President Trump, commenting on a decline in the stock market, said, "I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy...Actually, it's a correction that we've been waiting for for a long time, but I really disagree with what the Fed is doing."
Trump will be ritualistically denounced for interfering with the Fed's much-prized "independence," but the truth is that under our Constitution the power "To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures" is granted to neither the president nor the Fed but to Congress.
The long stock market upswing and the low unemployment of recent years have made grumbling about the Fed less fashionable than it was in, say, 2009 or 2010. But the lyrics of Hayek in the Hayek vs. Keynes Rap — "There's a boom and bust cycle and good reason to fear it" — are as relevant as they ever were.
For the politicians, the existence of the Fed in the current system is convenient, because it provides a place to direct blame when things do start to turn sour. The more severe the busts, though, the greater will be the political pressure to replace the current system of fiat currency with something more stable. Gold was up (which is to say, the dollar was down) today by about as much as the S&P 500 was down.
