On Saturday, in a rare move reflective of growing international alarm at the increasingly precarious situation in America’s democracy, Mario Draghi weighed in on Fed independence amid incessant attacks on the central bank emanating from the Trump administration.
You can read extended highlights from Draghi’s remarks here, but suffice to say this was the line that grabbed headlines:
I’m certainly worried about central bank independence in other countries, especially in the most important jurisdiction in the world.
The fact that Draghi would wade into this debate underscores just how worried folks are about the prospect of Donald Trump commandeering monetary policy. No longer is it far-fetched to suggest that Trump is going the Erdogan route. In fact, it’s the opposite of far-fetched. Rather, it is playing out in real-time, on a daily basis. Our most incisive exposition on this yet can be found in “‘Growth-Phobiacs’ And Rates That Will ‘Never Rise Again’” – here’s how we described this situation:
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.
Fast forward to Sunday and Trump was back at it.
“If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points”, he tweeted, without providing any evidence to support those figures. Do note that the upper-end of Trump’s “range” would have the Dow sitting at 36,400. That is, frankly, laughable.
He continued, reiterating what he told Maria Bartiromo on March 22 about where he imagines GDP would be were it not for Jerome Powell.
“GDP would have been well over 4% instead of 3%… with almost no inflation”, Trump said Sunday.
And then, he capped it off by renewing his call for the Fed to restart QE. Amusingly, Trump appeared to suggest that the Fed should have never stopped buying assets in the first place. To wit:
Quantitative tightening was a killer, should have done the exact opposite!
In other words, Trump thinks the Fed should have been buying USTs hand over fist during the past two years, a time period which, “coincidentally”, lines up with Trump issuing mountains of debt to fund tax cuts for corporations and the wealthy, a fiscal maneuver which is now manifesting itself in a ballooning deficit that’s set to reach epic proportions under the self-declared “king of debt.”
There’s little else to be said here. Trump is going to keep this up until he either gets what he wants from the Fed, or else moves to “shake things up”, either by installing sycophants like Herman Cain and Stephen Moore, or, if that doesn’t work, simply conjuring an excuse to remove Powell as chair “for cause” and letting that serve as a warning to the rest of the board.