by Jon Schweppe
Remember when Donald Trump advocated for the gold standard on the campaign trail? GQ remembers:
Bringing back the gold standard would be very hard to do, but boy would it be wonderful. We’d have a standard on which to base our money.
And as Bloomberg’s Michelle Jamrisko highlighted last May, the GQ interview did not stand alone. Trump also expressed support for gold to New Hampshire’s WMUR-TV in early 2015, saying, “We used to have a very, very solid country because it was based on a gold standard.”
Gold standard advocates, often affectionately called “gold bugs,” were thrilled by these comments. And while that enthusiasm may be more tempered today, many still believe Trump will be the first president to publicly declare support for the gold standard in nearly a century. But so far in 2017, the Trump administration has said very little on monetary policy, choosing instead to focus on other issues deemed more pressing.
Perhaps that dynamic changed this week when the Federal Reserve announced it would be increasing its benchmark interest rate by a quarter basis point to a range between 0.75 percent and 1 percent, just the third increase since the 2008 financial crisis.
Yesterday, Politico’s Danny Vinik wrote an article examining the role Trump will play in setting Fed policy going forward. Vinik asked, what happens when President Trump gets his hands on the Fed?
It’s the question gripping the economic world these days. Though not as big a headline as immigration policy or his cabinet picks, Trump has a chance to appoint a new person to nearly every top Fed job over the next two years—a power not afforded most presidents, and with very high stakes…
Given the president’s tendency to take advice from a very close circle, experts have started casting a wary eye on just who’s in Trump’s immediate orbit—and what they think about the Federal Reserve. What they’re seeing suggests that Trump has the potential to bring more dramatic changes to the Fed than any president since at least Ronald Reagan.
Soon, as Vinik explains in his piece, Trump will have a tremendous opportunity to influence the Fed with his upcoming picks for three open Fed board spots. He also will be responsible for choosing new leadership for the central bank — both Janet Yellen, Chair of the Fed, and Stanley Fischer, Vice Chair of the Fed, will finish their terms in early 2018.
This begs the question: Will Trump appoint new officials to the Fed who will support a return to the gold standard? It’s certainly possible. Previously for The National Pulse, Ralph Benko highlighted a tweet back in December where Paul Krugman lamented that Trump’s economic team has “[shaped] up to be a gathering of gold bugs.” If you can look past Krugman’s unbearable smugness — difficult, I know — you can acknowledge that he was correct about that, as Vinik points out:
Beyond the president, the gold standard has support from Judy Shelton, the director of the Sound Money Project at the Atlas Network, who was on Trump’s transition team; Rebekah and Robert Mercer, top Trump donors who have funded past efforts in support of the gold standard; Ben Carson, the neurosurgeon turned presidential candidate who is now Trump’s Secretary of Housing and Urban Development; David Malpass, a former member of Trump’s transition team and potential selection for a top spot at Treasury; and John Allison, the former CEO of BB&T Corp. who Trump interviewed for treasury secretary in November.
While the idea of adopting a gold standard overnight seems like a pipe dream, Trump could easily implement first steps toward ending the Fed’s monopoly on money, such as appointing Fed officials that support sound money policies, and signing an executive order removing inhibitive taxes and regulations on gold and silver that prevent consumers from using the precious metals as currency, thus finally holding the Fed accountable to a market for its actions on monetary policy.
This is something we will continue to watch. After all, it’s not like President Trump is afraid of bucking conventional wisdom. As David Beckworth, a monetary economist at the Mercatus Center, told Politico, “He may not even support [the gold standard] but it’s a way of sticking the middle finger to the establishment. I could see a certain part of him being like ‘So gold standard is what irritates them, great, let’s run with it.’”
Photo credit: Disney | ABC Television Group via Flickr, CC BY-ND 2.0