to get such benefits.) He has never assumed accountability for anything; he just makes ridiculous faces. Paul Krugman, although YOU may not like what he says, is brilliant. And accountable. If ryan were accountable he wouldn't now be hiding from the citizens to whom he has to answer. ryan wants to be as far away from accountability as he possibly can, and he has engineered it so that he is. Yes, the tale of the TWO PAULS: One, a craven liar, as well as inept, corrupt, and anti-intellectual, who gives not one damn about the people of the United State, and the other, a brilliant economist who doesn't want to see his country turned into a joke, or see its citizens raped. It is just that the wise Paul may be too late, because the Barbarians who were at the gate...forced their way in, and they are destroying every intelligent, decent, moral, kind, thoughtful, and wise thing in their path, and hoarding all the riches and benefits for themselves, and raping indiscriminately, in every way they can, because...that is what Barbarians of the GOP do. For years, and years, that is what they have done, and as long as no one stops them, they will do, and do, and do...
2
Neither has Ryan , because he is from a safe, gerrymandered congressional district whose voters have no understanding of economics or finance. Also, none of Ryan's idiotic and simplistic proposals have thankfully never been made into law and ,therefore, he has never been in a position to be held accountable.
1
Like Bram Stoker's character the Dutch doctor Van Helsing, one could describe our plutocratic tyrant, "He have child brain." Meaning a level of animal cunning obtains, but not much ability to reflect, no self-awareness. Trump is a failure as a businessman, knowing less than nothing about macroeconomics or finance, except for how to welsh on large bank loans, and even more important, completely lacking in anything like statesmanship. He takes his cues from another tyrant, Putin, and they support each other in their moral turpitude while putting on airs of the bygone Romanovs while they preside from their thrones...No deep knowledge of government, constitution, law...we are doomed under his misrule.
3
How is it that America is so impotent to protect our nation, our rights, our position in the world, sanity with nuclear power, from the very dangerous man in the White House?
Is it not already past time to DO Something, before catastrophe?
2
'We will turn into Greece!'
That's the most laughable GOP id's 'wish fulfillment' dream.
It's absurd on so many levels it shouldn't need explained, but two things
stick out; We are the worlds largest economy, and two; we control our own currency.
The only way we could 'become Greece' is if someone put a metaphorical gun to our monetary system's head and pulled the trigger.
In other words, purposely destroying the nation's finances. . . .
Oops. . .
11.8.2016; A date that will live in infamy?
5
Trump will pick Ivanka or Jar-head since these are the chumps he trusts. Pitching something without any basis in truth works for them! Hopefully he won't pick anybody that Ryan trusts.
It's going to be a beautiful recession.
Well, whoever it is, they won't last long.
OK, now the serious part of the comment: Trump will install a person who will pledge fealty to him one way or the other. Trump will generally view this person as one of his accountants, the way he views the US as "his" business like how he has owned other businesses.
4
How would things change if we had Plato's Philosopher Kings, say Krugman, controlling policy? Worked out with Marcus Aurilius.
With "leaders" like these, who needs enemies?
Russia, don't waste your time--we are determined to be the source of our own destruction.
"That is, however, a norm rather than a legal requirement. And we know what tends to happen to norms in the Trump era."
and if we ever wrest it back from these scoundrels? we will need laws that plug these loop holes.... like mandatory release of tax returns, mandatory divestment, and mandatory psychological testing. this is how laws are born..... a criminal finds a new way to legally break the law. i am surprised at how many things trump has done legally..... i thought our money clearly stated "in god we trust" not you and not me and certainly not trump.
Will we see a Trumpification of our monetary system? Perhaps, if Trump will mint his own gold coins bearing his effigy, in denomination of One Million. Under the cheap gold sheen will be the cheapest Chinese made alloy. It will also say 'In Ayn I trust!'
Well Trump's "hero" Andrew Jackson brought about the first great American financial catastrophe by abolishing the Bank of the United States. Banks issued their own currency and credit, speculators feasted, and economic collapse followed. Lasted for years. A good start for the Trump financial dream team would be to abrogate the national debt held by foreigners. Play well in Trump land, showing those nasty foreigners they can no longer take advantage of good, white, gun loving Americans by loaning us money, then expecting us to repay our debts. Our President spent 50 years not paying his debts. Wanna bet?
1
I'm sure Ivanka will do a great job...
Yellen seems to have led the Fed cautiously and prudently, based on the data. Trump does not care about data and would not understand it if it hit him in the face. I worry that the Fed and the economy are next in line to be affected by the stupidity of this president. I also hold Congress equally responsible for not taking steps to remove him before that happens-there are means available but they seem afraid to use them. Whatever Trump does the GOP will own yet they act as if they are immune to his actions; they may find out otherwise in 2018.
85
" Whatever Trump does the GOP will own..."
Um, no. The GOP--through Fox News--will blame Obama and/or Hillary, and their base will eat it up.
1
Congress is not afraid of donald trump. They think they are going to get what their fat cat donors have bankrolled them to do. The only solution is to use the ballot to throw out every single member of congress who is either spineless or duplicitous.
Trump will pick a Federal Reserve Chair who is loyal to Trump. Beyond loyalty, nothing else matters. If we have not learned that, we have learned nothing.
137
Do you think he would pick a Fed Chair that was loyal to Obama?
Right.
Most likely, he will pick someone who is loyal to the concept of a stable, growing US economy.
And that would certainly be better then the overly cautious, hesitant Janet Yellen who has presided over a Fed that has had little influence on our growth and properity.
1
Where did President Obama come into the discussion "Owl"? I want a Fed Chair who promotes growth and who understands our economy. Trump's demand for loyalty above all else makes his appointees whipping boys for the master of the White House. I don't want subservience; I want leadership from the Federal Reserve. Trump's own Secretary of State thinks he's a moron. I'll trust Tillerson's judgment.
1
Pulling hundreds of billions of dollars out of the US health care system, and disruption resulting from collapse of medical insurance markets, causes a recession. Money from huge tax cuts for the rich is largely hoarded or spent elsewhere in the world. Paul Ryan and Mitch McConnell respond to the worsening recession by trying to balance the federal budget, slashing government spending. Fed Chairwoman Sarah Palin takes action to avoid expected inflation by aggressively tightening the money supply and raising interest rates. When the recession spirals into a full-fledged depression, Trump responds with a proposal to reinstate the gold standard.....
Janet Yellen has committed the unpardonable sin: Be independent of the GOP and Trump. And she represents the unacceptable demographic: Intelligent women. And she has done the unconscionable: A good job in a governmental role.
Trump and the GOP will reverse all of this. It’s what they do. It’s all that they do. (Apologies to The Terminator).
17
drumpf has appointed an unqualified and/or incompetent and/or corrupt person to virtually every position in his administration. Why would the Fed appointment be any different?
Maybe we'll get lucky and he'll appoint those two economic geniuses Jared and Ivanka to co-lead the Fed.
3
Remember this: a sinking stock market will prove to be Trump's Armageddon--if the Down drops bigly, Republicans will drop Trump bigly.
1
In my lifetime there hasn't been a GOP Administration which didn't end in a financial, why should Trump be any different?
3
Flabbergasted how you could still be praising the Bernanke/Yellen tenure, jus when the nonsense of the fed balance sheet is starting to be unwound. All the pain that was postponed by QE will only be magnified, but Yellen will have cleared the field, so it won't be on her watch.
2
Eight years of GW Bush didn't teach America a thing. After 8 years of Obama - the first 2 years recovering from Bush's fiscal, domestic and foreign policy disasters and the next 6 years attempting to build something constructive, Americans sank right back into the same sort of blind conservatism that got us into trouble before.
A conservative friend told me recently that lots of Americans are disgusted with the liberalization of America, and were even willing to support a buffoon like DT to help reverse that trend.
Definitely a case of tossing out the baby with the bathwater.
Hopefully we'll recover from the current round of insanity, but maybe not.
4
I assume it depends on how Donald can best personally monetize any change. That is after all the reason he's our, um, president.
1
It would be truly scary of the Ayn Rand groupies took over the Fed. I have never understood how such badly written novels authored by someone who had very serious empathy issues for other human beings could be so influential. But then the Republican party seems to be stacked to the rafters with people who only care about themselves and their own wealth. Perhaps you have to be a borderline sociopath like Trump to truly appreciate Ayn Rand novels.
4
It pains me to tell you this, Dr. Krugman, but those 63-million Americans, those thoughtful, prescient, concerned, civic-minded citizens who gave us the Stage 5 presidency that you acidly describe would vote for him again.
That Donald Trump has taken long strides down the road to ruin matters not to those who thought he would be a good idea. He represents, to them, the itch that they've been wanting to scratch since, oh, the Civil Rights era, when black Americans were legally franchised (again!) to vote and discrimination against them--or anyone else--was officially illegal, not to mention morally impermissible.
That this president's cabinet choices have all the odor of droppings left behind by a team of horses on that same trail in which Mr. Trump is wagon-master is quite beside the point. His rock-steady and steadfast base of support (37%, a distinct mathematical minority, but go figure) loves the sight of the dung left behind on the trail and also revels in its stench. They believe that they are getting their own back--the stuff, you know, that "others" took or tried to take from them.
These 63-millions don't care that American foreign policy is in the toilet or that catastrophic natural events scream for drastic changes in the nation's environmental policy. Or that it's necessary to spend untold sums to upgrade our fourth-rate infrastructure, itself a national safety concern.
No; they're applauding Trump as he punches the past, present and future in the nose.
Bigly.
2
When it comes to economic and monetary policy, Ryan’s doppelganger is Ayn Rand. Or maybe it’s Ronald “trickle-down” Reagan. I’m confused.
3
The President will continue his industrious plan of diluting the infrastructure of the USA, thereby crippling it's effectiveness in dealing with all sorts of internal problems, whether how destruction and death through Hurricanes or other environmental disasters are met on down to the weekly collection of garbage (they way it is in parts of Italy).
He will now start the World's first Nuclear War in the confused belief that a big bang or two will win it. But "it" can't be won.
Nonetheless, he IS right. It will do it;
-it will contaminate Land and Water (destroying food sources) irrevocably.
-Korea's former (and current) friends Russia + China will not just sit there twiddling their thumbs - both have tremendous Nuclear capability.
-it will probably set us (also irrevocably) on our way to the Armageddon that conservative christians impatiently await, all expecting to survive while the rest of the world gets killed (punished by god).
This all may sound a little insane but the only insane part of this is our sleepwalkers way of watching all of this develop.
Trump is reminiscent of Henry II, King of England who wanted more power through control over the Church. To achieve that goal Henry made his Chancellor, Thomas Becket Archbishop, but Becket defied him, making his job- function his priority. Trump demands 100% loyalty from his appointees (loyalty to trump, not to the USA). This blind loyalty from his base and his appointees will lead us to Nuclear destruction.
2
The Fed, by taking money from retirees and savers and giving it to gamblers on Wall Street, has overseen the biggest shift in wealth to the .01% in the history of the world.
Sooner or later this "frothiness" will cause a collapse which will do enormous harm to the world economy.
Now you can say they didnt have any choice after the GFC. However they kept ZIRP going mainly to kick the can of the correction down the road - beyound the normal duration of the business cycle.
Wait a few months or years and then see how history views the Fed.
3
Mr. Krugman, the FED has not been working for the real people under Bernake and Yellen, it is working for investors by buying bonds and keeping the interest rates low, all to force people to buy stocks!
It started before them, when Alan Greenspan had decided to transform USA in a service and financial services economy, thus gutting and offshoring US production, as he brags about himself in his book, The Age of Turbulence, oblivious to the human disaster he's caused.
All the FED policies in the last several decades have helped capital and hurt Americans! Time for a change.
Instead of going petty on Trump, I wish you recognized the facts above and tried to suggest a better strategy and someone who might carry it.
5
If Taylor or Warsh are appointed chair of the Fed it will not be because Trump but because Republicans. Please stop making the false distinction between Trump and his party. They are one and the same.
2
Yes. That's what he DOES. Trump can, and will, make ANY situation Worse. Anything, anytime, anyplace. That's his Superpower.
3
Dr. Krugman, to whom I affectionately refer as "The Krug," has succeeded in scaring me once more. His points about conservatives not learning from mistakes or lofty predictions based on pure political hubris are all brought home by noting their addiction to free-market worship and trickle-down fiscal policy. Now, we have a nitwit at the conn of our government who understands nothing about economics and makes policy decisions based on his likes or dislikes at the moment.
Scary indeed because as the Krug notes, the Fed is our last redoubt of fiscal sanity at the present.
2
The Trump Republican Rules:
(1) Always adopt the policy that most enriches the elites, especially members of the Trump, Ryan, McConnell, Mercer, Murdoch, Koch and Adelson families.
(2) If (1) above is not possible, then adopt the policy that makes life as miserable as possible for everyone who is not a white, English or Russian speaking, "Christian," male.
