Tag: federal reserve

Elizabeth Warren’s Hubris Allowed Trump To Defund the CFPB

Since at least the days of the ancient Greeks, humans have known that one way to write a compelling story is by including a bit of hamartia—a tragic flaw.

Sometimes that is a physical shortcoming—Achilles had that famously vulnerable heel—but it is often more interesting if the flaw is a more innate thing tied to a character’s understanding of themselves. Hubris, or excessive pride, is the famous one. After all, it wasn’t really Achilles’ unprotected heel that took him down, but his false belief that his mother had made him invulnerable.

You might say the exact same thing about the Consumer Financial Protection Bureau (CFPB). It could be headed into a sort of coma later this year because of a fatal flaw embedded by its own parents: Sen. Elizabeth Warren (D–Mass.) and former President Barack Obama.

Unlike every other department and agency within the federal government, the CFPB is not funded via congressional appropriations. Instead, its funding flows directly from the Federal Reserve. Each year, the White House submits a budget to the Federal Reserve, and the central bank hands over the necessary amount—$729.4 million last year, in case you were wondering.

For a long time after the CFPB was created in 2010, there were serious questions about the constitutionality of that structure. That finally got resolved last year, when the Supreme Court ruled that Congress was within its powers to hand off the purse strings. So, funding the CFPB via the Federal Reserve is not unconstitutional—it’s just unorthodox and foolish.

Here’s where the hubris enters the story. When Warren and Obama created the CFPB, they designed that unorthodox funding structure specifically to prevent a future Republican-led Congress from trying to defund the bureau. Remember, this was in the age when Republicans were running around the country telling voters they intended to repeal Obamacare too. By isolating the CFPB from Congress’ budgetary powers, Warren was trying to make it invulnerable to attack.

Instead, she simply gave it a fatal flaw.

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Musk Backs Ron Paul as Federal Reserve Chairman

Former Congressman Ron Paul (R-Texas) could make a great Federal Reserve chairman, Department of Government Efficiency task force leader Elon Musk suggested Monday.

Responding to remarks from TPUSA’s Charlie Kirk that Paul, who has for years questioned the legitimacy of the Fed, would “make a great next Chairman of the Federal Reserve,” Musk replied, “Great idea!”

The supportive comment was Musk’s second endorsement of the notion over the weekend.

That exchange was seen by Sen. Mike Lee (R-Utah) who told his audience: “Raise your hand if you’d like to see @RonPaul as Federal Reserve chairman.”

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Former Federal Reserve Adviser Arrested For Passing Trade Secrets To China

John Harold Rogers, 63, of Vienna, Virginia, a former Senior Adviser for the Federal Reserve Board of Governors (FRB), was arrested today on charges that he conspired to steal Federal Reserve trade secrets for the benefit of the People’s Republic of China (PRC).

            In furtherance of the conspiracy, Rogers allegedly made false statements to the Federal Reserve Board Office of Inspector General, and those false statements had a material impact on its investigation.

            The indictment, unsealed today, was announced by U.S. Attorney Edward R. Martin, Jr.,  FBI Assistant Director in Charge David Sundberg of the Washington Field Office, and John T. Perez, Special Agent in Charge, Headquarters Operations, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau (FRB-CFPB OIG).

            “President Trump tasks us with protecting our fellow Americans from all enemies, foreign and domestic. As alleged in the indictment, this defendant leveraged his position within the Federal Reserve to pass sensitive financial information to the Chinese government, a designated foreign adversary,” said U.S. Attorney Martin. “Let this indictment serve as a warning to all who seek to betray or exploit the United States: law enforcement will find you and hold you accountable.”

            “The Chinese Communist Party has expanded its economic espionage campaign to target U.S. government financial policies and trade secrets in an effort to undermine the U.S. and become the sole superpower,” said FBI Assistant Director in Charge David Sundberg. “Today’s indictment represents the FBI’s unwavering commitment to protect U.S. national security interests and U.S. jobs and to bring to justice those who are willing to betray their country for personal gain.”

            “This indictment sends a clear message that those who deliberately misuse sensitive Federal Reserve information for their own personal gain and lie about it to investigators will be held accountable for their actions,” said John T. Perez, Special Agent in Charge of Headquarters Operations FRB-CFPB OIG.

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Trump Says He Will ‘Demand’ Rate Cuts, Aligning His Views With Federal Reserve

President Donald Trump, speaking Thursday to the World Economic Forum, called for future interest rate cuts to follow declining oil prices, in remarks that align with the Federal Reserve’s projections for further easing. The speech marks Trump’s first significant commentary on monetary policy since taking office three days ago.

