Trump's Fed appointee Stephen Miran has policy ideas that perplex economists and investors alike

That company, Amberwave Partners, launched an ETF that “never attracted more than $1.7 million in assets" (a trifling sum in the world of US money management), according to The Wall Street Journal. Amberwave morphed into a hedge fund but didn’t gain traction and shut in late 2023.

Scarcely a year later, Trump’s victory in the US election amounted to a rebirth for Miran. Apart from being among the most ardent of all the president’s yes-men, he is a vocal proponent of drastically curbing immigration, weakening the dollar and asking US allies to bear a larger share of defence expenses on strategic alliances.

Trump’s win paved the way for him to take up a much larger role as chair of the US Council of Economic Advisers. Last week, the 42-year-old economist, newly appointed to the Fed by a slim Senate margin, with every Democratic senator having voted against his appointment, cast the lone dissenting vote in the Fed’s monetary policy decision.

He wanted a 50-basis-point cut to the Fed’s federal funds target, twice the size of what was delivered. On Monday, Miran doubled down, arguing that the US economy needs aggressive cuts so the policy rate reaches about 2.5%.

Miran argued that the Trump administration’s policies would lead to net zero immigration and help keep a lid on rental housing prices. “Given that roughly 100 million Americans rent, net zero immigration would imply (a percentage point) lower rent inflation per year," he said.

He added that “insufficiently accounting for the strong downward pressure on the neutral rate resulting from changes in border and fiscal policies is leading some to believe policy is less restrictive than it actually is."

He also pointed to tax reductions, regulatory changes and a projected slowdown in population growth as huge positives that would boost investment and productivity, and allow for lower interest rates.

Citing Congressional Budget Office estimates, he argued this week that tariff revenue could reduce the budget deficit by over $380 billion per year, which would support the case for lower rates.

It has been almost half a century since George H. W. Bush coined the term “voodoo economics" to deride Ronald Reagan’s similarly wide-eyed optimism and illogical policy mix. Bush lost that bid for the Republican Party nomination, but eight years of Reaganomics left the US saddled with higher deficits than ever before.

Similarly, Miran’s view of the positive impact of Trump’s disruptive policies could be termed champagne anarchism. His speech on 22 September, for instance, overlooked the impact chaotic policy announcements from the White House will have on business confidence and investment plans. The H 1-B confusion is only the latest example.

Miran even appeared to hold up Japan, which has spent two decades emerging from economic malaise and deflation, as an example for the US to follow: “It was just a few long years ago that there was widespread discussion about whether most developed economies would, due to declining fertility rates, converge to Japan’s low interest rates without significant immigration; those economic dynamics are still a force."

There may be a valid case for the US to cut interest rates faster, partly because the effects of Trump’s policies are slowing the economy considerably. Miran is right that exporters have slashed prices for US retailers and the impact of tariffs on inflation will perhaps be lower than what other Fed governors expected.

It is also true that many US trade partners, notably in East Asia, have had significantly undervalued currencies against the US dollar for years. Their central banks had contributed to its rise by amassing reserves in dollars.

The question is what to do about this. Threatening to force trade partners and allies to hold very long-term US government bonds, as outlined in Miran’s 2024 paper, at disadvantageous yields, and reiterating the case for a weaker dollar does not help confidence.

The currency is down more than 10% this year, its weakest performance in over two decades. Whether the administration has the right to fire governors on the Fed’s board to replace them with those who may take its view is now before the Supreme Court. Still, the stock market ended last week at a near high .

But, as the Financial Times columnist Katie Martin observes, as international fund managers buy US shares, they hedge their currency risk by selling US dollars, adding to pressure on the currency.

Meanwhile, as more investors turn away from the dollar, investment in gold is scaling new highs, pulling in huge inflows via gold companies as far afield as Thailand and resulting in an overly strong Thai baht. Martin quoted Dutch asset management firm Robeco, which in its recent five-year outlook says there are one-in-three odds that the global financial order will come unstuck.

There is an even higher likelihood that Miran and the outlandish policies he promotes could make investment managers’ returns even more mediocre than those at the firm he co-founded before it was forced to shut down. Ironically, the unsuccessful ETF that Miran managed had invested in companies deemed to be good for the US and its supply chains.

The author is a former Financial Times foreign correspondent.