In recent weeks, there has been talk of President Trump's next pick for the Federal Reserve Chair. The Chair of the Federal Reserve holds significant power in determining the monetary policy of the United States and as a result holds critical importance in the country's economy. The Federal Reserve's biggest function is to help prevent financial and economic crises while also working towards economic stability. As a result, a competent and sensible individual must be chosen in order to run the Federal Reserve. Currently, the position is being occupied by Janet Yellen who, among other things, has done a pretty good job of keeping the country in check while also rectifying the mistakes of the past chairs in contributing to the financial crisis of 2008. Under Janet Yellen, unemployment rates have remained low as well as keeping inflation within a manageable rain for several years.
The Federal Reserve carries significant weight and credibility that has been established over several years of sensible economic management and carefully planned monetary policy by different chairs. Despite the mistakes of the last couple of Fed Chairs, it is important to select someone who puts the stability of the American economy above all other agendas. If these monetary policy powers are not carefully utilized, inflation rates could run rampant and may even create an aura of deflation as well, facilitating significant economic instability. If left unchecked, the financial system could easily run into a significant crisis if poor monetary policies are implemented as was seen during the years after Alan Greenspan and Ben Bernanke.
The Fed is also in charge of managing the strength of the American dollar as an internationally traded currency and as a reserve currency. In addition, the economic strength of the US is hinged on its monetary policy. As a result, the monetary policies and tools the Fed can implement may work to the detriment of the US. For example, if the Fed engages in quantitative easing for a perceived but imaginary threat, then the ramifications of that could seriously cripple the economy,
Turning to look at Donald Trump and his history of appointment decisions, it is very likely that Donald Trump will choose someone who is loyal to him and his administration, which may prioritize economic growth and trickle-down economics over the stability of the economy or inflation. The good news is that the current chair, Janet Yellen is not completely off the table in discussion as to who the next chair should be, however this presents a unique opportunity for the Trump administration to make yet another painstakingly important decision that has significant ramifications for the next several years or decades even.
