The Federal Reserve Board of Governors may be in danger. A headline at The Federalist reads “Democrats Will Gladly Trash The Economy To Put A DEI Hire On The Federal Reserve Board.” I suggest we get together to save the Fed. Here’s the thesis:
The Biden administration has established the precedent of making appointments based on identity, and many people are suggesting that the close assassination attempt may have been the result of the Secret Service not choosing the best candidates for the job. If the Fed becomes dominated by unqualified candidates, dangerous results based on unsound economic theories such as Modern Monetary Theory (MMT) could fatally harm the United States economy with hyperinflation or sustained economic depression.
If you’re not familiar with MMT, here’s the short version. The U.S. government can print money. (Technically not true, but whatever.) Therefore, they can borrow without limit because they can create enough money to buy all the bonds the government issues.
If that sounds stupid, that’s because it is. We have numerous historical examples. Argentina, Zimbabwe, and a host of other countries have tried this. The result has been massive inflation followed by poverty. Steve Hanke keeps track of this at his Troubled Currency Project. His most recent inflation dashboard is here.
The Federalist continues:
The current Fed board is made up of four Democrats and three Republicans, and the current chair is Jay Powell, a Republican. Adriana Kugler, a Democrat, is due to have her term expire in 2026. The next president will appoint her replacement to a 14-year term that starts in 2026. Chairman Powell’s term as governor does not end until 2028, but his term as chairman ends in 2026, and neither party is likely to reappoint him.
Therefore, the next president will have the opportunity to name a new chair in 2026 and a new governor in 2028. As a result, the next administration will at least replace one governor from each party in addition to filling any additional vacancies brought about through resignation.
The Fed, however, is in increasing danger of having its appointments based on qualities other than merit, which can lead to the dangers of bad monetary policy and runaway inflation. This danger can be realized if the Democrat Party continues to pursue appointments based on skin color, sex, and sexual orientation, rather than trying to appoint the most qualified person for the job.
The worst example of this trend in the Federal Reserve is Lisa Cook, whom Biden appointed in 2022 and whose term is not up until 2038. Cook was previously an economics professor at Michigan State University. Her major academic publication before her Fed appointment sought to prove that race riots and lynchings led to a sudden decline in the number of black inventions in the early 20th century, the proof of which was based on dubious evidence. Beyond this questionable publication, Cook’s resume is rather unimpressive, suggesting she was almost certainly appointed based on her identity characteristics.
Chris Rufo and Luke Rosiak did a deep dive on Dr. Cook’s academic record. It’s not pretty.
(click for larger image)
I’ll just conclude by pointing out a recent example right here in the U.S. Between January, 2021 and January, 2022 the M2 money supply grew by 11.6%. And, sure enough,
