And then the supposed Federal Reserve independence was torn to shreds. Celebrating a solid November jobs report in Las Vegas, President Joe Biden recently claimed the economy is now in a "'sweet spot' that’s needed for stable growth and lower inflation, not encouraging the Fed to raise interest rates." In the blink of an eye, he reversed his previous position to not intervene in the central bank’s policy choices. But while it is easy to fault Biden for his remarks, other presidents engaged in the same behavior of respecting the body’s independence only when it was politically convenient.
Joe Biden and the Federal Reserve
In May 2022, before the annual inflation rate topped 9%, Biden told reporters that he would not attempt “to influence its decisions inappropriately.” He added: "And my plan is to address inflation. It starts with a simple proposition: Respect the Fed and respect the Fed’s independence, which I have done and will continue to do.” A day later, when he met with Fed Chair Jerome Powell, the president reiterated this straightforward and direct plan.
Perhaps it all depends on how the administration defines “influence” and “inappropriately.”
(Photo by Celal Gunes/Anadolu Agency via Getty Images)
To be fair to the incumbent, he has not been nearly as vocal about the Federal Reserve as his predecessor. Former President Donald Trump routinely railed against the Eccles Building, calling central bankers “boneheads” and repeatedly commenting on what the institution should do on monetary policy. When he was a candidate, he lambasted the century-old organization for crafting an artificially low interest-rate environment. When he entered office, Trump blasted the entity for raising the benchmark Fed funds rate in his term. He went as far as calling for negative rates a la Japan to bolster growth.
In a recent interview with NBC News' Kristen Welker, Trump was candid that he would strong-arm Powell to loosen monetary policy. "Interest rates are very high. They’re too high. People can’t buy homes. They can’t do anything. I mean, they can’t borrow money," he said. But who gets to determine if rates are high or low? The market is prohibited from signaling to the economy whether they are excessive or subdued.
Still, Biden has a knack for criticizing the Republican frontrunner for one thing and then mirroring that same conduct for political expedience. If Biden respects the Fed’s decision-making prowess, why does he believe the Fed should stop raising rates? Because, like other presidents, he would benefit from an easy-money climate.
Fed Independence Is a Myth
As Liberty Nation has documented, the Federal Reserve is anything but an independent institution. It is an extension of the US government, used by Republicans and Democrats to fund federal largesse by monetizing the national debt. The intimate relationship between the White House and the Fed goes back to the 1930s.
During the Great Depression, then-Fed Chair Marriner Eccles and the Franklin D. Roosevelt administration “coordinated” monetary policy to facilitate aggressive intervention in the economy. A few decades later, the Johnson White House pushed then-Chair William Martin to accelerate money-printing to pay for the guns and butter of the 1960s. President Richard Nixon maintained a cozy relationship with then-Chair Arthur Burns because the White House needed easy money to flood the stagflation economy. President Bill Clinton adored Alan Greenspan because White House officials viewed him as someone "we could deal with.” Indeed! In the two-term Clinton administration, $1.4 trillion was created in the Federal Reserve's basement, leading to one of the strongest economic landscapes in modern times and a couple of disastrous bubbles.
Today, the Federal Reserve receives more attention because of how addicted financial markets and politicians have become to a zero-interest-rate policy and exorbitant money-supply creation. But while there is more Fed coverage in the media landscape these days, the way reporters write and talk about the central bank, mostly with adoration and adulation, is concerning. Rather than concede it is the man behind the curtain who pulls the levers and distorts the economy with manufactured booms and busts, reporters convey to the public that it is a benevolent institution that only Ivory Tower occupants can – and should – comprehend.
The US president is often said to be the most powerful person in the world. If there were more interest in the history, record, and power of the Federal Reserve, one would concede that whoever occupies the chief seat in the Federal Open Market Committee meetings is the omnipotent one. The only control a sitting US president has over the central bank is nominating people who share the same groupthink mentality.
