Thursday, August 30, 2018

The Senate Has Just Confirmed a Federal Reserve Vice-Chairman Who Might Stick a Knife into Trump's Booming Economy

Newly confirmed Federal Reserve Vice-Chairman Richard Clarida
By Robert Wenzel

The Senate has confirmed economist Richard Clarida, a Trump nominee. to be vice chairman of the Federal Reserve.

Clarida is
an economics professor at Columbia University and has been a managing director at the bond firm PIMCO since 2006. He was an assistant secretary at the Treasury Department during the George W. Bush administration.

The Senate confirmed him by a vote of 69 to 26.

But here is the thing. Although Trump is a low interest rate man, Clarida is not of the same mold.

When he was nominated, I wrote:
He has published studies with Jordi GalĂ­ and Mark Gertler that suggest that monetary policy in many countries today resembles a forward looking Taylor rule, whereas the policy makers of the 1970s failed to follow such a forward looking Taylor rule, which resulted in the rapid price inflation of that decade.

Thus, we may have a chairman and vice-chairman of the Fed who lean toward monetary policy inspired by the Taylor rule.

This suggests that the current Fed may be more aggressive in hiking rates than generally believed, especially if price inflation accelerates as I suspect it will.
Trump may have a tough time with his tweet-intimidation tactics against Federal Reserve chairman Jay Powell and  Clarida as a tag team. I suspect they will end up way behind the battle to fight price inflation but they aren't going to listen to Trump either.

Stagflation maybe in the future.

Robert Wenzel is Editor & Publisher of and Target Liberty. 

More about Wenzel here. 

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