Noted non-economist Donald Trump has spent months now attacking Fed Chair Janet Yellen for being a political pawn of the Obama administration who is using her power over monetary policy to help Hillary Clinton.
After announcing that The Fed is going to sit on interest rates for the time being - a decision that shocked more than a few investors and apparently almost killed Bill Gross - Yellen went about her usual dry recitation of economic data to justify her decision and then answered questions from journalists. One of those questions just happened to sound similar to the theories of a certain New York City-based contractor turned presidential candidate, prodding Yellen on the notion that she's suppressing rates to help Hillary.
“I can emphatically say that partisan politics plays no role in our decisions about the appropriate stance on monetary policy,” responded Yellen, summing up her retort by saying “We do not discuss politics at our meetings and we do not take politics into account in our decisions.”
And while it is hard to fathom Janet Yellen as a cunning political operative posing in the disguise of an employment data-obsessed economist (one who possesses neither personal animus nor the ability to modulate her voice in a way that communicates normal human emotion) the argument for keeping rates where they are lessens with each passing day.
Because why didn't anything happen yesterday though? It's objectively a little weird. Markets went apeshit on the last friday in August when Yellen and Richard Fisher appeared at Jackson Hole and made vague hints that they wanted to do two raises before the curtain dropped on 2016. Factoring in that November of an election year is a shitty time to fuck with monetary policy, and that pure-bred dove Lael Brainard of all people was quite suddenly sounding like the hawkiest hawk in the aerie, September seemed like the inevitable moment for The Fed to pull the trigger on a little hike. Nothing major, more like a Kardashian sister dropping in on her plastic surgeon before fashion week. And like the Kardashians, money remains way too cheap.
Well, Michael Harris, head of research at Renaissance Capital, has an idea.
"(Fed Chair Janet Yellen) says that she won't go into politics, she won't go into politics, she won't discuss it. But I think the reality of the situation is she's afraid of Donald Trump," he told CNBC Thursday.
What we have here is a variation on a theme. Harris is n't so much backing up Trump's accusations as much as he's alleging that Yellen is terrified of even a notional Trump presidency. And, if true, Yellen would be violating her promise to be apolitical, and that's not a good look J-Yells. But if we step back and observe this theory from a wider view, maybe Yellen's calculating effort to help stop Trump's surging popularity is also a form of active economic policy.
Let's be honest, it's hard to imagine that the market won't behave like toddler who accidentally ingested a speedball the Wednesday morning after a Trump election. If America were to somehow elect a man without a cogent economic policy (nice try though, Carl Icahn) and a personal business career overwhelmed by bizarre decisions, a borderline sociopathic relationship with debt and a not-insignificant number of bankruptcies, it stands to reason that the U.S. economy would suffer badly in at least the short-term. Yellen would also certainly be deprived of the opportunity to do anything to fix it once Trump replaces her as Fed Chair with his hand-picked nominee, Vince McMahon.
If Yellen is playing a flinty-eyed political game to preserve the legacy of Barack Obama while trying to get someone in the White House who will keep her running The Fed, that's cold careerism. But if she's trying to prevent Donald Trump from grabbing the reins of the American economy... well... that's just cold.