3
Krugman's fairy tale about the Fed being a trustworthy steward of the economy doesn't come close to the truth. In order to paint this inaccurate picture, Krugman had to ignore the ignominious reign of Alan Greenspan. The fact that Janet Yellin has pronounced the economy "recovered" gives a good indication of how out of touch the Fed is, and has always been, with Main Street.
The Fed enacts policy to benefit corporate America. Back in the day, when William M. Martin chaired the Fed, what was good for business was good for the public. Now, with the middle class on the endangered species list and 13 trillion dollars in profits parked off shore for tax avoidance purposes, only a fool would repeat that outdated adage.
3
If Trump does appoint incompetence, the next financial crises will turn calamity into catastrophe and true to conservative victimhood, they will blame it on President Obama.
Perfect additional position for Jared Kushner. Or maybe Ivanka.
1
Great piece as usual, except for the totally inappropriate grouping of Tillerson with Price and Pruitt. Tillerson is actually doing his best to prevent millions of people from getting killed on the Korean Peninsula - give the guy some credit.
2
Given #45's cabinet appointment record - ignorant DeVos, science illiterate "skeptic" Perry, and the list goes on and on and on - and the utter disregard for anything resembling policy-making (see Congress' Obamacare proposed "replacements"), it is a terrifying prospect to just think who may end up in charge of monetary policy.
I just hope the rest of the world wakes up to the insanity ruling the US and start acting to limit the damage those "policies" will create
3
Yet another piece from Krugman as seen only through his rose colored glasses.
There is this slur against the President's choices for cabinet members: "And we know what tends to happen to norms in the Trump era."
What Krugman is really advocating is the continuation of the status quo, the hegemony of the 1% global, elite ruling over us all since he's a part of that cabal. No need to change anything, let the stagnant, rotten state we're in continue because Krugman and his ilk are all benefiting. That's why he is still bemoaning that the establishment candidate yet horrible leader Hillary Clinton lost. Better, in Paul's world, to have a docile lap dog than the raging pit bull that is Trump.
Then there is this whopper in reference to Bernanke and Yellen and the financial crisis: "And their intellectual and moral courage has been completely vindicated by events."
Yes, we needed a strong response to the financial crisis, which Bernanke did. However, he and then Yellen, as well as our do-nothing President Obama and the recalcitrant Congress, accomplished little to nothing to actually reform the dysfunctional financial system, that is the gambling den of Wall St that is all about continuing another bubble masquerading as an economic recovery. The working people, or I should say the people who want to work, know better.
We are headed for another financial crisis when this Wall St bubble pops. But most practitioners of the dismal science still have their heads in the sand.
1
Dr. Krugman, you’ve scared the bejeezus out of me, and I don’t scare easily. This was the operative quote: “It seems safe to assume that Trump himself understands nothing about monetary policy.” This is a man who not only says he knows all about everything, he believes it. To Trump, Trump is omnipotent. If Trump manages to read far enough past the title of this editorial to encounter this line, unlikely but miracles do happen, he’ll probably appoint some retired general or pipsqueak relative to the post just to spite the “failing” NYT in general, or you in particular.
So please, if it looks like Trump’s handlers are wavering from reappointing Janet Yellen, find a stately-looking white Republican gentleman with a magnificent head of silver hair, tailored suits, and a billion dollar bank account who is capable of successfully guiding the Fed, and arrange for him to bump into the president on a Trump golf course. Then we cross our fingers and hope they look good together in pictures.
3
The GOP and its dysfunctional Administration may not succeed in passing legislation but they will succeed in destroying our country and its place in the world in just four years. After all the appointments of unqualified government officials with a selfish political agenda, sabotage and wholesale reversal of regulations protecting health, safety, finance and the environment, drastic budget cuts to fund tax cuts for the wealthy, trashed international agreements and threats of new conflicts that will kill millions and disrupt the world economy, What will be left? The hope that this country could survive four years of Trump seems less and less likely.
1
This is exactly why Putin supported Trump. Trump is Russia's WMD, planted in the most strategic place in the US government. Russia is probably patiently waiting for Trump to destroy America from within, leaving a power vacuum in the World for Russia (and China) to fill. Thank you Republican base! America will not be great (again).
2
The word "chairman" is sex-neutral, like almost all such compound words in the English language. That's because "man" was originally sex-neutral, with males designated by werman, and females designated by wifman. The latter eventually became "woman", while the former disappeared entirely - men had to make do with being generic humans. And it's the generic sense in which compound words involving "man" were created.
It wasn't until the early 20th century, with feminist claims that language was sexist, was there anyone who did not understand these sex-neutral meanings.
The current chairman of the Federal Reserve is female. There's nothing grammatically wrong with that statement.
The selection of a coal industry lobbyist to assist Pruitt in destroying the EPA is the latest Trumpism, as is Jeff Sessions' steady erosion of civil rights at the Justice Department. One wonders why Trump bothers appointing people to destroy government agencies and protections they're put in charge of. Why not simply abolish them? No more EPA. No more Energy Department. No more Education Department. No more State Department. Just Emperor-for-Life Trump, surrounded by sycophants, robbing the nation blind with his finger on the nuclear trigger. That's what he really wants.
116
True and the GOP has been talking about dismantling federal agencies for years (remember Rick Perry couldn't remember the third department he wanted to "get rid of"?). So Trump is just doing it in an underhanded way, which is no surprise. The party whose simpleton, inflexible mantra is that "government is always the problem" will stop at nothing to make government not work and then try to blame the Democrats (what they did to Obama essentially). Because, you know, the magic of the free market will always prevail and companies will always do the right thing because it's in their best interest to do so. Yeah right. It's still hard to fathom that there were left leaning people out there - you reading Susan Sarandon? - who thought Clinton would be worse than Trump. What in God's name were they smoking.
Most impressive about this and other instances is the disregard of one's past mistakes. What deserves real study is why one's past experience does not inform one's present opinions. I can understand not learning from others' experiences--we do repeat history--, but not learning from our own is puzzling. Imagine a Lusitania which scraps an iceberg but survives the contact only to have the captain suggest that it ram the next one. Are such individuals self-mad lemmings?
54
Except the Lusitania's iceberg was a U- boat torpedo.:)
Well, the Lusitania ran into a torpedo, not an iceberg -- but substitute Titanic for Lusitania, and your metaphor is apropos.
I thank Rep de Pan for his correction and Peter Czipott for his generous indulgence. Blame hurried writing and old age (but not faulty memory!) for my error.
Ever since the days when George H.W. Bush caved to "voodoo economics" to make President Reagan happy, the Republicans have found it easier, with each passing election, to deny imperical evidence of what a fraud trickle-down, free-market economic policies really are. As PK has reminded us for more than a year, Speaker Paul Ryan is not the "numbers guy" his party claims him to be. He is, in his own simplistic, fool-the-Trump-base philosophy, a Laffer Curve acolyte. Despite the evidence of a thrice-failed economic concept, he clings to Laffer's faux logic because it not only confuses people who can't see the fraud for what it is, it also gathers campaign donors like moths to the flame.
Perhaps the public reactions to faux healthcare reform, and quite likely, the upcoming tax-reform-in-progress, there may be signs that the majority of Americans will not be fooled by Ryan's version of three-card-Monty.
Meanwhile, Trump continues to build his kleptocracy with the nomination of a coal industry lobbyist as EPA director Scott Pruitt's number two bag man for the polluters of water and air. They might as well rename the EPA, as the Environmental Destruction Agency.
When will this nightmare of Trump madness end?!?! While the rest of the world is giving up on America as a beacon of enlightenment, TeamTrump turns our nation into an international laughing stock. Will this madman destroy our democracy or is rescue one impeachment away?
117
Granted, the Fed acted "superbly" when it needed to. What it didn't do was raise interest rates to head off obvious bubbles in the stock market in 1999 or in the housing market prior to 2007. Please give us your opinion about what banks should pay in interest on customer's deposits. Or more specifically what the spread should be between what they pay for funds and what they collect as interest on loans. If 6 points is a norm, we're way above that on credit cards, and even if 10 points was a norm. Rates are routinely 17-20%; isn't there a law with a 15% maximum? The Fed gave banks lots of leeway to increase their capital. Have the banks responding by gouging customers again?
1
"Now, I don’t know who Trump will actually pick to head the Federal Reserve. It might actually end up being someone smart, knowledgeable and honest. Hey, there’s a first time for everything." Isn't it pretty to think so? But alas it ain't going to happen.
1
When Mr. Krugman talks about the disasters rolling through the various cabinet departments we ought to remember the intellectual "father" whose nihilistic views on government brought this about...Grover Norquist. He is one happy man today as the acolytes of his deconstructive views proceed to tear apart the fabric of our country.
4
Which economic leader would be most likely to help Trump's personal finances? There's your man.
2
Remember what Trump said about the "great recession" - it presented a terrific buying opportunity. He's making money hand over fist now, planning a "buying opportunity" meltdown is the next step. Take that into account in your current financial planning.
3
The opening paragraph, if true, delivers the most promising words to the world since VE Day.
As far as Fed Chairs having never worked outside of academia or government, inconsequential. That doesn't mean Pro Paulie should be a candidate.
"Ryan went so far as to suggest that the Fed’s policies were part of a politically motivated attempt to bail out President Obama’s fiscal policies. And so on."
I would go so far as to suggest that the Fed’s policies were part of a financially motivated attempt to bail out decades of US fiscal policies. And, social engineering, climate sci-fi, state building ... so on.
"both Bernanke and Yellen responded effectively ... despite constant heckling from back-seat drivers in Congress and on the political right."
True, but an incomplete statement. Krugman has often been critical of Bernanke and, after clamoring for her nomination, of Yellen as well. Of course, from the opposite perspective of the political right.
I would add that Krugman himself was wrong about the Fed raising interest rates, which have not had obvious deleterious effects on the economy, which is at or close to full employment.
Any sensible President would reappoint Yellen. Wish we had one.
2
The stock market & home prices are rising to historical highs, despite no accompanying increase in production, wages or employment, very much like the run up to 2008. We all know how that ended. The Drumpf "Bubble" may dwarf the Bush/Bernanke Bubble.
Meanwhile the GOP & Faux Business News, much like Paul Ryan, continue their puerile prattling about how tax cuts will unleash the might of American Business & its workers. Does anyone recall how well tax cuts worked for Reagan or Bush 43?
The alleged tax "reform" of 1986 resulted in elimination of most middle class tax deductions, while introducing taxation of Social Security benefits for the first time in 1984. The Gingrich era House of Representatives subsequently increased the portion of benefits taxed from 50% to 85% for "higher income" beneficiaries. That figure has not been revised since to compensate for 30 years of inflation, despite a burgeoning retiree population.
I hate to be cynical, but I seriously doubt any Drumpf/GOP tax overhaul will remove loopholes for multinational corporations or preferential treatment of hedge fund managers & other financial magicians "carried interest"tax rates. I also predict retirees will see no increase in earnings before being subjected to paying taxes on benefits.
Donald J. Drumpf could leave office tomorrow, but the bankrupt policies of the GOP's voodoo economics would continue taking us down the same yellow brick road we have travelled before under Republicans & their hoodoo.
1
To say Bernanke and Yellen have handled their jobs "superbly" is patently absurd, and reflects just how staggeringly useless economists are.
Bernanke was a spectacular failure who, for all his "studying of the subject" of economic history, failed to see the worst economic crisis in a century coming. It was a crisis he helped to cause by his inaction and his ignorance in 2006 and 2007, saying that the economic fundamentals underlying the housing bubble were strong; nothing to see here. And then he broke capitalism by intervening, thereby preventing its creative destruction cleansing process from occurring, just so he wouldn't be blamed in the economic history books read only by his fellow nerds for causing the second Great Depression.
Yellen is in way over her head and is utterly incompetent. She has come very close to admitting as much in recent weeks, by implying that maybe the economy doesn't work the way the economic textbooks say it should. And that's why all of a sudden the economic levers don't work anymore, and why there are so many "economic mysteries" that have "puzzled" the "distinguished academic economists". Perhaps something structural has changed; better wait for more "Economic Literature" on the subject, while the developed world collapses and the middle classes begin the implementation phase of their revolution.
History will judge both as being among the root causes of the violent social unrest that is just getting underway across the developed world.
1
Dr. Paul, those of us who have survived Category 5 hurricanes (in my case, 2 of them, and rebuilding my cottage twice on a small British Caribbean island) agree with your metaphor of Trump Being a Cat 5 hurricane leaving devastation in his wake. But we are more concerned with the rampant kudzu growth of gun-buyers, sellers and demented shooters who massacre our people in places with beautiful-sounding names (Aurora, Columbine, Mandalay Bay) than in the Federal Reserve. If the Fed is `trumpified` will that make any difference in the degradation and wild downspin of our society and culture? BTW, the next crisis may hit America sooner than you or any of us can imagine.
