Jerome Powell Takes JFK for Granted

The former Fed chief, Jerome Powell, is invoking JFK’s “inspiring” legacy. The recipient of the Kennedy Library’s “Profile in Courage” prize, Mr. Powell used Sunday’s award ceremony to pipe up for the central bank’s independence. On monetary policy, though, Mr. Powell and the Fed come up short by comparison. For JFK had a less doctrinaire view of the central bank’s autonomy — and would have been dismayed by the Fed’s stewardship of the dollar.“I am one of the many whom President Kennedy inspired to serve the public,” Mr. Powell crooned, touting America’s heritage of “integrity.” JFK, per Mr. Powell, “upheld that tradition.” In that vein the Fed governor praised, too, “the legal protections that support the non-political conduct of monetary policy.” Giving presidents too much power on this head, Mr. Powell said, would mean “the Fed’s credibility would be lost.”Yet Mr. Powell’s rhetoric is at odds with JFK’s track record. To be sure, Kennedy did stress the need “to keep the day-to-day operations” of the Fed “removed from political pressures.” Even so, JFK emphasized, too, “a relationship of mutual confidence and cooperation” between the Fed and the White House. To that end, Kennedy proposed giving future commanders in chief power to name their own Fed chairmen at the start of their presidencies.Under JFK’s proposal, mooted in 1962, “a new President will be able to nominate” a Fed chairman “of his choice for a term of four years coterminous with his own.” He reckoned that “the current situation — under which the four-year term of the Chairman is not synchronized with the Presidential term — appears to be accidental and inadvertent.” JFK pointed to the need for the president to “have a free choice when he begins his own term.”It’s a mystery why Mr. Powell omitted mentioning JFK’s call for a Fed chairman of his choosing. Kennedy’s view, in any event, is at odds with the bloviating over Fed independence among today’s press and Democrats — and Mr. Powell — when President Trump called for new leadership at the bank. That said, JFK is not on the record backing Mr. Trump’s claim to have power to fire Fed board members. That effort, which could yet cost Mr. Powell his position as a governor, is before the Supreme Court.Kennedy, though, was emphatic about the need to maintain a dollar that was “as good as gold,” as he famously put it in the so-called Telstar press conference of 1962. Parts of that parley with reporters were broadcast globally using new satellite technology. JFK seized the chance posed by this high-profile event to warn about what might happen if America “refused to cash in dollars for gold,” or in other words breached the Bretton Woods agreements.At a time of strain on this system, of which the linchpin was a dollar defined in gold at a 35th of an ounce, JFK averred that “we are not going to devalue.” At the time, America’s policy of redeeming foreign states’ dollars for gold had implications for the balance of payments. He reminded foreign nations that America “can balance its balance of payments any day it wants, if it wishes to withdraw its support of our defense expenditures overseas and our foreign aid.”JFK called for “cooperative effort” to “maintain” the “dollar, upon which so much of Western prosperity is built,” calling it “the reserve currency of the whole free world.” He would have been shocked by the fiat dollar’s plunge to less than a 4,400th of a gold ounce. If Mr. Powell wants to honor JFK’s legacy, he could focus his efforts at the Fed less on defying the White House and more on charting a course back to Kennedy’s ideal of a dollar defined in gold.

Jerome Powell Takes JFK for Granted

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