New York Sun: The right road to ending the trade war


From The New York Sun
Wednesday, August 28, 2019

The summer squall over a suggestion that the Federal Reserve join the resistance against President Trump is certainly music to our ears. That's because the specter of a self-financed agency of the American government running a campaign to defy the voters will help put the debate over monetary reform into sharp relief. And none too soon, in the view of The New York Sun.

This contretemps was touched off by a former president of the New York Fed, William Dudley. Writing for Bloomberg, Mr. Dudley suggests the central bank should "refuse to play along" with "President Donald Trump's trade war" with Communist China. "There's even an argument," he writes, "that the election itself falls within the Fed's purview." He wants the Fed to explicitly oppose Mr. Trump in 2020. ...

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What is so horrifying about Mr. Dudley's demarche, at least in our view, is not that he is suggesting the politicization of monetary policy. Our view is that monetary policy is inherently political, a view that has been articulated by Mr. Trump's prospective Fed nominee, Judy Shelton. No, what's so horrifying about Mr. Dudley's idea is that it is so contrary to the Constitution.

That parchment doesn't grant any monetary powers to the Fed. The central bank didn't exist when the Constitution was framed. When it was framed, it granted all of America's monetary powers -- to tax, spend, borrow on the credit of the United States, coin money, regulate its value and that of foreign coin, and fix the standard of weights and measures -- to the Congress. ...

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