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    Jailed Trump adviser predicts mass deportations as second term priority

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    The first 100 days of a second Donald Trump presidency would see the sacking of the Federal Reserve head, Jerome Powell, mass deportations of undocumented immigrants and higher tariffs on Chinese imports, the ex-president’s former trade adviser Peter Navarro has said.Navarro, the maverick former head of the Office of Trade and Manufacturing Policy in Trump’s first administration and a key loyalist, made the forecasts in an interview conducted from prison – where he is serving a four-month sentence for contempt of Congress.Speaking to the website Semafor, Navarro predicted that axing Powell – an establishment figure who was initially appointed as Federal Reserve chair by Trump in 2018 before being reappointed by Joe Biden – would be among the first acts of a newly re-elected President Trump.“Powell raised rates too fast under Trump and choked off growth,” Navarro told Semafor in responses emailed from a prison library in Miami, where he has been putting the finishing touches to a new book, The New Maga Deal, whose title references the former president’s Make America Great Again slogan.“To keep his job, Powell then raised too slowly to contain inflation under Biden,” Navarro said to Semafor. “My guess is that this punctilious non-economist will be gone in the first 100 days one way or another.”He predicted that Powell – who served in the presidential administration of the late George HW Bush – could be replaced by either Kevin Hassett or Tyler Goodspeed, both former chairs of the council of economic advisers.The first order of business in a second Trump presidency, however, would be intensifying a rumbling trade war with China, said Navarro, a noted hawk on Chinese trade policy.“At the top of the trade list is Trump’s Reciprocal Trade Act, first introduced by congressman Sean Duffy in 2019,” he wrote. “If countries refuse to lower their tariffs to ours, the president would have the authority to raise our tariffs to theirs.”Asked about unfinished business likely to be revisited, Navarro identified mass deportation and reinforcing a “buy American” policy.“Trump will quickly close down the border and begin mass deportations,” he said, accusing Biden of “importing a wave of crime and terrorism along with an uneducated mass that drives down the wages of Black, brown and blue-collar Americans”.skip past newsletter promotionafter newsletter promotionDespite – or perhaps partly because of – his incarceration for refusing to cooperate with the congressional investigation into Trump supporters’ 6 January 2021 attack on the US Capitol, Navarro remains an authoritative source on insider thinking in the former president’s camp.Several members of Trump’s inner circle have visited Navarro during his confinement in a minimum security facility, according to Semafor, fuelling speculation that he could play a key role in a future administration.Reinforcing that impression, Navarro said his book identified 100 actions that Trump would take in the first 100 days of a second presidency. He said he planned to attend the Republican national convention in mid-July – where Trump is expected to be anointed as the GOP presidential candidate – if he is released from prison in time.While he was close to the former president throughout his first administration, Navarro’s views on trade are considered fringe by many mainstream economists. He is a vocal critic of Germany, as well as China, and has accused both countries of currency manipulation. More

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      The US central bank is poised to cause untold hardship to millions of Americans | Robert Reich

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      The US central bank is poised to cause untold hardship to millions of AmericansRobert ReichThe Federal Reserve chairman has admitted that at least 2 million people could lose their jobs if interest rates keep risingAs chairman of the Federal Reserve board, Jerome Powell is making his semi-annual policy report to Congress this week. I have an urgent question for Powell that I hope members of Congress will also ask: how can he justify further rate hikes in light of America’s staggering inequality?The US should break up monopolies – not punish working Americans for rising prices | Robert ReichRead morePowell and his colleagues on the Fed’s open market committee are considering pushing interest rates much higher in their quest to get inflation down to their target of 2%. They believe higher interest rates will reduce consumer spending and slow the economy.With all due respect, this is unnecessary – and unjust.Over the past year, the Fed raised interest rates at the fastest pace since the 1980s, from near zero to more than 4.5%. But consumer spending isn’t slowing. It fell slightly in November and December but jumped 1.8% in January, even faster than inflation.As a result, Powell is now saying he may need to lift rates above 5%. A recent paper by a group of academic and Wall Street economists suggests that he will need to raise interest rates as high as 6.5% to meet his 2% target.This would worsen America’s already staggering inequalities.You see, the Americans who are doing most of the spending are not the ones who will be hit hardest by the rate increases. The biggest spenders are in the top fifth of the income ladder. The biggest losers will be in the bottom fifth.Widening inequality has given the richest fifth a lot of room to keep spending. Even before the pandemic, they were doing far better than most other Americans.The top fifth’s savings are still much higher than they were before the pandemic, so they can continue their spending spree almost regardless of how high the Fed yanks up rates.That spending is a big reason Powell and his colleagues at the Fed are having so much difficulty slowing the economy by raising interest rates (in addition to the market power of many big corporations to continue raising prices and profit margins).Those higher rates are flowing back into the top fifth’s savings, on which they’re collecting interest. But yank up rates much more and we’ll impose big sacrifices on lower-income Americans.Powell himself has predicted that at least 2 million people will lose their jobs if he raises interest rates to 4.6% by the end of the year.The study I mentioned a moment ago concludes that “there is no post-1950 precedent for a sizable central-bank-induced disinflation that does not entail substantial economic sacrifice or recession”.Well, there’s also no post-1950 precedent for the degree of income inequality America is now experiencing.Relying on further interest-rate hikes to fight inflation will only worsen the consequence of America’s near-record inequality. The people who will endure the biggest sacrifices as the economy slows will be the first to lose their jobs: mostly, those in the bottom fifth.There’s no reason for further hikes, anyway. Inflation is already slowing.I understand Powell’s concern. What looked like a steady, albeit gradual, slowdown is now looking even more gradual. But so what? It’s the direction that counts.He should abandon the 2% target rate of inflation. There’s nothing sacrosanct about 2%. Why not four? Getting inflation down to 2% is going to cause too much pain for the most vulnerable.And Powell should suggest to Congress that it use other tools to fight inflation, such as barring corporations with more than 30% market share from raising their prices higher than the overall inflation rate – as recently proposed by New York’s attorney general.Mr Powell, if you’re reading, may I be perfectly frank? You weren’t elected to your current post. Nor were your colleagues. That’s understandable. The Fed needs to be insulated from politics. But you at least owe it to America to do your job fairly.It would be terribly unjust to draft into the inflation fight those who are least able.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
      TopicsUS politicsOpinionEconomic policyUS economic growth and recessionJerome PowellFederal ReservecommentReuse this content More

