Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

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The Fed Shouldn’t Enable Donald Trump  [Bloomberg]

I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

Bill Dudley, former President of the New York Federal Reserve Bank

No there’s not.

An argument that the presidential election falls within the Fed’s purview, I mean.

There’s no argument at all. Not unless you’re a … you know … technocratic fascist who believes that hedonic adjustments to iPad prices offset real world increases in food prices.

And that’s certainly one plausible explanation for Bill Dudley’s now infamous opinion piece in Bloomberg Opinion this week, where he says that the Fed should explicitly use monetary policy as a weapon against Donald Trump’s presidency.

There are four such plausible Occam’s-razorish explanations for this article, IMO:

A) Bill Dudley is a technocratic fascist.

B) Bill Dudley has lost his mind. In a sad clinical sense.

C) Bill Dudley is a MAGA sleeper agent.

D) Bill Dudley is Leeroy Jenkins.

Now I realize that these options are by no means mutually exclusive, and I have zero interest in plumbing the depths of Bill Dudley’s mind if not soul to ascribe relative attributions, but for you non-gamers out there I’ll explain the Leeroy Jenkins option.

In 2005, a home video of a group of World of Warcraft players went ‘viral’, as the kids would say. While one of their members – the aforementioned Leeroy Jenkins – is in the kitchen making a plate of food, the rest of the group engages in an exhaustive planning session for making an assault on a near-impregnable fortress of evil monsters. They solidify the plan and are confident in its success, but Jenkins walks back from the kitchen and – without any consultation with his partners – attacks the evil fortress head-on and berzerker style, yelling out his battle cry, “LEEEEEROY JENKINS!!!”.

The entire party is slaughtered by the horde of evil monsters that Jenkins triggers.

And that’s going to be the outcome here, too.

Because now when Trump tweets that the Fed is his political enemy … it’s no longer a joke.

Because now if the Fed does NOT cut 50 bps in the September meeting, they will face a withering political attack … and they will lose that fight.

Because Bill Dudley just widened the widening gyre by a country mile.

My prediction:

Within six years, regardless of who is elected in 2020, the Fed as we know it will no longer exist.

It will be explicitly brought within Executive control, no different than, say, the Department of Homeland Security.

I’m not saying that’s a good thing and I’m not saying that’s a bad thing. I’m saying that’s what I think will be.

And the evolution of capital markets into a political utility will be complete.


  1. Ben, your analogies are awesome, and this is one of my favorites. LOVE ME SOME LEEROY!!!

    However, I’m going with (A). At least he ain’t chicken. LOL

  2. Avatar for rwgood rwgood says:

    If the Fed loses its independence at the same time that the world wakes up the fact that monetary policy is not a universal panacea for economic woes maybe it isn’t all bad. If you imagine being a fly on the wall in 1910 at Jekyll Island versus say being a fly on the wall at the Constitutional Convention in 1787. I trust the judgement of the later more. On the other hand, even the nameless bankers of 1910 seem like giants compared to our current crop of Lilliputians.

  3. Avatar for Zenzei Zenzei says:

    Ah the good old days of World of Warcraft Vanilla. That was a damn hard room to do and to be honest…the video is hilarious. A couple of points…

    1. The only reason they are going to do that room in the first place is cause Jenkins needs some piece of armor from there
    2. The whole time they are discussing the plan Jenkins is clearly sitting next to them AFK while he is getting dinner
    3. When they get done planning the whole thing out they number crunch and have a 33% chance of survival which leads to classic line number 1 - “that’s better than our usual odds”
    4. At the end of the whole thing…when they are telling Jenkins just what a total idiot he is…the classic Jenkins line emerges: “Well, at least I got chicken”

    Oh my. So much fun. Here is the video for those of you that are wondering what I am yammering about.


  4. Avatar for DaHoj DaHoj says:

    The Dud…or, at least this Dud, does not abide.

  5. Avatar for Schase Schase says:

    $40 trillion Fed balance sheet directed by a Presidential mobile phone app from a suite at the Plaza Hotel

  6. The Fed ends in 6 years. The planet becomes uninhabitable in 12 years. Stop the world - I want to get off.

  7. The Dud thinks the fed should control the presidency in 2020, and the president thinks he should control the fed. Both of them think they can control the economy! Vanity of vanities, says the Preacher, vanity of vanities! All is vanity!

  8. The Fed is a creature of Congress. Ben, do you really think the Congress can agree to do anything nowadays? Especially if it entails giving the Executive ALL the power…

  9. “And that’s certainly one plausible explanation for Bill Dudley’s now infamous opinion piece in Bloomberg Opinion this week, where he says that the Fed should explicitly use monetary policy as a weapon against Donald Trump’s presidency.”

    Don’t you think they already have been? They practically refused to raise rates during the prior administration even when economic growth was strong, implicitly because they didn’t want to damage Mr. Obama. They have had zero such compunctions during this administration even at the lagging end of a supremely long bull market with the yield curve flashing yellow.

    As far as I’m concerned this is just an honest admission of the game they’ve been playing all along.

  10. Ben, being at the point we are today, where you can say that the 50bps are a line in the sand for the future within six years, we can already say that the Fed as we know it no longer exists. And I don’t think it’s Trump’s fault. It was a death of their own making. This point was decided long ago with the decision to go past QE1. At that point, it was already clear that if it didn’t work quickly (and who thought it would?), there was no getting back to normal. Without getting back to normal, the Fed, in function if not in name, no longer existed as we knew it or as we still imagine it. What HAS changed this year is that, unlike the last ten, they aren’t even pretending any more. Thanks for ET and the home you’ve made for the pack.

Continue the discussion at the Epsilon Theory Forum

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