Donald Trump wants lower interest rates, he wants them now and he’s not taking “no” for an answer.
That’s according to… well, to Donald Trump, who beamed himself into Davos Thursday for a virtual speech to World Economic Forum attendees.
Trump made his political career in part by presenting himself as the antithesis to Davos, which emblematizes and epitomizes the much-maligned “globalist consensus,” a catch-all for the allegedly nefarious schemes of the world’s elite.
Yesteryear’s Trump — jet-setting playboy –would’ve been right at home eating $75 hot dogs adorned with gold leaf in an exclusive resort town, but all too often, his invitations to such events were lost in the mail. Arguably, the perception of snubs and slights did more to drive Trump’s political ambitions than anything else.
Whatever the case, Thursday marked Trump’s first Davos address since 2020 when, on the eve of the pandemic, he regaled attendees with tales of America’s economic miracle, which he called, to audible laughter, “a boom the likes of which the world has never seen before,” a boast with no basis whatever in reality.
Five years later, Trump castigated Joe Biden for ruining it all. America, he said, must repair the “economic chaos caused by the failed policies of the last administration” which “racked up $8 trillion in wasteful deficit spending.” I suppose I don’t have to say this, but just in case: The deficit widened every, single year under Trump and Mike Pence.
You can (and should) write off 2020 as the cost of rescuing the economy from the pandemic, but what about the other three years? Remember: Deficits are only bad when the other party holds the presidency.
Note also that growth obviously ran much faster under Biden and Kamala Harris than it did under Trump and Pence. That’s not a fair comparison, but Trump regularly traffics in unfair comparisons and outright non sequiturs, so why should we afford him the intellectual honesty he doesn’t afford to anyone else?
Anyway, the highlight (or the macro highlight) of Trump’s 2025 Davos address was his pronouncement on monetary policy. “I’ll demand that interest rates drop immediately,” he said. “And likewise, they should be dropping all over the world.” Recep Tayyip Erdogan would be proud.
Here’s the thing (and this is yet another example of something I shouldn’t have to say, but do, because Wall Street-types like to pretend they don’t understand the distinction, lest they should have to concede uncomfortable realities about the man who’s hell-bent on cutting their taxes and relaxing regulations for their employers): Trump “demanding” interest rates be lower is something categorically different from, for example, Elizabeth Warren insisting the Fed lower rates because Main Street needs the relief.
The difference is that Trump’s the president, and more to the point, he’s a president who believes he should be able to comment publicly, loudly and in a credibly threatening manner, about how the Fed should and shouldn’t conduct its business.
Further, Trump’s a president with no qualms whatever about demonizing the Fed (he once suggested Jerome Powell and his colleagues hate America), a risky endeavor which, in the current domestic political environment, undoubtedly endangers both officials and their families. The only saving grace is that a majority of Americans don’t know what the Fed does, nor who Powell is, and as such aren’t as likely to harass Fed officials as they are, say, public health authorities.
Finally (and most importantly in many respects), history’s clear: You don’t want monetary policy beholden to a demagogue. That’s not a partisan assessment. It’s not a question of left or right. It’s a question of populism. Letting a populist dictate the price of money is one of the surest paths to national ruin.
A caveat’s in order. The lack of viable dollar alternatives and the fact that America’s economic exceptionalism and corporate pole position in the AI gold rush are a magnet for capital flows, together mean there’s no real risk to the currency.
But make no mistake, democratic backsliding, a weaker rule of law (see not only Trump’s actions, but Biden’s on the way out the door) and a populist “demanding” lower rates, is a bad combination. Full stop.
About 10 years ago, I went through the list of all the countries in the world and divided them into two categories: “high level of corruption” and “low level of corruption”- using objective, and not relative measures.
At that time, I didn’t even hesitate about which category the USA belonged. Either I was seriously naive back then or we have declined substantially.
Similarly his drill baby drill mantra to reduce fuel prices is a pale imitation of Captain Picard’s
“Make it so” order and unlikely to cause anyone on the bridge to take notice. The bridge being the OPEC cartel that (loosely) manages supply to maintain price. Trump’s exhortation on reducing prices for fuel by increasing production pretends that the current marginal cost of production is significantly below current marginal revenue. This may be true for the OPEC countries but not the US producers. If it were the US producers would be hitting it out of the ballpark. But they are constrained in that they do not have pricing power.
For food pricing to be demanded to be lowered his own actions against illegal immigrants will be counter productive. Food production that relies on human pickers will decline. His proposed tariffs will raise out of season vegetables and fruit prices. My two cents is that he should eliminate ethanol additive requirements to fuel and allow corn and related food products to find lower prices.
The Caudillo of Mara Lago cannot simply order domestic drillers to spend huge money to expand oil and natgas production. This is one reason that he envies Putin, Xi and Rocket Man.
Their shareholders want buy-backs and dividends, as to the executives compensated with shares and options. A reminder that capitalism not patriotic.
The FT has three articles on this subject.
Shareholder returns rule our country.
