Tuesday, July 25, 2017

WARNING The US Dollar Could Crash if Gary Cohn is Named to Replace Janet Yellen at the Federal Reserve

There is much speculation in the financial media that current top Donald Trump economic adviser Gary Cohn may replace Janet Yellen as head of the Federal Reserve when her term as Fed chair expires on January 31, 2018.

In a recent Forbes column, John Tamny warns why this may be a big mistake and that Cohn, a former Goldman Sachs president, is in favor of a weak dollar policy:
[T]he dollar...looms as a reason for President Trump to not appoint Cohn. It does because of the perceptions it will create about the Administration’s stance on the matter...

 [I]t’s been reported by prominent sources that when he initially met with President-elect Trump ahead of the transition, Cohn indicated that a weak currency has a positive impact on the economy. Ok, but it doesn’t...

A policy of dollar devaluation would run counter to the very investment necessary for the businesses and jobs that the Administration would like to have materialize.

Applied to Cohn, ...his appointment to the central bank’s top spot would likely signal to markets that the Administration shares Cohn’s view that a weak dollar is in the best interests of the U.S., and worse, that it’s the Administration’s policy. To be blunt, if Trump embraces the discredited FDR, Nixon, Carter, Bush (43) policies in favor of a weak currency, his economic program will fail....

That Cohn wants the job of Fed Chairman is the surest sign that he, like Bernanke, wants to “accomplish things” while at the Fed. And that’s very dangerous. While the Fed’s relevance on a day to day basis is way overplayed, its role in the 2008 bailouts reminds us that on the odd days the Fed is capable of creating major damage. That Cohn plainly lusts for the job is a sign that he believes the Fed has expansive powers that need to be utilized. For that alone, Gary Cohn is the wrong choice for Fed Chairman.
Note, Tamny attempts to make the case in his column that the Federal Reserve does not play a role in causing a  weak dollar. This view is not one I hold. My excerpt from his column does not include that part of his commentary.

I consider Tamny's warning that Cohn is an advocate of a weak dollar policy the important part of his essay.

Also, it should be noted that, in the EPJ Daily Alert, I have recently started warning of a possible future dollar collapse. If speculation intensifies that Cohn will be named by President Trump to replace Yellen, the collapse of the dollar could accelerate sooner rather than later.


No comments:

Post a Comment