“I guess I’m stuck with you.”
… is what more than half of the American public said on the evening of March 24, when William Barr delivered his “summary” of the Mueller report to Congress, exonerating Donald Trump on charges of colluding with a hostile foreign power to fix a US presidential election.
It’s also what the president said to Jerome Powell during a phone call on March 8, as US stocks were busy logging their worst week of an otherwise stellar quarter.
According to the Wall Street Journal, Trump has lambasted Powell in not one, not two, but three meetings over the past week for the Fed’s alleged role in playing spoiler to the president’s MAGA economy and holding back the stock market.
The Journal cites three unnamed sources who were present for the proceedings, during which Trump also cast aspersions at Steve Mnuchin. “Mnuchin gave me this guy”, the president reportedly said, echoing criticism he lobbed the Treasury Secretary’s way late last year as stocks careened lower.
You might recall that on Christmas Day, following Mnuchin’s (extremely) ill-advised effort to rescue US equities by placing panicked calls to the CEOs of America’s largest banks, only to see the effort backfire in spectacular fashion, rumors circulated that Trump was at the end of his rope.
That wasn’t the first time Mnuchin’s job looked tenuous. In November, the Journal reported that the White House was dissatisfied with Mnuchin for a number of reasons, not the least of which was that the President blamed Steve for Powell’s hawkish sins.
Trump apparently described the March 8 call to his Fed chair during the meetings mentioned above. The conversation between the president and Powell came during the week of the February payrolls report, which of course showed the economy adding just 20k jobs for the month, the slowest pact of job creation since September of 2017.
The Fed confirmed Powell took a “brief” call from Trump that day – a spokeswoman wouldn’t elaborate any further than that.
As Bloomberg writes, Senator Roy Blunt “separately confirmed that the president complained about Powell being a drag on the economy.” Blunt expressed confidence that Trump can’t fire Powell.
Of course Trump has made no secret of the fact that Powell’s pivot isn’t good enough when it comes to making amends for Q4’s “mistakes”. The Fed spent all of Q1 engineering a mammoth rally in global risk assets that manifested itself not only in the best quarter for US stocks in a decade, but also in one the most impressive cross-asset vol. collapses in recent memory.
But again, that’s not good enough for Trump, who is still stinging from being made to suffer the embarrassment of presiding over the worst December for stocks since the Great Depression, a headline that likely haunts his ego to this very day.
And so, Trump continues to lash out at Powell. There was the harangue about “the gentleman at the Fed” delivered at CPAC, for instance. And then there was the anti-Powell screed Trump forced on Maria Bartiromo as the 3M-10Y inversion stoked recession fears on March 22. And don’t forget about last week’s “had the Fed not mistakenly raised interest rates” tweet.
All of that, despite Powell’s best efforts to placate the president by delivering two dovish surprises in a row that were each dramatic enough to elicit incredulity from Wall Street and force markets to price in rate cuts by year-end.
The fact that Trump would call Powell on March 8 at the first sign of weakness in stocks suggests the president is in no mood to tolerate even a single week of losses on Wall Street. It also suggests that if this Friday’s jobs report isn’t a blockbuster, Powell might be getting another phone call from the White House. Finally, it betrays a comical (if predictable) lack of introspection on Trump’s part – that is, he is everywhere and always unwilling to contemplate whether his own actions are causing consternation among market participants at any given time.
The final insult to Powell is Trump’s endorsement of famous moron Stephen Moore for a seat on the Fed. As we’ve variously documented, that is a move so egregious that the English language fails as a tool to communicate the inherent ridiculousness of the situation. Moore has been a staunch critic of Powell and Trump’s decision to float a nomination for Stephen smacks of vindictiveness, although it looks like Moore’s personal problems and lack of credentials may ultimately derail that train before it leaves the station.
As for the Trump train more generally, it went off the rails a long time ago and this all-out push to demonize and scapegoat the central bank is proof positive that America is on the fast track to authoritarian statehood, something we warned would happen more than a year ago in a now-classic post for Dealbreaker.
And on that note, we’ll leave you with some excerpts from that very post which, again, we remind you was written nearly 14 months ago.
From “New Fed Chair Resists Yelling “Welcome To The Suck“, published February 18, 2018
…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. 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 Fed governors.
Anyway, don’t say I didn’t warn you. But also, don’t forget to laugh when this starts because again, the bright side will be that the tweets and the anti-Fed campaign rallies will be nothing short of hysterical.