In a just world, Trump would be laughed off the stage and shuffled off to assisted living. Instead, we live in a kakistocracy where incoherence and corruption are badges of honor. I hope all those execs who are cozying up to Trump have their words etched in their epitaphs. I’m embarrassed and ashamed for our species.
You nailed it !
Wall St’s savior Bessent is keeping a low profile in these first days.
Walt: Some time ago you made critical remarks regarding crypto
(which I agreed with). Given what’s going on now, what’s your current assesment ?
I mean, I spent all of early 2021 investing in, figuring out and otherwise learning what’s good, what’s bad, what’s fraud and what’s something in-between across crypto, Web3, DeFi and so on. I strongly encourage you to go back and read those articles. I’m not sure what you mean by “critical remarks” from “some time ago.” I’ve probably written 500 crypto articles over the last half decade. In a Weekly from around the election, I said I’d be buying Bitcoin on dips. There really weren’t any dips. But as I’ve mentioned on any number occasions since 2021, I still own Bitcoin, Ethereum, Solana, AVAX and some stuff I can’t remember the names of. I never look at it. All of that’s left over from that early-2021 deep-dive. I still own all my photography NFTs too, but only because there’s no liquidity for them (I couldn’t sell them if I wanted to). At the end of the day, it is what it is: Bitcoin’s digital gold, the rest of it has parallels with the private money business, and DeFi’s just a casino built on a Ponzi scheme. Historically, the private money business is dicey, to put it mildly, and Ponzi schemes are just fraud. Also, I think it’s important for folks to understand that, at least in my opinion, buying crypto through an ETF (or even on Coinbase, etc.) is no substitute for going through the process of doing it the “hard way,” which is to say via Metamask, etc. You really have to get your hands “dirty” so you understand what it is you’re dealing with. Just buying it with an ETF or on something easy like Coinbase is about like shorting vol through an ETN: You’re kinda shielding yourself from the underlying reality of what you’re doing, which is fine until something bad happens, at which point you’ll be even more frustrated than you would be otherwise, because you won’t understand what just happened to you.
The idea that a majority of Americans don’t know what the Fed does and who Jerome Powell is seems to me to offer negligible protection. When President Trump confronts Chairman Powell with simple demands that MAGA followers regard to be transparently beneficial and focuses his populist megaphone, they will know who Powell is and the obstacle he is to the “golden age”. Assured by the precedent of Trump’s pardons and more to come, the 1500 released “hostages” could well hear the call to the Eccles Building in a reprise of January 6. Among all of the aspects of this presidency, I find the groundwork laid for a private militia to do the president’s bidding among the most ominous.
Fortunately the Eccles Building has formidable defenses. Every guard I’ve seen is fully armed for war, streets closed to traffic, barriers etc. the whole nine yards. Getting in even if you an approved guest is a formidable process.
Unfortunately you are outlining the typical authoritarian playbook. Resorting to violence to force a position on the populous or your enemies is the anthesis of a democracy or even a republic.
That people do not see the american experiment as having already ended is sad for me to see. It saddens me that people are not willing to educate themselves about what we hold so dear and the biggest threat to our way of life. I have given up opposition to the changes and am now resigned to toil away while awaiting a new dawn.
Fully agree, were not heading for the path of demise we’re already well down it. The photo of the inauguration with the gods among men present is enough proof.
Trump likes beating up on the weak. Children, poor people, migrants, poor child migrants, federal workers, etc.
That will thrill the most odious of his supporters, but for the rest, performative cruelty will only get him so far.
He will need to take on increasingly strong entities, and he’ll find he has less ability to push them around. Trump can’t push around the oil industry, they are too politically strong. He’ll find the same with many other industries. Oddly, technology is not politically strong in that sense – half of them are credible candidates for being broken up, and none of them have much political love from Joe Voter.
Foreign governments, other countries’ central banks, Xi, Putin are all beyond his ability to push around – he can make things difficult, they will look to flatter, misdirect, deflect, etc, but at the end of the day the US economy depends enough on trade and the US consumer/voter has so little tolerance for pain or even inconvenience or merely expensive eggs, that anything Trump does to hurt them will hurt him too.
And, by the way, us. “Us” meaning investors. So despite all the new highs and money flows, it’s Condition Yellow or even Orange. Be ready to close the hatches, flood the tanks, and dive.
Great observation on the tech industry as being politically weak. I noticed that the celebs paying homage at the inauguration included Elon, Bezos, and Zuckerberg. Perhaps they are savvy enough to do the necessary transactions to avoid trouble. Tim Cook seems to be the ideal candidate for a Trump attack. Bill Gates is a question mark. How safe is Sundar Pichai?
Gates has a pretty compelling incentive for bending the knee. Two hundred sixty thousand acres of productive farmland, China and soybeans ya know.
Once his billionaire friends start arguing, the cracks will start showing up.
“Marshal Dillon, come quick, there’s a lynch mob gathering!”
And they are pulling a guillotine. ‘What give Marshall shall we stop them from coming into town?’