By Tho Bishop *
For months, the battle for the Federal Reserve has been played out in the financial press. On the one hand, the Warren wing of the Democratic Party trying to make institutional gains within the central bank. On the other hand, Janet Yellen’s allies promoted Jerome Powell as a fellow traveler. Today, Joe Biden finally received a script naming Powell as the winner.
The real question is whether the battle will end there.
As we’ve seen before, what Joe Biden managers want isn’t always what Joe Biden managers get. High profile nominees like future OBM director Neera Tanden and future ATF director David Chipman have already been defeated. One obvious calculation in Jay Powell’s re-appointment is the belief that Republicans will walk through and make up for the foreseeable defections of the most progressive Democrats from the Senate.
The question now is how many Republicans are prepared to own the Powell Fed?
As the Betting Thread noted on his initial appointment, Donald Trump’s selection of Powell reflected one of the most important areas where the swamp won over Trump’s campaign rhetoric. While Powell was quickly the target of Trump’s wrath, the resulting monetary policy was predictable. The current inflation pandemic does not reflect a radical departure from traditional monetary policy, but rather is a direct product of the technocratic status quo.
Since 2010, however, failures of the status quo have demanded a more advanced lens to appreciation. Corporate consolidation, the Cantillon effects, the regressive nature of financialization, all resulted from the monetary hedonism of the radical nature of the central bank post-2008, but none of these are as apparent as a more expensive Thanksgiving dinner. Or rising gas prices.
While the Republican Senate caucus is the institution where Bush-era conservatives continue to have the most power, the question is how many senators are prepared to officially support the current state of the dollar. Plus, will the rising populist media make them pay to do it?
Tucker Carlson, for example, has emerged as one of the biggest threats to Republican politicians. While your average Republican may be able to raise money from a nasty article in the New York Times or being done a Stephen Colbert punchline, a Tucker monologue can ruin a career. Will the populist right recognize the importance of Murray Rothbard asking, “What has the government done with our money?” “
Looking back enough, Republicans in the Senate would be right to join Warren / Sanders Democrats in dismissing Jerome Powell. This would not, however, force them to embrace the more partisan Lael Brainard or the radicalism of modern monetary theory. While the Biden administration is unlikely to ever appoint a serious thinker as the head of the US central bank, Republicans could manage to take a scalpel against those who are the face of the currency embezzlement the Fed is guilty of. Substituting Powell for, say, a Raphael Bostic, would do nothing to improve the Federal Reserve system, but it would provide a small token display of accountability.
To reject a Federal Reserve appointment would be a historically significant vote of no confidence.
Does the Senate GOP have the courage to act?
* About the author: Tho Bishop is associate editor for the Betting Thread, and can help with questions from the press. Prior to working for the Mises Institute, he was Deputy Director of Communications for the House Financial Services Committee.
Source: This article was published by the MISES Institute