Comey, Cohn, Sessions,… Powell?

From Bloomberg, tonight:

President Donald Trump has discussed firing Federal Reserve Chairman Jerome Powell as his frustration with the central bank chief intensified following this week’s interest-rate increase and months of stock-market losses, according to four people familiar with the matter.

Advisers close to Trump aren’t convinced he would move against Powell and are hoping that the president’s latest bout of anger will dissipate over the holidays, the people said on condition of anonymity. … 

Fed Chair Powell can only be removed “for cause”. This rather vague term could be stretched by Mr. Trump to rationalize removal, I suppose (I’m not the first to think of this scenario)

Even if Mr. Trump were not able to remove the Fed Chair, the mere “discussion” should be enough to spook the markets, at a time when uncertainty is already high.

Figure 1: Baker, Bloom and Davis measure of Economic Policy Uncertainty index (blue) and centered seven day moving average (red). Source: accessed 12/21.

28 thoughts on “Comey, Cohn, Sessions,… Powell?

  1. pgl

    Trump is upset that interest rates are rising so I guess he is doing his version of WWJD (What Would Janet Do). Of course Trump thought some chick who is only 5′ 3″ could not be a good FED. Heck that would be too short for being a model. Oh wait – maybe he will make Melanie the FED chair!

  2. CoRev

    I just love the uncertainty chart since3 July/Aug, when predictions of a Democratic win became more raucous or the 2018 DJ avg after reality of the Democratic win in Nov. Of course the obvious effect of the Democratic win on Dec 21 can not be overlooked.

    You wished for it now accept the blame, but, that too is obviously not a possibility.

    1. pgl

      We should call this the CoRev hypothesis – the only cause of uncertainty is Democrats. The only thing that leads to stock market declines is Democrats. Of course the predictive value of the CoRev hypothesis is even lower than how well James Glassman and Kevin Hassett forecasted the DOW in their 1999 book!

    2. Menzie Chinn Post author

      CoRev: Could the July/August uncertainty spike be possibly associated with those soybean tariffs that you said would have little effect on soybean prices by the end of the year?

      By the way, welcome back. We have missed your comments and discussions of out-of-sample validation methods. I welcome your latest prognostications on soybean prices as compared to your June forecasts. I can add to my year-end review.

      1. pgl

        The graph on your barcharts from yesterday’s post is a bit confusing. I get quoting soybean prices per pound or even per metric ton. I have yet to figure out how barcharts does this $894 per ??? Please help us out here as when I go to their website – they are not the clearest in terms of labeling.

      2. CoRev

        Menzie, nice to see when I’m missed, but you probably well know that I’ve been reading. As you also well know there are many reasons cited in articles for economic uncertainty, but I doubt all sides would have the same list of events nor emphasis as you and the liberal cohort following here.

        1. noneconomist

          Many thanks, however, for clarifying that we need look no further for the cause of DJIA shockwaves than Democratic chicanery.

          1. pgl

            CoRev has “evidence” that the Chinese imposed those soybean tariffs in the hope of making Hillary Clinton President. Everything bad is a Democratic plot!

          2. CoRev

            Chicanery??? “…the use of trickery to achieve a political, financial, or legal purpose.?” Only you used this term. To what I referred was the imminent Democratic economy, the lack pro-economy politics that is about to ensue with Democratic control of the House, and the memory of the past administration’s economic performance.

            It seems only the liberals are in denial of how poorly the economy performed under their (Obama) policy control and how quickly and easily it improved under pro-business (Trump) policy control.

          3. pgl

            CoRev failed to get your joke. Of course he offered his own joke:

            “It seems only the liberals are in denial of how poorly the economy performed under their (Obama) policy control”

            Obama the socialist! Inherited the Bush “boom” and then gave us 8 years of recessions according to CoRev. Never mind the Great Recession started in December 2007 and we had a reversal after Obama’s fiscal stimulus took effect. But you see – CoRev is completely clueless when it comes to anything involving a calendar.

            Now most people get that Trump inherited Obama’s booming economy but not our dear friend CoRev. After all – he got his economic education watching Fox & Friends!

