He doesn’t understand how any of this works.
We received this calm, collected message from the president this morning after the most recent jobs report was released:
Great jobs number just announced, breaking all estimates (except mine!) by double and triple – And you haven’t seen anything yet! EMPLOYERS ADDED 162,000 JOB IN AUGUST. Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago! A STRONG COUNTRY MEANS A LOWER INTEREST RATE – IT’S A BETTER CREDIT…Very simple! We should have the LOWEST RATE of any country in the World, like “the old days.” Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE! LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT, which the U.S. Supreme Court, in its ridiculous and very costly Tariff decision, strongly acknowledged “the President” has an absolute right to do. ITS BETTER THAN TARIFFS! The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen! President DONALD J. TRUMP
A few things.
One, a strong labor market is seen by economists as a reason to allow for higher interest rates if inflation data warrant them, not lower rates, because the economy can handle pricier borrowing when it’s chugging along.
Two, the interest rate set by the Fed is not the same as the rate on your credit card. A lot of Americans pay interest, yes, but a lot of them also earn interest — like everyone who owns a savings account or Treasury bonds, for example.
Three, the Federal Reserve’s job is not to cut people a good deal on credit, as if it were negotiating with a mortgage broker. It is to set interest rates so as to achieve price stability and “maximum employment.” Interest rates affect the money supply and, in turn, inflation. Alas, the president does not understand anything about how that works.
Four, yes, the IEEPA statute does unfortunately authorize the president to impose an embargo on imports from entire countries during national emergencies. And who declares national emergencies under a different statute? The president. Congress, once again, has given the country terrific handiwork. Of course, this has nothing whatsoever to do with monetary policy.
Well, that should do it. Nothing more to see . . . oh, wait.
How crazy is this? We just got GREAT Numbers on Jobs, the Market should go UP, because our Credit and Economy are better but, as always, for the past 25 years, the Stock Market goes DOWN, because we’re living under False Reality that if things are good, you’ve got to “KILL IT” because of a “fear” of Inflation. It should be the opposite, and always was until 25 years ago. If we stay with this Theory, we will never be able to have the True Economic Greatness for our Country that it deserves, because every time we do well, the stupid people want to immediately stop this Great Upward Momentum. GROWTH DOES NOT CAUSE INFLATION! I knew this morning as soon as I looked at these fantastic Job Numbers that the Market would go down when it should be going UP like a Rocketship. We should be doing GDP of 15 and 20%, not 2, 3, and 4%, and America should become Far Greater Financially than it is right now. Our Debt would be paid off, and all of these other things would happen. Remember, every point in the Interest Rate costs the U.S. 650 Billion Dollars a year. We should pay the Lowest Interest Rates in the World because we make everything run, and give otherwise failed countries Great Economic Wealth! Thank you for your attention to this matter. President DONALD J. TRUMP
A few more things.
One, yes, I agree that it’s absurd that the stock market sells off whenever there’s a good jobs report because it makes them expect higher interest rates. But I would be more concerned that investors are seemingly addicted to interest rates well below historically typical levels and exhibit signs of withdrawal when those rates might go away.
Two, what do you mean by “fear” of inflation? (Sorry, I mean Inflation.) It exists right now, and Americans are not exactly thrilled about it.
Three, no, “growth” doesn’t cause inflation. Excessively loose monetary policy, which is what the president demands of the Fed, causes inflation.
Four, our GDP growth should not be at 15 or 20 percent, because that is verifiably ridiculous. And GDP growth isn’t currently at 4, 3, or even 2 percent. It’s at 1.5 percent.
Five, our debt would not be paid off if interest rates were lower. We would barely cut our annual deficit in half if interest rates on every federal bond went to zero.
Six, yes, each percentage-point increase in Treasury bond interest rates does cost the federal government a whole lot of money. Unfortunately, the rate on Treasuries is not legally tied to the Fed’s benchmark rate and is, in fact, free to rise much higher should bond markets think it appropriate — as the last month has demonstrated. Seems like a good reason to get our fiscal house in order. (But we won’t.)