'Crackpot economics': Paul Krugman details chaos in countries that followed Trump's path
President Donald Trump's increasingly tight leash on the Federal Reserve — most clearly exemplified by his efforts to remove Federal Reserve governor Lisa Cook on unproven fraud allegations — is a massive threat to the stability of the dollar and the economic system generally, Nobel laureate economist turned political analyst Paul Krugman told MSNBC's Ari Melber on Wednesday evening.
"We actually quoted you the very night this news broke and your comparison to other countries that have done what Trump wants to do and why it's backfired for the economy," said Melber. "Explain what you meant by that."
"Okay, so the Federal Reserve, loosely speaking, they control the rate at which money flows into the economy," said Krugman. "And we know that it's important to have some flexibility in doing that. You need to fight things like the financial crisis of 2008. You need to fight things like the inflation of 2022. But we also know that it's a very — it's an easily-abused power. It's way too easy for an autocratic head of state to say, you know, rev up the printing presses because I want to, I want to push up my standing in the polls, just, you know, and you say it's going to cause inflation, well, I've got these guys that I like, and my favorite crackpots tell me it won't be inflationary."
"So we have a system which is that this extremely important but dangerous power is vested in an independent agency," Krugman continued. "It's not free of political accountability. The board of governors is chosen ... by the president and approved by Congress. But they have 14-year terms and we've done — you know, they aren't perfect, but they've done pretty well."
A recent example of a country that seized control of monetary policy for political gain, Krugman noted, is Turkey.
"You had the president, who is an autocrat, first of all, just wanting to see the printing presses roll to make himself more popular, and then bought into crackpot economics and said actually, raising interest rates increases inflation, so I want to cut them instead," said Krugman. "And he didn't change course until inflation hit 80 percent."
"I wouldn't give any president control over monetary policy," he added. "There are very good reasons not to do that. And I definitely wouldn't want to see Donald Trump do that. This is, you know ... he's talking nonsense about all of this stuff. And then the way of it just to say it's not just that he's trying to install, you know, cronies, loyalists at the Fed, but he's also doing this personal attack. It's basically saying, it's not just about Lisa Cook. It's a message to everybody else at the Fed: get in my way and I will ruin your life. And this is not, this is not the America that I want to live in."
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