Uddrag fra Authets, FT
Centralbankens uafhængighed — Denne gang er det personligt
Der er en tætpakket dagsorden, men i denne uge overskygger emnet om Federal Reserve, dens uafhængighed, dens nuværende politik, og hvorvidt præsidenten har ret til at fyre dens formand, alt andet. Det skyldes bemærkninger, Jerome Powell kom med onsdag til Economics Club of Chicago:
Vores forpligtelse er at holde de langsigtede inflationsforventninger godt forankrede og sikre, at en engangsforhøjelse i prisniveauet ikke udvikler sig til et vedvarende inflationsproblem. Vi kan befinde os i det udfordrende scenarie, hvor vores mål under dobbeltmandatet er i konflikt med hinanden.
Med andre ord: Den engangsforhøjelse i prisniveauet, som skyldes toldsatser, kan medføre både inflation og arbejdsløshed og kræve, at Fed hæver renten. Det fremprovokerede dette opslag på Truth Social fra præsidenten:
(se originaltekst nedenfor)
Trump sagde derefter dette til journalister torsdag:
Jeg er ikke tilfreds med ham. Jeg lod ham vide det. Og åh, hvis jeg vil have ham ud, så er han ude derfra meget hurtigt, tro mig.
Og fredag sagde han dette:
Hvis vi havde en Fed-formand, der forstod, hvad han lavede, ville renterne være på vej ned. Han burde sænke dem.
I weekenden bekræftede præsidentens økonomiske rådgiver Kevin Hassett, at administrationen overvejede måder at fyre Powell på, og klagede over, at Fed ikke havde fremført lignende klager på tv over den “åbenlyse løbske udgiftsføring fra Joe Biden, [som] var skoleeksempel på inflationær adfærd.”
Powell var ikke chef, da Trump først overtog (og selvfølgelig valgte Trump ham senere til at efterfølge Janet Yellen), men det er tydeligt, at administrationen betragter Fed mere som en partipolitisk modstander end som en uafhængig institution. Der er en klar intention om at fremprovokere en konfrontation om Powells job på kort sigt og om Feds status på lidt længere sigt. Her er nogle forsøg på svar på de vigtigste spørgsmål, der opstår:
Kan administrationen gøre dette?
En præsident kan fyre en Fed-formand, men kun “for en saglig grund”; intet ved uafhængigheden beskytter ham eller hende mod ansvar for f.eks. bedrageri eller insiderhandel. I 2021 trak Dallas Feds præsident Robert Kaplan og Boston Feds præsident Eric Rosengren sig begge, efter at det blev afsløret, at de havde handlet stort med aktier under Covid-forstyrrelserne i 2020. (De blev senere frikendt for forseelser, men kritiseret for at have skadet tilliden til Fed.)
Problemet for Trump er, at Powells egne finansielle dispositioner har været uangribelige. Han var allerede en velhavende mand før jobbet, så det er ikke overraskende. Et latterligt forsøg på at anklage ham for insiderhandel i 2021 førte ingen vegne.
At fyre Powell vil derfor kræve enten en lovændring i forholdet mellem Fed og den udøvende magt eller en udvidelse af begrebet “saglig grund”. Det første kan muligvis komme fra Højesteret, som Kathryn Judge og Lev Menand forklarer i Bloomberg Opinion, afhængigt af, hvordan den afgør administrationens forsøg på at fyre ledere af to andre føderale agenturer.
Der er også et argument fra Jay Hatfield fra Infrastructure Capital Advisors om, at Powell kan fyres for saglig grund. Han siger:
Udtrykket “for cause” bruges i juridiske sammenhænge til at angive, at en beslutning eller handling er baseret på en gyldig, retfærdig grund i stedet for at være vilkårlig… I Powells tilfælde har præsidenten klart en saglig grund til at fyre ham. Som Fed-formand udviklede Powell teorien om “forbigående” inflation efter at have tilskyndet til højere offentlige udgifter, hvilket tilsammen udløste den store inflation i ’21.
Dette argument er kontroversielt, men viser, at hvis administrationen vil gøre dette, kan den – og så tage kampen i retssystemet bagefter. Det er ikke en tom trussel.
Bør centralbanker være uafhængige?