1
I appreciate the voters who voted for Hillary Clinton. Every other voter and non-voters has put the future of the U.S. in jeopardy.
1
Unfortunately, macroeconomics has only part of the answers to the worlds problems.
Far more important is the issue of population growth, and economists like Krugman leave out the population variable, which dominates in the very long run.
In 1972, Meadows, Meadows and Sanders published "the Limits to Growth," which explored the consequences of continued population growth. They gave mathematical models. Human behavior is unpredictable, so there were many models, but all showed population growth leading to disaster.
One particularly telling prediction was "overshoot and collapse" which occurs because children born today do not use resources at a maximal rate until 20 years later.
Although global warming was not specifically mentioned, the destruction of the environment was one way in which population growth could ultimately cause disaster.
Even liberals, like Krugman, never discuss population growth. In the Podesta emails, Hillary Clinton was caught arguing for "open borders" with donors, in spite of claiming the contrary in campaign events.
Bad as he is, Trump at least recognized that illegal immigration is destroying America.
Liberals cannot admit that, an even greater lapse than denying global warming. In their view, racism is the source of all problems.
We are witnessing the dimming of America. If we are lucky, China will rise to take our place. If unlucky, the mass migrations from the overpopulated third world will make events like those in Puerto Rico common.
The job will either go to the last person that the last of Trump's advisors to talk to him about the matter mentions to him, or to the person all of Trump's advisors told him not to choose. That's how Trump operates...he either goes with the last argument presented to him or he intentionally makes a contrarian choice to give the impression of making his own decisions and being smarter than he really is.
2
You could probably add Ben Carson's stay as head of HUD to the list of Trump appointees who have demoralized and degraded departments under their charge.
I am a low income senior living in HUD housing, and am watching the Trump budget and Carson's actions with significant trepidation. Not much hope for lengthy employment for a 71 year old in not so perfect health. Cut public housing by much, and you toss many seniors and disabled out into the street.
And don't think that is trumped up alarmist thinking. Look at all the seniors already living in cardboard under bridges. Not sure the Republicans care.
Hugh Massengill, Eugene Oregon
http://nymag.com/daily/intelligencer/2017/08/ben-carson-hud-secretary.html
1
"Not sure the Republicans care." Well I'm sure.THEY DON'T! If you aren't one of their big time donors you are just another taker and deserve whatever hell they decide to visit upon you. The only way to stop this madness is to work like the devil to overcome their gerrymandered advantage in 2018.
1
Hugh,
Neither the Republicans nor the Democrats care about you, and the millions in your predicament, and they will never care, and Lean More to the Left, if you think 2018 midterms will make the slightest difference, be prepared for a shock; see it is clear to me, and I dare say many others, that the moneyed elite Democrats are firmly in Trumps' camp, whinging and bemoaning his awfulness, for the benefit of their adoring know-nothing's, but doing nothing, and with no intention of doing anything to help the poor and middle-class.
See, as far as both parties are concerned, when Bernie was shot down, they breathed a great sigh of collective relief, patting themselves on the back at their latest success in dumbing down the unbelievably gullible people of America.
American Democracy is the joke of all time; we are a plutocratic state, corporate owned and operated for the sole benefit of corporate behemoths, domestic and foreign.
To presume otherwise is foolish; look around you ...
1
Of course Trump will Trumpify the Fed. That is all he knows how to do. Other than the destruction which he and his appointees have already wreaked upon the U.S., what have he and his cohorts done since January 20th? Nothing ! He is not a President in the sense we have had in the past. Even George W. Bush and Richard Nixon came closer to being "presidential" than Trump has been or ever will be. Trump has no idea what the true meaning of the Presidency is, and he never will have. This is a sad time for our country, and there is no way out..........
3
These constant attacks on the American oligarchy must stop. It is only right that monetary policy favor those who own vast amounts of property. To insist otherwise and recklessly threaten the wealthy's property rights just invites the oligarchs to arm themselves, their followers and their employees and stage a coup. As bad as things are now at least oligarchs aren't hiring shooters to mow down rebels, rebels such as the occupy wall street movement and the Green party. They certainly could have decided to take out the OWS rebels, but instead they kindly stood back and let the police harass and detain them until they disbanded on their own. We do not want to end up like Phillipinos, cowering in slums worried about death squads. We have the most patient, generous, kind, oligarchs in the world. Let's not forget that and give them their due in favorable monetary policy, regulatory relief and tax cuts. Paul Ryan knows this, Mitch McConnell knows this, Ayn Rand knew this. Wake up America before it is too late.
2
Trump and his voters take US prosperity and greatness for granted, and don't realize that it requires competent administrators and trustworthy institutions. Can you imaging what might happen to the dollar as a currency if Trump installs some wing-nut and starts opining daily on interest rates?
Fortunately, the fact that he hasn't monkeyed with the Fed yet is an encouraging sign that he might view it as a fifth "grown up" in the room.
Heading the Fed is the logical next step up the federal ladder for Ivanka hubbie Jared Kushner. He's clearly hit the limits on Middle East peace -- all those long trips away from the Washington social scene. Like Dad-in-Law Donald, Jared knows all about borrowing money from banks and investors all over the world -- and sometimes even paying it back. The Fed never has to worry about payback; it just prints up cash whenever it needs some. And don't forget that Jared is Jewish, which as Trump pointed out early on, means he knows how to do deals.
President Krugman wants a Fed that obeys his whims. Much like the Congressmen, bankers, railroaders, and oilers wanted a government-related central bank to help them stay in power by obeying their whims. The government-run Fed propped up Britain's downward-spiraling gold reserves after WW1 by lowering US interest rates and setting the stage for the 1929 stock market crash and the Great Depression.
When the Fed leaves things alone - q.v., 1920-1 Recession - the economy gets back together very quickly. When the Fed interferes - q.v., the 1929 crash, the 1930-1945 Depression, the 2007-8 mortgage meltdown which is still felt ten years later - the economy stays mired in the cesspool that the Fed is responsible for.
1
I'd take a wait and see attitude re who will l head the Federal Reserve. There are qualified candidates to pick from and not so unlikely that Trump will get this right. Seems to me expecting the worst before he has made his selection does no good.
Having anticipated a less than superb appointment to the Fed, can Mr. Krugman provide us with one column in which he recommends actions that ordinary people might do to ameliorate their future problems?
1
The billionaires are in charge now. Several generations from now they'll be asking why we did this.
This year has been a slow motion movie - watching our society crumble.
1
This is a nation where we have and allow many divergent views some of which are provably right and other provably wrong. Why we have to choose the provably wrong on a consistent basis should indicate something is amiss and has gone awry. Why supposedly intelligent people from either end of the political spectrum cannot or more likely will not understand this simple concept should indicate that something is fundamentally wrong with our approach and is not limited to economics..
I harp on the fact most of us are brainwashed from birth to accept a higher spiritual power as our governing axiom. This is literally spelled out on our currency "In God We Trust".
The fact is all gods are concepts which should have no bearing whatsoever on the way we order and govern our society but we allow these myths of antiquity as having literal control over us today.
My sense is people can believe whatever they want so long as their belief is not imposed in any way on our society. Regardless the plea for rationality in government which would exclude reference to any supernatural concepts we are burdened with myriad mystical beliefs which should have no bearing whatsoever on our governance.
Until we demand reason as our basis for governance we will burden ourselves with any and every demand to accept belief rather than knowledge gained from actual experience.
As no house can eliminate the forces of nature so too no nation can eliminate the forces of ignorance and superstition.
I think Prof Krugman misunderstands republican congressmen by taken them seriously about what they said during the time of the Obama Administration. Republican congressmen are not against spending or money printing. They did not want Obama to print or spend money. Obama spending money on healthcare, building bridges, schools, powerplants, the fed printing money so that the economy grows out of its misery and new jobs are created... this was a horror-vision they tried to prevent. Themself they got no problem with spending or money printing - as long as it all flows into the pockets of those who pay them.
1
Hope the president will appoint some one who is an intellectual and can operate the fed in a non-partisan way for good of the country and not just the 1%.
Since a scorched earth policy is the only agenda this administration seems to have, I would expect that whomever Trump nominates to head up the Fed will wreak economic havoc. Just one more thing to worry about along with a possible confrontation with North Korea, the hacking of the 2016 election, environmental de-regulation, health care and a host of other issues.
Sad to think that this time last year Hillary Clinton seemed to have all but clinched the Presidency, then came the October surprise from Comey, along with the Russian interference in the election, and here we are saddled with a man unfit for and unqualified to hold that office. Trump holds our very ives economically and otherwise in his small hands.
1
One only has to look at Arthur Burns' tenure as Fed chair during the Nixon Administration to see the sad consequences of meddling by the executive branch on economic performance. Those who ignore history ....
This is a nation where we have and allow many divergent views some of which are provably right and other provably wrong. Why we have to choose the provably wrong on a consistent basis should indicate something is amiss and has gone awry. Why supposedly intelligent people from either end of the political spectrum cannot or more likely will not understand this simple concept should indicate that something is fundamentally wrong with our approach and it is not limited to economics..
I harp on the fact most of us are brainwashed from birth to accept a higher spiritual power as our governing axiom. This is literally spelled out on our currency "In God We Trust".
The fact is all gods are concepts which should have no bearing whatsoever on the way we order and govern our society but we accept these myths of antiquity as having literal control over our us today.
My sense is people can believe whatever they want so long as their belief is not imposed in any way on our society. Regardless the plea for rationality in government which would exclude reference to any supernatural concepts we are burdened with myriad mkystical beliefs which should have no bearing whatsoever on our governance.
Until we demand reason as our basis for governance we will burden ourselves with any and every demand to accept belief rather than knowledge gained from actual experience.
As no house can withstand the forces of nature so too no nation can withstand the forces of ignorance and superstition.
Most of the damage Trump has done, as Putin's unwitting Manchurian Candidate, is reversible. But if Trump appoints a Price/Zinke/DeVos/Pruit/Mnuchin/Carson type clone at the Fed, Putin's desire to unravel American power may well be complete. We saw how George W. Bush nearly destroyed our economy, exploding the deficit, the debt, shifting wealth to the wealthiest, doubling unemployment, and starting 2 endless wars. We are still recovering from Bush's mess and some of it may not be fixed in a generation, particularly the concentration of wealth.
Hard to imagine worse? Not anymore! With Trump, there's never a bottom he cannot crash through! As Trump decries the destruction of the economy and legal system in Venezuela, he's been doing the same thing as much as possible in the USA.
But if he appoints a Kevin Warsh, he will make what happened to the Greece look like a game of bean bag. The economic destruction of the United States will collapse the World's economy, blowing back on Putin in ways far beyond a KGB agent's tactical planning and vision. And, like the Great Depression was the catalyst that brought on WWII, this cataclysm wrought by Trump will ultimately bring on WWIII.
Unless Congress grows a spine and uses the Senate and Mueller's investigations to impeach and oust Trump. But it's hard to imagine that happening before 2018, or after, if the Democrats don't take back the House. And, given Pelosi's historic reluctance to Impeach, it may not happen even then.
2
And then after the Fed gets Trumpified, and the economy goes into a tailspin, Fox will somehow find a way to blame that on Democrats, and the right will shift into the extreme outer cosmos, and pack all states houses and Congresses wtih these extremists, and things will get even worse than they are now, which will lead to even more extreme, outer galactic right wingers, and on and on, until, this Democracy will fail.
And Fox will blame Obama, and Hillary, and those old, white Fox loyalists will believe it and with their last breath, will pull the lever for yet another R candidate.
4
"Will Trump Trumpify the Fed?".
According to the Constitution and the statutory language of the Federal Reserve Act he has the authority to do so.
This shows it really was not a good idea by the Republican party to nominate this demagogue as its candidate for President of the United States of America.
It was a worse idea for the American people to award him the presidency even though Hillary Clinton got 2,868,691 more votes than he did. Majority does not rule in the U.S. as it does in most democracies.
Janet Yellen is brilliant, brave, steady under fire, experienced, and has been an excellent Fed Chair. Oh...if she only looked better in four inch heels then she'd be a shoe-in.
If Janet Yellen stays put for another 18 months my belief is that Trump will no longer be the one to nominate a replacement.
Trump’s desire to “shake up Washington” is simply to destroy its institutions. It reflects the poverty of his thought.
Unfortunately, Trump's anti-intellectualism extends far beyond him to the base that voted for him, For whatever reason, those people don't like the idea of intelligent people occupying the presidency... or any branch of government for that matter. Roy Moore anybody?
Unless some of those folks begin to understand how counterproductive the votes they cast for these so called 'leaders' are, we could be in for far too much more of this insanity.
Krugman conveniently ignores the ignominious reign of Alan Greenspan - that would unravel his whole thesis about the Fed's trusted, sober management of the economy. The fact that Janet Yellin has declared the recession over shows how out of touch she is with Main Street.
