The Fed still operates on the “professor standard,” enshrined with Bill Clinton’s nominations of pure academics. Their textbooks say strong economic growth, particularly strong wage growth, causes inflation, which Fed policy should temper. Both the Bush and Obama administrations perpetuated the professor standard, and both presided over income stagnation.
I have a different perspective. The professor standard doesn’t work, and the Fed needs new voices to argue for an approach that does.
The best way to achieve full employment, price stability, economic growth strong enough to solve our fiscal problems, and sustained income growth for the striving majority is for the Fed to stabilize the dollar. The professor standard will not challenge itself—that much has been proved. That’s why my voice is needed at the Fed.
Hmmmmmm. Mr Cain is certainly not a professor or even a doctor as far as I can tell.
I’m not unsympathetic to his analysis. But two points to make:
- Politicians are generally very risk averse when it comes to technical appointments. This means that they seldom deviate too far from the mainstream,
- US politicians have tended to make appointment from a very, very narrow base (Harvard and MIT).
This then is Trump’s great comparative advantage – he isn’t risk averse and is willing to roll the dice on appointments. He is also willing to buck conventions that he doesn’t much value. This is also his great weak spot – some conventions are worth keeping and others are part of the swamp that needs draining.
What he hasn’t done – as far as I’m aware – is have a long hard look at whether the US actually needs a Federal Reserve.