“With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” Trump, speaking via video from the U.S., told the audience of global leaders and business elites gathered in the Swiss alpine town. His comments suggest a conditional approach, linking monetary policy to energy markets.

A Rare Accord With the Fed

Trump’s remarks are notable for their congruence with the Federal Reserve’s current outlook. The central bank, under Chair Jerome Powell, has signaled plans to cut interest rates twice more this year, with additional reductions likely in 2026 and 2027. The Fed’s stance reflects expectations that inflation will continue to moderate even as the unemployment rate stays low and the economy grows faster than what the central bank sees as its long-term potential.

This alignment contrasts sharply with Trump’s first term, during which he frequently criticized the Fed for raising rates.

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U.S. Federal Reserve withdraws from global climate coalition

The United States Federal Reserve has withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a global coalition of central banks engaged in the study of climate risk that was launched in 2017.

“While the Board has appreciated the engagement with the NGFS and its members, the work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate,” the central bank said in a statement on Friday.

The Fed has come under pressure in recent years from Republican lawmakers, including over concerns that climate concerns have unduly influenced financial regulation and that the central bank has become increasingly politicized.

In September, two House Republicans asked the Government Accountability Office to evaluate U.S. bank regulators’ membership in the NGFS.

Graham Steele, a former Biden-era Treasury official, said the Fed’s decision is “clearly a political move.”

“It defies what we know about the science and economic science risks of climate change,” Steele said in a statement. “There is no way to read this as anything other than responding to short-term political considerations.”

The central bank joined the global coalition in 2020.

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Bankers, Fed Origins, And World War I

Let me issue and control a nation’s money and I care not who writes the laws.—Rothschild

The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson…—FDR

The American people are suckers for the word “reform.” You just put that into any corrupt piece of legislation, call it “reform” and people say “Oh, I’m all for ‘reform,’” and so they vote for it or accept it.”—G. Edward Griffin

Though there had been steady steps toward centralization of the monetary and financial system in the United States—especially since banking and the federal government were connected by the National Banking System during and after the Civil War (ca. 1863-1913)—the financial-banking elite, especially in New York, still had several complaints prior to the creation of the Fed.

New York Banks, Wall Street, and “Monopoly”

The movement toward central banking, the Federal Reserve System, in America was a keystone of the Progressive movement. Like all other regulations and reforms of the Progressive era—as perfectly encapsulated by G. Edward Griffin’s quote above—the movement toward the Fed was ironically presented publicly as fighting banking “monopoly,” “stabilizing” the system, curbing inflationism, and disciplining banks and financial elites. In fact, it would involve the establishing of a monopoly in the name of fighting monopoly. Consequently, this would furnish government a handy tool for greater inflationism and would allow the banks in the system to engage in unsound monetary practices with the promise of government bailouts. Remarks Rothbard in A History of Money and Banking,

Fortunately for the cartelists, a solution to this vexing problem lay at hand. Monopoly could be put over in the name of opposition to monopoly! In that way, using the rhetoric beloved by Americans, the form of the political economy could be maintained, while the content could be totally reversed.

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Powell says he won’t resign for Trump, can’t be fired

Federal Reserve Chair Jerome Powell had a clear, direct response when asked during a press conference Thursday if he would step down if asked to do so by President-elect Trump.

“No,” said Powell, whose term as chair ends in 2026.

When asked to elaborate and if he would be legally required to leave, he again said, “No.”

Powell later said it is “not permitted under the law” for the president to fire or demote him or any of the other Fed governors with leadership positions.

Trump appointed Powell during his first term in 2017 but repeatedly and publicly criticized the Fed and its chair for not cutting rates fast enough throughout his tenure.

Powell also said in 2019 that he would not resign if asked by Trump. President Biden reappointed Powell in 2021 — despite objections from progressives who have criticized the chair — saying he has burdened the average American by keeping rates too high for too long.

Trump suggested earlier this year that Powell, a lifelong Republican, was “political” and would cut rates ahead of the 2024 election to help Democrats. While the Fed did cut rates in September by a whopping 50 basis points, Trump handily defeated Vice President Harris this week.

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From High Inflation To Hyperinflation: How Close Are We?

The Federal Reserve is now entering a monetary easing and rate-cutting cycle in an environment of elevated inflation.

The last time this happened was during the 1970s, a decade that saw inflation spiral out of control.

The 1970s: An Optimistic Scenario

In the early 1970s, under Chairman Arthur Burns, the Fed faced rising inflation and concerns about economic growth and unemployment.

