This week, President Donald Trump endorsed the former Republican presidential candidate Herman Cain for a seat on the Federal Reserve Board of Governors. Many find this development troubling due to the numerous unresolved sexual harassment allegations against Cain.
In fact, The New York Times has gone so far as to say Cain has opened “another #MeToo minefield” for the GOP.
Trump has taken actions that shatter the status quo, so I was unfortunately unsurprised when I heard about his support for Cain. The president has already vouched for and allowed Brett Kavanaugh, a man with a very questionable past, to hold a seat on the highest court in the land.
Despite the general public’s poor reaction to Kavanaugh’s confirmation, Trump still seems to disregard the public’s disapproval of his decision-making process.
There are two other causes of concern. One is that Cain, unlike most members of the Federal Reserve Board today, doesn’t have a doctorate in economics. The other is the relationship between the Federal Reserve and the president seems to be always changing. After all, the Fed was created to act on behalf of the American economy and be independent of the presidency.
The independence provision was put into place in order to ensure the long-term health of the economy. Consider Trump’s rebuke of increasing the interest rate. Increasing interest rates is necessary to combat the overall rise in prices and inflation across the entire economy.
If the Fed were, in fact, to lower interest rates right now, people could borrow more money. This would lead to an increase in consumption and stimulate the economy, but only temporarily.
Hyperinflation, inflation occurring at a very high rate, could potentially then become an issue. Presidents are not equipped to understand monetary policy to the same degree as members of the Federal Reserve are. If the Fed were to respond to such politically motivated requests as Trump’s, it could endanger the bank’s ability to act appropriately during economic downturns.
The Fed, specifically Fed Chair Jerome Powell, has done quite a good job of resisting Trump and maintaining the bank’s independent status. Regardless of the fact that Trump nominated Powell for his position, Powell does not seem to feel the need to satisfy the president’s every whim. His steadfastness in leading the Fed’s policy is likely supporting the current economic growth that the United States has witnessed since the 2008 crisis.
Even in the midst of Trump’s verbal abuse on Twitter, Powell is not letting himself succumb to political pressures. And that’s great. Trump did attend University of Pennsylvania’s business school, the Wharton School, and will, of course, have his anxieties about the economy confirmed by fluctuations in the marketplace.
But the market is not the end-all-be-all, especially when it comes to talking about the entire U.S. economy. There are so many more determinants.
The future of the Federal Reserve appears to be at stake with Trump’s recent nomination of Cain. I don’t know what to expect, but I hope Trump somehow comes to his senses and rescinds the nomination.
