This is Brad DeLong's Grasping Reality—my attempt to make myself, and all of you out there in SubStackLand, smarter by writing where I have Value Above Replacement and shutting up where I do not… Chaos Moneys Trying to Fire Fed Governor Lisa Cook to Lower Interest Rates Succeed in Raising ThemChaos monkeys chaosing as they caravan down Constitution Avenue from the White House to the Eccles Building. The attack on Fed independence spooked investors, widened yield spreads, & raised the...
Chaos monkeys chaosing as they caravan down Constitution Avenue from the White House to the Eccles Building. The attack on Fed independence spooked investors, widened yield spreads, & raised the risk premium on Treasuries. & in aiming at Lisa Cook they guarantee that the intellectual center of gravity of the FOMC will be less receptive to the technocratic arguments for lower interest rates…
Another Trumpist chaos-monkey own goal:
And:
Register this: The interest rates that matter for boosting spending are not the short but the long-term interest rates. Donald Trump wants spending boosted in the economy by lower interest rates, so he said a thing on Truth Social and sent a letter to Fed Governor Lisa Cook purporting to dismiss her that caused long-term interest rates to go up.
Truly a genius level move here. Congratulations, Bessent, Lutnick, Hassett, Miran, and company: Here we have proof that you really are as incompetent as the right-wing Washington and New York whisper machines have been saying. There are currently twelve regional Fed Bank Presidents and, after Adriana Kugler’s resignation, six sitting Governors of the Federal Reserve—Powell, Jefferson, Bowman, Barr, Waller, and Cook. Of these, there is one who feels in her bones the strength of the case for a low-interest rate policy to generate labor-force upgrading in a high-pressure economy: Cook. If there is a case to be made for lowering interest rates right now, she is the most likely Governor to make it, and to make it persuasively. And if she is not making that case strongly, it is because it is not now a strong case. Why isn’t it? Because for the case to be strong the chaos monkeys need to be giving the Fed fiscal and supply-side policies that make reducing interest rates right now a prudent thing to do, and they are not. If we are to rank current sitting Fed Governors in terms of their expertise and ability to make convincing arguments these days with respect to monetary policy, the ranking goes like this, starting from the bottom:
I arrived at Berkeley as a professor just as Lisa Cook was finishing up her Ph.D. She was clearly smart as a whip, hard-working, had a broad range of knowledge and expertise casting a very wide intellectual net over the literature and the world, and able to actually get things done quickly and professionally. Should Trump and the Trumpists succeed in moving her out and moving their own white guy in, they will have to draw from a pool of Trumpist sycophants and whatever Republican worthies remain who have no shame at all. That is probably a big pool. But from that big pool, there are very few who feel the strength of the case for a low-interest rate policy to generate labor-force upgrading in a high-pressure economy in their bones. Maybe zero? And even if there are some, I cannot believe that they will find even one who knows enough about the technocratic issues of monetary policy. At least, I cannot think of any. And should someone come forward with a Trumpist sycophant or shameless Republican worthy Fed-Governor candidate with (a) technocratic experience who (b) feels the high-pressure economy case in their bones, I would (c) give 9-1 odds that they are dumb as a post, and unable to make arguments in the policy-discernment scrum that is the FOMC that would convince anyone. Plus (d) they will be rotten and tainted goods—everyone will know from the get-go that their arguments are pure bulls**t. By contrast, Lisa Cook makes genuine and earnest points she believes in, intelligently formulated and thought through, based on a deep knowledge of monetary and financial affairs, from a perspective that feels the importance of maintaining a high-pressure economy in her bones. If Trump were rational, if Bessent were rational, if Miran were rational, if Hassett were rational, one of them would have called a halt to this by now—would have said: “Wait a minute! This Governor is the one who is making our case within the FOMC discussions in a much better way than anyone we could replace her could! This one is our ally!” And if the response was: “But she really isn’t making that case effectively enough, is she?” The rational counter would be: “That is because the case is not there to be made, and if it is to be made we need to first give her and the rest of the FOMC fiscal and supply-side policies that make reducing interest rates now prudent”. To repeat myself: Lisa Cook is, by Trumpist lights, a better member of the Board of Governors than they could find to replace her, and a much better Governor than they deserve. But if there is a rule about Trump’s chaos-monkey crew, it is that they are chaos monkeys. And so they want interest rates to go down, and in an attempt to do so they try to push a better advocate for that case than they could appoint off the Board of Governors, and so the interest rates that matter go up.
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