Donald Trump Has A Ground-Breaking New Theory About The Stock Market

Who is responsible for record high stock prices?

That’s a joke. The Fed is responsible for record high stock prices. Everyone knows that. Including, of course, Donald Trump. Just ask him:

Yeah. Trump “did a lot of calling.” And he “called” the stock market “false” just a little over a year ago. Then he did it again a couple of days later. Here, listen:

Now whether or not he actually understood the dynamic in terms of just how QE, ZIRP, and a market-dependent (as opposed to “data-dependent”) Fed actually creates bubbles in risk assets is certainly debatable, but what he said in the clips above is largely accurate.

Of course now that he’s President he’s extremely pleased with the stock market. So pleased, in fact, that he talks about it almost every, single day. Just last night for instance, he tried to claim that stock market gains have reduced the national debt. Here’s the clip, slowed down for maximum drunk uncle effect:

Got that? Here’s the transcript:

The country, we took it over in 20 trillion you know the last eight years they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion. Right? And yet we picked up $5.2 trillion just in the stock market. Possibly picked up the whole thing in terms of the first nine months. In terms of value. So you can say in one sense, we are really increasing values and may be in a sense, we are reducing debt. We are very honored by it and very, very happy by what’s happening in Wall Street.

Just to be clear: there is no “sense” in which that is true. And so, by extension, that makes absolutely “no sense.”

In fact, to the extent the stock market bubble is part and parcel of a post-crisis policy response that rests on credit expansion…

(Citi)

… Trump now has this completely backwards, which means either he didn’t understand what he said about the “artificial” market last year or he did understand it then but doesn’t now. Or, perhaps more likely than either of those two possibilities, he’s just completely making it up as he goes along at this point.

You decide.