The latest amicus brief filed in the controversy between President Trump and Governor Lisa Cook of the Federal Reserve is a humdinger. It contains an illuminating plea for the independence of the central bank from the congressional politics that created the Federal Reserve and the president who nominates its governors. It reckons that allowing Mr. Trump to fire Governor Cook would violate the central bank’s independence.

What strikes us about the brief is that those who signed it are mostly economists. They include some past Fed chairmen, among them Alan Greenspan, age 99, Ben Bernanke, and Janet Yellen, though not the incumbent, Jerome Powell. On their watches, the value of the dollar, measured in gold, collapsed. The dollar’s value plunged 18.9 percent under Mr. Greenspan, some 54.6 percent under Mr. Bernanke, and, under Mr. Powell, a staggering 64 percent — so far.   

On what basis does this qualify any of them to be left alone, with their PhD colleagues, to operate the central bank independently? It’s not as if the Fed is making a profit. On the contrary, since the fall of 2022 the Federal Reserve has been running at a loss. Using standard accounting, it now has a negative net worth. It’s a busted flush, with ten of the 12 Federal Reserve banks unable to keep sending to the Treasury the profits they used to earn.

Their brief in defense of independence strikes us as stentorian. An independent central bank, the amicus brief says, can help with the inflation-unemployment trade-off. Yet from where did that glorious trade-off come? Why, it came from the very political process of which they complain. It was launched in Congress, to which the Constitution grants, we have often said, between 99 percent and 101 percent of the monetary powers.

The central bankers argue that central bank independence is a protection against the risk of “defacto defaulting on the debt through inflation.” Nice to see them acknowledge that inflation is a default. Yet using their independence, they have set a target for inflation at 2 percent. Or, as one could put it, they want a policy of “de facto defaulting” at a rate that would halve the purchasing power of an American family’s savings within 36 years. 

The central bankers also argue that maintaining the public’s “belief” in the independence of the Federal reserve is “crucial to economic stability.” The source of the independence the central bankers cite is statutory — the Banking Act of 1935. The president’s authority, though, to fire persons he hires is more of a constitutional power, part of taking care that the laws are faithfully executed. That is a duty assigned to only the president.

No doubt our monetary policy has come a long way since FDR sat in bed and set the purchase price for gold. It’s well to remember, though, that it wasn’t the last time a president played a role in monetary policy, starting with President Truman, who in 1951 hauled the entire Open Market Committee to the White House to ensure they kept buying American bonds at a yield of 2.5 percent. LBJ, Nixon, Carter, among others, had their own quarrels with the Fed.

Which brings back to Mr. Trump, most of whose predecessors coveted a share of control over what the Fed does. It would be one thing were the system of fiat money working the way a monetary system should work. And were a one-dollar Federal Reserve note able to fetch more than a 3,700th of an ounce of gold. Given the current scandal, the Fed might benefit from having an ally of Mr. Trump’s stature and prepared to take a share of the blame.

________
Correction: Chairman Powell was not among the signers of the amicus brief, and the editorial has been corrected for that error in the bulldog edition.