Chamath Palihapitiya, a prominent venture capitalist, has expressed skepticism about the Federal Reserve’s alleged independence.
Fed Is Partisan, Always Aligns With Presidents
Palihapitiya, on the All-In Podcast on Tuesday, argued that the Federal Reserve is not as politically neutral as it is often portrayed. He likened the Fed to other governmental appointees, stating that they are “partisan” and aligned with the ideologies of the presidents who appointed them.
Palihapitiya emphasized that the governors of the Federal Reserve were appointed due to their alignment with the ideologies of the respective presidents and that it is time to acknowledge this reality.
“The idea that we still can’t admit that the Federal Reserve is political, is part of the problem,” stated Palihapitiya.
He also proposed that the president should be “allowed to remove” a Fed governor if their actions are not in line with the electorate’s wishes.
Palihapitiya Questions Fed's Role in Global Economy
Palihapitiya also questioned the effectiveness of the Fed’s current role in the rapidly evolving global economy, suggesting that certain functions, such as being a lender of last resort, could be better handled by the Treasury.
He also proposed that the capital and free markets could do a better job of defining monetary policy and price stability.
However, the venture capitalist conceded that the Fed performs a reasonable job in banking supervision and regulation, and as a payment system and clearing house.
Economists Fear Inflation, Market Risks From Fed politics
Palihapitiya’s comments come at a time when the Federal Reserve is under increasing scrutiny. In July, he backed William “Bill” Pulte as the next chair of the Federal Reserve, citing his strong alignment with the Trump administration and expertise in housing.
The Fed’s independence has been a topic of debate amid President Donald Trump’s ongoing criticism and attempts to influence its policies. This has raised concerns about the potential risks to the financial markets, including a rise in inflation and a loss of faith in U.S. government debt, as highlighted by economists in a recent survey.
Former Fed Chair Janet Yellen also warned of the potential catastrophic consequences of Trump’s actions against the Fed’s Lisa Cook, stating that politicized central banks could lead to higher inflation, volatile growth, and weakened currencies.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
