For months the battle over the Federal Reserve has been playing out within the financial press. On one side, the Warren wing of the Democrat Party trying to make institutional gains within the central bank. On the other, allies of Janet Yellen have promoted Jerome Powell as a fellow traveler. Today, Joe Biden was finally provided with a script naming Powell as the victor.
The real question is whether the battle will end there.
As we have already seen, what Joe Biden’s handlers want is not always what Joe Biden’s handlers get. High-profile nominees like would-be OBM director Neera Tanden and would-be ATF director David Chipman have already been defeated. An obvious calculation in the renomination of Jay Powell is the belief that Republicans will cross over and make up for predictable defections from the more progressive Democrats in the Senate.
The question now is how many Republicans are willing to own the Powell Fed?
As the Mises Wire noted during his original nomination, Powell’s selection by Donald Trump reflected one of the most significant areas where the Swamp won over the rhetoric of Trump’s campaign. While Powell was quick to become a target of Trump’s wrath, the resulting monetary policy was predictable. The current pandemic of inflation doesn’t reflect some radical break from mainstream monetary policy, but rather is a direct product of the technocratic status quo.
Since 2010, however, the failings of the status quo have required a more advanced lens to appreciation. Corporate consolidation, Cantillon effects, the regressive nature of financialization—all have resulted from the monetary hedonism of the radical nature of post-2008 central banking, but none of these is as apparent as a more expensive Thanksgiving dinner. Or rising gas prices.
While the Republican Senate Caucus is the institution where Bush-era conservatives continue to have the most power, the question is how many senators are willing to go on record in support of the current state of the dollar. Additionally, will rising populist outlets make them pay for doing so?
Tucker Carlson, for example, has established himself as one of the greatest threats to Republican politicians. While your average Republican may be able to fundraise off a nasty article from the New York Times or being made a punchline from Stephen Colbert, a monologue from Tucker can ruin a career. Will the populist Right recognize the importance of Murray Rothbard asking, “What has government done to our money?”
With enough pushback, Republicans in the Senate would be right to join with Warren/Sanders-style Democrats in rejecting Jerome Powell. This would not, however, require them to embrace the more partisan Lael Brainard or the radicalism of modern monetary theory. While it is not likely to see the Biden administration ever nominate a serious thinker to head America’s central bank, Republicans could succeed in taking a scalp against those who are the face of the monetary malpractice the Fed is guilty of. Substituting Powell for, say, a Raphael Bostic, would do nothing to improve the Federal Reserve System—but it would provide some small symbolic demonstration of accountability.
Rejecting a Federal Reserve nomination would be a historically significant vote of no confidence.
Does the Senate GOP have the courage to act?