The fact that Trump will probably nominate someone wholly inappropriate shouldn't distract us from the fact that the Fed guides the economy to accommodate the wants and needs of corporate America. Unless you still think that what's good for business is good for America, that should anger you.
1
Janet Yellen has proven herself highly qualified, which is exactly why she will not be reappointed. Trump doesn't care about qualifications. If you are rich, you must be smart enough to run anything. If you are really good in one field (Ben Carson, neurosurgeon), you can administer anything. This is part of his magical world view which explains to him why he is now king. Besides, he is raking in money every day by being president, so who cares?
He appoints people whose resumes prove them highly unqualified for those posts (Gorsuch excepted). He wants to shake things up, drain the swamp by appointing rainmakers. 'Creative destruction' must ensue. He heard something about that at Wharton, it's like capitalism, right?
So who will he appoint to the Fed? Bernie Madoff is just one quick pardon away!
2
In Trump's version of the United States we don't need no stinkin Fed. We also don't need competent people in the cabinet or running the military. Trump is so brilliant that he can do all of it on his own. When he appoints others it's to show us that he's being modest because with his record as a businessman or a dealmaker puts him head and shoulders above people who have worked in these areas for years. That could be his rationale for selecting people like Pruitt, Price, DeVos, Tillerson, and the rest down to Ivanka and Jared. He can blame them and then come up with his own wonderful solutions.
In truth what he and the GOP are doing is destroying the country for everyone. Even rich people and corporations are not immune to how this administration is making enemies or making us look intransigent, selfish, and ridiculous to other countries. We are not a small insignificant country fighting for recognition. We're a large country with a large economy and what we do affects more than just America. It's too bad that we voted in people who are determined to turn us into a third rate country with a brain drain. If I were 30 years younger I'd be looking to leave America to work elsewhere and I wouldn't bother to emigrate here to work especially not with the attitude towards immigrants being what it is.
Welcome to the America the GOP always wanted: one where it's government of, by and for the rich and corrupt.
25
Donald J. Trump is a despicable liar. He will likely name someone who shares those traits. Throughout this administration, and in both houses of Congress, Republicans are colored by liars of every stripe. From what cesspool should the President draw his successor-nominee? Of course he could draw from Wall Street, but that's getting pretty old for Trump. Does Liberty University have any economists to spare?
19
Mr. Warsh will get the job. Here is all one needs to know (courtesy of Wikipedia): “In 2002, Warsh married Jane Lauder, a granddaughter and heiress of Estée Lauder and long-time employee of the family business, the Estée Lauder company. The couple lives in Manhattan. Formerly general manager of Origins, Jane has served as the Global Brand President for Clinique since 2014. According to Forbes, her net worth as of September 27, 2017 was $2 billion. Warsh's father in law is Ronald Lauder who is a longtime friend of Donald Trump.”
17
By now it should be clear to all that Trump supporters want a kakistocratic kleptocracy: government of the incompetent for the corrupt.
11
Ummm ... one of your few columns that sheds heat, but no light at all. Please resume your technocrat persona.
It's hard to be a mind-reader when the subject making appointments (or not making them in many cases) barely has a mind, relying on vindictive slyness and mendacity instead.
1
Ummmm... another reader who does not quite grasp nor understand the danger posed by Mr Trump. Basically, Prof Krugman is worried that Trump will nominate an incompetent, intellectually challenged pseudo-Economist to head the Fed, with possibly dire consequences. Given Trump's history, Krugman's worries are justified
1
To quote Rex, as he's now known, trump is a moron.
Expect all appointments to be mirror images of the leader
Maybe he'll start requiring all appointments to wear their hair in his style, like Kim does in N Korea. Try to picture how hilarious that would be
13
Well, it's October and now down to about 3 more years of Trump. I hope we accomplish something in the next election, but doubt it based on a lot of stupid people feeling, "it's going good". The truth is the Fed is just the next part of the Government the Rs want to destroy.
5
Mr. Warsh's connections to the Bildebergers should give Trump pause in pushing the Estee Lauder heiress's hubby. The wingnuts are not going to like this at all with the prospect of one-world government looming once again. Bandying his name about will just increase insider confidence despite his jockeying for the job.
1
Trump seems to thrive on chaos and outrage. I can hardly wait for world leaders to use his "moron" moniker after he stirs up the Iranian hornets nest.
Trump believes most people know the truths of things the way he does... so he will appoint someone that mimics his behavior... on a much smaller scale of course... as he must remain the most important and influential person in the world.
4
Paul, if 97% of the scientists couldn't stop the "down is up" party from ensconcing Scott Pruitt, how can reason stop the leader of this angry mob from choosing some vandal to keep our economy safe?
Weather reports are unambiguous and regularly broadcast: If a plurality of Americans can be convinced to disbelieve their lying eyes, how many can be convinced that pointy-headed economists hold no candles to some guy who slaps his name on things and quietly settles lawsuits?
A lot of people went to the polls peeved that their President was black and that his wife made outrageous if sensible suggestions that they and their children slow down on the road to diabetes. They were told by trusted media outlets that their guns were as good as taken, that Barrack's enforcers were lying in the weeds waiting for Hillary's election to spring into action.
Trump was elected in part by those who share his misogyny. Many good reasons to vote for a man his own Secretary of State asserts is ...
Real America has been straining to get off the Elite leash ever since Richard Hofstadter detailed its frame of mind in the 1960's.
They raised a middle digit to their fellow Americans by voting for George W. Bush. Two wars (one entirely out of spite) and one financial crash later, they were shocked into sanity for a few minutes but then resumed their quixotic quest for the village idiot who could put on a suit and tell them the sweetest lies.
Tax cuts raise revenue. They said it on the tee vee.
26
"how can reason stop the leader of this angry mob from choosing some vandal to keep our economy safe"
Reason used by Mueller and Co. might.
2
Well, if it is Warsh, at least we will finally get proper scrutiny of this Republican hack who married into money.
Terrifying.
5
Trump is like ignorant Pope Urban VIII and the EPA and the rest of the government is Galileo. Do we have to wait 600 years to clean up this mess too?
4
Pope Urban VIII expanded the papal territory by force of arms and advantageous politicking. It's unlikely that even on his best day the Trump could do that, though there is no question that he can run up debts like the Pope with Republican help.
Rule of thumb, if history is any guide. If Trump approves of something, do the opposite.
It's impossible to forget/forgive the non-voters, 3rd party nihilists, and Bernie babies who let Trump slip into OUR White House.
He's burning the place down!
6
Thanks for the "...Greece; Greece, I tell you" memory. It's amazing how quickly guys like Ryan and his ilk can forget how wrong they were and continue to coast along on their "wonk" label.
Also, with Fed and Supreme Court appointments over the coming years, it's daunting to think how long the legacy of this mentally maladjusted boy-man in the White House might continue to impact our society.
5
Being amazed solves nothing. Too passive to be of much help in the here and now. Been there done that noi help at all.
Whether the global economy or nuclear Armageddon, we've got two schoolyard bullies standing in a pool of gasoline playing with matches.
What could go wrong? Why not what could go right and how to make that happen?
Trump is as transparent as glass. A narcissistic simpleton with attitude on steroids. There's not much complexity there. His brain has a dimple instead of dense folds.
He's surrounded by toadies or schemers who bow, scuff and flatter. And "his generals" who set Trump's autocratic heart racing with their tough good-looks and tightly clenched central casting jaws. If Generals have groupies, Trump's first in line.
Those who work with Trump who aren't acolytes know the only way to deal with him is like a 12 year old brat. To get something from Trump, you con, flatter, divert, bribe, lie, fabricate, inflate, name-drop. And in a pinch, you cite cable news.
There's a Trump-whisperer out there who can protect the Fed. Maybe Paul Volcker. Maybe Lady Gaga. Maybe Trump's Big Apple bud, Chuck Schumer. Maybe Fortune 500 CEOs. Maybe Jimmy Kimmel. (Putin's no help here.)
Promise an X-box, a bucket of KFC, a play date with Iron Man. Or tell him a financial genius like himself will undoubtedly pick a proven, pro central banker who won't risk him looking bad, unlike Cohn, Mnuchin, Manafort, Ryan, McConnell, Price.
It's brain surgery. Does he really want voodoo surgeons cracking his skull and poking around in his grey matter?
Promise him beautiful chocolate cake.
16
I can envisage the process of choosing the next Chairman of the Fed to be much like an episode of Celebrity Apprentice, with one after another trying to suck up to/lavish praise on the preening, self-absorbed chooser-in-chief. Which means that merit and intellect will not be part of the equation. If anyone ever wanted to know how long it would take to turn the greatest country in the world into second rate irrelevancy, the answer is about four years.
11
There is a significant number of Republican economists who still believe that a return to the gold standard is the way to go not to degrade the dollar.
Image that the future Fed chairperson were to study the feasibility of having the US and the global monetary system be based on a carbon monetary standard of a specific tonnage of CO2e per person. This monetary transformation would change the world given the monetary system is the glue that binds the monetary, financial, economic and commercial systems together.
An initial effort towards the study of such carbon-based international monetary system is made in Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" with updated at www.timun.net. An outstanding, globally known climate specialist believes: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.” Bill McKibben, May 17, 2011
1
Fed chair Eric Trump. Has a certain ring to it.
4
The ring of doom
1
So basically you're saying that while Nero played the fiddle while Rome burned ... our incompetent twitter in chief will continue playing golf while our country and worldwide reputation goes down the drain ...
6
If the pattern holds, anything Obama touched Trump will lift his leg on. Trump is so psychologically damaged everything he does arises from his humiliation at the correspondents' dinner at the hands of Obama. Trump isn't well and needs to be removed before he breaks something that can't be repaired.
15
“By all accounts, Rex Tillerson has demoralized and degraded the State Department to the point of uselessness.”
And Tillerson calls Trump a moron. He must be right since Trump hired him.
In “Foundation and Empire” Isaac Asimov laments: “I am afraid a monster is grown that will devour all of us. Yet we must fight him.”
He also famously said: “Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that my ignorance is just as good as your knowledge.”
We wait with dread to see what Trump will do with this Fed appointment. But the current coterie that has surrounded him, those like Mike Pence, Jeff Sessions, Steven Mnuchin, Tom Price, Scott Pruitt, Betsy DeVos, Ben Carson, Rick Perry, Ryan Zinke, and the rest of the sorry lot indicate that Asimov presciently had it right.
Odious lust for money and power, cemented to raw and execrable stupidity, is the monster we now must engage and fight with all that we have.
We should train every citizen in survival tactics, anticipating the upheaval and violence to come with the looming, and perhaps historically worst, economic crisis – since we can’t rely on our government to make rational decisions for us. Just as we should viscerally school everyone in mass shooting exercises, since we can’t control guns, and in how to prepare for nuclear war, since we can’t harness our president.
Maybe then we would start to get the message.
10
I've been watching this and I think I have Trump's method of appointments figured out. The appointments basically go, quite literally, to the highest bidder.
Whoever gives a pile of money to Trump in some form, whether that's campaign money, inauguration contributions, whatever helps Trump - they get their pick of the plum appointments to do with as they choose.
"Who do you want?", Trump will ask them.
And they either designate their favorite lackey, like Scott Pruitt for the EPA, or the say, "me", and take the job themselves - like Betsy DeVos, Rex Tillerson, Steve Mnuchin, Gary Cohen, etc.
It's totally pay-to-play, and the only real rule is. 'you have to respect the money'. In that sense, Trump has his own kind of integrity here. It may be corrupt, but at least you know you'll get a square deal for your filthy campaign bribe money.
(Ok, I'll play. My guess for next Fed Chair would be Ron Paul. Because I can't imagine anyone who would more gum up the works. Sometimes, Trump does these things just for fun, and to flummox his opponents.)
4
It does seem that Trump was elected by his white supremacist base with the help of the Russians to destroy the US government. You have to admit that's one thing Trump is doing quite well.
7
Scary thought, that of having a crazy, and highly incompetent, and increasingly irresponsible, bully in the White House; totally unpredictable and unscrupulous in his dealings thus far, the worse may be 'safely' assumed, when a replacement of the 'Fed' is considered.. Abuse of power is not infrequent, given that we, human beings, tend to be fickle when immature, insecure and vengeful, but Trump's level of corruption seems unsurpassable (insurmountable). He is a true narcissist, a sick man, demanding and requiring full adoration, no matter how moronic his big- mouth utterances may be (and they usually are), as Rex Tillerson 'candid' impromptu stated (his best, however undiplomatic, truism). The Federal Reserve ought to remain independent of politicking, if somebody with two working neurons can explain to nitwitted Trump.
6
We have elected a third-grader. Expect choices that a typical third-grader makes.
2
Trumps base is solely people who hate their fellow citizens, hate the government, hate minorities and love Putin. We don't need to fear North Korean nukes, because a far more painful demise awaits us at the doing of the red America.
