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Krugman writes: "It's clear that Trump's motives are and always have been purely political: he wanted the Fed to hurt President Obama, and now he wants it to boost his own reelection chances."

Economist Paul Krugman. (photo: Forbes)
Economist Paul Krugman. (photo: Forbes)

Goldbugs for Trump

By Paul Krugman, The New York Times

16 July 19

They sold their principles a long time ago.

efore going to the White House, Donald Trump demanded that the Fed raise interest rates despite high unemployment and low inflation. Now he’s demanding rate cuts, even though the unemployment rate is much lower and inflation at least a bit higher. To be fair, there is a real economic argument for rate cuts as insurance against a possible slowdown. But it’s clear that Trump’s motives are and always have been purely political: he wanted the Fed to hurt President Obama, and now he wants it to boost his own reelection chances.

It’s not surprising, then, that Trump is also trying to stuff the Federal Reserve Board with political allies. What may seem surprising is that many of his would-be appointees, like Stephen Moore and now Judy Shelton, have long records of supporting the gold standard or something like it. This should put them at odds with his efforts to politicize the Fed. After all, one of the supposed points of a gold standard is to remove any hint of politics from monetary policy. And with gold prices rising lately, gold standard advocates should be calling for the Fed to raise rates, not lower them.

But of course both Moore and Shelton have endorsed Trump’s demand for rate cuts. This creates a dual puzzle: Why does Trump want these people, and why are they so willing to cater to his wishes?


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0 # janie1893 2019-07-16 14:46
Donald Trump is an evil person!
+2 # BetaTheta 2019-07-17 10:04
The high value placed in recent years on "mathematical razzle-dazzle" brings to mind a story about the economist John Nash (of "Beautiful Mind" fame)

During his graduate career at Princeton, Nash wangled a meeting with Einstein to put to the physicist what he thought might be some revolutionary new mathematical insights into relativity. After an hour or so, Einstein politely suggested that Nash go back and study some more physics.

A lot of the "quants" of modern economics might also do well to study some history and psychology, to better understand the "madness of crowds" that throws sand in the gears of their equations.

Real, rounded economists like Stiglitz and Shiller understand this and are more grounded in reality than the Famas and the Laffers who live in economic la-la land and spin theories cut to fit the predilections of the financial elite.
0 # yolo 2019-07-19 09:54
Unlike fiat currency which can be created by a few keystrokes of the computer, gold can only be found by exploration and mining which wastes labor better used on other things. Which brings up the other reason why the gold standard is not used in any other country because it is a limited commodity which can be manipulated just like the Hunt Brothers and the Saudi's attempted to do in the late 70's. Which is also why there are billionaires out there who would like to return to the gold standard because they have the money and influence to be able to manipulate markets to benefit themselves. As William Jennings Bryan once said, "you shall not crucify mankind upon a cross of gold" Only the rich, and the ignorant of history want to return to the gold standard.

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