As I am sure you know, President Trump is engaged in a constant twitter attack against Jerome Powell, the chairman of the Fed. The unprecedented, unethical and ridiculous public tirade boils down to this: The Fed is destroying the economy by refusing to lower interest rates to zero or less than zero.
Presidents often are at odds with the Fed. They generally want the Fed to do something that benefits the economy immediately so that they can take credit for it. When the Fed lowers interest rates, it makes borrowing money easier because it’s cheaper to pay back the loan. When borrowing money is easier, businesses are more likely to borrow money and invest capital and this turns up the economic heat. To much heat equal inflation. If the Fed is nervous about inflation, it increases interest rates, which makes borrowing more expensive and results in less capital investment and less cash getting in people’s hand .
The Fed is basically the groundskeeper and the economy is the basement boiler with a sticky release valve in the Shining (the book, not the movie). When the boiler pressure is too high, the Fed steps in and releases steam by raising rates. When the boiler is too cold, the Fed adds coal (lowers interest rates) to heat things up.
Trump argues that the Fed needs to heat things up. He’s probably wrong, but at least it’s an argument that isn’t bat shit crazy.
What is bat shit crazy are Trump’s constant tweets on blaming the Chairman Powell for the fact that the economy isn’t doing as well as he wants. The whole point of the Fed (well, a major point anyway) is that it operates independently from presidential whims. It does what it feels is best for the economy based on a bunch of economic indicators such as:
1. Google them yourself.
What is REALLY bat shit crazy, is that Trump refused to divest himself from his business interests and refused to put his assets in a blind trust. Trump continues to to profit from the Office of the President. Some people are worried that Trump is attacking the Fed for personal reasons. In fact, you would have top be bat shit crazy if you didn’t wonder about that and here’s why:
Based on Trumps financial statements , as of June 2017, his businesses owe at least $315 million to lenders. That’s at least. And it assumes Trump hasn’t committed fraud on his financial statements.
So, if Trump owes $315 million in outstanding loans, and the Fed lowers interest rates, guess what happens? If you guessed that your credit card interest rates go down, you might be right, but I wouldn’t count on it. But if you guessed that Trump will save millions in loan payments you’d be right! Lower interest rates from the Fed translate into lower interest rates on Trump’s existing debt.
Trump’s presidency is clearly an exercise in self interest. Just yesterday he tweeted about some dipshit award one of his hotels or golf courses (I can’t be bothered to dig up the tweet) won.
Oh wait, I can be bothered.
Do I know if Trump is trying to slut shame Chairman Powell into lowering rates so the president can save millions? I don’t. But in a normal world, I wouldn’t even have to question it.
In a normal world…