‘Growth-Phobiacs’ And Rates That Will ‘Never Rise Again’

If you ask the President of the United States, what’s needed right now when it comes to US monetary policy is a resumption of large-scale asset purchases.

Here, we’ll let him explain it to you (again):

Now, sure, it’s entirely possible that Trump’s understanding of “quantitative easing” is limited to knowing it’s the opposite of “quantitative tightening”, and since the latter was ostensibly bad for stocks and the economy in Q4, the former must, by definition, be good. Or, as Trump puts it, things would “take off like a rocket ship.”

He’s probably right with regard to his “rocket ship” characterization, at least as far as asset prices go, but it might be a mistake to think that’s all he’s after when it comes to influencing monetary policy. That is, this is one case where it might not be entirely safe to assume Trump doesn’t understand the finer points/mechanics of something that’s at least a little bit complex. Trump undoubtedly realizes that a restart of QE would mean the central bank is monetizing all the debt he needs to issue to fund his tax cuts, and in the same vein, he likely realizes that more QE would push long-end US yields lower, helping to alleviate the current situation, which finds the self-declared “king of debt” holding the all-time record for most interest paid in a single year.

In other words, America is now in a dead-sprint down the road to the kind of insane, pedal-to-the-metal policy combo that one normally expects to find in locales where the executive is intent on turning the economy into a screeching tea kettle in order to perpetuate and otherwise validate an economic fairy tale foisted upon the gullible masses. Generally speaking, that entails pairing  fiscal stimulus with aggressively easy monetary policy even as the economy is humming. It also sometimes entails installing loyalists at the central bank irrespective of their qualifications.

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Red Ink: The Politics Of Fiscal Insanity

Over the past couple of months, this push has gone into overdrive. In the nine months since Trump first assailed Jerome Powell during an interview with CNBC’s Joe Kernen, we have gone from shocked at the president’s audacity vis-à-vis encroaching on central bank independence to totally desensitized. Now, Americans are subjected to daily calls for rate cuts from the president, his advisors, his central bank nominees and, as of Thursday, the vice president. It never, ever stops.

Journalists and television anchors are asking the “right” questions (e.g., “Why do we need monetary accommodation when the economy is doing ok?”) while bloggers and analysts are adopting the appropriate sarcastic derision (“We need rate cuts and QE because the economy is doing so well.”), but nobody seems willing to state the obvious, which is simply that this is right out of the authoritarian playbook.

That’s all this is. No different, really, than what’s going on in Turkey.

And it continued on Thursday. First, Stephen Moore showed up on Bloomberg to parrot the same talking points he used on Fox 24 hours previous. He even rolled out a new moniker for the Fed. To wit:

And I think the Fed has been afraid of growth — there’s ‘growth-phobiacs’ over there and I think they’re wrong.

This is truly pernicious rhetoric and what nobody seems willing to call Moore out on is the fact that he is employing the same logic Trump employs when the president claims that anyone who doesn’t support his immigration policies is “pro-crime” or “the party of drugs”.

What Moore is saying makes no sense. Obviously, the Fed isn’t “anti-growth” in the same way that Democrats aren’t “pro-murder-by-illegal-aliens”. What Moore is doing is taking something that is unequivocally good (growth) and suggesting that anyone who doesn’t agree with the president’s policies on how to go about attaining/achieving that thing is by definition anti that outcome. Larry Kudlow uses the same trick all the time – in fact, it’s one of Larry’s main talking points. If Kudlow were a pull-cord doll, he would shout “Growth, growth, growth” when you pulled his string.

This is all a red herring. Trump’s base (and the public more generally) doesn’t have any conception of monetary policy or fiscal policy, just like they don’t really understand immigration policy or the mechanics of global trade and commerce. What they do understand, though, are simple concepts like “murder”, “drugs”, “illegal immigrants”, “bad deals” and, yes, “growth”.

So, what you get from the administration are incessant references to people who push back on Trump’s policies as being “anti” or “pro” (whichever the case may be) the simple goals those policies are ostensibly designed to achieve. If you don’t like Trump’s immigration stance, well then you must be “pro-human-trafficking”. If you don’t agree with cutting rates and monetizing deficits, well then you must be “anti-growth” or, as Moore put it on Thursday, a “growth-phobiac”.

And so on, and so forth.

But nobody ever draws this parallel, presumably because it’s not polite to accuse Stephen Moore and Larry Kudlow of perpetuating the very same mindf*ck that Sarah Huckabee Sanders has mastered and that has allowed Trump to commandeer the Republican party, which, apparently, is now on board with massive deficits and printing money to finance them.

On that note, we’ll just leave you with a video of Larry telling The Hill that rates will “never rise again” in his lifetime and please – please – do note how Kudlow feels like it’s necessary to say that “the Fed is an independent central bank and we aim to keep it that way”, which is about like the police coming to your house to investigate reports that your spouse is missing and you inexplicably saying, unprompted, “I’ve never even been to that river down the street, by the way.”