Why is the Federal Reserve so tiger after 14 trips with Trump in half a year?

 Why is the Federal Reserve so tiger after 14 trips with Trump in half a year?

Although Twitter Trump deliberately showed brutality, frankness and temperament, he had little money to turn the table over in the face of the Federal Reserve.

_Data map. The pictures are irrelevant. Picture/Visual China

Trump was angry at the news that the Federal Reserve had raised interest rates.

On December 17, two days before the Federal Reserves interest rate meeting, Trump tweeted a warning: Its incredible that the Federal Reserve will consider raising interest rates again.

Its not relieved yet. The next day, Trump sent another tweet reminding the Federal Reserve to feel the market and not just look at meaningless numbers.

However, the Fed did not take Trumps Twitter cries seriously.

On the 19th, they announced their last decision to raise interest rates this year, the fourth time the Federal Reserve has raised interest rates this year. At the press conference, Fed Chairman Powell finally responded to Trumps Twitter, saying, Whoever tweets will not affect our work, we have our own way of working.

Its hard to go back.

This is not the first time Trump and the Federal Reserve have fallen in love. Trumps baby has long been unhappy.

Since he told the media on July 19 that the rise in interest rates is not encouraging, Trump has beaten the Federal Reserve at least 14 times, and the firepower is getting stronger and stronger.

Feel his anger - -

I think the Federal Reserve is crazy, Trump said at a Pennsylvania campaign rally on October 10.

On October 23, Trump said he regretted the appointment of Powell as chairman of the Federal Reserve.

On Dec. 11, Trump said in an interview with foreign media that I think its foolish to raise interest rates by the Federal Reserve.

Abuse and intimidation are never battles. In the second half of this year, the Federal Reserve responded to Trumps pressure by raising interest rates twice on September 26 and December 19.

The Federal Reserve is equivalent to the Central Bank of the United States. The central banks function is to issue money, manage financial order and prevent inflation. The decision-making basis should be adapted to the need of the government to regulate the economy. However, it seems that the Federal Reserve does not take the President of the universe seriously.

Why did the Federal Reserve dare to go against Trump?

1. The Federal Reserve is a public-private central bank

Central banks in most countries of the world have been, or remain, government banks. But the situation in the United States is a bit special.

After the War of Independence, Hamilton, Washingtons military attache and the first U.S. Treasury Secretary, once wanted to establish a federal-controlled central bank.

Hamilton is a well-known Federalist who wants to establish the authority of the federal government. But his proposal was strongly opposed by 13 former colonies. After Hamiltons efforts, the First Bank of America was finally established in 1791.

The bank was mainly funded by European shareholders, so Congress set a time limit for First Bank to operate, requiring congressional approval every 20 years.

Shareholders want to make money, so First Bank also issues stocks, bonds and loans, which is totally unlike a central bank. So after only 20 years of operation, Congress wiped out the First Bank. But Hamiltons head was printed on a $10 bill.

Then the Second Bank of the United States was established. The fate of the second bank is the same as that of the first bank, which has only survived for 20 years.

Since then, there has been no interest in the creation of a central bank in the United States. From the closure of the second bank to the beginning of the 20th century, for more than 70 years, there was no central bank in the United States, and the financial order was maintained by private banks. This order is extremely unstable. Every year, a large number of banks fail. In the most year, more than 500 banks fail.

By 1907, the financial crisis had reached its peak. JP Morgan, the banking giant, was unable to sit back and rallied several big Wall Street banks to raise money for the market to contain the crisis. In this way, rebuilding the U.S. central bank is on the agenda.

But people still argue whether the central bank should be government or private. In 1913, under the impetus of President Wilson, a balanced plan was finally found, and the Federal Reserve was established qualitatively.

The Feds balancing plan is composed of the Federal Reserve and 12 regional Federal Reserve banks. The Federal Reserve is a government agency, but 12 regional Federal Reserve banks are private companies. These reserve banks have codes.

The first was called 1A and the second was called 2B (for the New York Federal Reserve), and so on. To avoid the lesson of the competition between the First Bank and the Second Bank of the United States and commercial banks, 12 regional Federal Reserve banks were set up as non-profit institutions.

U.S. monetary policy is formulated by a meeting of seven executive members of the Federal Reserve, including the chairman of the Federal Reserve, and 12 chairmen of regional reserve banks. Twelve out of 19 people usually have the right to vote.

Trumps troubles lie here: the seven executive members of the Federal Reserve are theoretically government employees who need presidential nominations and congressional appointments. However, the term of office of the executive committee is 14 years. Although the chairman is appointed and removed once every four years, he is still in the executive committee even if he is not the chairman if he wishes to.

What does that mean? It means that the president has offended people and may not be able to let the Fed follow his will. Depressed!

As for the 12 regional Federal Reserve chairmen, the president has no desire to control them. The chairman of the regional Federal Reserve Bank is nominated by the board of directors, most of whom are the bosses of large private companies, and some of whom are highly respected in other places. Therefore, the regional Federal Reserve basically represents the interests of local and private enterprises. They dont think the same as the president.