1
I am certainly expecting the worst.
2
The sooner we get rid of Trump and his wrecking crew of agency heads, the better off we will all be.
4
The only thing Trump knows about the Fed is that it has lots of gold bars stockpiled in Fort Knox. He's probably trying to figure out a way to get some samples for himself and his family. Bigly.
4
"It’s almost impossible to imagine the Fed forcing banks to lower credit card rates, or take lower profits on their mortgage sales."
Above excerpt from NY Times report - https://mobile.nytimes.com/blogs/dealbook/2012/09/14/how-much-does-the-f...
The Fed as an entity which first, and always, insures that banking policies, regardless any adverse effect on the public, be protected, and enhanced.
Further, see excerpt and link below -
http://ritholtz.com/2013/07/federal-reserve-policy-mainly-benefits-big-f...
"We’ve extensively documented that the Federal Reserve is intentionally locking up bank money so that it is not loaned out to Main Street. Specifically – due to Fed policy – 81.5% of all money created by quantitative easing is sitting there gathering dust in the form of “excess reserves” … instead of being loaned out to help Main Street or the American economy".
While the Fed has catered, expressly, to banking and major corporations, Main Street has suffered, and continues to suffer, as evidenced by the historic level of inequality Fed policies have created and nurtured, so guess what, it matters not a whit who is at the helm of this so called quasi-governmental agency, because we all know that the entire Fed board is comprised of executives from the main banks, therefore insuring policy always benefits banking.
Mainstreet is the high octane fuel which banking sucks into its engine, with abandon.
1
Trump will choose wisely. He'll pick whichever cable financial news talking head has the highest ratings.
But will Republicans go along with the pick?
If he/she meets with the approval of the lobbyists of the financial industry, absolutely.
14
If past is prologue, I'd bet on Jim Cramer for the Fed.
Paul Krugman wrote:
“But surely it’s possible, even probable, that the Federal Reserve, like other government agencies, is about to get Trumpified, that one of American policy’s last remaining havens of competence and expertise will soon share in the general degradation. And won’t that be fun when the next crisis hits?”
I fear I’m a bit more pessimistic than Professor Krugman. I think this could be the *cause* of the next crisis.
12
I normally agree with Paul Krugman and I certainly don't want to see the Fed politicized. However the Fed has been far from perfect. Most recently the Fed has kept Quantitative Easing too long and failed to unwind their QE positions, resulting in asset (especially equities) price bubbles and aggravating income inequality. I realize that the Fed was forced to use monetary stimulus because Congress refused to provide fiscal stimulus but the Fed needs to be at least slightly more competent.
They also appear to completely miss the reasons why wages and inflation are not increasing. Keeping interest rates low or maintaining QE has almost nothing to do with these issues.
4
Bernanke himself admitted he was unsure how Quantitative Easing would work out. Historians would argue the jury remains out. In any case, there is no chance an appointee out of the mainstream will be confirmed. There is too much division among Republican senators to win a majority vote along party lines. And if by some miracle they could unite, the Democrats have the ability to filibuster. The only way the author’s doomsday scenario could happen would be if eight or more Democratic senators went along.
4
Senators tend to fall in line behind appointments made by Presidents of the same party much more readily than they do around legislation. And when it comes to confirming appointments - as opposed to passing legislation -
don't count on the filibuster. I can't imagine that the same Republicans who eliminated the filibuster for US Supreme Court appointments wouldn't do the same for a Fed Chair nominee.
1
" would be if eight or more Democratic senators went along."
?!
That can change in a Kentucky second.
As an executive branch nominee, there can be no filibuster. (I'm sure someone will correct me if I'm wrong, but most nominations now are simple majorities.) And the current GOP is happy to unite behind a nominee that is certain to harm the country. It's what they do best these days!
1
My experience with real estate developers like Trump is that borrowed money is their lifeblood - - lots of it, and cheap, i.e. low interest rates. A rational real estate developer should gravitate toward a more moderate Fed nominee. But is Trump a rational real estate developer?
For other agencies Trump has chosen nominees who look good to him in TV vignettes, regardless of relevant resumes. There is no shortage of lightweight pundits who opine on TV about the economy. I think we will get one of those.
8
My concern is that the next recession, which always comes, will find us with little room to offset it. If we cut taxes as promised by trump and we have not raised interest rates during this boom, we will not have the classic tools to fight the recession.
We have been experiencing inflation that is not being measured. Just ask anyone on fixed income about it. We are not measuring accurately the medical and medicine cost, the cost of food items has grown faster than being measured. We have been benefitting from lower fuel and utility costs but the affect is less than being credited with. Travel costs have skyrocketed.
Anyone flying or staying in hotels will attest to that, and of course the accompanying cost of restaurant meals also. the cpi is understating this area.
So when the recession hits, and it will, what action is available to reverse the fall?
17
Although I am a Senior Citizen, I have always and continue to travel as a backpacker. The writer says that travel costs have exploded. Sure, for luxury travel. If one turns to our younger cohort using tools like Couchsurfing, Air BnB, Work-A-Way, guesthouses, low cost carriers and the countless sources of good food other than three star restaurants, one would discover that travel, real travel, is cheaper and more accessible than ever. Forget the lifestyles of the rich and famous and take a look at the "share" economy. You might like what you find.
3
"So when the recession hits, and it will, what action is available to reverse the fall?"
Direct cash payments to every American for a start. The Republicans have forced fiscal policy off the table for decades. The only "fiscal policy" the Republicans know or care about is cutting taxes. As we all know well, those solutions funnel more money to the wealthy, who will spend very little of their new-found largess, than to the rest of us who would spend additional resources on the necessities of life and maybe a little enjoyment from time to time.
The Republicans seem ready to enact a tax cut in the trillions of dollars to reward their wealthy donors. It will make little difference to the rest of us and have essentially no stimulative effects on the economy. The evidence from past tax cuts is pretty clear.
7
When you state "ask anyone on fixed income" about inflation, your implication is to "ask retirees and senior citizens." I would broaden this:because of collusion within corporate America, most working people are on fixed incomes. Raises vary between o% and 2.2%. Bonus programs are increasingly hard to earn or non-existent. Stock options and other such rewards are reserved for only the small top of the pyramid. Meanwhile costs go up. In nor-Cal, there is a plan sponsored by the billionaire boys of the Silicon Valley to raise ALL bridge tolls to 8.00. (they only have 2 bridges into their area and NONE of these big boys need cross them). They are doing this so that We the People will fix the roads and maintain/build public transit systems for their staff and themselves to use. They propose this so that they-- the billionaires and the companies that exploit the rest of us-- do not have to pay applicable use taxes for the services they need and want. This new bridge "tax" will be highly inflationary (it's set to go to 10.00 within a couple of years) AND regressive, and as such eats into the already shrinking incomes of the vast majority of Northern Californians.
The Trump Administration is the "Star Trek" of American history, i.e. "to boldly go where no one has gone before." After all did we ever expect to hear a President wink at Nazi's ? Did we ever expect to see a gutted State Department, and EPA ? Crazy is the new normal. The fever swamps of the GOP have always hated the Federal Reserve. Crazy says get rid of the Fed.
14
He might select Warsh to lead the Fed as you suggested he might. Then again, he might give Omarosa a shot. Racial inequality solved. Sigh....
4
For 8 years under Obama, the self-serving Fed transferred trillions of tax dollars and lost interest on savings from the middle classes and seniors to Wall Street. This policy, designed to benefit the wealthy, suppressed spending, labor participation, and wages for all but the wealthy, while simultaneously increasing income inequality. Clearly, being a "distinguished academic economist" is not a requirement to help the economy of the country.
2
You never took a macroeconomics course, did you?
3
RC, you are aware that the FED can create money out of thin air, aren't you?
Explain how the FED got tax dollars to transfer to the Rich.
3
You don't remember the '01-'08 transfer??
1
As an Economist, I have been impressed with the excellent economic management of both Bernanke and Yellen. Had the back seat drivers had their way, the Recession would have gone much deeper, probably into a full scale Depression. In fact, what Ryan and company advocated were the same Republican ideas that pushed the country into the Depression.
The US would be asking Panama, et al, for help!
22
Trump's monetary 'philosophy' entails zero taxation for business, zero interest rates for business borrowers and a total lack of regulation and oversight for oligarchs, corporations and the powerful.
If Trump could, he would appoint Scott Pruitt to every position in his Administration so the government could blindly serve the Robber Barons and Reverse Robin Hoods properly while the non-rich society drowned in a sea of anarchy, neglect and corporate fascism.
Trump's understanding of economics comes from being born with a golden pacifier in his mouth, the gambling industry, real estate gambling, 'branding' and TV shows; he knows nothing about manufacturing, distribution, research and development, education, healthcare, infrastructure, supply chains and most of the basics that form the bedrock of a stable and growing economy.
Trump's philosophy is 'free money' and a 'free lunch' for oligarchs; death and taxes for the non-rich.
Trump will appoint Marie Antoinette to the Federal Reserve and the Fed will start serving cake to all Americans.
Trump destroys everything he touches; that's who he is.
335
The actual "robber barons" were Medieval European Lords who robbed caravans and merchants for the "crime" of traveling on roads or rivers.
SewCrates wants you to believe that every businessman today is a "robber baron" - except no business uses cannons or weapons or physical force to encourage you to buy from them. SewCrates wants you to believe that everyone selling you something is stealing from you, even when you need only walk away from an offering to avoid being "robbed".
The true Robber Barons of today: The same Medieval thinkers in Congress - and SewCrates - who take what they want from you at the point of a gun. But SewCrates cannot admit that, for it would demonstrate his own inability to think rationally.
1
For Karlos - In "Wealth and Democracy." Kevin Phillips points out that there is a feedback in economic distribution because as the rich get richer, they use their wealth to get more power. They then use their power to get more wealth and so on.
In olden time, rich nobles used their money to hire a bans of thugs called knights. Then then used the power of the knights to extort money from the peasants and merchants.
Today they use their money to buy politicians. Then they use their politicians to pass laws which get them more money.
There seems to be a tipping point where this process becomes impossible to reverse. When inequality becomes bad enough, the country soon goes down the tubes. He gives several examples, e.g. the 18th century decline of the Dutch Republic. Chrystia Freeland used 14th century Venice to illustrate this process in a Times article, but history is replete with other examples.
According to Phillips, the great success of America has been that before the tipping point was reached, something has always happened that reverse the flow of money upwards, e.g. the rise of unions, FDR's reforms.
Will that happen this time?
4
There's not much for the Fed chairman to do right now except what Yellen has been doing. Since there's no big inflation, we won't see the kind of sudden dramatic rate hike that might devalue existing bonds and crash a leveraged stock market. Since the economy is running pretty well (in its distorted way, where banks allocate loans to sure-fire enterprises, like luxury condos, that generate domestic housekeeping jobs) and we're near the lower bound, there will be no reduction in rates. Not all Nobel Prize winners believe the Fed matters so much. I wish Dr. Krugman would stop saying the Fed printed money. It swapped solid government paper for radioactive bonds and has held them through maturity. A central bank can do that to help bankers ride out a banking crisis (or scandal). The expression "printing money" makes people nervous.
11
It might make people nervous, but what other term would you use to describe the growth in the monetary base from about $850 billion in August, 2008, to some $4 trillion today?
https://fred.stlouisfed.org/series/BASE
Surely the real economy did not grow by a factor of five in less than a decade. I'm not opposed to the Fed's actions, but they sure do look a lot like "printing money" to me.
Er, Kerry, what is "government paper" if not money?
2
Peter, if the FED doesn't print the money we need to conduct commerce, to buy and sell stuff, who will?
2
A 1% hike in interest rates, equals $150 billion of the US budget.
The Obama Fed has put the US in a very precarious position. Artificially suppressing the prime rate only benefits the wealthy.
6
Where’s the beef? All you’re offering is gas.
The interest you pay on your home mortgage is lower than it would be if the FED policies were not adopted.
1
It's doubtful we will see Trump stick to long-established norms by picking someone who's actually qualified to lead the Fed.
Based on his track record, it's clear Trump will very likely pick someone who's unqualified simply because he or she harbors that same sick ideology which insists Government is bad; someone who's happy to join the Trumpian effort to "deconstruct the administrative state."
A point of clarification, however...
Hasn't Trump at least contributed to - even caused - the demoralized degradation at the State Department? After all, he hasn't allowed Tillerson to hire anyone to fill a lot of unfilled positions there, which seems a likely source for Tillerson's frustration which, in turn, makes it difficult for Tillerson, an accomplished corporate executive in his former life, to hide his displeasure and dismay. Tillerson was appointed by Trump to head up one of the most important departments, yet Trump has not allowed him to do so. That's also a factor in the Secretary of State's sour demeanor.
18
Sixty percent of Americans would agree with Krugman's assessment that Trump has devastated our country like a category 5 hurricane. In their alternate reality world, the remaining Trump supporters and most Republicans it's sunny and everything it perfect. It's a bizarre and likely deadly situation.
