Thursday, August 6, 2015

The Donald on the Fed

By Joseph T. Salerno

In his Economic Viewpoint memo yesterday, Brendan Brown,  Executive Director and Chief Economist of Mitsubishi UFJ Securities International, surveyed the crowded field of prospective Republican Presidential nominees on the subject of radically reforming the Fed and pronounced it sadly lacking.  
Since Brown is one of the few financial commentators who thoroughly understands the Austrian concept of sound money and seeks to end the Fed's manipulation of financial markets, his remarks on Jeb Bush are particularly noteworthy
 On the subject of private equity boom and bubble one of the leading candidates in the Republican presidential candidates – Jeb Bush – has an important financial background here. Commentators stress the similarity in this respect with the last Republican candidate for President, Governor Romney. Private equity barons almost by definition will not attack the present Federal Reserve regime as they are amongst the biggest gainers from the asset price inflation which this creates (so long as they jump off the train before the eventual end-phase of the disease or there is a rapid response in the form of a new even bigger monetary experiment to follow). Governor Romney pointedly would never join the bandwagon of criticizing Ben Bernanke (who Governor Perry described as a “traitor” that would be fired on day one of his presidency) and in similar fashion Jeb Bush stands out in not criticizing the Yellen Fed.
Although Trump had not commented on the Fed prior to Brown's memo,  Brown interprets Trump's strong poll presence as injurious to the cause of the anti-Fed forces, since it permits Bush to position himself as a moderate in the race against the populist Trump, thus squeezing out other would-be monetary reformers.  But hold the phone!  Trump's remarks today on  Bloomberg TV about the Fed's policy gives hope to those who oppose the Fed's flagrant financial repression::
 Right now, we have the low rates.  In terms of real estate, if I want to develop … from that standpoint I like low interest rates. From the country's standpoint, I'm just not sure it's a very good thing, because I really do believe we're creating a bubble.
It should also be noted that, unlike private equity baron Jeb, who carefully refrains from commenting on an issue that shines a light on his financial interests,  Trump forthrightly declares that his interests are in accord  with a policy that he recognizes gravely damages the U.S. economy.   The establishment  media keep saying--and praying--that Trump is a flash in the pan, but  It is difficult to see why the Republican rank and file would choose a secretive crony capitalist over a plain-speaking populist.
The above originally appeared at

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