Over the weekend President Donald Trump once again shook up his cabinet, leading to rumors that he might nominate Stephen Moore or Herman Cain to chair the Federal Reserve.
The President’s potential nomination of the two men, who are political allies, has caused alarm among economists, reports Business Insider.
“And with growth expected to slow in the coming months, economists say the stakes couldn’t be higher,” the finance magazine points out.
Monetary policy should be free of political considerations, the Insider notes. And Trump’s interference puts the US in danger of high unemployment and inflation. Even more dangerous, if another recession hits, policymakers may have less ability to blunt its impact or reverse the downturn.
“To avoid a meltdown like we had in 2008, you have to have somebody focused on systemic risk and who has the political courage to do something before it happens,” Alice Rivlin, a former Fed vice chair, told Business Insider. “They have the power to raise capital requirements, for example, which is an unpopular thing to do. Politicians would put that to their banking friends and supporters who say not to do it, but it might be necessary.”
Austan Goolsbee, head of Council of Economic Advisers under Obama, warned that the President’s nominees are not adequately prepared for the complex work of monetary policy.
“It’s also the question of whether these nominees know anything about the financial system, monetary policy or the other key aspects of the Fed job,” Goolsbee noted.
“People worry about encountering a 2008-type event or even a smaller crisis event … and having people in place that have no familiarity with the issues and botching the response.”