Svaret er ikke åbenlyst. Centralbankfolk har enorm magt og er ikke underlagt regelmæssige demokratiske begrænsninger. Det er problematisk. De fleste centralbankchefer bliver udnævnt gennem en demokratisk proces, men bliver næsten ikke overvåget derefter. Og uafhængighed er ikke evig. Bank of England havde sin rente fastsat af (den valgte) finansminister helt indtil 1997.
Problematikken er vendt tilbage i hele USAs historie, startende med Alexander Hamilton. Centralbankfolk er opmærksomme på deres manglende demokratiske legitimitet; det førte f.eks. til, at Ben Bernanke insisterede på, at Kongressen skulle godkende bankredningspakken TARP i 2008. Sir Paul Tucker skrev en tyk bog kaldet Unelected Power, efter at han trådte tilbage som vicechef for BOE, hvor han fremlægger argumenter for at ændre overvågningen af centralbanker og lignende institutioner.
I praksis er det svært at argumentere imod, at pengepolitik og finanspolitik bør adskilles. Regeringer ønsker generelt at gøre livet nemmere i nutiden, hvilket skaber fristelsen til at sænke renterne for meget; de er naturligt mere tilbageholdende end en uafhængig centralbank med at “fjerne punchbowlen, når festen begynder”.
Selv om økonomi ikke egner sig til kontrollerede eksperimenter, giver Storbritannien og Tyrkiet et praj om forskellen, når regeringer blander sig i pengepolitikken.
I Storbritannien gav Tony Blair i 1997 BOE sin uafhængighed. Indtil da kunne finansministeren koordinere renten med finanspolitiske tiltag, hvilket skabte “stop-go økonomi” – opsving før valg og smertefulde nedture bagefter. BNP-væksten i UK før og efter BOE overtog rentestyringen viser, at uafhængighed giver en mere jævn og stabil rejse.
Mere for nylig har Tyrkiets præsident Recep Tayyip Erdogan udskiftet centralbankens leder seks gange siden 2016, og i 2021 tvang han sin økonomiske teori igennem, hvor man skulle sænke renterne for at bekæmpe inflation. Her er resultaterne:
[Diagram ikke medtaget]
Fortjener Powell virkelig at blive fyret?
Hvis økonomiske resultater kan være “saglig grund” for fyring, skal de være virkelig dårlige. Den grumme fejl i 2021, hvor Fed fortsatte med QE og nulrenter under stigende inflation, er den oplagte kandidat. Det var uden tvivl en stor fejl i bakspejlet, selv om mange forsvarede det dengang. Pandemien skabte hidtil usete forhold og gjorde politikbeslutninger svære. Men hvor slemt var det?
Siden Jimmy Carter har man brugt “Misery Index” – summen af arbejdsløshed og inflation – som mål. Det står nu på 6,6 %, hvilket historisk set er ret godt. Hvorfor så fyre ham nu?
Trumps påstand om, at Powell er “for sen” og burde sænke renterne mere, har også noget for sig; mange anerkendte økonomer er enige. Men det er svært at sige, at de finansielle forhold er for stramme lige nu, eller at pengepolitikken skader økonomien.
Bloombergs indeks for amerikanske finansielle forhold — som samler indikatorer fra kontanter, obligationer og aktier — er blevet strammere på det seneste. Hvorfor? Beviserne peger på toldsatser, ikke pengepolitik, der ikke er ændret siden renten blev sat ned i december.
Will Denyer fra Gavekal Economics argumenterer for, at sådanne indeks måler risikovillighed, ikke de “virkelige” forhold for kreditvækst. Et andet indeks, som kombinerer pengemængde, rentekurver, banksektorens vitalitet, forskellen mellem afkast på investeringer og finansieringsomkostninger samt boligpriser, viste meget stramme forhold i 2022 – og nu et normalt, let lempeligt miljø.
Fed holdt renten for lav for længe i 2021. Men hvorfor straffe Powell nu? Økonomien er tæt på ideel, og Fed har tacklet den værste inflation i årtier uden at udløse recession. Så er der spørgsmålet om, hvilken effekt en fyring i sig selv ville have.
Hvad sker der, hvis han virkelig bliver fyret?