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      Fed announces smallest interest hike in a year as inflation ‘eases somewhat’

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      Fed announces smallest interest hike in a year as inflation ‘eases somewhat’Quarter-point increase to a range of 4.5% to 4.75% signals a slowdown in Fed’s fight against soaring inflation The US Federal Reserve signaled a slowdown in its fight against soaring inflation on Wednesday, announcing its smallest hike in interest rates in almost a year.After its latest meeting, the Fed announced a quarter-point increase in its benchmark interest rate to a range of 4.5% to 4.75%, the smallest increase since March last year. “Inflation has eased somewhat but remains elevated,” the Fed said in a statement adding that “ongoing increases” will be appropriate as it seeks to bring prices down.“We covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do,” said Fed chair Jerome Powell.Inflation in the US has been running at levels unseen since the 1980s, triggering a cost of living crisis as the price of everything from eggs to gas and rent has shot up.In order to tamp down inflation the Fed has aggressively hiked rates as it seeks to cool the economy and bring prices back under control.A year ago the Fed rate – which affects the interest rates on everything from business and personal loans to mortgages and credit card rates – was close to zero. After the most rapid series of rises since the 1980s, it is now at a level last seen in 2007.There are signs that prices are coming down. In December, the annual rate of inflation fell to6.5% from 7.1% in the previous month, the sixth straight month of yearly declines and well below the peak of 9.1% it hit in June, its highest rate since 1982.Consumer spending – the largest driver of the economy – fell 0.2% from November to December. The housing market has slowed and many of the major tech companies have announced large job cuts as they have moved to rein in spending.But inflation remains well above the Fed’s annual target rate of 2% and the central bank has said it will keep rates high until price stability is achieved. The Fed also continues to worry about the jobs market. The unemployment rate was 3.5% in December, a 50-year low and on Wednesday the labor department announced there were 11m job openings in the US in December – almost two available jobs for every person looking for one and an increase from November.The tight labor market has driven up wages and Powell, has made clear that the central bank believes rising wages threaten to spur on inflation – a so-called wage-price spiral. “You don’t see that yet, but the whole point is, once you see it, you have a serious problem. That means that effectively in people’s decision-making, inflation has become a real salient issue,” said Powell. “That is what we can’t allow to happen.”TopicsFederal ReserveUS economyJerome PowellEconomicsUS politicsInflationnewsReuse this content More

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      We need serious public policy, not more printed money – the US economy is in tatters