Despite elevated inflation, the Fed cut interest rates multiple times until 1972 to stimulate economic growth.

Inflation soared to over 12% in the months that followed.

In response to the rising inflation, the Fed raised rates aggressively in 1974, pushing the federal funds rate from around 5.75% to 13%.

However, as the economy entered a deeper recession, the Fed began cutting rates again in 1975 despite inflation remaining elevated at around 9%.

By the end of the decade, inflation had reached double digits again at over 11% in 1979 and peaked at 13.5% in 1980.

The raging inflation of the 1970s and early 1980s is a stark illustration of the danger of cutting interest rates in an environment of elevated inflation… such as the one we are in today.

However, as bad as the 1970s inflation was, I believe it’s an optimistic scenario.

That’s because the out-of-control inflation then was only tamed when Paul Volcker hiked rates above 17%… an option that is not available to the Fed today because of the skyrocketing federal interest expense.

In fact, the Fed could only raise rates to about 5.25%—less than a third of what Volcker had to do—before capitulating recently.

In other words, the higher the debt load, the less room the Fed has to raise rates because of the interest expense.

As the debt pile and accompanying interest expense grow exponentially, I am skeptical of their ability to hike rates to even 5.25% again; forget about higher than that.

Imagine what could have happened in the 1970s and early 1980s if Volcker could have raised rates to only 5.25% instead of over 17%.

This is the environment the US now finds itself in.

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Governments must tax or ban Bitcoin to maintain deficits: Minneapolis Fed

A recent research paper by the Federal Reserve Bank of Minneapolis suggests that assets such as Bitcoin should be taxed or banned to help governments maintain deficits. 

In an economy where the government tries to maintain permanent deficits using nominal debt, the presence of Bitcoin BTC$66,910 creates problems for policy implementation, the Minneapolis Fed said in a working paper released on Oct. 17.

Bitcoin introduces a “balanced budget trap,” an alternative state where the government is forced to balance its budget, the Fed wrote. 

The researchers used Bitcoin as an example of a fixed-supply “private-sector security” without “real resource claims.” They concluded that it should be banned or taxed to solve the conundrum. 

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No Compromise With the Fed!

Some people argue like this: Although the Fed as it now exists is very bad, a nation needs a central bank to regulate its money supply, and the Fed is better than nothing. That being so, we should try to urge the Fed to adopt a non-expansionary monetary policy. In this view, calls to “End the Fed” are mistaken. I’m sure most of my readers already know what I’m about to say, but, just to be clear, that view is disastrously wrong. We do not need a central bank, and to argue in the way indicated is to betray the great Murray Rothbard and the great Dr. Ron Paul, whose slogan “End the Fed” has galvanized so many of us.

What we need is the classical gold standard, based on 100% reserve banking. There is no need for an expansion of the monetary system, even a gradual expansion. In fact, monetary expansion is inflationary and dangerous. As the leading Rothbardian authority on money, Professor Joseph Salerno, explains: “Under the classical gold standard, [which prevailed in the nineteenth century before World War I] if people in one nation demanded more money to carry out more transactions or because they were more uncertain of the future, they would export more goods and financial assets to the rest of the world, while importing less. As a result, additional gold would flow in through a surplus in the balance of payments increasing the nation’s money supply.

Sometimes, private banks tried to inflate the money supply by issuing additional bank notes and deposits, called ‘fiduciary media,’ promising to pay gold but unbacked by gold reserves. They lent these notes and deposits to either businesses or the government. However, as soon as the borrowers spent these additional fractional-reserve notes and deposits, domestic incomes and prices would begin to rise.

As a result, foreigners would reduce their purchases of the nation’s exports, and domestic residents would increase their spending on the relatively cheap foreign imports. Gold would flow out of the coffers of the nation’s banks to finance the resulting trade deficit, as the excess paper notes and checks were returned to their issuers for redemption in gold.

To check this outflow of gold reserves, which made their depositors very nervous, the banks would contract the supply of fiduciary media bringing about a monetary deflation and an ensuing depression.

Temporarily chastened by the experience, banks would refrain from again expanding credit for a while. If the Treasury tried to issue convertible notes only partially backed by gold, as it occasionally did, it too would face these consequences and be forced to restrain its note issue within narrow bounds.

Thus, governments and commercial banks under the gold standard did not have much influence over the money supply in the long run. The only sizable inflations that occurred during the 19th century did so during wartime when almost all belligerent nations would ‘go off the gold standard.’ They did so in order to conceal the staggering costs of war from their citizens by printing money rather than raising taxes to pay for it.”

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