29
I guess that is why the stock market is setting all time new highs.
While not a trained economist, I have been keen observer of the Fed for many years. And while I can only look at things on an outsider level, from what I've seen, by any measure you want, the economy is doing well.
So the simple answer regarding Ms. Yellin is that if something isn't broken, don't try to fix it.
Much as I detest trump, I put the odds on him re-appointing Yellen at around 70%. There's one caveat though:
If breitfart (read Bannon) demonize her with the base, those odds drop to around 20%. But I do believe that's a big if because the odds for trump in '20 go up dramatically if the economy continues as it has been doing.
10
Yes, the risk is real. But is there a way to prevent the worst from happening?
8
And the next economic upset is just around the corner. We all know the business cycle is not dead, and it will rear its head again sometime. It's been ten years since the crash, we are due on time if nothing else. (And after the next fall there will be all sorts of analysis pointing out the clear signs that it was on the way-- so called tax reform anyone?)
6
It's of course appropriate to be wary of any big decision from Trump world, but I think we may be alright here. Trump seems to listen to Mnuchin on financial matters, and Mnuchin will no doubt explain to him that the last thing he needs is tight money causing a recession. Here's hoping.
5
The world economy, including that of the U.S., is on the brink of destruction! Our Republican controlled Congress must stop Trump -- NOW. But, more than likely it won't, and the Great Depression will be remembered as merely a mild case of economic indigestion.
It's time to phone every Senator, promising them that if they don't save us, we will do everything we can to see that they are never again elected.
4
You're right, but there's little we can do given who we're dealing with. As you may recall, President Obama was about to appoint another awful person, Larry Summers, an architect of the policies that led to The Great Recession, as Fed chair. It took a public uprising to get Janet Yellen. I don't see that happening now, unfortunately.
11
There is one nugget of hope: financial markets will be grading Trump on his pick for the Fed, and it's hard to imagine him taking on Wall Street if markets tumble. What will he say? That investors were told by Democrats to be nasty to Trump? That markets are purveyors of fake news?
4
"By all accounts, Rex Tillerson has demoralized and degraded the State Department to the point of uselessness."
As Trump has been doing to Tillerson since Tillerson became Secretary of State.
Remember the old Greek saying: A fish rots from the head down.
10
Richard
Back in January and February you were admonishing your fellow readers about how we all didn’t see what a brilliant person Trump is and how he was not going to sign ridiculous legislation and would get Congress to work effectively. You’ve written repeatedly that Trump was the person we needed to get us back on track.
At this point it’s doubtful, having doubled down on your support for Trump and your assertions about his competence, that you might re-evaluate that stance.
I find your commentary helpful in getting a window into the psychology of a Trump supporter. Not much is going well for America these days under Trump’s leadership but no doubt you can explain that away as well.
But for the record, Trump was not an amazing businessman who ran a successful business nor did he have the experience of managing a team of executives and he spent most of his time pursuing celebrity status . Every business he’s had control of he has run into the ground while accumulating law suits, paying enormous fines ($10 million for money laundering at his casino) and reaching a point where no US bank would loan money to him.
He really doesn’t understand what he’s doing and it’s likely most of his decisions are made after someone has flattered him enough that he’ll do what they recommend. For the record, that’s not leadership.
Most everyone knows Rex Tillerson, who has plenty of experience with Trump, was correct in his assessment. But keep on keeping on with your support for Trump.
26
What we never do is study how well or poorly monetary policy worked in other large economies in distress.
Sure, we talk about Greece.. but their problem is political spending, corruption, large social programs and the failure to raise revenue from the wealthy Greeks who hid it. Their monetary policy largely depended on the EU. So we could tax-cut our way into trouble and look like Greece, but that isn't the Fed, it is the GOP kowtowing to the oligarchy.
So look at Japan - how did conservative policy serve them in the wake of their own debt disaster? How did the EU recover versus the US after the meltdown, with austerity as the base? Both economies extended wither the depth of misery or the length of time.
But yes, I agree with Krugman. The position of this administration is nihilistic even if intellectually they don't know what nihilism is. And yes, I believe we will suffer for decades form the fallout of this debacle.
11
"...if congressional Republicans play a large role in selecting the next Fed chair, they’ll insist that it be someone who has been wrong about everything for the past decade."
The interest-collecting class is tired of cheap money. The next Fed chief will bang the inflation drum, raise rates, create a brief wind-fall for some, (who will bail just in time,) and create an economic mess that the next president, probably a Democrat, will have to clean up. Just a theory, but we seem to be establishing a pattern.
We're not yet recovered from the Bush II train wreck. How long will it take to recover from the Trump train wreck?
8
I'll never forget the day when Paul Ryan was shown on TV opening up a food bank after regular hours so he could have a pretend session of caring for the poor. His magnanimous task? Washing a few spotless pots and pans that had already been cleaned and dried by the regular staff.
Paul Ryan, like Trump and most Republicans, don't care--or understand--what policies are or are not good for the country. They only understand what superficially looks good to their base and promotes the interests of their patrons.
15
The Fed has always been "political." That is the fundamental flaw. I agree with the dangers you cite with Trump as President, given the unique nature of how he can make it even more ruinous with his appointment for Fed Chair. Our entire banking system needs revision. Our currency has been debased rapidly since we left the gold standard. A weak dollar indicates a weak country.
1
I doubt Mr. Trump understands the importance of independence of the Fed, and he is not alone in this ignorance.
The independence of the FED was weakened in November, 1977, when maximum employment was added to its mandates. Politicians are responsible for the growth of the economy, and they wrongly shifted this responsibility to the FED.
If Mr. Trump truly wants to improve the FED, he will change the maximum employment mandate to a financial stability mandate.
1
Yellen is toast. Not only is she extremely smart, effective and highly competent - anathema to Trumpsters, she was appointed by Obama himself. If there is one recurring theme to the havoc being bestowed by the Donald, it is his enduring resolve to undo everything that Obama has achieved. One can only hope that the person he appoints can walk and chew gum at the same time, but I'm not hopeful.
15
Yellen has kept rates near zero for a decade, robbing savers of income and forcing them into a very speculative stock market to pay the bills. It has also allowed corporations to borrow trillions at no interest to buy back their already inflated stock to keep the markets humming. Now the Fed won't dare raise rates in a meaningful way because it will add to our already outrageous $20 trillion deficit. And now there is a generation of investors who believe the markets are risk free. Buy buy buy! Dow 50,000! What could possibly be wrong with this picture?
1
I don't know either. But I don't think Republicans were determined to do bad things to our economy because they're stupid. Well, not always. I think they wanted to do bad things to the economy precisely because they understood that the economy would tank, voters would blame President Obama (not realizing that they were suffering from Republicans poisoning the well), and Republicans would win bigly in the next election.
Now the Republicans should want the economy to do well so that voters would have one less reason to throw them out in the next election. That's why they don't seem to care about government deficits anymore. Maybe they would want a capable Fed chairperson too.
Well, most Republicans. I don't think Trump understands the convergence between economic policy and political strategy. No telling what he might do.
2
The world will not forgive us if we cause yet another global meltdown. We may very well find ourselves isolated and on the receiving end of economic sanctions for a change. Republicans will do well to remember that this is one area of government not to be messed with. If Trump nominates someone who will be a disaster and they confirm them they will own whatever happens and will be punished accordingly.
5
The world economy, including that of the U.S., is on the brink of destruction. Our Republican controlled Congress must stop Trump -- NOW. But, more than likely it won't, and the Great Depression will be remembered as merely a mild case of economic indigestion.
It's time to phone every Senator, promising them, that if they don't save us, we will do everything we can to see that they are never again elected.
3
Will Trump Trumpify the Fed? Of course he will. We are, after all, talking about Trump. He is not a good businessman and he knows nothing about government, and I mean nothing he doesn't even understand the three branches as if he never had a civic class. He thinks he knows everything and that is the most dangerous person in the world. But Trump serves a purpose. He will institute exactly what the reactionaries and Libertarians who have co-opted the Republican Party are convinced should be done. He will begin dismantling the American Government, including the Fed. The only department the Right Wing believes should keep going is the War Department (we can no longer call it the Defense Department) as proven by the huge budget increase given it with no discussion. As regular Americans come to suffer like the British have been suffering from Thatcher's almost complete Libertarian revolution, they will see the duplicity in Trump's rhetoric and they will, we hope, respond with the same vigor as has been happening in Britain by throwing the Libertarians out and getting the truly Liberal Left back in. Trump will finally prove that the rhetoric of the rich, that they care about the Middle and Lower classes, is just a means to an end and not an end that will help the nation but only help themselves to our assets thru recessions and our labor with diminishing wages and benefits. All the while they enrich themselves on our backs. We can only hope Trump's duplicity will wake people up.
6
What all the anti-Trumpers who have commented (not to mention Mr. Krugman), have overlooked is that the 12 Federal Reserve Governors can keep the head of the Fed under control. I'm willing to be wrong on this but I think Yellen will be reappointed. Walsh would be a poor choice given his posture on the financial crisis. Let's see what happens!
No worries. Trump knows that he can trumpify the EPA for example and not be hurt, unless one of his golf courses is too close to the waterline at high tide. The Fed is different and messing it up could affect his personal wealth. So don't look for him to do anything too radical. In 3 more years expect the national government to reflect all the things that are good for Trump. That means the Fed, the armed services, and Homeland security will be ok but EPA, HHS, and generally the things that make life tolerable for the rest of us, will be hobbled.
Funny how Alan Greenspan, the longest serving Fed chair and biggest political hack in Washington, is not discussed. Greenspan biggest accomplishment was getting George Bush elected in 2004 by creating the housing bubble that exploded into the great recession. Before Bush, Greenspan had completely opposite policies to keep the Clinton boom from reaching to far into the middle class. In fact while doing everything he could to hurt Clibton, the media gave Greenspan the credit for the Clinton boom and failed to blame Greenspan for the Great Recession he caused.
I remember attending a lecture by Milton Friedman where he argued we should get rid of the Fed and just increase the money supply by 4% a year because the Fed board was a bunch of political bunglers. It is funny how Friedman most famous deciple, Alan Greenspan, proved him right.
4
there a Republican intelligent and patriotic enough to to stop this predictable monetary madness? Although the destruction of the middle class is the ai, of corporate America, politicians might be wise enough to recognize that the result will leave them without a "job," even if corporate America lacks the imagination to see where its greed is leading both the country and the world.
The most lucrative export of the US was recently and may still be, arms. The arms industry's pr is the NRA. The current president and the Republican Party are heavily supported by the NRA. Destruction is the name of the game.
Dear Mr. Krugman: I think that the 2nd amendment to the Constitution should be interpreted as the founders intended, namely insofar as guns (firearms) are concerned, we should take that to mean what they must have intended, i.e., muzzle loading flintlocks. After all, of what else could they have conceived?
5
I often wonder if Paul Ryan who loves the works of a third tier Jewish Russian emigre philosopher has a clue of his own family history.
There was no famine in Ireland from 1845-1852 but there was starvation. One million Irish starved to death and another million were force-ably deported or fled for their lives from an Island whose economy was based on food export.
The economy Paul Ryan advocates is the same economy that brought his ancestors to America. The economy Paul Ryan vigorously advocates and defends everyday starved two million people while every year during the blight Ireland exported enough food to feed all of its hungry for the entire duration of the blight.
My cultural heritage is more Ayn Rand than Paul Ryan but if I were of Paul Ryan's heritage Ayn Rand would be evil incarnate and America's economic system would not be something I would want to preserve.
The concentration of wealth at the top presents America with the same problem Ireland faced in 1845 and that is whether to fed, educate and care for those who do not serve the economy when there is great abundance. I fear Ryan and the GOP will decide to do the same thing the British Parliament did during the potato blight. Even as Ireland was a land with more than enough grain, meat, vegetables and dairy letting one million people die and loading a million more on ships was better than sharing Ireland's bounty.
I do not understand Paul Ryan no one can be that evil or that stupid. Can they?
15
He is that evil, but he does not see himself as stupid, he considers himself to be better than the have-nots, and brilliant in his ability to fool so many.
It would give me exquisite pleasure to this miserable man experience destitution.
The question I have had for most of the year is that when Trump is gone, is it possible for country to recover and rebuild itself from the devastation Trump has wrought?
4
We need not wait for the next crisis. With Mr. Trump, it is here already as the Category 5 "hisicaine" Dr. Krugman describes. Mr. Trump did not get his madness from mercury--hat makers in England used mercury in felting their wares, giving the workers mercury poisoning with mental changes and giving Lewis Carroll the Mad Hatter--but it is nearly as evident and telegraphed through his actions and nominations. His free-form speeches give Jabberwocky a run for its money. Like Alice, we too have gone down a rabbit hole.