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      AnalysisWe need serious public policy, not more printed money – the US economy is in tattersDoug HenwoodDecades of bailouts have convinced some that the Fed will always come to the rescue – but this only papers over the fundamental flaws of the US economy With the Federal Reserve leading the world’s central banks in a tightening cycle of interest rate rises, the likes of which we haven’t seen since 2006, commentators across the political spectrum are noting the fondness of the Fed chair, Jerome “Jay” Powell, for his legendary predecessor, Paul Volcker. On the left, the comparison is fearful; on the center and on the right, it’s one of admiration. But circumstances don’t really support the comparison.Fed announces sixth consecutive hike in US interest rates to fight inflationRead moreOn taking office in October 1979, Volcker declared “the standard of living of the average American has to decline” as a consequence of the war against the chronic inflation of the 1970s. He quickly set to work making that happen by driving interest rates up towards 20% and creating the deepest US recession since the 1930s.That squeeze did put an end to high inflation but at a tremendous social cost. Six million people lost their jobs over the next three years, taking the unemployment rate from 6% to almost 11% in late 1982. The cost wasn’t merely short-term. About half of those job losses were categorized as permanent, as opposed to being temporary layoffs, many of them in the manufacturing heartland. The term “rust belt” entered common usage.Volcker was appointed by Jimmy Carter, who seemed to have no idea of what he was getting himself into. His friend and adviser, the Georgia banker Bert Lance, prophetically warned him that he was dooming his prospects in the 1980s election. But Carter listened to the consensus of Wall Street and the political class – Volcker was the man to tame inflation, which was running around 13% at the end of 1979. The US had seen inflation rates that high before, but never outside of major wars or their immediate aftermath. Inflation, which was under 2% in 1965, had been rising relentlessly for 15 years, barely pausing even in the nasty recession of the mid-1970s. Contrary to a belief popular on the left, that inflation was not kind to workers. Wages badly lagged prices, and real average hourly earnings fell 14% between 1973 and 1980.There are some similarities between the present and 40 years ago. Then, as now, food and energy prices were important factors in sparking inflation, but in both cases, even if you strip out those two volatile components, a severe inflation remains. And in both cases, polls have shown inflation to be deeply unpopular.But there are also major differences, notably in the strength of labor. At the end of the 1970s, almost a quarter of all workers were unionized; now only about a tenth are. Then, an average of 22,000 workdays were lost to strikes every year; last year it was just 1,500 – a decline of 93%. The early 1980s recession hammered the bargaining power of the working class. Unions were busted, and we went from a time when Take This Job and Shove It could be a hit song (as it was in 1977) to one where workers were grateful to have any job at all, no matter how tenuous and low-paying. As the recession ended in late 1982, the stock market took off and the employer class began a 40-year celebration of its triumph.That’s not the world Powell finds himself in. Inflation has been a problem for close to 15 months rather than 15 years, and although there are some tentative signs of life in the labor movement – notably at one Amazon site and a few hundred Starbucks outlets (out of 9,000) – the share of the labor force represented by unions fell last year, and strike activity so far in 2022 is about a third lower than in 2021. Unlike the inflation of the 1970s, this is not the wage-push kind (to use the jargon). It’s been driven first by supply chain blockages, thanks to Covid, and extended by embargoes against Russian energy exports, and most workers are just looking on helplessly as their paychecks fail to keep up with price increases.There’s another difference as well: we’re coming off a decade of extremely indulgent monetary policy. Coming out of the Great Recession, the Fed kept short-term interest rates near zero between 2011 and 2021, with the brief exception when they pushed them up to just over 2% in 2017 and 2018 (still quite low by historical standards). On top of that, the central bank pumped over $3tn (£2.7tn) into the financial markets between 2008 and 2015, and almost $5tn between early 2020 and early 2022. The earlier pumping was meant to prevent a financial implosion after the sub-prime crisis, and the latter to counter the threats of the early pandemic months. But the result of both has been to stimulate crazy inflation in asset prices – stocks, crypto, unicorns, housing – a remarkable waste of capital and one that can be very risky to deflate. Decades of bailouts have convinced financial market players that the Fed will always come in to rescue them and reversing that mentality could require a Volckerish austerity for Wall Street – one that’s politically hard to imagine.The Fed’s interest rate hikes are going to hit the most vulnerable | Dean BakerRead moreWhat Powell is up to now bears almost no resemblance to Volcker’s clampdown. The federal funds rate, the interest rate at which banks lend each other money overnight – that is the Fed’s most direct policy target – changed from just above 0% to just under 4% after raising the target rate another 0.75 points this week. That’s almost 15 points below the Volcker peak. In real terms – deducting the rate of inflation – Volcker’s peak was almost 10%, a lot higher. Right now, the real fed funds rate is around -4% (yes, that’s a negative sign). Powell may admire Volcker, but next to him, he’s a piker.The debate over monetary policy overlooks a more important issue. That decade of cheap money papered over a lot of fundamental problems with the US economy: low levels of public and private investment, massive polarization between rich and poor and unstable employment for much of the labor force. These should be addressed with serious public policy, not by printing money. It would be nice if we talked about that, but given the degraded state of American political discourse, I’m not hopeful.
      Doug Henwood is an economic journalist based in Brooklyn. His radio show, Behind the News, airs on KPFA radio in Berkeley, and is available on all the standard podcast outlets
      TopicsFederal ReserveUS economyJerome PowellUS politicsInflationanalysisReuse this content More