Monday , July 15 2019
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Steve Moore for the Fed?

Summary:
I’ll say this about the rumored choice of Steve Moore for the Federal Reserve Board; he’d be the first Trump pick that actually reflected President Trump’s views on monetary policy. And what are Trump’s views? 1. Favoring tighter money when a Democrat is president, and the economy is depressed and clearly needs easier money. 2. Favoring easier money when Trump is president, and the economy is booming and does not obviously need easier money. (You can argue it might need slightly easier money, but it’s not as “obvious” as it was during the recovery from the Great Recession.) These are Trump’s views, and they also seem to be the views of Steve Moore. As you may gather from this post, I’m not a fan of politicizing the Fed.  And even if Moore’s views are not

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I’ll say this about the rumored choice of Steve Moore for the Federal Reserve Board; he’d be the first Trump pick that actually reflected President Trump’s views on monetary policy. And what are Trump’s views?

1. Favoring tighter money when a Democrat is president, and the economy is depressed and clearly needs easier money.

2. Favoring easier money when Trump is president, and the economy is booming and does not obviously need easier money. (You can argue it might need slightly easier money, but it’s not as “obvious” as it was during the recovery from the Great Recession.)

These are Trump’s views, and they also seem to be the views of Steve Moore. As you may gather from this post, I’m not a fan of politicizing the Fed.  And even if Moore’s views are not politically motivated, they reflect a set of policy preferences that are far too procyclical. And this is true regardless of whether or not a year from now it’s clear that the economy needed easier money right now.

PS.  Steve Moore might be a good choice for Treasury, as he favors lower taxes on capital income.

Update:  This is an interesting comment, coming from someone who is about to join Jerome Powell at the Fed:

Economist and conservative commentator Stephen Moore said Sunday that the Federal Reserve is “the swamp” and President Trump needs to drain it, even if it means exercising his power to remove Federal Reserve Chairman Jerome Powell.

I wonder if he’ll be confirmed by Congress. Steve Moore for the Fed?

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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