Lobbying The Fed For Interest Rates Cuts To Help Biden Has Started Already

It’s an election year. Interest rates are high relative to current inflation rates and are the highest they’ve been since 2006. Do those two conditions have anything to do with each other? The Federal Reserve would say “no,” but history would say “yes.”

On the one hand, the Federal Reserve has always maintained they are above politics. According to Fed propaganda, members of the board of governors check their politics at the door of the Fed boardroom and act solely on the basis of economic data and what’s best for the U.S. economy in terms of inflation and unemployment.

Of course, that’s nonsense. The Fed has always been highly political. It’s just that they’re very good at hiding it.

In the late 1940s and early 1950s, the Fed and the White House operated under a strict understanding that the Fed would keep interest rates low in order to help finance the war effort in World War II. President Truman tried to perpetuate that deal into the Korean War years (1950-1953), but the Fed rebelled. An understanding was reached that the Fed would return to independence, but politics were never completely off the table.

In 1972, Fed Chair Arthur Burns revved up the money supply to help Richard Nixon win reelection that year. It worked. Nixon won by one of the greatest landslides in U.S. history. But the legacy was horrendous, including inflation from 1977 to 1981 that cut the value of the dollar in half in just five years.

What’s the situation today? Fed Chair Jay Powell is a Republican, but he’s definitely a Bush Republican. The Bushes despise Trump as much as the Democrats. So, you can count Powell as a Trump-basher even though he is a Republican.

As reported in this article, one of the top Democrat members of Congress, Ro Khanna, a radical progressive, has called upon Jay Powell to cut interest rates to help Biden. Khanna went so far as to say that if Powell doesn’t cut interest rates, “he may be the person most responsible for the possible return of Trump.”

Powell is too smart to take the bait on a challenge like that, but he is listening. The truth is Powell may cut interest rates in June or July anyway.

He won’t do this to help Biden. He’ll do it because the U.S. economy will be headed for a severe recession by then and Powell will be getting the blame for the recession. So, Powell may be able to finesse his way through this political minefield.

He’ll get to cut rates this summer (because of recession), keep the Democrats happy (because he cut rates), and keep the Republicans happy (because he caused a recession in the process).

It’s not that the Fed doesn’t care about politics. They do. It’s simply the case that they’re good at keeping their heads down and leaving no fingerprints at the scene of the crime.

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