1
This idiot makes my blood boil. This is serious but what is being done at the EPA is irreparable. What is wrong with the people in government? This is no joke. This fool is destroying not only our way of life but our planet just because he hates Barack Obama.
Congress you MUST take action. This is no longer humorous or a joke. We are in serous danger.
6
What do you expect from a man who went bankrupt 4 times and is a serial molester.
25
The key line was the Fed Chairperson may be more powerful in the world of monetary policy than the president. Trump can't have that. The role of all the appointees in this administration are to implement policy that makes Trump look like a winner. And to not look smarter than the guy who appointed you. In other words, make a moron look like a genius. It's an art really. You become the moron; he becomes the genius.
8
Thanks to Janet Yellen, in great part, the huge increase in stock prices is the only bright spot in the Trump administration.
3
Actually I see Trump's sorely needed assault on immigration, legal and illegal, as another bright spot. Are we tired of winning yet?
We need a true Central Bank. One that works within the government with the Treasury. One that does not create debt, dollar for dollar, for net federal government spending. Modern Monetary Theory economist Bill Mitchell explains how 'independent' central banks like the Federal Reserve needlessly hobble national economies by issuing unnecessary debt. We need to upgrade our financial literacy when it comes to the fiscal powers of a monetary sovereign like the United States.
"...in both cases: superbly."
Really? Is this the same Bernanke who told us that we shouldn't worry about a housing bubble because housing prices never go down?
Is that what you mean by "superbly"?
Bernanke quadrupled bank reserves because he believed in the "loanable funds" model of banking, according to which banks loan out reserves.
The only problem is that banks don't loan out reserves. That's why all his QE and quadrupling bank reserves resulted in absolutely nothing.
He believed in the loanable funds model of banking because that's what he learned in economics textbooks.
So our Fed Chairman literally didn't understand how banks make loans.
You can't make this stuff up.
But this is the world we live in.
Unfortunately, most of the field of mainstream economics is still under this and many other delusions.
All mainstream economists should have been fired after 2008, and their field declared a pseudo science. Because that's what it is, as 2008 demonstrably proved.
Unfortunately, they all have tenure. (While urging flexible labor markets on everyone else, they've made sure they can't get fired.)
And good luck getting someone who can't get fired to change their mind.
2
"But remember, we’re living in the age of Trump, which means that we should actually expect the worst."
should we file this in the category along with your market call on election night? things seem to be going along quite well...the market, consumer confidence, etc.
Ben Bernanke's monetary policies post-2008, were designed to salvage a crashing economy, and it succeeded in doing so. Because this helped turn around the global economy, by definition it also helped support the party then in power headed by President Obama.
This enraged a GOP that was far more dedicated to 24/7 Obama-bashing than supporting the American people with economic recovery and stability. If we haven't learned yet, we probably never shall. If the political choice pits winning against improving people's lives, Republicans will plunk for winning every time.
20
The Yellen Fed admitted at least twice (June 2015 and May 2016) that its policies are causing income and wealth inequality.
As for inflation, look to staple products like candy bars. From 1925 until 1969 the price of a standard Hershey bar held steady at 5 cents. Since 1970, right when the Nixon Shock allowed the dollar to float, it has risen to $1.10.
1
How in the world did we reach this point where a self-described "king of bankruptcy" have the power to control the US, and by extension the global, financial conditions all consumers must live with?
The GOP used to be political party of logic and reason, with all due regard to history. While I often disagreed with their positions, I had no reason to think they were acting in anything but the best interests of the nation as they understood it. That line of belief no longer exists in the age of Trump.
18
"And won’t that be fun when the next crisis hits?"
Yes it surely will be hoot. And if the Trumpster and Repubs can ever pull the finger out and pass that ever so anticipated tax "Reform," the next crisis will be here real soon. Kansas for everyone Dorothy!
28
All good points. Trump is so anti intellectual he is probably salivating at the prospect of screwing up the Fed. But he appointed Scott Gottlieb as head of FDA. Dr Gottlieb actually knows something, and so far we aren’t seeing reports that he’s wrecked the place. I just hope we get lucky here.
3
It is probable to a near certainty he will. Everything Trump touches
turns to crap. See the casinos, Trump Soho, Trump university
for starters.
The man is incompetent, so he has to drag everyone down to
his own level.
27
And as he ages and becomes more belligerent, his "own level" is dropping fast.
1
My biggest gripe about Dr. K's conclusions are that he gives only credit but does not dish out the criticism. Though the Treasury also played a big roll the Feds monetization of every thing that moved, the Fed/Treasury did absolutely nothing for the average citizen. Ok, so unemployment peaked at 10% or so. But how many homes were saved by these great money warriors? I would submit few to none, and few was on vacation/sabbatical. Crap bonds and mortgages were purchased at above market value. (if you could find a market) This under the goal of re-liquifying the market. All it did was preserve the wealth of those who were the root cause of the crisis and allowed them to destroy those who were the victims. I don't think we should appoint a knucklehead like Warsh and definitely the not Taylor Rule. He's a joke too. But there has to be someone out there who next go round won't participate in the destruction of the middle class to the benefit of the uber rich and Rat Finks of the world. Maybe even the Doc himself.
5
Trump is a (what Tillerson said). But the Republicans? Well, what can you expect from brains that have been trickled down on for decades by likes of Ayn Rand and who too busy arranging a hole of one and half trillion to further fatten the behinds of the wealthy and to handcuff the Dems should they ever get back into office? America isn't a great country to these right wing nuts, but a slot machine they know, from vast experience, exactly how to fix.
16
I don't doubt Trump will find a way to screw up the Fed. The Republican Ideologues don't understand it's role, and their donor class wants it to serve their (Malefactors of Great Wealth and all that) interests, not the broader interests of the public.
The hard prediction is how soon we will see a global economic crisis, and how bad it will get before someone can convince "The People" that it is their beloved Orange One (and Party) who caused it.
The US is still the 800 pound Gorilla of the Global economy. OK, maybe only 600 pounds these days, but our problems will reverberate, and China counts on us as their market.
America already has people living on the streets, a "feature" of modern life that only becomes prominent under Ronnie the Dim. And I still can't get them to make that connection.
26
Trump will screw this selection up as he has with the rest. It's amazing how people like Warsh could even be considered given his proven inaccuracy. Yellen should remain - those who have any brain and can read on recent past economic decisions would come to this conclusion. But as you say, the Trump-effect may chase away any common sense and intelligence.
28
Rex Tillerson may have demoralized the State Department but he certainly called it right when he referred to djt as a moron.
63
In 1976, I started a new job with the State of Michigan, at $4.24 per hour. I had an Associates degree in science, but it included nothing but one basic Sociology class related to the social services job I had applied for. I had no experience working with delinquents in a residential setting, the job I was hired for. Today, adjusted for inflation, the starting pay would be $18.44. I was barely earning that much when I retired in 2002 after 26 years. A floor sweeper at a local Ford plant earned more per hour than I did. The USA has a consumer driven economy, the greatest the world has ever seen. If the workers keep losing buying power, through inflation and wealth transfer to the already wealthy, what will sustain that consumption? High unemployment, low wages and elimination of benefits lead to less discretionary spending. Higher interest rates on credit cards and other loans lead to less being saved for retirement and emergencies. Who is addressing these issues? Certainly not the millionaires in Congress or the Administration. Who speaks for the common man?
118
They don't need Americans to have such high wages when they can expand their sales into the developing countries like China and India. Sure the wages there are even lower but there's billions of people there compared to the 320 million in the US so companies are going where the money is.
The role of the American consumer is being outsourced just like the jobs were decades ago.
1
Trump pretended to speak for the working man. And Bannon, to his credit seems to be motivated to help. The problem is that Trump doesnt care a hoot, he is a con, and Bannon is a dangerous zealot with no idea how to help.
2
"Who speaks for the common man?"
Elizabeth Warren and Bernie Sanders.
Having been alive since FDR's first term, I have come to agree with the 19th century French philosopher and poet Paul Valery. He said: "The trouble with our times is that the future is not what it used to be." And Paul Ryan and anybody else who reads Ayn Rand to shape an economy never had a mind to lose.
59
Messing with the Fed is playing with fire aka the economy. Place an Republican ideologue or crazy in the chairman is going to cause all sorts of trouble (the other governors have no obligation to remains silent) and kill the goose that lays the golden egg which is not going to redound to the credit of Trump or the Republican party. They have already produced the two greatest economic crashes of the last 100 years, do they really want to go for a hat trick?
138
Apparently yes.
1
Where will the economy be if interest rates go up and wages don't? Then the incresing income tax burden on the middle class wage earners thanks to the new tax bill will make the Obama years look like Nirvana. Trump and his minions know how to appeal to our worst devils but they are incapable of long term strategic thinking.
74
They have no long term strategic thinking. Their thoughts are extremely primitive and run to "Me, me, me."
2
I expect Trump will appoint someone who gets good economic press from Fox and Friends. Ben Stein, maybe? Whoever Trump picks will make choices based on ideology rather than reality. When disaster ensues, Trump will either call it fake news, or blame Hillary Clinton, Barack Obama, and the other usual suspects.
We can also expect policies that enrich Trump. Hyperinflation would let Trump pay off his debtors easily. Deflation would destroy his real estate empire. So, I'd guess we're in for big league inflation.
143
Tax cuts increasing the deficit, the return of inflation amd rising interest rates making the deficit even worse. All likely to be Trump's worst legacy. Remember Carter. Trump will be worse. And then there's North Korea. Jeez.
25
@NB Texas
Actually Carter appointed the Fed Chairman (Volcker) who brought the inflation of the 70's to an end. Carter in this area was just unlucky in inheriting the effects of a 9 fold increase in oil prices and financing deficits left by the Vietnam war.
159
To be fair to President Carter, he came into the administration facing stagflation, which allowed no easy solution. All the alternatives to battle it were painful, and his economic policies were thoughtful, logical and largely correct. Now we are in almost exactly the opposite situation, and what we are facing is the possibility of a Fed basing its policies instead on ignorance, film-flam and propaganda completely detached of both reality and basic economic knowledge. No equivalence with President Carter or the Carter era.
18
Ya, I remember Carter. He took the necessary steps to curb the Vietnam era stagflation he inherited, and then lost the next election as a result of doing the right things because of public political economy ignorance (which persists).
19
Kevin Warsh, a former Fed governor widely considered a favorite for the job....warned about inflation in the midst of global economic collapse;..argued vigorously against doing anything, monetary..to fight 10 percent unemployment;[and] warned that the United States was about to turn into Greece.
Yet the Fed not only prevailed, it saved the saved one of the greatest financial melt downs in US history from destroying the economy.
So we can be sure of this: when Trump has consistently shown great willingness to appoint people whose main mission is to destroy the integrity and purpose of the agency they'll lead, why should the historically independent Fed be immune from politics?
Which could be especially disastrous when the next crisis hits, as it surely will with all the financial deregulations that have been unfolding, conveniently out of view.
188
The right blamed the financial crisis on government forcing those poor Wall Street bankers to give mortgages to unqualified "blah" people.
The bailout, at first voted-down in Congress, resulting in stock market chaos, was then passed. The saving of GM by the Obama administration also helped stabilize the markets.
The major market indices recovered and have now reached all time highs. Unemployment slowly went down from over ten percent to under 4.5 percent.
Still, the recovery was not great by historic measures, with GDP under 3% annually. The annual deficit rate slowed, even though the total debt increased to almost 20 trillion dollars.
By any measures, Bernanke (a Republican appointed by W), and his successor, Janet Yellen, have been successful.
Trump, being unpredictable and mentally unstable, would be wise to follow a similar course as the two prior presidents.
Low interest rates are necessary even though seniors have been hurt by the low rates.
If the ten year Treasury rate goes over 3%, then all bets are off.
84
Trump and wise do not go in the same sentence.
4
"So trying to guess his Fed choice from his policy views is a mug’s game"
But guessing from the Trumpist view is easy: Trump will choose somebody from the business world who will make decisions based on self-interest, oblivious to what happens to the world economy. Paul Ryan's misunderstanding of macro economy is the least of my worries.
198
"Aurace Rengifo" — very clever, you.
Trump was elected to destroy the US government and that's what he does.
630
All those people who wanted him to "shake up Washington" had no idea what they were talking about or what that would entail. In the words of one of those Wahington bureaucrats, "they didn't know what they didn't know." Yet they were sure they knew what they were doing. They may learn to their dismay about unintended consequences.
The lack of understanding of much of the U.S. Electorate seemingly knows no bounds.
15
So, perhaps the time has come to remove him from office before we cannot salvage our country from his incompetence and impulsivity.
4
On Planet Trump, there has been hyper-inflation, but the BLS has hidden the "truth" by statistical lying under the direction of a certain Kenyan Muslim, issuing orders from the basement of Comet Ping Pong.
