[View here as a Twitter thread.]
On Wed. I argued that our democratic institutions [appear to be] holding out against Trump’s onslaught. The federal reserve debacle provides another example.
1/ Trump was enraged when Federal Reserve chairman Jay Powell raised interest rates. Why? Perhaps because Trump has $340 million of debt with Deutsch Bank and raising the interest rate would cost him dearly.
2/ So Trump pulled his usual bullying tactics: He bashed Powell and hinted that he would fire him. The idea of the president manipulating interest rates sent Wall Street into a panic, prompting a massive selloff, causing stock prices to plunge.
3/ People may disagree about whether interest rates should rise, but Wall Street and all market watchers agree that the Federal Reserve must be free from political manipulation. Here’s what the Fed. Reserve says about why it must be independent.
4/ Our (controversial) history of a national bank dates back to Alexander Hamilton, who rattled the Democratic-Republicans (Jefferson and friends) by creating one. Jefferson & friends argued a national bank was beyond the federal government’s constitutional powers. Hamilton won.
5/ Andrew Jackson killed the bank, prompting one of our first economic depressions. The Federal Reserve (a national bank) was created in 1913. The Federal Reserve operates entirely independently from the government, subject to Congressional oversight.
6/ Through market disasters and the lessons of other countries, we’ve learned that politics has no place in capital markets, partly because of a tendency for politicians to make short term decisions. Some of them (er, names rhyme with Lump) may even try to enrich themselves.
7/ So we leave the decisions to experts acting independently. In other words, the President must keep his hands off. Trump tried to manipulate (bully?) the Feds into enacting policies that would personally enrich him. He gave other reasons for wanting low interest, but still.
8/ Trump backed down after he got his hands slapped by the collective outrage of Wall Street and others. He “now realizes” that he can’t fire the Federal Reserve chairman.
9/ For more on how our institutions are withstanding Trump’s attempts to control all parts of the government, see Wednesday’s thread. Consider it a pleasant New Year’s thought, from me: We will get through this with liberal democracy intact.
