(Headline USA) Bombshell reports on the campaign donations of Federal Reserve employees showed that at least one thing was clear about the nebulous central bank, which loans Congress its money and has the power to set the interest rates affecting the entire U.S. economy: It is not apolitical.
Nor do its staffers agree with the American people on the healthiest policies for fixing the out-of-control money issues that have ailed the nation during the Joe Biden presidency.
The Fed gave 91% of its donations to Democrats in a year that Vice President Kamala Harris, at the top of the ticket, was promoting widely lambasted Marxist policies such as regulating prices.
Federal Reserve employees donated 552K to Democrats. Only 51K to GOP candidates. Is the Federal Reserve politically imbalanced? https://t.co/3ayI1wTiSF
— Peter Schweizer (@peterschweizer) November 11, 2024
Meanwhile, President-elect Donald Trump has promised to fire Fed Chair Jerome Powell over his failure to rein in the inflation that became pervasive during the Biden–Harris administration.
And with even the acronym for the new Elon Musk– and Vivek Ramaswamy-headed Department of Government Efficiency making reference to a Musk-promoted cryptocurrency, there may be strong indications that the Fed itself may be dissembled.
The controversial, semi-private financial institution—the product of secret meetings at a Georgia hunting resort during the Woodrow Wilson era, by industry tycoons who sought to maintain a firmer hold on the nation’s wealth—has elicited strong passions from those who wish to see economic control brought back directly into the hands of the people.
“When you’ve got Fed employees almost exclusively bankrolling one party, it’s fair to ask if they’re even hearing the full range of voices in America,” one unnamed Capitol Hill staffer told Breitbart. “This isn’t just about politics—it’s about ensuring America’s central bank reflects America.”
On Thursday, however, a top Federal Reserve official gave a lengthy defense of the central bank’s political independence during prepared remarks for an economic conference in Montevideo, Uruguay.
“It has been widely recognized—and is a finding of economic research—that central bank independence is fundamental to achieving good policy and good economic outcomes,” claimed Adriana Kugler, one of the seven members of the Fed’s governing board.
Kugler insisted that greater independence for central banks in advanced economies was related to lower inflation.
She spoke just a week after Powell tersely denied that Trump had the legal authority to fire him, as the president-elect has acknowledged he considered doing during his first term.
Powell also said he wouldn’t resign if Trump asked.
Trump: Hold my beer.
Could this be the standoff that finally extricates the #FederalReserve from U.S. economic policy? Why is a secretive, semi-private institution in charge of minting currency and setting interest rates? There has to be some public accountability. https://t.co/AZxHKUhsIx— Ben Sellers (@realbensellers) November 8, 2024
“I was threatening to terminate him, there was a question as to whether or not you could,” Trump said last month at the Economic Club of Chicago.
Trump said during the campaign that he would let Powell complete his term in May 2026. But in Chicago he also said, “I have the right to say I think you should go up or down a little bit.”
Kugler’s remarks addressed why most economists are opposed to the idea of politicians, even elected ones, having influence over interest-rate decisions.
A central bank free of political pressures can take unpopular steps, Kugler said, such as raising interest rates, that might cause short-term economic pain but can carry long-term benefits by bringing down inflation.
However, the Fed was accused of election-meddling during the recent election by its decision to delay interest rate cuts until the cycle immediately before the November election, providing what some assumed would be an economic jolt for the Biden–Harris administration
That was followed by reports that the Bureau of Labor Statistics had effectively been lying for the last year by overcounting its number of job additions, painting a false picture about how robust the economy was.
Such manipulation would indicate that there was an active and deeply pernicious manipulation of the Fed’s policies, but one that was far more nefarious than having the president use his soapbox to weigh in on its moves.
The Fed’s political donations—-which surpassed $1.1 million for Democrats in the highly disputed 2020 election to roughly $100,000 for Republicans—also suggest that the powerful bank is not the least bit independent in the first place.
Kugler argued that an independent central bank had more credibility with financial markets and the public, but she did ignored criticism that the Fed itself was not free from political bias.
“Despite a very large inflation shock starting in 2021, available measures of long-run inflation expectations … increased just a bit,” Kugler said. “Anchoring of inflation expectations is one of the key elements leading to stable inflation.”
Consumers and business leaders typically expect that it will be able to keep inflation low over the long run. Such low inflation expectations can help bring inflation down after a sharp spike, such as the surge in consumer prices that took place from 2021 through 2022, when inflation peaked at 9.1%.
On Wednesday, the government said that figure had fallen to 2.6%. The average year-over-year inflation rate during President-elect Donald Trump’s first term was 1.9%.
Moreover, there has been no deflation to reduce the impact of policymakers’ failure to act under Biden, including higher costs for basic staples like food and shelter.
Because inflation is simply the rate of currency devaluation and not an actual measure of the value itself, a lower number does not signal a return to the prior purchasing value for consumers’ hard-earned savings.
To do so would require the U.S. government to grow without adding additional currency or debt, which Trump hopes to do by reducing government waste and addressing foreign trade imbalances.
That waste-reduction effort might just put the Fed itself in the dustbin of history.
Adapted from reporting by the Associated Press