But back in the real world, we have managed to avoid much of the deflationary malaise that infected Europe and Japan, with negative interest rates dragging down their economies, thanks to the Fed.
Trump the Intemperate reminds us daily of his capacity for sowing chaos. Some $72 billion in Puerto Rico bonds lost 12% of their value in a single day when Trump informed the world casually that the debt had to be "wiped out", as if PR was just another Trump Casino, before the White House issued their daily "clarification".
Rick Perry had some pretty harsh words about the Fed as I recall, threatening Bernanke with physical harm if he ever came to Texas. That would make him a perfect Trumpian wrecking ball appointment.
146
If you are a spokesman of the status quo, of Wall Street and Citigroup, of an excessively weak fiscal policy, Obama was a great success. The market tripled, while wages of the bottom 90% declined after inflation. As Marx so rightly said, the way to multiply profits and enrich the owners of the means of production (those who have mutual funds) is to keep wages down.
QE, especically after the first few years, is widely seen as a failure that inflated the market but not the economy. The time has come to normalize interest rates. Warsh wants to do that. The way to do that without producing a recession is to replace a monetary stimulus with a fiscal one--that is, an increase in the deficit. Trump is taking Krugman's advice to Obama to have a fiscal stimulus--which Krugman now says is awful.
Trump will bargain to get his 60 votes. Responsible Democrats--not right-wing New Democrats--are thinking how they might win back the core New Deal voters with tax and health measures that they can get credit by insisting on. Alas, the supporters of the Goldwaterite activist, Hillary Clinton, think the core New Deal voters are deplorable because they want higher wages and they want 100% resistance to Trump out of fear he may be too far left in his economic views.
12
We know for a fact that we avoided a depression around 2009 and 2010.
Not sure how you get to higher wages with Fed that was completely wrong about how to proceed in 2009 and 2010 ?
Why do you assume that Trump will invest money in infrastructure? Trump is more likely to invest in businesses that are in the infrastructure business through unnecessary tax cuts, which will only lead to richer executives not higher wages for their employees.
92
Agree. QE allowed financiers, whom Krugman usually castigates, to use essentially free money to play the markets, producing no real economic value. If bolster Wall Street is the sole measure of success in "avoiding recession" then the past 8 years were a success. Sometimes a good recession flushes out a lot of excesses, and in the case of 2008, it should have gotten ridden of some WS financial types. But Fed policy saved them.
3
So, fiscal stimulus, a function of Congress, was weak in the aftermath of the Great Recession because President Obama willed it so?
10
There are outrages yet in the wind
And Sins the Donald hasn't sinned,
The number is dwindlling
Structures ripe for kindling
Disaster dates as yet unpinned.
A blunder just waiting to be
A true Trumpian shivaree
If it turns out the Fed
A disaster led
By one more off the wall nominee.
123
When does the Eisenberg Book of Limericks come out? It's about time, I think.
2
In less than nine months we're well along the path to the GOP's long-dreamed dystopia, so why not complete the transformation by rendering the Fed as incompetent and corrupt as is the rest of the "administration"? I say go for the trifecta. After all, idiots can learn in only one way. That is, if they can learn at all, which, as you describe, is an open question.
99
But the trifecta would be suicidal!
1
Terrifying prospect, also for those living in other countries: the world's economy is at stake. First the climate, then the possibility of another unnecessary war, now the economy. But the idea of another term for Yellen (and don't forget some of her colleagues, think of the top-notch economist Lael Brainard) is a mere phantasy in these days.
45
There is a unifying theme to Trumpian policy: it is the antithesis of Obamaism. Think of anything Obama did: Trump will do the opposite. Think of more Obama might respond to a situation: Trump will be 180° off.
286
The Fed will definitely be degraded by His Unfitness - the only question being, by how much ? The answer depends on a combination of factors:
1) Has Kushner yet brought peace to the Mideast, and thus needs to fatten up his portfolio ?
2) What does Pootie Poot think ?
3) What does Bannon, the self-declared 'I want to bring everything crashing down' Leninist think:
https://www.thedailybeast.com/steve-bannon-trumps-top-guy-told-me-he-was...
4) Who will be the last person His Unfitness talks to before the decision is announced - er, um, Tweeted ?
Basically, we should prepare for an Alfred E. Neuman Fed chair appointment, in keeping with everything else going on in D.C.
In any event, conjuring the visage of a Fed Chair standing in front of a mic publicly pledging everlasting fealty to His Unfitness, is jarring.
250
Yup, low interest rates have been what’s hurting the middle class. I can remember the good old days when interest rates on cars were 14-18%. Now that they are down to 3-6.% it really adds up. Same with mortgage rates. I’m sure that people who bought when the rates were not 4% are much happier than those who bought and got a 3.77% rate. That’s the real problem the middle class is facing, paying less interest. It couldn’t possibly have anything to do with wage stagnation, or the unseen monster in the room. Far too many people can only get part-time work, meaning there’s a lot of underemployed people in the middle class.
214
My wife just bought a new, low-end Honda Civic -- interest rate 2.3%.
For someone who will soon retire that rate is a real savings.
2
YUP! A middle class baited with low interest rates got hooked on $12-14 trillion in household debt which would have been better spent the stock market to collect dividends rather than pay mortgage premiums on overpriced real estate.
When I was paying 14% interest on a car loan, I was getting 16% interest on my CD. Now, I might pay 4% on a car loan and get 0.1% interest on my CD. This is nuts. There is no incentive to save. We have taken an economy where financing through equity has been replaced with financing through debt.
Any corporation can just walk away from their debt. Individuals can't.
Sounds like a recipe for failure.
11
Nothing enduring wanders out of anger; anger does not sustain an economy, is never a safety net. Anger—maybe madness!—is Trump's ideology: nothing is more important. In anger, officials are fired, elected leaders attacked, healthcare sabotaged, white supremacy defended, and accords on trade, climate change and nuclear proliferation abandoned. Trump's anger is dysfunctional, destructive, and demented; counterpoint to his narcissism.
The third leg of Trump's ideology is described by an Old English term from the 19th century, bunce. A windfall generated from persistent patterns of thief, corruption, and chaos. Thieves and crooks focus on the benefits of bunce; full bookings at Trump's properties, raised fees, travel perks, and charging working families higher taxes to give to the rich, disrupting consumer protections.
If the Fed is turned over to an ideological master of narcissistic non-confession, who thinks bunce is proof of strength, troubled passage lies ahead. He or she who measures success by wealth and thinks safety nets drag the economy into collapse are translating the negative space of anger and bunce into economic terms. Shadows conceal ill-gotten gains (bunce!), but also hide the holes that cause growth to stumble. Anger, narcissism, and bunce are not policy. They are folly!
360
Is that where the term "bunco" comes from? A bunco game.
21
Anger abandons logic and principle; its appeal is emotional and irrational. Its use in economics is seen in GOP resistance to stimulus and their refusal to concede lowering taxes rearranges capital but doesn't create an economic boom in jobs or wages (see Kansas!). Trump's company bashing has not created a framework for growth.
Narcissism removes doubt where it is healthy and positive. Its presence blinds many to the mistakes that flow from it.
Bunce encircles the self-reflection of narcissism and leads to Marie Antoinette's dictum, "let them eat cake."
Combine the three elements into a single important banker and damage could reign. The economy could shrink; wages fall, prices rise--as wealth expands!
69
Yes, "...charging working families"... in the next generation, higher taxes to give to the rich.
2
Trump and Senate Republicans could pleasantly surprise Paul.
Consider. First, they don’t appreciate the Fed’s importance. Then, they understand that an experimental Fed is most dangerous when we’re in the midst of an economic catastrophe, but they don’t expect that anything remotely like that is going to happen for the foreseeable future due to regulatory and tax cuts and the economic renascence that generates … so it doesn’t really matter how Martian a Fed-head is because he or she won’t get the opening to be green and tusky or generally impolite to John Carter.
Consider as well that Trump has been the target of unceasing vitriol from the MSM, editors, reporters and news analysts, on-air blow-dried and sprayed manikins but most particularly from the pundit liberati. An opportunity presents itself to blow a hole in that “resistance”, since a Fed-head traditionally must be very careful about what he or she says, so as not to excessively push global confidence and markets into undesirable directions from which recovery is difficult and time-consuming.
I think y’all may see where this is going.
Charles Blow isn’t an economist, but there IS an annoying someone on the scene who could be appointed to a post that the right doesn’t think matters much but whose absence elsewhere could be happy and otherwise beneficial. And HE possesses a Nobel in economics.
I know this sounds far-fetched, but consider it from all sides. The next Fed-head could be someone we ALL know and love.
11
Poor Donald. The fake news media has been so unfair. And then there are people in his cabinet calling him bad names.
Thankfully, we have honest people like Richard who are completely objective and would never resort to name-calling, except when he called Obama a "collectivist" for implementing a market-based health care reform that originated in a conservative think-tank, the very epitome of an oxymoron.
Speaking of morons, Trump, at a White House dinner last evening, cryptically mentioned "The calm before the storm''.
What, pray tell, could our moron-in-chief be implying?
War with North Korea and/or Iran? The sacking of Rex?
Tune in soon, after these words from his sponsor: The Russian Federation, and we will find out.
364
Tax cuts and market deregulation helped stoked the animal spirits and led to dishwashers in California getting mortgages to finance the purchasing of McMansions.
The end game was the 2008 financial crisis and the worst recession since the 1930's.
This time will be different, right?
167
Actually the number of dishwashers financing McMansions was nowhere near enough to cause a meltdown. The problem was the derivative instruments created through the repackaging of those mortgages levered them significantly. See or read The Big Short for a concise explanation.
42
We have a history if what happens when politicians meddle with the Fed.
FDR took the country off gold to be able to increase the money supply. When the dollar was fixed to the amount of gold available, deflation occurred. It is counter intuitive, but when there is a limited supply, it becomes more expensive. Those who already have it profit even more. Expanding he money supply creates inflation, that has to be watched also, just printing money without any collateral creates runaway inflation.
To fund the budget, the government sells treasury bonds. The Fed buys some and prints money against them, they are a US debt and backed by the power to tax. Other countries buy the bonds also relying on the "Full faith and credit of the US, thank Alexander Hamilton for this. Some of the retrograde tRump supporters want to return to the old standard, it was the economic theme of Rand's book. The great depression was one result of this policy.
In the Federal Reserve Act, "The monetary policy goals of the Federal Reserve are to foster economic conditions that achieve both stable prices and maximum sustainable employment."
So the Fed governors have to watch prices and employment, and determine if those conditions are being met. Not all the governors agree on what should be done at times, but so far it has worked as designed. The hyper inflation that followed Nixon was due to irrational price controls that resulted in shortages.
A tRump ideologue could inflict economic disaster.
48
To continue:
Know Your Enemy
To know your enemy, you have to know what his/her underlying belief are.
Most of you hate Ayn Rand's writings. But you need to understand what he presented, just a you need to read Mien Kampf to understand Hitler.
She took her ideas form the Austrian School of Economics led by Von Boehm, Bawerk, and Ludwig von Mises inhe20the century. She searched for the antithesis of Socialism/Communism. They were valid for their time, but the modern world no longer works the way it did then. Their philosophy was one of unrestricted free market capitalization, uncontrolled by any man made regulations. In their view, the market is self correcting. People like Ryan and his sycophants like this view, we know it does not work as believed.
She also had a view of human behavior which Ryan and the GOP cult do not follow. She would call them collectivists. But of course they ignore all that, if they followed her personal philosophy, they would put themselves out of their misery.
It would not hurt my feeling if the did.
58
" just printing money without any collateral creates runaway inflation."
What collateral does the FED have when it creates money out of thin air? There is no collateral?
Somebody has to create the new money we need to conduct commerce as the economy grows. You do realize that there is a lot more money in the private sector than there was in 1917 ot 1817. Where did it come from?
Today, only the FED can create this money which we need to avoid disastrous deflation, i.e. areal depression. But the FED cannot get it to the people who buy and sell goods and services. The FED has to use it to buy Treasury bonds, and then the federal government can spend it thus getting it to people, businesses and state & local governments.
Runaway inflation has not been caused by the excessive printing of money. although in at least one case (Wiemar) it exacerbated it. Prices were already rising because of shortages due to the war. Then reparations in kind increased the shortages. Finally France's invasion of the Ruhr in 1923 was the last straw.
Our inflation of the 1970's - There was the failure of the anchovy harvest off the coast of Peru due to the 1972 El Nino which contributed to a worldwide spike in food prices because of the anchovy's role as an ingredient in animal feed and fertilizer. Then there was the oil embargo.
Zimbabwe - Farms were taken from those who knew how to run them and given to those who did not. Production fell, prices rose.
And so on.
55
Just remember, in the end she was a taker. Ayn Rand wound up living on Social Security and having the government pay for her medical care. Proving my hypothesis that you’re just one catastrophe away from embracing Socialism, right Senator Cruz?
18