At this point, the English language is not a sufficient tool when it comes to communicating how over-the-top Donald Trump’s criticism of Jerome Powell has become.
The President has lashed out at his Fed chair on so many different occasions since his bombshell interview with CNBC’s Joe Kernen in July that it’s well-nigh impossible to document them all.
It started with that interview on July 19 and within two months, Trump was trash talking Powell at the Hamptons home of a hot dog baron – and that was before the selloff.
Initially, Trump’s criticism of Powell revolved around the extent to which ongoing Fed hikes were effectively watering down the tariffs by pushing up the dollar, but recently, the President’s ire stems directly from the stock market rout. He’s called the Fed “crazy”, “loco” and “his biggest threat” and we’ve variously argued that he (Trump) will eventually claim that Powell is, like the media, an “enemy” of American prosperity.
The irony is (was and always will be) that Trump called out Janet Yellen during his campaign for deliberately keeping rates low and inflating a stock market bubble, something he castigated as too “political”. Now, after firing Yellen and installing Powell, he wants Powell to do exactly what he criticized Yellen for doing.
On Friday, the Wall Street Journal reported that Trump is now trying to blame Steve Mnuchin for Powell. Over the weekend, during a characteristically insane Twitter diatribe that found Trump referring to himself in the third person as “President T”, he demanded the Fed “listen” to lower oil prices in the course of pausing the hiking cycle.
Well, on Tuesday evening, the Washington Post published what might very fairly be described as Trump’s most inflammatory anti-Powell comments yet. As ever, the sheer blatant absurdity is difficult to fathom. Here’s what he said:
I’m doing deals, and I’m not being accommodated by the Fed. They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.
So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit.
And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.
To be clear, “what they’re doing” is their job – hiking rates in an effort to keep the economy from overheating. Smart people can debate whether or not they’re doing that job correctly, but Donald Trump is not a smart person, no matter what his “gut” tells him.
Apparently, Trump also blamed Powell for General Motors’ decision to cut jobs and close factories. Presumably, Trump believes the Fed will hike the economy into a slowdown and corporate management teams, anticipating that, are starting to slim down their workforce.
Whatever the case, this is all kinds of inappropriate and all kinds of absurd. It is just a matter of time before he tries to replace Powell, a contention that many readers called silly back when we first suggested it over the summer.
Suffice to say Trump’s ongoing criticism of the Fed continues to vindicate my long-held contention that when it comes to central bank independence, the U.S. president is rapidly morphing into his counterpart from Turkey.
And on that note, I’ll leave you with what I said in a February piece for Dealbreaker which I’m very fond of quoting these days.
Anyway, circling back to poor (and by “poor” I mean in terms of circumstance, certainly not in terms of his massive back account) Jerome Powell, he’s going to quickly find himself in a situation where he’s getting pressure not to raise rates no matter what happens to inflation and no matter how hot the economy is running.
I don’t think everyone fully appreciates how soon-to-be precarious this is going to get for ol’ Jay. Just imagine for a second that Trump’s myopic tax cuts and stimulus end up getting him the economic sugar high he’s after and just as he’s shrieking about it at a rally, the Fed hikes rates citing an overheating economy. Trump would go crazy. He would never let that stand. I’m telling you, he’s going to turn into Erdogan when it comes to rates.
Do me a favor and read the following quotes from a speech Erdogan made back in November when inflation was spiraling out of control in Turkey and the lira was plunging:
They say central banks are independent so we shouldn’t interfere. This is the end result because we haven’t interfered. Results speak for themselves.
We will solve this, things can’t go on like this.
Who does that sound like to you? I mean besides Erdogan.
If you read the accompanying color from Bloomberg it’s even easier to imagine Trump going this route if Powell gets too aggressive. To wit:
Erdogan [is] vowing to step up a fight against what he calls the “interest rate lobby,” an alleged cabal of financiers and lobbyists that he says is conspiring to keep Turkey’s interest rates artificially high.
It’s almost too perfect a parallel. Before you know it, “the swamp” and the “American deep state” will include the Fed governors.
Anyway, don’t say I didn’t warn you.