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Illustration: Sarah Grillo/Axios

Donald Trump wants to politicize the Fed. One White House source explained his thinking to the WSJ:

"Mr. Trump has selected candidates like Messrs. [Stephen] Moore and [Herman] Cain in recent weeks because he believes they have the interests of his presidency in mind, the person said.
Describing Mr. Trump’s views, the person said, 'I want people who care about me and my presidency and economic growth…because that’s important to the health of the country and his re-election chances.'”

The big picture: Ken Rogoff, one of the most respected technocrats in the economics profession, warned this week that Trump is effectively pushing at an open door. Giving a lecture at the IMF this week under the auspices of the G30, Rogoff warned that the world might be facing "the beginning of the end of central bank independence." None of his four main reasons had anything to do with Trump.

  1. Central banks have become victims of their own success. Historically, the main argument for central banks to be independent has been that without independence, inflation will return. But inflation is below target in nearly every major economy, and long-term inflation expectations have never been lower. No one is worried about inflation anymore, and without that worry, there's little need to keep central banks independent.
  2. Central banks also exist to stabilize the broad economy by cutting rates when it looks like we might be heading into a recession. But they can't effectively do that today, since rates are already so close to zero.
  3. Central banks have often been needed in a crisis, partly because they're home to a lot of institutional knowledge and expertise. But with rates very close to zero, that knowledge and expertise can just as well reside in the executive branch. In the next crisis, fiscal policy, rather than monetary policy, is going to be the first line of defense.
  4. An increasing consensus that national indebtedness can and should be greatly expanded has taken a lot of macroeconomic work away from central bankers and given it instead to finance ministries.

Rogoff's proposed solution to all these problems is for central banks to embrace negative interest rates as a policy tool, with a system of subsidies that prevents regular depositors losing money in their checking accounts. "The countries that do it first will be glad they did it," he said. The central banks that don't? They risk losing their independence entirely.

The bottom line: Central bank independence is almost never enshrined in a country's constitution; it can be lost easily and needs to be fought for. Politicians now have the wind at their back if they want to take back control of their central banks. But, says Rogoff, "countries that do that, including the U.S., if it chooses to go down that path, will live to regret it."

Go deeper

Scammers seize on COVID confusion

Data: FTC; Chart: Sara Wise/Axios

Scamming has skyrocketed in the past year, and much of the increase is attributed to COVID-related scams, more recently around vaccines.

Why it matters: The pandemic has created a prime opportunity for scammers to target people who are already confused about the chaotic rollouts of things like stimulus payments, loans, contact tracing and vaccines. Data shows that older people who aren't digitally literate are the most vulnerable.

12 hours ago - Politics & Policy

Biden explains justification for Syria strike in letter to Congress

Photo: Chris Kleponis/CNP/Bloomberg via Getty Images

President Biden told congressional leadership in a letter Saturday that this week's airstrike against facilities in Syria linked to Iranian-backed militia groups was consistent with the U.S. right to self-defense.

Why it matters: Some Democrats, including Sens. Tim Kaine (D-Va.) and Chris Murphy (D-Conn.) and Rep. Ro Khanna (D-Calif.), have criticized the Biden administration for the strike and demanded a briefing.

14 hours ago - Health

FDA authorizes Johnson & Johnson's one-shot COVID-19 vaccine for emergency use

Photo: Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

The Food and Drug Administration on Saturday issued an emergency use authorization for Johnson & Johnson's one-shot coronavirus vaccine.

Why it matters: The authorization of a third coronavirus vaccine in the U.S. will help speed up the vaccine rollout across the country, especially since the J&J shot only requires one dose as opposed to Moderna and Pfizer-BioNTech's two-shot vaccines.