Federal reserve

It was, on the surface, a fairly routine proposal. Officials from the BRICS nations, made up of Brazil, Russia, India, China and South Africa, have decided to discuss, at a summit in New Delhi later this year, how to deepen trade and collaboration. No one was paying very much attention when the decision was made. And yet, according to a report in the well-informed newspaper Berliner Zeitung, a resolution was quietly suggested that might turn the global monetary system upside down. It was the start of what might be termed the “plot against the dollar.” America’s currency is likely to face its most serious challenge of the post-World War Two era. BRICS Pay may not sound very exciting.

President’s Trump’s efforts to reign in the administrative state and prod the Federal Reserve to adopt more Trumpian policies took a dramatic turn when he ousted Dr. Lisa D. Cook, an alleged miscreant, from the Federal Reserve’s Board of Governors last week. The drama, and there’s always high drama in Trump World, unfolded after Federal Housing Finance Agency Director Bill Pulte made a criminal referral to the U.S. Department of Justice based on Cook’s apparently falsified mortgage documents for homes in both Ann Arbor, Michigan as well as Atlanta, Georgia. Cook claimed the Ann Arbor house as her primary residence, which would allow her to obtain more favorable financing terms. Just two weeks later, Cook claimed her Atlanta condominium as her primary residence as well.

Donald Trump never made a secret of the fact that he wanted to be a commanding president but it wasn’t clear that it included a command economy. In the past few months, though, Trump has been steadily meddling with it, ranging from his insistence on a 15 percent cut of the profits from his threats against computer chip manufacturers Nvidia and AMD to his threats against the independence of the Federal Reserve – including his peremptory demand that Fed Governor Lisa Cook resign, which she has vowed to resist. Others are not as resistant. It appears that Trump has successfully extorted a cool $10 billion from Intel CEO Lip-Bu Tan whom he has previously derided as in cahoots with China. Trump is depicting his move as a grand bargain that will benefit both sides.

There is no shortage of reasons to feel gloomy about the American economy right now. First, there’s inflation. In 2021, the Biden administration claimed that the cost of a summer barbecue had declined by 16 cents from the year before. It probably now wishes it hadn’t made that claim. This summer, the cost of that barbecue is up not 16 cents but 17 percent. Hot dogs are up 37 percent over a year ago. This is the highest inflation in forty years, with the consumer price index up 8.6 percent from a year ago. Some necessities, such as gasoline and food, have risen even more sharply, with gas having gone from $2.18 a gallon when Biden was inaugurated to $5.

All is not well with the economy. It’s true that 390,000 jobs were added last month, exceeding estimates, while hourly income is up 5.2 percent since May 2021. However, analysts guessed unemployment would drop a tenth of a percent, which didn’t happen. Gas prices keep rising, as GasBuddy.com reports a 43 cent jump over this time last month. It’s enough of a problem that OPEC has agreed to increase production in July and August. The economy remains stricken by inflation, with Treasury Secretary Janet Yellen issuing a mea maxima culpa earlier this week. “I think I was wrong then about the path that inflation would take," she told CNN on Tuesday.

Federal Reserve Chairman Jerome Powell looked calm when he testified before the Senate Banking Committee in February 2021. He’d just been asked by the folksy Louisiana senator John Kennedy whether he had concerns about the dollar supply being the highest it had been since 1946. “Right now, I would say the growth of M2, which is quite substantial, doesn't really have important implications for the economic outlook,” Powell stated. “M2 was removed some years ago from the standard list of leading indicators, and just that classic relationship between monetary aggregates and economic growth in the size of the economy, it just no longer holds. We've had big growth of monetary aggregates at various times without inflation, so something we have to unlearn, I guess.

The Federal Reserve raised interest rates by 0.25 percent last week, the first increase since December 2018. Back then, Donald Trump had been very vocal in his criticisms of the Fed and its chair Jerome Powell, demanding no more rate increases. There was no resistance from the White House this time with press secretary Jen Psaki saying that the Biden administration respected the Fed’s independence. Powell called the rate increase necessary due to inflation coupled with rising prices. “As we emphasize in our policy statement, with appropriate firming in the stance of monetary policy, we expect inflation to return to 2 percent while the labor market remains strong,” said Powell, before warning that it will take longer than expected for inflation to sink.

President Joe Biden’s re-nomination of Jerome Powell as Federal Reserve chairman came as no surprise to financial analysts. Powell remained the most likely candidate given his ability to schmooze and glad-hand with politicians within and outside the administration. He earned the title of “best bureaucrat in Washington, DC” by receiving endorsements from both National Review and the American Prospect despite their divergent policy views. A corresponding vote in the Senate seems preordained, unless Massachusetts Senator Elizabeth Warren gets her way and forces a new pick. “Reappointing Powell is the safest route here,” the Cato Institute’s Norbert Michel told me in an email after Powell’s nomination on Monday.

Jay Powell, the Federal Reserve Chairman, has banned any public appearances by any member of the Fed, Cockburn hears. Appearances at conferences have been canceled, all scheduled interviews have been abandoned and any comments on or off the record are outlawed. This unprecedented action is a reflection of two pressures. First, there are growing economic indicators that suggest the US is heading into a recession with the Dow plunging 800 points on Wednesday. Second, relations with the White House have reached a new low. President Trump has pinned the success of his presidency upon a strong economy and his qualifications as a businessman who understands the economy. If a recession takes hold, Trump believes his reputation will be destroyed and his chances of reelection dimmed.