American economist Kenneth Rogoff says that the Federal Reserve’s autonomy is a lot more fragile than most people realize. The loss of the Fed’s independence, he warns, can lead to the return of price controls and financial repression, as was seen in the 1970s.
What Happened: On Wednesday, while appearing on the In Good Company podcast, Rogoff spoke extensively on the recent conflict between President Donald Trump and Fed Chair Jerome Powell.
Rogoff explains that the Fed’s independence is a “new thing,” something that came into being in recent decades. In the 1920s and 30s, he says, the Federal Reserve was a part of the Treasury Department and worked out of a small room in the Treasury.
The Harvard economist noted that, unlike the U.S. Supreme Court, the Federal Reserve is not enshrined in the Constitution and lacks the institutional protections afforded to bodies like the European Central Bank. …