Der er mange måder, Feds nuværende forfatningsmæssige status kunne forbedres på, men det ændrer ikke på, om Powell bør fyres nu. Det bør han ikke. Det ville praktisk talt garantere et markedskollaps.
Hvorfor? Trods den kritik, Fed fortjener, er den konsistent, og markederne ved, hvor de har den. Dens institutionelle stabilitet er en hjørnesten i det amerikanske finanssystem – og dermed, givet dollarens status som reservevaluta, i verdensøkonomien (hvilket forklarer, hvorfor udenlandske regeringer ikke ønsker, at Powell skal gå). Hvis præsidenten gør dette, vil ansvaret for renter overgå til ham. Vil markedet overføre sin tillid til den nuværende Fed til et nyt regime ledet af Donald Trump?
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Fra Authers
Central Bank Independence — This Time It’s Personal |
There’s a packed agenda, but this week the topic of the Federal Reserve, its independence, its current policy, and whether the president has the right to fire its chairman swamps all else. That’s because of remarks Jerome Powell made Wednesday to the Economics Club of Chicago:
Our obligation is to keep longer-term inflation expectations well-anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.
In other words, the one-off rise in the price level caused by tariffs might raise both inflation and unemployment and require the Fed to hike rates. That provoked this Truth Social post from the president:
Mr. Trump then said this to reporters on Thursday:
I’m not happy with him. I let him know it. And oh, if I want him out, he’ll be out of there real fast, believe me.
And on Friday he said this:
If we had a Fed chairman that understood what he was doing, interest rates would be coming down. He should bring them down.
Over the weekend, presidential economic adviser Kevin Hassett confirmed that the administration was considering ways to fire Powell, and complained that the Fed hadn’t made similar complaints on TV over the “obvious runaway spending from Joe Biden [that] was textbook inflationary.”
Powell wasn’t in charge when Trump first took over (and of course Trump then chose him to succeed Janet Yellen), but it’s clear that the administration regards the Fed as a partisan opponent more than an independent institution. There’s clear intent to force a confrontation over Powell’s job in the short term, and over the Fed’s status in the only slightly longer term. Here are some attempts at answers to the most important questions that arise:
Can the Administration Do This?
A president can fire a Fed chairman but only “for cause”; nothing about independence protects him or her from accountability for fiddling expenses or insider trading. In 2021, the Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, both highly respected, resigned after the revelation of big stock transactions during the Covid disruption in 2020. (They were subsequently exonerated of misconduct but criticized for damaging confidence in the Fed.)
The problem for Trump is that Powell’s own financial dealings have been above reproach. As an independently wealthy man long before the job, this isn’t surprising. A laughable attempt to pin insider trading on him in 2021 went nowhere.
So firing Powell will require either a change in the law governing the Fed’s relationship to the executive, or a big stretch of the concept of “cause.” The first might just come from the Supreme Court, as explained for Bloomberg Opinion by Kathryn Judge and Lev Menand, depending on how it rules on the administration’s attempts to fire heads of two other federal agencies.
There is also an argument, made by Jay Hatfield of Infrastructure Capital Advisors, that Powell can be dismissed for cause. He says:
The term “for cause” is used in legal settings to indicate that a decision or action is based on a valid, justifiable reason, rather than being arbitrary or without basis… In the case of Chair Powell, the President clearly has a case to fire him for cause. As Fed Chair, Powell developed the “Transitory” theory of inflation after advocating for higher government spending, which together precipitated the Great Inflation of ’21.
This argument is contentious, but establishes that if the administration wants to do this, it can, and fight with the courts later — a modus operandi that it has used several times already. It’s not an empty threat.
Should Central Banks Be Independent?
The answer isn’t obvious. Central bankers are hugely powerful and not subject to regular democratic limits. That’s problematic. Most central bankers get appointed via the democratic process but face minimal oversight thereafter. And independence isn’t eternal. The Bank of England’s interest rates were set by the (elected) chancellor of the exchequer until as recently as 1997.
