Donald Trump didn’t learn much from the commentary that accompanied the second-worst consumer sentiment print of his presidency.
“The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession”, Richard Curtin, director of the University of Michigan consumer survey, said in a statement, underscoring the notion that the president’s efforts to draw attention to the Fed and force rate cuts may be backfiring.
Sources (some Republican) who spoke to the Washington Post last week suggested the president is becoming increasingly paranoid about the economy ahead of 2020. The angst which is apparent to those close to Trump boiled over last Wednesday when an 800-point plunge in the Dow prompted a series of wild tweets about the Fed and the “crazy inverted yield curve“.
Read more: Trump ‘Rattled’ Amid Market Chaos, Is Calling Business Leaders About Economy, Sources Say
With stocks up sharply on Monday, Trump probably should have let sleeping dogs lie, but instead, he took to Twitter to launch a fresh attack on the Powell Fed.
“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed”, the president said, before positing a conspiracy.
“The Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election”, he said, without citing any evidence. He called this imaginary plot “Very Selfish!”
An NBC/Wall Street Journal poll released over the weekend showed Americans still approve of Trump’s handling of the economy, but the margin shrank to just 3ppt.
Trump continued on Monday, lamenting the resiliency of the greenback. “Our dollar is so strong that it is sadly hurting other parts of the world”, he wrote, without even a passing acknowledgement of the fact that if you’re looking for the culprit when it comes to explaining what’s “sadly hurting other parts of the world”, it’s the trade war.
This month’s turmoil has at least as much to do with trade escalations as it does with Fed policy, although the waters are hopelessly muddy thanks to the fact that Trump is now seemingly injecting uncertainty into the trade discussion solely to engineer rate cuts.
The president proceeded to demand aggressive cuts to “the Fed rate”.
“The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well”, Trump declared. He is apparently oblivious to the mechanics of the Fed’s balance sheet policy. Runoff stopped this month and it seems as though nobody has apprised him of what will mechanically unfold in the months ahead. That said, he is obviously calling for “outright” (so to speak) QE, something which may in fact be necessary for all the reasons outlined here.
The president’s latest attacks and exhortations come days ahead of Powell’s hotly-anticipated remarks in Jackson Hole, something Trump is doubtlessly aware of.
If you’re wondering what Trump imagines would happen in the event the Fed cut rates by 100bps in “a fairly short period of time” and resumed large-scale asset purchases, the answer is that, quote, “our Economy would be even better, and the World Economy would be greatly and quickly enhanced”.
That, Trump shrieked on Monday, would be “good for everyone!”
That’s not a genuine Trump tweet. He spelled “quantitative” correctly.
H, your opening line “Donald Trump didn’t learn much from the commentary…..” should come as no surprise.
Trump isn’t about learning, Trump is about Trump.
The trade war is solely about him wielding his power to single-handedly bring China to its knees. Trump needs to be the “winner” and the other to be the loser.
Trump LOVES that power, and the consequences be damned, but he wants everyone to stand behind him in doing it.
Powell is yet another respectable person who will be humiliated by the moron (using your favorite descriptive)
Let’s just be real, trump wants to goose stocks to claim he was better than Obama. If the Fed would just ignore trump and let stocks fall, perhaps allowing yields to rise, the market would have a short-term temper tantrum, then move on and the Fed would be a stronger institution. Most people might look back and be thankful that the total return for the S&P 500 for the last 10 years has been 137.016%; Annualized S&P 500 Return @ 9.013% per year. If the Fed would stop playing games and allow for a market correction, even towards a 20% haircut, what’s gonna happen … people will buy back in and the Fed will look far more independent and trump will limp back to selling fashion trinkets with the fake first lady.
Maybe so but so far nobody has stumbled over any negative consequences to goosing said stocks. Until they do expect this behavior to continue. People, especially large groups of people, are irrational actors. There are already people claiming that central bank and government stimulus and financial policies in the post-2008 world have made recessions a thing of the past. In other words, we’ve entered a period of indefinite, if moderate, growth so there’s no reason to worry about those aforementioned negative consequences. So why not keep rates at 0? Why not pile stimulus atop loose monetary policy? Why not break down multilateralism when it comes to trade? Nothing bad can ever happen again, because the suits at the Fed have you covered. Until something snaps people out of that mindset expect the irrational exuberance to continue.