US President Trump Poised to Change Fed Leadership +
Every US President gets the chance to influence Fed policy through nominations to the central bank’s Board of Governors.
But, most often, that chance is limited to a small number of nominations, 3 max, including a nomination for Chairperson.
But President Trump is getting a much larger opportunity to influence the Fed with his nominations.
In addition to his upcoming nomination to replace Janet Yellen at the Chair, President Trump will also appoint 4 new members to the Fed’s Board of Governors.
That means President Trump will appoint 5 of the 7 total members on the Fed’s governing board before the end of his 1st year in office. The last time a President had this much power over the Fed was about 100 years ago.
The Big Q’s:Who will President Trump nominate?
The Big A: What we know so far; Kevin Warsh is currently the obvious frontrunner as President Trump’s replacement for Janet Yellen. And if Mr. Warsh does end up Chairing the Fed, then it is safe to say he will have a hand in the rest of President Trump’s central bank nominations.
This is very important because Mr. Warsh is know to hold a more “pragmatic” view in respect to continuing the easy monetary policy we have been struggling to pull ourselves out of for the past couple years.
Instead of risking the consequences of tightening policy into economic weakness, which the Fed has attempted and failed at in recent months, Mr. Warsh would likely return us to the realm of near-Zero rates and continuing QE, aka what I have called in the past: QE Infinity.
That said, a new team of Fed officials with a penchant for easy monetary policy would only mean 1 thing, the lowering of the USD and the beginning of our next major inflationary cycle.
Below are 3 Key reasons why investors should expect President Trump’s Fed picks to spark a new period of strong inflation, as follows:
- National Debt: US lawmakers have 1 Key reason to want a significant uptick in inflation, and that’s the national debt. Inflation helps the government service its debt around the world. And considering our current debt-to-GDP ratio is over 105%, it is no surprise politicians are pushing to stack the Fed with pro-inflationary officials.
- President Trump’s Personal Agenda: After criticizing Ms. Yellen and her policy decisions throughout his campaign (Schoolmarm Yellen), President Trump has now gone on record saying he thinks USD is too strong, and that he is a low interest rate person.
- Past Failed Fed Strategy: The Fed has tried to pull back on its QE policies from the last crisis, by normalizing interest rate policy and unwinding the Fed balance sheet. But the US economy is not responding as planned. President Trump’s new Fed officials will likely abandon normalization regardless of how necessary it is for long-term economic viability in favor of predictable, easy monetary policy that will drive inflation North.
That then begs the Question, what should people do to prepare their savings before the new Fed nominations set off a new round of inflationary policies?
Investing in the market carries excessive risk, while “safer” investments offer paltry returns. And leaving your savings in cash simply guarantees the erosion of your spending power.
But one asset gives you a way out: physical precious metals.
Precious metals like Gold, Silver, and Platinum run during times of major inflation. And owning these metals ahead of President Trump’s big Fed management change may well be a wise decision.
Economic forecaster Jim Rickards explains what likely lies ahead, and why owners of gold and other metals will benefit: “You should expect lower real rates, slower balance sheet normalization and higher inflation than markets are now pricing. This will not happen all at once, but in stages over the next year. The biggest winner will be gold. The time to enter your gold position, if you don’t already have one, is now.”
Have a terrific week.
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