          4. 2slugbaits

            CoRev how quickly and easily it improved under pro-business (Trump) policy control.

            This coming from somebody who not only voted for Trump, but voted for Bush 43 twice and even twice voted for Nixon!!!

            By “pro-business” do you mean trade tariffs? Or policy uncertainty? Or corporate tax cuts that have resulted in less investment? Or huge structural deficits that forced the FED to raise interest rates? Do you mean those kinds of “pro-business” policies? The only thing remarkable about this recovery is its length. There have been a couple of good GDP quarters, but nothing spectacular and no greater than some of the GDP quarters during the Obama years. Employment growth during the recovery has been good, but no better than it was under Obama. During Trump’s first year the stock market did slightly better than it did under Obama, but since the Trump tax cut the stock market has been miserable.

            Like a lot of conservatives who never took an economics course, you seem to conflate “pro-growth” and “pro-business” policies. They are not the same. Crony capitalism is “pro-business”. Rent seeking is “pro-business”. Neither of those are “pro-growth.” “Pro-growth” policies are those that increase trade, correct for externalities, increase investment and reduce the structural deficit over time. Those don’t sound like Trump policies.

            You might want to read JDH’s latest post explaining why the unemployment rate stayed so high during the recovery. It’s a nice piece of analysis. Then ask yourself how much blame should be assigned to folks like you and the clueless Tea Party gang for advocating fiscal austerity while businesses were shedding jobs. As JDH points out, what happened was the unusually high number of low skilled (type “L”) workers who got dumped onto the streets. Prior to the Great Recession what policies did the GOP and Bush 43 advance that would increase the re-employment skills of low skilled workers? None. During the Great Recession what policies did the Tea Party nuts recommend that would sustain aggregate demand and stem the exodus of type “L” workers from the labor force? None. Bush 43’s policies set us up for a slow recovery and Tea Party austerity ensured that unemployment would stay high. Of course, we shouldn’t be surprised. After all, Sen. McConnell admitted that his highest priority was to make sure the economy didn’t recover under Obama.

          5. noneconomist

            CoRev, you are indeed a history whiz without peer. That massive tumble in the DJIA in the Obama years as well as triple digit unemployment from 2009 to 2017 are indeed stains on the economy that cannot be easily erased.
            That’s especially true after the economic boom times and restrained spending of the GW Bush administration; that wonderful era when the national debt was almost entirely erased by Republican congresses from 2002 to 2007, especially 2008 when the Dow soared to unprecedented heights.
            Looking to the future, who can doubt that the pro-business policies of the self-styled “Mr. Tariff” and the “King of Debt” will overcome that, yes, Democratic chicanery, that has seen the Dow tumble solely because Wall Street makes decision based wholly on fears of that chicanery.
            Again, many thanks for clarifying muddled waters. Can’t imagine what we’d do without your uncanny economic knowledge and foresight.

  3. randomworker

    There’s nothing Mr. Market hates more than uncertainty. Ask Larry Kudlow.

    In April 2014, supply-sider Larry Kudlow moaned that the “incredible uncertainty about Obamacare and its taxes and regulations” was hampering the markets and the economy.

    Wait…what did he say about his boss again??

    “And let’s not forget: The stock market, which is a leading indicator of the future economy, is in a wee bit of a correction. Given the recent rise of presidential candidate Donald Trump, we should all be thankful that stocks haven’t plunged. Trump’s agenda of trade protectionism, dollar devaluation, and immigrant deportation is completely anti-growth. It’s like Fortress America in an economy that is completely globalized and where the U.S. must compete in the worldwide race for capital and labor. Trump’s policies don’t fit.” — August, 2015

    I think maybe that time he was right. It just took awhile for the tax cut sugar high to wear off.

    1. pgl

      Speaking of Kudlow – back after we invaded Iraq some 15 years ago, Kudlow had a 12 and 12 prediction. 12 million barrels of oil per day produced by Iraq leading to oil prices falling to $12 per barrel. Ask CoRev how well this prediction turned out. Oh wait – he’ll blame the forecast error on Democrats!

