As intrigued as Asia is by what a Joe Biden White House portends, this region could have even more riding on Fed Chairman Jerome Powell.
Outgoing U.S. President Donald Trump’s tenure has been about as event rich as Asia can handle. His tariffs, penchant for ending trade deals, assaults on supply chains and Twitter tirades have most in this region relieved that voters chose Biden.
Yet through it all there was Powell mopping up Trump’s economic messes—and limiting the fallout.
The Fed is often, for better or worse, the glue holding Asia’s emerging markets together. When the region’s markets collapsed in 1997, the Fed helped create what then-Chairman Alan Greenspan called an “oasis of prosperity.” In 2008, its aggressive easing helped stave off another Great Depression.
It works both ways, of course. In 2013, hints the Fed might reduce bond purchases precipitated a “taper tantrum” in markets from Bangkok to Johannesburg. Now, there’s talk of another kind of tantrum that could quake markets, this one involving Trump’s anger over losing to Biden.
The cause: outgoing Treasury Secretary Steve Mnuchin working to hobble the Fed’s ability to stabilize a slowing economy. He’s refusing to extend programs Powell’s team uses to channel credit to shaky companies and municipalities amid cratering growth.
Mnuchin claims he’s not sabotaging the economy the Biden administration will inherit come Jan. 20. The most immediate failure that will distract Biden is a Covid-19 epidemic Trump is ignoring on the way out the door.