The late Louis Rukeyser claimed inventing financial commentary on television. While the gig, Wall Street Week, brought Rukeyser fame and fortune, there are scant few financial pundits, none with regular appearances, who captivate my attention these day. More on this later. One of Rukeyser’s favorite guests, Marty Zweig, coined the phrase “Don’t Fight the Fed.” While Zweig’s observation rings true, rising interest rates tend to depress stock prices; we live in a far different time than Zweig could have envisioned with ballooning national debt and the loosest monetary policy (still) the Fed has ever pursued.
The American economy and American consumers benefit from a politically independent Federal Reserve System, full stop. To advance their political agenda, presidents of both parties have criticized Federal Reserve policies. LBJ threatened (allegedly) to barbecue Fed Chairman William Martin over his decisions. Sometimes the economy can weather the criticism, but many economists argue Richard Nixon’s haranguing Arthur Burns for lower rates before the 1972 election caused runaway inflation later that decade.
Bill Clinton had many faults, some overstated, but to his credit, he listened to his advisors and kept his mouth shut about interest rates. Bush 45, unlike his father, and Obama followed suit. Regardless of your opinion of these three, they realized the importance of an independent Federal Reserve. The Fed only sets short-term interest rates, supply and demand set longer-term rates; neither move in lock-step. For instance, the 10-year Treasury note has dropped precipitously from its 3.25% peak last November to just over 2 percent today. PS, it’s not a 1 percent decline, far from it.
The current chair, nominated by President Donald Trump, Jerome Powell, is well-qualified and was the right choice to replace Janet Yellen. In his tenure, Powell continued his predecessor’s plan of raising rates drawing Trump’s ire. When Trump found out he couldn’t fire Powell, a la “The Apprentice,” he took a different course by sending inept, dreadful nominees. One candidate, TV commentator Stephen Moore, was shot down by the usually lap-dog Senate after reports surfaced regarding a $300,000 contempt of court charge in a divorce case.
A recent potential nominee, Christopher Waller, like Powell, is competent, experienced, and well-suited for the job. The other one, Judy Shelton, is far from qualified. Ms. Shelton argued for higher interest during Obama’s term but switched gears when Trump took office, precisely what we don’t need at the Fed. Even more dangerous is her advocacy of the gold standard, which eliminates the flexibility modern finance requires. Two major players in gold mining are Russia and China, both autocratic nations who look to disrupt Western democracy and dislodge American influence around the world.
The Federal Reserve should be non-partisan for the good of the country and the economy. To paraphrase then-Senator Obama, it’s not a red or blue thing but a greenback dollar thing.
You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.