Biden the Fed’s Hand
Everyone in Washington knows that the Federal Reserve is a political institution, designed to benefit both Republican and Democratic administrations. President Donald Trump pointed this out on the campaign trail in 2016, so it is no secret that he has been utilizing the central bank as another weapon in his MAGA or KAG arsenal. But while monetary policy fails to generate much attention in politics, it looks like the Democrats might be attempting to alter the Eccles Building’s mandates.
The Wall Street Journal is reporting that former Vice President Joe Biden and his team are attempting to make racial equity a part of the central bank’s third mandate. Full employment and inflation have been the Fed’s two official mandates since its creation.
According to the newspaper, a Biden administration would require the Fed Chair to collect data and report on “the extent of racial employment and wage gaps” and what the Fed could do about them. Ultimately, the idea is to pump money into either black-owned businesses or companies that hire black workers. But that is not all.
WSJ further reports:
“The Biden monetary mandate also would open the door to regulatory mischief, which is the real prize for the progressive left. Under a diversity mandate, the Fed could require the banks it regulates to collect detailed data about the racial make-up of employees, and their pay, at companies applying for loans.
That data could then form a basis for enforcement action against banks that didn’t do enough to reduce racial pay gaps via their lending decisions, whatever “enough” means in the wilds of social-justice Twitter or a Treasury run by Elizabeth Warren. This would be a back-door way to impose through regulatory pressure various wage and diversity rules that otherwise couldn’t pass Congress or survive the Supreme Court.”
In recent years, Democrats have been pushing the Fed to become more woke. Senators want more black people to serve in the Fed, while members of the central bank have been advocating for wokeness in monetary policy. The concept of a central bank is already inherently socialist, so adding the Marxist element of Black Lives Matter (not black lives matter) would make the Soviet disciples satisfied.
Mnuchin on Dollars
The Trump administration’s take on the U.S. dollar over the years has been up and down. In 2017, White House officials were talking about abandoning the strong-dollar policy of the last 25 years. A couple of years later, the Oval Office is pleased by the currency’s endurance through market turbulence.
The latest position, according to Treasury Secretary Steven Mnuchin, is that “we want a stable dollar.” Speaking in an interview with CNBC, Mnuchin noted that the president and his colleagues would continue to keep the greenback as the world’s premier reserve currency.
“[T]he dollar reflects lots of money coming into the United States, so I’m not going to make any short-term comments on the dollar. Over the long term, you know, the dollar is the greatest place to be all over the world, the reserve currency of the world, and we’re going to protect that.”
Indeed, this should be the objective of any administration – Republican or Democrat. The issue, however, is that the Fed has created trillions of dollars in only a few months. Another problem is the global de-dollarization push happening around the world as countries attempt to kick the international economy’s reliance on the buck.
That said, the U.S. dollar remains an attractive currency of choice around the world. For example, according to the Bank of Korea, foreign currency deposits at South Korean banks surged $3.61 billion to an all-time high of $84.53 billion in June. Deposits held in U.S. dollars accounted for $73.46 billion. Most of the increases in India’s foreign currency deposits were also in dollars. Until the rest of the world grows tired of the dollar, its safe-haven status remains solid during times of a crisis. Whether this is justified or not is debatable, but you cannot dispute what the market signals.
Millennials Chasing Gold?
Robinhood data suggests that thousands of users have been pouring into gold and silver exchange-traded funds (ETFs) in the last few days, looking to make a handsome return in a short period. The most popular pick is the iShares Silver ETF (SLV), which has skyrocketed alongside the spot price of the physical white metal. The GLD ETF has not been as fast and furious, but the data highlights that anytime there is a dip, more users hit the buy button. In total, 28,000 users hold this ETF.
It is often said to follow the Federal Reserve, but in this chaotic and irrational market, perhaps it is time to follow the Robinhooders for some quick cash. They seem to be doing better than the hedge funds and other power players on Wall Street. At least for now. That said, you can never go wrong with buying and holding precious metals, especially when governments are spending trillions, and central banks are printing trillions more. Is everyone a gold bug now?
Read more from Andrew Moran.