Larry Lindsey on Withdrawing Fed Nomination, China Tariffs, and Monetary Policy

Withdrawal from Federal Reserve Nomination

• 💡 Larry Lindsey withdrew his name from consideration for the Federal Reserve due to a desire to maintain his current fulfilling life, which includes his company, clients, and family.
• 🧠 He cited a "been there done that" sentiment regarding government service and noted the increasingly hostile environment.
• 📌 Personal considerations ultimately outweighed the potential pleasure of working with Secretary Besson.

Perspective on China Tariffs

• ⚠️ Lindsey views President Trump's threat of "massive new tariffs" on China as a predictable response to China's restriction of rare earth access.
• 🎯 He suggests that while tariffs are a likely tool, the situation is a "passing thing" that will ultimately be worked out.
• 🚫 His recommendation, especially to the Fed, is to ignore the tariff threats as they are not solvable by monetary policy.

Monetary Policy and Inflation

• ⚡ The back-and-forth between the US and China, including supply-side issues like rare earths, is not solvable by monetary policy.
• 📈 Levying larger tariffs could raise consumer prices and thus inflation, but Lindsey is unsure if the Fed should then intervene further.
• 💰 He believes that when the Fed cuts rates, it validates passing on price increases, and that signaling a reluctance to validate them can put a lid on inflation.
• 📉 The worst action the Fed could take is to signal to businesses that they won't lose market share, which a rate cut might imply.

Federal Reserve Interest Rate Stance

• 📊 As a private citizen, Lindsey would hold steady at the next Federal Reserve meeting, not continuing rate cuts.
• 💼 He observes the labor market as soft but not significantly different from expectations given the extended expansion.
• ✅ Wages for lower-end workers are performing well, indicating no serious problems in the labor market according to the Atlanta Fed wage tracker.