Paul Krugman: Will Trump Trumpify the Fed?

“The Fed, which sets monetary policy, is by far our most important economic agency”:

Will Trump Trumpify the Fed?, by Paul Krugman, NY Times: By all accounts, Rex Tillerson has demoralized and degraded the State Department to the point of uselessness. Tom Price did much the same to Health and Human Services before jetting off. Scott Pruitt has moved rapidly to eliminate the “protection” aspect of the Environmental Protection Agency. And similar stories are unfolding throughout the executive branch. …

And one question I don’t see being asked often enough is, will the same thing happen to the Federal Reserve? And if it does, how disastrous will that end up being for the world economy?

The Fed, which sets monetary policy, is by far our most important economic agency…

When the financial crisis struck in 2008, it was essential that the Fed engage in aggressive monetary expansion…

But congressional leaders fought these necessary measures every step of the way. Most notably, Paul Ryan, who gets his ideas about monetary policy from Ayn Rand novels, berated Bernanke, claiming that his policies would debase the dollar and lead to runaway inflation. …

And it goes more or less without saying that none of the people who kept warning that the Fed would cause terrible inflation have admitted having been wrong, or learned anything from the experience.

What all this means is that if congressional Republicans play a large role in selecting the next Fed chair, they’ll insist that it be someone who has been wrong about everything for the past decade.

Kevin Warsh, a former Fed governor widely considered a favorite for the job, certainly fits the bill. He warned about inflation in the midst of global economic collapse; he argued vigorously against doing anything, monetary or other, to fight 10 percent unemployment; he warned that the United States was about to turn into Greece, Greece I tell you. And he has shown no hint of being chastened by the failure of events to play out the way he expected.

Now, I don’t know who Trump will actually pick to head the Federal Reserve. It might actually end up being someone smart, knowledgeable and honest. Hey, there’s a first time for everything.

But surely it’s possible, even probable, that the Federal Reserve, like other government agencies, is about to get Trumpified, that one of American policy’s last remaining havens of competence and expertise will soon share in the general degradation. And won’t that be fun when the next crisis hits?