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The chairman of the Federal Reserve is arguably more important than the president of the United States.

The power of the Fed is unprecedented. There’s no parallel. So, you should know what the Fed is and what it does.

The Fed chairman is a guy named Jay Powell. He used to be a private equity guy at a place called The Carlyle Group. He’s basically a banker, a business guy—not a PhD economist like most of his predecessors.

Powell has done a reasonably competent job of running the Fed, with a few mistakes here and there. He’s reasonably respected—not the most respected—but he’s more powerful than Donald Trump. Which is why Trump beats up on the Fed all the time.

Around dining room tables and on Twitter, we spent a lot of time arguing about who the next president should be. But when has a president affected your life in any tangible way? The only time I can think of was the Obamacare mandate to buy health insurance. One day I didn’t have to buy health insurance, and the next day I did. But I already had health insurance, so it didn’t really affect me. But for people who suddenly got hit with a financial penalty and still didn’t have healthcare, it mattered to them.

So, it kind of matters who’s in charge.

At the extremes, with a guy like Bernie Sanders, it would probably matter. He wants to change things a lot. But aside from that, most of the candidates wouldn’t really change enough to impact your daily life and decision-making.

I mean, maybe your taxes would go up; maybe your taxes would go down. During the Bill Clinton era, when I started working, he raised taxes to 39.6%. So that was in ’92. Ever since then, my taxes have never been in the 20%s and they’ve never been in the 40%s. They’ve always been in the 30%s. Small differences here and there.

I’ll take a small tax cut any day. But the reality is that, outside of a few small tax changes, whatever a president has done has never really affected anybody in a big way. Yet, people go crazy about who should be president.

Now what the Fed does, on the other hand, affects your life.

• If the Fed is good at its job, then prices are low and stable.

• If the Fed is bad at its job, then prices go up and they’re unstable.

That hasn’t happened in a while, but it has happened in history. Arthur Burns, Fed chairman in the ‘70s, recommended wage and price controls. Those would affect your life in a profound way.

The Federal Reserve affects your life in other ways…

Think about the interest you get at the bank. In the ‘80s, we used to get 8% interest. Now, we get 0%. That affects your life. It affects all kinds of economic decisions that you make. It affects how much money you borrow. It affects how you borrow. It affects where you invest—all these decisions because of the price of money that the Fed has set.

And by the way, it’s a little odd that we entrust setting the price of borrowing money to people. The interest rate—the price of borrowing money—is the most important price in the economy. In the rest of the economy, we let the market decide. But when it comes to interest rates, we have a guy decide. This is madness.

But this is just one of the things the Fed does that impacts our lives.

Believe it or not, the Fed clears checks. If you write a check to somebody, and they deposit it, the Fed clears the checks. That’s a big job.

It’s also a regulator. The Fed regulates banks. The Fed has very strong regulations. That’s an important job, and it decides on monetary policy.

So what is monetary policy?

Monetary policy is how big the money supply is, how much money is in the economy, and what the interest rates are/will be.

To apply that to what you’re seeing in the markets right now: If you want to stimulate the economy, then you put more money in the money supply and you lower interest rates.

Fiscal policy, on the other hand, is government spending.

What is the government doing right now? They’re spending lots of money… which means we have lots of debt.

Right now, we have a very expansionary fiscal policy and we have a very expansionary monetary policy, which means the economy is on fire and the stock market goes up forever. Even when it’s down, it goes back up again. And changes in monetary policy often spark those moves.

And that’s why the Fed chair is more important than the president by a factor of 10.

The Fed chair is not an elected official. He or she is appointed by the president and confirmed by the Senate. Powell was probably the least qualified of everyone Trump was considering for the job.

He had a guy named Kevin Warsh, who used to be on the Fed’s Board of Governors. That powerful body oversees the nation’s 12 regional Federal Reserve Banks and implements monetary policy. He also had a guy named John Taylor, who was a Stanford economist. And he passed up those guys and picked Powell.

Remember how I said the Fed chair is more powerful than the president? Consider that Trump says he can remove the chairman of the Fed. Legally, however, he cannot. It’s a four-year term, and Powell became chairman in February 2018. If Trump is still president after November 2020, my guess is we’ll have a different Fed chairman in a couple years.

Powell has become one of Trump’s preferred punching bags on Twitter. But the Fed is bigger than both of them.

There’s the Board of Governors with seven members. Then there are 12 regional Federal Reserve Bank presidents who are appointed by the board’s directors of the bank. These people make a committee. It’s called the Federal Open Market Committee, the FOMC. And all these people help to set monetary policy.

These are the people who have the capacity to make a giant mistake and make everything a lot more expensive.

Jared Dillian