- Donald Trump may have named Jerome Powell as president of the Federal Reserve, but the two will surely face each other.
- Whether it's climate change, the gold standard or how "hot" the economy is, they both go in different directions.
- And if the time comes when Mr. Trump told Powell that he had to leave, the Fed chief says, "My answer would be no."
Federal Reserve Chairman Jay Powell not only believes that climate change caused by man is real, but agrees that the climate is more severe, he told the Senate Committee on Banks on Thursday. It's just the last way the nation's central banker disagrees with the president who appointed him.
President Donald Trump has called climate change a "hoax," said global warming goes "both ways" and omitted any reference to the phenomenon in a speech this week that was supposed to be about the environment. But it is not the most significant way in which the two men disagree. Here is a sample, taken from two days of Powell's testimony in Congress.
How hot is this economy?
"We are considered, by far, the hottest economy in the world," Trump said at this year's state of the Union. The president has talked about the economy since he took office, repeatedly pointing to corporate hiring and bonus ads.
Powell does not agree. "3% is a low unemployment rate, but to rate something hot, you need to see some heat," he told Congress on Wednesday.
Speaking to the House Financial Services Committee, Powell said that wages should be rising much faster in an economy that is growing at this rate.
"We have no basis or evidence to call this a hot labor market," he said. "We have wages and benefits that go up 3%, which is good because it was 2% a year ago, but 3% just covers productivity increases and inflation … we have not seen wages rise as sharply as they have done in the past. "
The "wonderful" gold pattern.
Mr. Trump's latest nominee to the Federal Reserve Board, Judy Shelton, is an advocate of the gold standard. So were Herman Cain and Stephen Moore, two nominees who withdrew from the process. Mr. Trump himself has been ambiguous in the gold standard, but he defended it in the electoral campaign.
"Returning the gold standard would be very difficult to do, but well, it would be wonderful," he said in 2016.
"We used to have a very solid country because it was based on the gold standard," he said in 2015, a few months before announcing his career. "We do not have that anymore."
I know. UU They left the gold standard 48 years ago, and most modern economists agree that the idea would wreak havoc on the economy. Tying the value of the dollar to gold limits the supply of dollars, and would reduce the ability of the Fed to respond to economic recessions. On Wednesday, Powell explained why going back to gold would not make sense for the US. UU
"I do not think it's a good idea," he said, explaining that it would leave the Federal Reserve less able to conduct monetary policy.
"You have assigned us the work of two direct objectives of the real economy: maximum employment and stable prices," he said. "If you [wanted] To stabilize the dollar with the price of gold, monetary policy could do that, but the other things would fluctuate and we would not mind. We would not mind if the job went up or down. "
"That's why all the countries of the world abandoned the gold standard a few decades ago," he added.
Who can fire the chair of the Fed?
Mr. Trump has insisted that he has the authority to dismiss Powell or dismiss him from the position of Fed president, although most of the outside experts disagree. The president reportedly investigated the possibility of firing Powell after the Fed's latest interest rate hike in December.
White House adviser Kellyanne Conway told reporters on Tuesday that Trump made clear his dissatisfaction with Fed rate policies and believes he "has the power to fire Jay Powell, but he has not. He is not doing it. "
Asked later in the week about the president's authority, Powell contradicted Conway's analysis.
Representative Maxine Waters asked Wednesday: "If the president called you, today or tomorrow, and said:" I'm saying goodbye. "Packing, it's time to leave," what would you do? "
"Of course, I would not do that," Powell replied.
"I can not hear you," Waters said, eliciting laughter in the courtroom.
"My answer would be no," Powell said, a little louder.
"And you would not pack and you would not leave?" Pressed water.
"No ma'am," said Powell.
When asked if he believed the president had the authority to dismiss him, he said: "What I have said is that the law clearly gives me a period of four years, and I intend to comply with it."
Well, not everything
There is an area in which the president, the president and most modern economists agree: fear of high inflation is a thing of the past.
The double mission of the Federal Reserve, to make unemployment as low as possible and maintain stable prices, balances two forces that historically have worked against each other. The economic theory behind that holds that sudden unemployment drives higher inflation.
Historically, conservatives have preferred to keep inflation low, while liberals were more concerned about employment. But they have not had to make that decision in the current expansion. Inflation has been below 2% for more than a decade, even when unemployment falls to previously unsustainable levels.
"We have learned that the economy can keep unemployment levels much lower than we thought without causing inflation," Powell said Wednesday.
"At the end of the day, there has to be a connection because low employment will increase wages and, ultimately, higher wages will drive inflation, but we have not reached that point," Powell said. In many cases, that connection between the two is quite small these days. "
– The Associated Press contributed reporting.