A new menace has arrived in the Washington swamp, and, according to the business press, he is your worst nightmare. Just who is this creature lurking in the night? Stephen Moore, an economist who is about as frightening as the head of a middle-school chess club going through puberty. But if you listen to petulant folks in the legacy media, Moore could stoke the flames of the pending financial Armageddon if he gets a seat inside the Eccles Building.
Trump Taps Moore
Ostensibly, the talking heads are perturbed by President Donald Trump nominating the former Wall Street Journal editor and Heritage Foundation official to the Federal Reserve Board of Governors. The financial experts on the left and right contend that selecting Moore is politically charged, questioning his credentials for such an important job. Libertarian circles also are irked by the president picking a “supply-side crackpot,” as David Stockman recently opined.
Many are now urging the Senate to block Moore’s nomination in the same way lawmakers did not approve last year’s Fed nominees, Nellie Liang and Marvin Goodfriend. We know for now that Sen. Rand Paul (R-KY) will vote for Moore, but other Republicans and Democrats on the Senate Banking Committee are not so certain.
Not exactly a stalwart of Fed policy, Moore is a mixed bag that can please conservatives and offend liberals – and vice versa. He supports a return to the gold standard, advocates tax cuts, and opposes the administration’s trade war. On the other hand, he worries about deflation, opposes interest rate hikes, and presently endorses fiscal and monetary stimulus.
That said, Trump likely tapped Moore for political reasons, attempting to find allies at the Fed to keep rates low and prevent additional reductions in the $4 trillion balance sheet. What many in the press fail to grasp is that every single insertion into the Fed bloodstream has been based on politics. In fact, despite the assertion that the Fed is an independent body, the central bank is one of the biggest political entities in the United States.
Politics at the Fed
Dating back to its infancy, the Fed always has had a relationship with Washington.
Throughout the Great Depression, then-Federal Reserve Chair Marriner Eccles “coordinated” monetary policy with Franklin Delano Roosevelt. In the 1960s and 1970s, Republican and Democrat administrations insisted that the central bank expand the money supply, and the Fed happily did so. Monetary policy was integral to the economic success of the 1990s as Alan Greenspan maintained a cozy friendship with President Bill Clinton and his administration, resulting in more than $1 trillion in newly printed dollars.
Even the Board of Governors is subject to the political whims of presidents. During his tenure in the White House, President Barack Obama announced several nominations to the Fed, including Jeremy Stein and Jerome Powell for the Board and Janet Yellen for head of the central bank. The reasons were obvious: All three parties favored quantitative easing, a monetary policy that helped stabilize the house of cards and pad the numbers at the New York Stock Exchange.
Every appointment, whether it is to lead the Fed or to serve on the Board, is done with the intention to toe the party line at the time. Unless you are a perpetual Fed critic and oppose most initiatives and members, to suddenly be outraged over a politically charged appointment is disingenuous.
That said, considering how much of the business media have been diagnosed with Trump Derangement Syndrome, reporters would be enraged even if the president chose Rep. Alexandria Ocasio-Cortez (D-NY) to work at the Fed and advance her Modern Monetary Theory (MMT) cause.
Moore of the Same
Is Moore a terrible pick? He is hardly different from the hundreds of other nominees over the years who have endorsed monetary expansion, artificially controlled interest rates, and routine interventions in the economy. In other words, everyone on the Fed Board is bad, and Moore’s addition will not make a significant difference to the future of monetary policy. The status quo will continue, and giving the nod or thumbs down to a 25-basis-point hike or cut will not do much to rein in destructive policies emanating from the Eccles Building for the last several decades.
Were Trump stumped on a selection to fill a vacant seat, Joseph Salerno, Tom Woods, and Hans-Hermann Hoppe are available. They would be glad to bring the gasoline and matches.