The issue has recurred throughout US history, starting with Alexander Hamilton. Central bankers are aware of their lack of democratic legitimacy; it led for example to Ben Bernanke’s insistence that Congress authorize the TARP bank bailout during the 2008 crisis. Sir Paul Tucker produced a huge tome called Unelected Power once he’d stood down as the BOE’s deputy governor, setting out the arguments for altering oversight of central banks and other quasi-autonomous entities.
In practical terms, the case for keeping monetary and fiscal decisions separate is hard to rebut. Generally, governments want to make life easier in the present, which means a temptation to lower rates too much; they’re naturally more reluctant than an independent central banker to remove the punch bowl as the party gets started.
Controlled experiments are difficult in economics, but the UK and Turkey give an idea of the difference in outcomes when governments interfere in monetary policy.
In the UK, Tony Blair gave the BOE independence in 1997. Until then, a chancellor could coordinate rates with fiscal stimulus, creating what was known as “stop-go economics,” with booms before elections, followed by painful slowdowns. UK GDP growth before and after the BOE started setting rates suggests that independence makes for a smoother and more consistent ride:
(On a historical note, the most extreme example of Stop-Go came in the “Barber Boom” driven by the Conservative Chancellor Anthony Barber in the early 1970s. Its disastrous consequences were a critical factor in persuading the party to take on the free-market Margaret Thatcher as its next leader.)
More recently, Turkey’s President Recep Tayyip Erdogan has cycled through six new central bank governors since 2016, and in 2021 forced the application of his novel economic theory that to combat inflation it was necessary to cut rates, not increase them. Here are the results:
Independent central banks have made terrible, avoidable errors in recent history, generally by being too enthusiastic to cut rates — which is what Trump wants the Fed to do. History suggests that ceding this power to elected politicians would make things even worse. There is a natural tension in economic policy between fiscal and monetary measures, and between trying to maximize employment and minimize inflation. It makes sense to institutionalize that tension with an autonomous central bank.
Does Powell Really Deserve to Be Fired?
If economic outcomes can really be “cause” for dismissal, they need to be really bad. The hideous policy error of 2021, when the Fed continued with QE and zero rates amid rising inflation, is the obvious candidate. That was unquestionably a bad mistake in hindsight, although plenty defended it in real time. The unprecedented conditions of the pandemic made policy-setting difficult. But how bad was it?
Since Jimmy Carter, the shorthand for combining the Fed’s two mandates has been the Misery Index — the unemployment rate plus the inflation rate. That currently stands at 6.6%. Historically, that’s pretty good. Why fire the guy now?
Trump’s argument that Powell is “too late” and should be cutting rates further also has plenty to recommend it; many reputable economists agree, and few would dismiss it out of hand. But it’s hard to argue that financial conditions are unduly restrictive at present, or that monetary policy is harmful.
Bloomberg’s US financial conditions index, which smooshes together indicators from cash, bond and equity markets to gauge risk appetite, has indeed tightened of late (any number below zero denotes restrictive conditions). Why? The circumstantial evidence points to tariffs, not monetary policy that has been unchanged since the last rate cut in December:
Will Denyer of Gavekal Economics argues that indexes like this gauge risk appetite, not the “true” conditions that foster credit growth. The following index captures it by combining money supply growth, the yield curve, metrics of vitality in the banking sector, the spread between the rate of return on corporate investments in real assets and the real cost of financing those investments, and measures of housing affordability. It showed terribly tight conditions as the Fed belatedly took on inflation in 2022 — and a normal, slightly loose environment now:
The Fed stayed too easy for too long in 2021. But why punish Powell now? At this point, the economy is almost near Goldilocks conditions, and the Fed has dealt with the worst inflation outbreak in decades without causing a recession. Then there is the issue of what impact the firing in itself might have.
What Happens If He’s Indeed Let Go?
There are plenty of ways the Fed’s current constitutional position might be improved, but this doesn’t affect whether Powell should be fired now. He shouldn’t. It would virtually ensure a market disaster.
Why? For all the criticism it deserves, the Fed is consistent and markets generally know where they are with it. Its institutional stability is one of the cornerstones of the US financial system, and by extension, given the dollar’s reserve status, of world finance (which explains why foreign governments don’t want Powell to go). If the president does this, responsibility for rates will move to him. Will the market transfer its trust in the current Fed to a new regime headed by Donald Trump?
