And Trump’s Pick for Fed Chair Is…


Like I said in Nashville, I don’t believe any of the choices for Federal Reserve Chair will matter in the short run. Whoever leads the Fed will have to be able to form a consensus with the 12 Fed presidents and the Board of Governors. They won’t be able to foist big changes on policy when they take the reins.

Going into Thursday’s formal announcement, the front-runner for the job was Jerome Powell, who currently serves on the Board of Governors and is a current voting member of the Federal Open Market Committee (FOMC). He served in the George H.W. Bush administration, and prior to that, he worked as a lawyer and investment banker.

President Trump officially nominated him for the position yesterday afternoon.

Powell is the first Fed chair in 40 years not to have earned a Ph.D. in economics. He’s a lawyer by trade – but maybe that’s not so bad considering the former chair’s confusion over what drives inflation! Of course, Powell admitted that inflation was below target and that it was a mystery as to why in an August CNBC appearance.

Powell is a Republican, but he was appointed to the Board of Governors by President Obama. And, according to required financial disclosures, his net worth is in the range of $21 million to $61 million, which makes him the richest Fed chair ever.

So much for Trump’s promise to “drain the swamp!”


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Remember early last year, when candidate Trump accused the Fed and Chair Janet Yellen of keeping interest rates artificially low to help fellow Democrats in the previous administration?

President Trump’s tune changed, as he recently said that he thinks Yellen’s done a good job. So, even though he didn’t reappoint her, his choice suggests that it’s just politics as usual.

As Fed chair, Powell will most likely continue the same policies of slow and deliberate normalization of both the balance sheet and interest rates.

More importantly, when the economy inevitably slides into a recession, Powell will most likely resort to quantitative easing, as his predecessors did. That’s not all that comforting a though, as he even admitted last year that QE didn’t stimulate the economy as much as the Fed though it might. That’s why, he explained, the Fed has been so slow to increase interest rates.

So, Jerome Powell is President Trump’s pick for the next Fed chair. That means monetary policy won’t change much in the short or even the medium term. The markets seem happy with the choice, and Treasury rates have dropped over the last few days because Powell was widely expected to be the choice.

Now we’ll just have to wait and see if the Senate will confirm him.

You can prepare and profit from surprises in the financial markets, and specifically in the Treasury bond market with Treasury Profits Accelerator.

Good investing,

Lance

What Killed the Middle Class?

Today real incomes of the middle class are 5% lower than they were in 1970 and 12.4% lower than in 2000… when they peaked! How could this be?

In our new infographic What Killed the Middle Class?, we take a look at some shocking numbers to show how bad it’s become and what has been fueling this middle-class revolt.

 

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Categories: Economy

About Author

Lance Gaitan graduated from Franklin University in Columbus, OH with a degree in Finance. After graduating and working as an auditor for an insurance administrator as a number of years, he attained his securities license. He then went to work as a broker for a small firm and during the mid-1990’s Lance managed the futures trading desk for Piper Jaffray, a large regional brokerage firm based in Minneapolis. After migrating to Florida in early 2000, Lance founded a futures trading firm, GSV Futures, specializing in retail commodity trading strategies. Lance sold that business in 2006 and joined Harry Dent, Jr. and Rodney Johnson at Dent Research shortly thereafter.