All You Gotta Do Is Act Naturally

The U.S. Supreme Court isn’t the only influential government entity that President Trump will have an opportunity to make his mark on.

The Federal Reserve Board will likewise bear the Trump brand in the not-too-distant future. Two of the seven seats on the Federal Reserve Board of Governors are already vacant and now a third governor, Daniel K. Tarullo, has announced that he will step down in April. Called the “lead architect of post-crisis financial regulations plans” by The Wall Street Journal, Tarullo is not likely to be replaced by a pro-regulation governor.Natural Rate

In addition, the Fed’s influential general counsel Scott Alvarez, who has sometimes been referred to as “the eighth governor,” will retire this year after a 36-year career at the central bank. And the leadership term of Chair Janet Yellen expires in January 2018, while Vice Chair Stanley Fischer’s term expires in June.

The changes are likely to result in a different perspective for the board, which has been dominated by ”academics who don’t know how finance and the economy really work,” according to Danielle DiMartino Booth, a former Federal Reserve Bank of Dallas staffer and author of a new book, Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America.

Booth describes “a tribe of slow-moving Fed economists who dismiss those without high-level academic credentials,” and she counts Ms. Yellen and predecessor Ben Bernanke among them.

“Central bankers have invited politicians to abdicate leadership authority to an inbred society of Ph.D. academics who are infected to their core with groupthink, or as I prefer to think of it: ‘groupstink.’”

We hope the final copy offers more wit and insight than that, but you likely get the idea. 

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What Consumer Protection?

Imagine creating a federal agency that is accountable to no one.

Its funding is not approved by Congress. It is funded directly and automatically by the Federal Reserve.

Its current unelected director may have been appointed illegally, as the U.S. Supreme Court has ruled that other appointments made that day were illegal “recess appointments.”

Its director “enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. Government, other than the President,” according to the U.S. Court of Appeals, which ruled that the federal agency’s governing structure is unconstitutional. (Last week, the court granted a request for a review by a broader set of judges.)Dem and Rep

Many are calling President Trump autocratic, but he didn’t create this most autocratic of government agencies. It was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which the Trump Administration is seeking to change.

Most Powerful, Least Accountable

The agency, the Consumer Financial Protection Bureau (CFPB), is to consumer protection as the Affordable Care Act is to affordable care. It does the opposite of what its name suggests it does.

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Financially Unsustainable

Sustainability is a big deal. Large companies have hired chief sustainability officers whose job it is to ensure that the company minimizes its negative impact on the environment. They’ve found that it is often possible to increase profits while also reducing their companies’ impact on the environment.

In theory, a company must achieve environmental equilibrium to be sustainable. While that’s not achievable, a great deal of progress has been made. Economies throughout the world still rely on fossil fuels, but conservation efforts have made the air and water cleaner and safer in many countries.usgs_chartDp11f

This Can’t Go On Forever

But what about financial sustainability? That’s an area where we all have a long way to go, both in the U.S. and around the world. We can think of many examples of financial unsustainability that could lead to economic collapse or, at the least, a lowering of living standards. Here are a few:

Greece. Consider the ongoing saga of Greece. Greece has been in such sad shape for so long, the rest of Europe has agreed to bail it out—not once, not twice, but three times. And now, unsurprisingly, Greece may be going for a fourth.

As further proof that socialism is a nutty idea, Greece continues to resist more stringent austerity measures while allowing its debt to continue to build. The International Monetary Fund (IMF), which is hardly ever a voice of reason, is arguing that “Greece’s debts are unsustainable and on an ‘explosive’ path to reaching almost three times the country’s annual economic output by 2060.”

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The Good, the Bad and the Ugly

For the past eight years, the Federal Reserve Board has been the primary force behind the U.S. economy. That hasn’t worked out so well.

Now President Trump is in charge of the U.S. and its economy.

Whether that will revive the economy and make America great again remains to be seen. While the Trump presidency is still brand new, we’ve already seen more action take place that will affect the economy than we saw in the past eight years.trump_cowboy_2509705

Some of what’s taking place appears to be good. Some of it appears to be bad. And some of it appears to be ugly.

The good. Already, President Trump has signed a slew of executive orders. While we’re no fan of executive orders, every president has used them to a degree–and it was one way to make a quick impact, even before his cabinet has been confirmed.

Regulation, as we have frequently noted, has paralyzed the economy, having its greatest impact on small businesses. That President Trump is serious about deregulation is clear by what he’s done to date.

One of his executive orders requires that whenever a new regulation is approved, it must be offset by “the elimination of existing costs associated with at least two prior regulations.” The order adds that the “total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law.”

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