  4. pgl

    President Trump is tweeting cartoon drawings of a “Steel Slat Barrier.” So Trump thinks this is some cartoon?

    I wonder if Senator McConnell has seen these cartoon drawings. McConnell took to the Senate floor saying we need to curb the imports of illegal drugs. A laudable goal but a wall will never stop people like El Chapo as they would just build tunnels around the wall. But look at those Trump cartoon drawings. One could easily pass drugs through those slats.

    Look – I don’t know whether the Republicans are this incredibly stupid or are just lying thinking we are stupid.

    1. Keith

      Exactly right on drugs. However, I don’t think the industrial size quantity of drugs consumed in the US moves solely through the tunnels. My hunch is that a sizeable portion comes in stashed in shipments of other goods (by land or sea) where either they have some way of hiding the drugs from customs or the shipments go through when compromised customs workers are on the job.

      Building better border fortifications won’t do much in the end. Where there’s demand either for goods, services or labor people will find a way to supply it.

      1. pgl

        Speaking of drugs – what is CoRev on? Consider his latest utter nonsense:

        “It seems only the liberals are in denial of how poorly the economy performed under their (Obama) policy control and how quickly and easily it improved under pro-business (Trump) policy control.”

        A tariff war and rising interest rates is pro-business? Seriously? Is that the intellectual garbage Fox & Friends is spewing these days?

    2. noneconomist

      They’re hoping the wall will work as well for border security as the Maginot Line did for France in controlling the German “caravans” in WW II?

    1. Menzie Chinn Post author

      Not Trampis: Trump could allege that Powell had faked his identity with a forged birth certificate, and was actually an illegal alien from Kenya, then have him arrested under the FBI newly under the new directorship of Rudy Guliani.

  5. pgl

    FRED is really good at a lot of things that CoRev really never learned. One is getting dates right (let’s buy CoRev a calendar for Christmas and have someone teach him to use it). The other is presenting economic facts such as the employment to population ratio:

    Take a look at this series over the past decade as you take in one of the stupidest statement CoRev has ever written (I know, I know – there is a ton of competition):

    “It seems only the liberals are in denial of how poorly the economy performed under their (Obama) policy control and how quickly and easily it improved under pro-business (Trump) policy control.”

    Obama inherited an incredible recession from Bush43 which dropped the employment to population to just over 58%. By the time Obama left office, this ratio had passed 60% and was still rising. Now it is up to 60.4%. I guess we should feel lucky that Trump’s trade wars and the higher interest rates from his insane fiscal stimulus has not derailed the Obama recovery – YET!

    1. noneconomist

      And then there are these simple numbers.
      DJIA Obama’s first two years: +29.84% (2009 + 18.82% 2010 + 11.02%)
      DJIA Trump’s first two years: +16.88% (2017 +25.08% 2018 -9.20%)
      But fear not. When the tax cuts really kick in (and deficits dwindle because of the cuts), all will be well. Taxpayers–especially Republicans who, after all, are the only ones who pay taxes–will finally see those pro-Trump business policies steaming full speed ahead. Me? I’m taking that average $954 tax cut and buying that new car I’ve always wanted. Or maybe I’ll just the family on a vacation to Fresno.

      1. pgl

        Given that CoRev conflates the stock market with the rest of the economy, your numbers are really going to frustrate him. Oh well – he can always revert back to telling us how profitable those US soybean farms have become with this trade war!

        1. noneconomist

          Today’s big Dow drop: 653 points. But Trump did say, “The only problem with our economy is the Fed. They don’t have a good feel for the Market…”
          That would appear to let Democrats off the hook until we recall that all current Fed members are Democrats appointed by Democrats.
          If only Chuck Schumer had not appointed Powell, we’d be so much better off today. He could have been satisfied with that little woman (who was appointed by Mitch McConnell), but her slight stature forced Schumer to look elsewhere.

  6. Willie

    Here’s some appropriately data free and analysis free thoughts for CoRev to chew on and provide analysis . Take a look at economic data for since the late 1960s, and tell me who was president every time a recession started. Thanks.

    And, here we go again in 18 months or so. Why would Trump be any different from any other Republican president?

Comments are closed.