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.
To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.
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.
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.