- Donald Trump may have named Jerome Powell as president of the Federal Reserve, but the two are clashing.
- Whether it's climate change, the gold standard or the strength of the economy, they both go in different directions.
- And if it comes to the fact that Mr. Trump told Powell that he had to leave, the Fed chief said, "My answer would be no."
US Federal Reserve Chairman Jay Powell not only said that human-caused climate change was real, but he also acknowledged that weather conditions would be more severe, he told the committee. Senate of Banks and Banks. This is the latest way in which the central banker of the country is in deep disagreement with the president who appointed him.
President Donald Trump called climate change a "hoax", said global warming was "two-way" and omitted any reference to the phenomenon in a speech this week intended to be devoted to the environment. But this is not the most significant way in which the two men disagree. This is a two-day sample of Powell's testimony before Congress.
What is the temperature this economy?
"We are considered by far as the most fashionable economy in the world," said Trump during the state of the Union this year. The president has been talking about the economy since taking office, repeatedly highlighting the hiring and bonus announcements made by companies.
Powell is not in agreement. "3% is a low unemployment rate, but to talk about something hot, you have to see a little," he told Congress Wednesday.
Speaking to the House Financial Services Committee, Powell said wages should rise much faster in a growing economy at this rate.
"We have no basis or evidence to speak of a very active labor market," he said. "Salaries and benefits are up 3%, which is good because they were 2% a year ago, but 3% barely cover the increase in productivity and inflation … we We have not seen wages grow as strongly as in the past. "
The "wonderful" gold standard
Judy Shelton, Trump's last Federal Reserve candidate, is a defender of the gold standard. Just like Herman Cain and Stephen Moore, two candidates who have withdrawn from the process. Mr. Trump himself was equivocal about the gold standard, but he defended it during the election campaign.
"Bringing the gold standard would be very difficult to do, but hey, it would be wonderful," he said in 2016.
"We had a very solid country because it was based on the gold standard," he said in 2015, just months before the announcement of his race. "We do not have that anymore."
The United States broke with the gold standard 48 years ago and most modern economists agree that this idea would wreak havoc on the economy.. Linking the value of the dollar to gold limits the dollar supply, which would reduce the Fed's ability to react to economic downturns. On Wednesday, Powell explained why the return to gold would make no sense for the United States.
"I do not think it would be a good idea," he said, explaining that it would leave the Fed less able to conduct its monetary policy.
"You have given us two direct objectives of the real economy: maximum employment and stable prices," he said. "If you [wanted] we could stabilize the dollar at the price of gold, monetary policy could do it, but the other factors would fluctuate and we do not care about it. We would not care if employment increased or decreased.
"That's why every country in the world has abandoned the gold standard a few decades ago," he added.
Who can fire the president of the Fed?
Mr. Trump insisted that he had the power to dismiss Powell or dismiss him as chairman of the Fed, although most outside experts question him. The president reportedly examined Powell's dismissal after the Fed's last rate hike in December.
White House advisor Kellyanne Conway told reporters on Tuesday that Trump had clearly expressed dissatisfaction with the Fed's interest rate policy.
Questioned later in the week on the authority of the president, Powell contradicted Conway's analysis.
Representative Maxine Waters asked on Wednesday: "If the president calls you today or tomorrow and says," I shoot you. Pack your bags. It's time to leave, what would you do? "
"Of course, I would not do that," said Powell.
"I can not hear," said Waters, causing bursts of laughter in the audience room.
"My answer would be no," said Powell, a stronger touch.
"And you would not pack your bags and you would not leave?" Pressed waters.
"No ma'am," said Powell.
When asked if he thought the president had the power to dismiss him, he replied, "What I said is that the law clearly gives me a four-year term. years and that I have the intention to serve him. "
Well, not everything
There is one area in which the president, the president and the most modern economists agree: the fear of high inflation is a thing of the past.
The Fed's dual mission of reducing unemployment as much as possible while keeping prices stable, balances two forces that have traditionally opposed each other. The economic theory behind this is that extremely low unemployment leads to higher inflation.
Historically, the Conservatives have preferred to maintain low inflation, while the Liberals were more concerned about jobs. But they did not have to make that choice in the current expansion. Inflation has been below 2% for more than a decade, even as unemployment fell to lows that we thought unsustainable.
"We learned that the economy could sustain much lower than expected unemployment rates without causing inflation," Powell said Wednesday.
"At the end of the day, there has to be a connection, because low employment will drive up wages and, ultimately, higher wages will lead to inflation, but we have not succeeded," Powell said. In many cases, the relationship between the two is pretty weak these days. "
– Associated Press contributed to the report.