It was shocking to see William Dudley single-handedly compromise the future existence of the Federal Reserve.
This is how he concluded a Bloomberg editorial on Tuesday:
“There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.”
The fault certainly lies with Mr. Dudley for making an all-time blunder with his commentary. But it also lies with the editors at Bloomberg, who certainly should have understood the implications and consequences of a piece that had such obvious narrative directionality.
Unfortunately for the US and the world, both Dudley and Bloomberg dropped the ball in an epic manner. The piece was published and likely filed at the White House under: “How to foment populist rage at the Fed”.
The act of attaching a political agenda to the Fed means that the independence of the Fed is now a thing of the past.
Trump will no doubt use the piece to get voters on the side of weaponizing the Fed for political goals – “the Fed has been weaponized against us, clearly, so we need to win that control back!”
That popular sentiment will open the door for the folks in Congress to get on board with the partisan war to control the Fed. That will, in turn, open the path for the Senate to confirm replacements for current Fed positions with highly partisan candidates.
Stephen Moore and Herman Cain were recently turned down because they were clearly partisan foot soldiers. But the next such proposed candidate – and Trump will have no compunction about pushing another foot soldier in that direction – will likely get through because “Dudley was 2nd in command at the fed just last year…Now, it’s necessary to get our guys in there to fight back!”
And that about wraps it up for the Fed we knew for the past 10 decades.
This one editorial, because of how it is placed within the narrative evolving in US politics and financial markets, could seriously end up being one of the most consequential pieces of content composed in this century in terms of its real implications for the world.
Thanks Bill. Great work. And thanks Bloomberg. Really great job, guys. Thanks for pulling the pin on the grenade we just ate.