It is tough to nail down Ms. Harris’ view on the currency and interest rates since Mr. Biden’s announcement three days ago that he was discontinuing his campaign for a second term. So far, her outreach efforts have included a couple speeches to black sororities, a meet and greet with her campaign staff in Wilmington, Delaware, and a comment published after President Biden’s address to the nation regarding his decision to leave the campaign trail.
Yes, neither Ms. Harris nor former president Donald Trump will have any direct influence on the Board of Governors of the Federal Reserve System, or for that matter, the monetary policy the Board puts into action. They will, however, be required to nominate a new chairman, vice-chairman, and vice-chairman for supervision within two years of being inaugurated.
Section 10 of the Federal Reserve Act requires that the President nominate three members of the Board of Governors to serve as chairman, vice-chairman, and vice-chairman for supervision. Jerome H. Powell’s term as chairman expires in May 2026. Philip N. Jefferson’s term as vice-chairman expires in September 2027 while Michael S. Barr’s term as vice-chairman for supervision expires in July 2026.
Prognosticators of the economic health of the economy have been calling for a recession for the last two years, but even members of the Board of Governors have been observing slowdowns in economic activity including flattening of wage growth and upticks in unemployment. Chairman Powell has warned Congress during visits to Capitol Hill that demand would have to be slowed in order to slow down inflation. That translates into a labor market that will reduce demand for workers.
While Ms. Harris has signaled a pro-labor stance over the last decade, she will have to expand her economic lexicon to include currency and dollar policy. Mr. Trump has been reportedly clamoring for a weak dollar, with the rationale that a cheaper dollar creates more demand for U.S. goods. In addition, a labor policy that includes encouraging an onshoring of supply chains and factories will hopefully translate into demand for American labor.
In the immediate term, the political narrative of the Trump campaign should tell traders that near the end of the 2020s there will be a pick-up in inflation assuming these jobs come into reality accompanied by more consumer spending. Ms. Harris’ current narrative focusing more on childcare issues and reproductive rights does not scream an inflationary result.
Not to be cynical, but Ms. Harris’ focus on reproductive rights may be a signal that she expects a continued slowdown in the economy such that more people will forego having families in light of tougher economic conditions. That is a depressing narrative and assumes a long-term visual capacity that Ms. Harris, in my opinion, has not demonstrated.
For the trading community, one that does not care for uncertainty, they should apply their resources to push for candidates and policy that reduces risk.
Alton Drew
24 July 2024
For more of my views on the American political economy, buy my book at amazon.com/author/altondrew.
Lawyers Write the Bets. Bankers Sell the Bets. 