Tuesday , September 27 2022

Trump & # 39; s almost incomprehensible wrong about the Fed, explained.


Jerome Powell

Be careful Jerome.

Alex Wong / Getty Images

Donald Trump is still angry with the Federal Reserve. He was against it for a while, of course. But his criticism seems to become more fierce. The president told the Wall Street Journal to see increases in rate & # 39; recent interest rate the central bank, which are designed to lose momentum in inflation but probably contributing to turmoil in the stock market and reduced domestic sale, as a "problem" for the economy than the usual item & # 39; his obsession, China. Then, said this almost incomprehensible flaw in & # 39; conversation with Washington Post.

And I'm not blaming anyone, but I say I think the Fed is & # 39; away from what you're doing, number one. Number two, positive note, we are doing very well on the business, are doing very well – our companies are b & # 39; very healthy. Do not forget, since we still came, 38 percent or something. You know, is tremendous – it's not like we & # 39; re up – and we have many more b & # 39; health. And we are much more liquid. And banks are now much more liquid during my mandate. And I'm not doing – M & # 39; INIX was working by the same rules as Obama. Obama had no interest to worry about; we are pay interest, much interest. He was not paying – we are talking about lots of & # 39; $ 50 billion in & # 39; different times, pay and laying liquidity. Also, Obama did it. And just so you understand, I am working with & # 39; of & # 39 economy; normalization, while he home free economy. It's easy to make money when they pay no interest. It's easy to make money when you do not pay, then do not – and yet, the numbers we have are phenomenal numbers.

This word slurry left many somewhat baffled yesterday. As Jared Bernstein, former chief economist & # 39; Joe Biden during his vice-presidential, put on Twitter"I just read that and broke mind. This stuff is like looking at an eclipse. It can not be read directly. You must have someone between you and the text to be safe."

So let's try to move some of the fog. Part of this is a standard point of speaking & # 39; Trump. The president believes it deserves more credit for overseeing good economy than Barack Obama, because when Obama was president, the Fed kept most rates & # 39; interest rate close to zero, whereas now the central bank jgħollihom. This is, of course, meaningless. Obama inherited the consequences of the Great Recession, while Trump bounced already expansive economy. Meanwhile, the Fed's decision to initiate the normalization of interest rates in 2015 may well have contributed to mine a little recession noticed in the manufacturing sector, fully know that helped President Donald Trump.

But the party's people really confusing was the comment of seemingly mysterious & # 39; Trump about spending & # 39; "$ 50 billion in & # 39; different times, paying cash and knocking." S & # 39; inħabna pay? That liquidity?

B & # 39; good luck, Bloomberg points to answer. As part of its efforts to return monetary policy back to normal, the Fed has been reducing its balance sheet to $ 50 billion a month. During the recession, the central bank bought massive quantities of & # 39; bonds to reduce borrowing costs, and are now slowly reduces that portfolio shrinks rates & # 39; back up (or "knocking out liquidity" in Trump speak).

This is good news for the country: the mind of the President can & # 39; to be flooded completely by Fox News, but at least considering macroeconomics, he still knows b & # 39; skill in reality.

Probably it is bad news, however, for Treasury Secretary Steve Mnuchin, which Trump allegedly promised to suggest that he has nominated Jerome Powell as chairman of the Fed in the first place. according to Bloomberg, Mnuchin recently asked if bond traders prefer to see the Fed policy to restrict its balance sheet or flow rates. It is a way around it looks like the Fed can & # 39; continues his business will not offset his boss. (What he must convince Powell to actually adopt that course & # 39; action is beyond me, because the Fed does not wish to take instructions from overseas). But because of the comments & # 39; Trump on "$ 50 billion", it seems that Mnuchin will have to keep looking for other ways to save his skin.

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