Therefore, Trump is no longer satisfied with the Federal Reserves monetary policy, and basically can only complain about it.

_Data map. The pictures are irrelevant. Picture/Visual China

2. The more the European and Japanese Central Bank develops, the more it resembles the Federal Reserve.

As mentioned earlier, most central banks in the world used to be government banks, but now in Europe and Japan the central bank is becoming more and more like the Federal Reserve and more independent.

The Bank of England of the Bank of England was chartered by the British royal family in the early days. It was intended to advance money for the royal family and learn from the experience of Dutch sea coachman in financial management.

In the 17th and 18th centuries, the trend of many wars in Europe was determined by the will of Amsterdam bankers. So far, the president of the Bank of England also needs the Queens appointment.

The Bank of England was once nationalized by the Labour Government after World War II and became a quasi-government entirely. However, with the Bank of England becoming more and more international, four of the nine members of the Bank of Englands Monetary Policy Committee are not British.

As a result, the Bank of England has gained more independence. In addition, with the reform of the financial services regulatory system, non-governmental organizations have become the regulators of British financial institutions, and the space for the British government to intervene in the central bank has become smaller.

The Bundesbank itself was built by private capital, much like the Federal Reserve. But for a long time, the Bundesbank had no autonomy and control was in the hands of government departments.

During World War II, the German central bank was controlled by the Nazis, which was crucial to the subsequent transformation of the German central bank. After World War II, the Bundesbank quickly extended the American-style mechanism and went further. The Bundesbank even set a limit on the amount of loans and loans it can make to the government.

Since the Maastricht Treaty of 1992, the German Central Bank has transferred the right to issue and manage its own currency to the European Central Bank. The Bundesbank therefore has supranational independence. Central banks in the euro zone are mostly so. Supranational central banks are good or bad for an economy. Since the European debt crisis, there has been a lot of controversy.

The Bank of Japan has more characteristics of East Asian system, and most of the time the monetary policy power is in the hands of Dazang Province. However, in recent years, the management functions of Dazang Province have been separated, and the independence of the Bank of Japan has been strengthened.

I remember an interesting example: after the outbreak of the international financial crisis in 2008, Abe was eager to stimulate the economy with unlimited monetary expansion policies, but the Bank of Japan feared that inflation was somewhat reserved.

As a result, Abe sent government officials to attend the interest rate meeting of the Bank of Japan. The Bank of Japan is therefore not too ashamed to make a resolution contrary to Abes wishes.

This is probably the so-called three-point love meeting.

The strengthening of the independence of Western central banks is the result of electoral politics. Every elected person has the tendency to use expansionary stimulus policy to find political achievements and help elections. If the central bank cooperates unconditionally, the pot will be thrown onto the next one. The economy will go against the cycle. Finally, it is a game of drumming and spreading flowers without winners. Therefore, the central banks independence is a design to avoid losing all.

_Data map. The pictures are irrelevant. Picture/Visual China

3. Trump didnt have the money to turn the table.

The Federal Reserve has a unique power mechanism, money does not need to be allocated by Congress, and people are not afraid of Presidents change. So in history, the President of the United States has always respected the independence of the Federal Reserve.

But there are exceptions to everything. Nixon once replaced the third Fed chairman, William McCulls Martin Jr., who was known for his caution, which became the style of most subsequent Fed chairmen.

He went through four presidents, Truman, Eisenhower, Kennedy and Johnson, who remained in office for 19 years, but Nixon overthrew him. To a large extent, Martin quit, not Nixon.

Nixon replaced Martin with Arthur Burns and occasionally shouted Kick the Feds ass in the hope that the Fed would pave the way for his second presidency with radical monetary policy and a brief economic boom.

Under threat, Burns followed Nixon step by step. As a result, Nixon fell to Watergate, and Arthur Burns left a bad name among the ten Fed chairmen: the Fed chairman who is most willing to cooperate with politics.

Although Twitter Trump deliberately showed brutality, frankness and temperament, he had little money to turn the table over in the face of the Federal Reserve.

The only thing he can do is make small gestures.

Five of the 12 voting members of the Federal Reserves interest-rate meeting are now chaired by the Regional Federal Reserve Chairman, which Trump cannot control; three of the remaining seven voting Federal Reserve Board executive boards are vacant.

Trump can only find candidates who are pigeon-inclined, but pigeon hawks are hard to identify. Peoples positions change with the economic cycle, and they have to be appointed by Congress.

Another way is to find a way to change the chairman. That requires two-thirds of the vote in Congress. Its a political tradition in the United States to prevent presidential power from becoming too big. If such a big operation is to be carried out, Im afraid it will be jointly opposed by a majority of members of both parties.

So, facing the Feds calm announcement of its fourth interest rate hike this year and its calm announcement that it will increase it twice next year, Trump has done nothing.

In the field of confrontation with the Federal Reserve, he can only say a few words helplessly.

Source: Gan Wenbin_NBJS7621, Responsible Editor of Beijing Newspaper