00:00Bullying the central bank is now official economic policy for the US government.
00:05It's a really bad idea and the best that can be said of it is that it probably won't work.
00:11What bothers me about this mostly is that it makes so little sense.
00:16Jay Powell is leaving as chairman in May regardless.
00:21He's being replaced then because his term is over.
00:24The chances that they could actually replace him any earlier than that are minimal.
00:31The government really wants to set a precedent or make a principle or arguably to encourage the others.
00:38That this is a threat that will always hang over your head if you are at the nominally independent Federal Reserve.
00:45That the government has the prosecutorial function and can come after you.
00:51There are certainly many ways you could improve the governance of the Fed.
00:54But there is a basic problem here which people on markets perceive and which the government at this point seems to have missed.
01:02Which is that it's of the nature of a central bank every so often to make itself unpopular and to take away the punch bowl when the party is getting started.
01:13Central banks have to be prepared to do things that democratic politicians wouldn't do because they're really unpopular in the short term.
01:23They have to be given that license.
01:25This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation.
01:37Governments that hate interest rates being left high so much that they resort to tactics like this are playing with fire.
01:46Now there has been very little market reaction to this really I think the main reason for that is simply many people on the market believe I think correctly that this isn't going to happen.
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