Trump appears to not understand the Fed

To the editor: Is President Donald Trump ignorant or rash? He has repeatedly threatened to fire Federal Reserve Chairman Jerome Powell for not lowering interest rates and continued to denigrate his ability and intellect.

There are three reasons such actions make no sense. First, the president cannot fire the Federal Reserve System chairman. Second, monetary policy decisions are made by the twelve-person FRS Open Market Committee — not the Federal Reserve chairman. Typically, those decisions are unanimous, though the most recent decision had two dissenting votes.

So, Chairman Powell does not have the sole ability to "lower interest rates."

Third, the FRS only sets the rates at which the FRS makes direct loans to member banks (the "discount" rate). The Open Market Committee targets the federal funds rate — the rate at which member banks make very short loans to each other. It does so by increasing or decreasing the monetary base by buying or selling designated United States government securities to change the reserves of the member banks. This indirectly influences other interest rates such as the rate on mortgage loans, etc.

But it is well understood that if the monetary base is increased (to attempt to reduce interest rates in the short term), in the longer term that will increase the rate of price inflation and a higher rate of price inflation will result in higher nominal interest rates — not lower nominal interest rates. President Trump’s stated desire to lower interest rates via a more expansive monetary policy will inevitably result in higher nominal interest rates, not lower ones. So, the question must be repeated: Is President Trump ignorant of basic monetary economics or is he so focused on the immediate present that he is willing to sacrifice the future for the sake of somewhat lower immediate mortgage interest rates?

Gene Smiley Waukesha

U.S. can act to end starvation in Gaza

To the editor: Forty-four Democrat senators sent a letter to the Trump administration asking that the United States stop funding the Gaza Humanitarian Foundation, which is connected with violence that has killed almost 1,000 Palestine people trying to obtain food. Senator Bernie Sanders of Vermont introduced a resolution to block the sale of U.S. offensive weapons to Israel because of Prime Minister Benjamin Netanyahu’s use of displacement and starvation of Palestinians as war tactics.

President Trump has said he is going to address the starvation in Gaza, but we have heard nothing about his plans. It appears Republicans’ blind support of President Trump includes allowing the starvation to continue in Gaza.

Mary Maronek Racine