Larry Kudlow stopped by Bloomberg Television during his traditional post-NFP, full-court-press propaganda junket, and although his comments on the jobs report were rather dry, he lit up when Jonathan Ferro asked him about Bill Dudley.
Dudley was in the news last week after penning a controversial Op-Ed that essentially called for the Fed to set about removing Trump from the Oval Office in a kind of coup-by-technocrat.
Although we (and plenty of others) were quick to suggest that Bill would have been better served by not making an explicit reference to the 2020 election, the rest of his Op-Ed was spot-on, as it essentially amounted to a recap of the notion that the Fed shouldn’t enable the trade war, something most desks across Wall Street wholeheartedly agree with. Dudley subsequently penned a highly amusing follow-up post, which included assurances that there is no “deep state” and that he’s not “part of any conspiracy”.
Well, on Friday, Kudlow lit into Dudley, calling him “far off the charts” and suggesting that his Op-Ed linking monetary policy to the election is a “new low”.
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“Dudley went over the cliff”, Larry seethed, on the way to calling the Op-Ed “the most politicized statement I have ever heard”.
Pressed by Ferro to explain how what Dudley said is different from what the administration has done with regard to pressuring the Fed to cut rates in the interest of bolstering the economy ahead of an election year, Kudlow had the audacity to say that “we have never suggested that Fed policy be geared towards elections”.
That is so wildly disingenuous that one struggles to decide where to start when it comes to lampooning it.
Trump is palpably concerned about the economy and he has repeatedly insisted that one of his greatest achievements as president is ushering in an economic renaissance. Never mind the fact that there is absolutely nothing extraordinary, let alone anomalous, about the GDP numbers Trump has posted. In fact, the only way you would know which quarters are Trump’s on a long-term bar chart of quarterly GDP prints is because they are arranged in chronological order (i.e., the right-most bars are “his”).
“It’s a wonder the US is growing at this rate with the monetary headwind”, Larry told Ferro on Friday. That’s just Larry parroting a line he’s used on countless occasions. While it’s true that when you measure from the QE-inspired lows in the shadow rate, this cycle has seen an abnormal degree of tightening, the funds rate is historically low. And, of course, the rate hikes commenced before Trump took office, something it seems more and more like this administration is keen to obscure.
Trump (and Kudlow and Peter Navarro) habitually blame the Fed for hurting the US economy, with Trump going so far as to ask, on August 23, “who is our bigger enemy, Jay Powell or Chairman Xi?”
“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election”, Trump tweeted, on August 19.
If that latter bit isn’t “suggesting that Fed policy be geared towards the election”, then I’m not sure what is.
When it comes to politicizing the Fed, Dudley may have been out of line, but does Kudlow really expect anyone to take him seriously when it comes to who the bigger threat to Fed independence is between Trump and Bill Dudley?
Below is a history of the president’s tweets about the Fed since April (and these are just using the keywords “Federal Reserve”, so it doesn’t necessarily capture every tweet on “Powell” and the “Fed”, shortened).
And look, you can trace this back a year. In October of 2018, Trump plainly stated (during an interview with Fox Business ) that “My biggest threat is the Fed”. That’s straight from the horse’s mouth.
As far as the trade talks go, Larry was keen to paint a pretty picture on Friday.
“There are no conditions, they’re coming to talk and we welcome them with open arms to talk”, he said. As to whether the October tariff hike (the rate on $250 billion in Chinese goods will ratchet higher to 30% from 25% on October 1), Kudlow demurred, saying he didn’t want to speculate. “It may be part of the conversation, there will be a lot of things as part of that conversation, I’m sure tariffs will enter into it”, he added.
Earlier, during a chat with CNBC, Larry said “the phone call the night before last with Secretary Mnuchin and Lighthizer and Vice Premier Liu He went very well [and] that’s important”. Here’s the clip:
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He continued: “The phone lines have been open during this period and the negotiations have been proceeding”.
You know, it’s funny: Given the number of times Trump has personally called Jerome Powell this year, you could say the same thing about the administration’s relationship with the Fed.
That is, “the phone lines have been open during this period and the negotiations have been proceeding”.
In a year filled with strange and mystifying events/pronouncements, the first Dudley letter stands out as one of the more mystifying. I dunno, maybe, given its direct channel to Wall Street, the NY Fed is primus inter pares, and Dudley was acting on his own. But I find that a little hard to believe: the guy is a born institutionalist. Despite Dudley’s protestations, the more likely explanation is that someone or thing was trying to put a shot across Trump and Navarro’s bow.