

President Trump looks on as Jerome H. Powell, then his nominee to become chair of the U.S. Federal Reserve Board, speaks at the White House on Nov. 2, 2017. (Carlos Barria/Reuters)

Reporter

President Trump has had a hard time finding people to fill the Federal Reserve’s two empty spots because he’s looking for something that doesn’t exist: loyal Republicans who like low interest rates.

Now it is true, as the New York Times’s Ross Douthat points out, that there are a handful of right-leaning economists who have consistently bucked the party line (or at least what it was during the Obama years) that lower rates will only set off a 1970s-style Great Inflation. Instead, they have quite accurately pointed out that the far greater risk is that higher rates will send us back into a 1930s-style Great Depression. The very fact that they’ve been willing to follow the evidence, though, and not what was in the party’s best interests — such as, say, crippling the economy ahead of President Barack Obama’s reelection — probably makes them suspect as far as Trump is concerned. After all, he has already appointed a few people just like this whom he now wants to fire, because of, yes, how independent-minded they’ve been. Specifically, they thought that the economy had improved enough last year that they could start raising rates a little bit faster.

The problem, then, is that loyal Republicans don’t want low interest rates, and Republicans who do aren’t loyal.

So how can Trump try to bend the Fed to his tweets when there aren’t any obvious candidates to help him do that? Well, unless he nominates Jared Kushner or Mick Mulvaney — it seems as though they’ve had every other job in this administration — he really has two choices. Trump can either try to find political foot soldiers who haven’t been wrong about monetary policy because they haven’t said anything about it, or ones who have been very wrong about it but are now willing to say whatever it is they think he wants to hear.

Someone like Derek Kan, right now the undersecretary for policy at the Transportation Department, fits the mold of that first group. He’s reportedly under consideration for one of the Fed jobs, and, on a certain level, it’s almost not hard to see why. He would most likely sail through the confirmation process, as he already did for his current job — it doesn’t hurt that he used to be the chief economist for Senate Majority Leader Mitch McConnell (R-Ky.) — and he’s generally well-regarded. He has even won praise from across the aisle for, in the words of Sen. Brian Schatz (D-Hawaii), being both “smart” and “serious.” The only drawback, as mentioned above, is that he doesn’t really have any relevant experience. He hasn’t published any papers on monetary policy or worked extensively in financial markets. Which is why, from Trump’s point of view, it would be something of a gamble to nominate him. There’s no way to know if Kan would support the kind of rate cuts that Trump wants. It would just be a bet that someone who has risen so far in the party wouldn’t want to upset itsleader.

The irony, then, is that Trump might have a better chance of getting what he wants by nominating someone who has been against rate cuts in the past. Someone who, as a result, feels as though they would have to go out of their way to let Trump know that they would go along with him now. Someone, in other words, who thinks how much stimulus the Fed gives the economy shouldn’t be determined by how much it needs, but rather by . . . the price of gold? Actually, yes. There’s always been a strain of thinking on the right, you see, that has wanted to repeal the 20th century: the taxes, the spending, and, above all, the monetary system. That’s because they think that going back to the gold standard — which would force the Fed to raise rates whenever supply and demand meant that gold prices “wanted” to rise — would prevent the government from running the kind of deficits or creating the kind of inflation that they blame for kicking us out of the small-government Garden of Eden that they consider to have been the 1920s.

The important thing to understand, though, is that goldbugs tend to be more partisan than ideological. Sure, they would like to cut the deficit, but they won’t complain if Republicans increase it by cutting taxes instead. And while they would really like for interest rates to be higher — they talk in fairly apocalyptic terms about the fate of the dollar if that doesn’t happen — they won’t object if a Republican president says they need to be lower ahead of an election. If anything, the opposite. That, at least, has been the case with Herman Cain, Stephen Moore, and now Judy Shelton, all supporters of the gold standard who went from saying that the Fed needed to drastically raise rates under Obama to now saying that it should cut them under Trump.

This is why Trump keeps trying to appoint them — he’s moved on to Shelton after personal problems derailed Cain’s and Moore’s candidacies — even though, at first glance, it would seem as though their policy preferences would be diametrically opposed to his own. Trump understands that if there aren’t loyal Republicans who want low rates in general, then he needs to find loyal Republicans who are willing to say they want low rates when he does. The kind of person who, like Shelton, would go from saying that any level of inflation was “immoral,” or that trying to create your own gold currency made you a “Rosa Parks of monetary policy,” to now saying that the Fed should temporarily cut rates to zero.

And it turns out that there are just enough of those.