Trump on FED
Sept 8th, 2016
Republican Donald Trump charged the central bank led by Janet Yellen was holding down interest rates to make the U.S. economy look good as President Obama prepares to depart the White House. In response, Democratic challenger Hillary Clinton contends Trump’s criticism of the Fed is out of bounds and demonstrates his unsuitability for the presidency.
Both candidates’ criticisms are, at best, disingenuous.
“They’re keeping the rates artificially so the economy doesn’t go down,” Trump said when asked about a possible Fed rate hike. But the result is “a very, very false economy” that Obama can tout when he goes out to “play golf in January and say he did a good job.”
Of Yellen, Trump charged, “so far, I think she’s done a political job.” He has made it no secret he would replace her as Fed chair.
At some point the rates are going to have to change,” the GOP candidate continued. Meanwhile, the main beneficiary has been the stock market, which is in a “bubble.” Trump continued, “That’s only strong because it’s free money because the rates are so low,” which has created an “artificial market.”
But that marked a reversal of Trump’s previous position, in which he declared himself to be a “low-interest-rate person,” as this column previously noted last May, since he was the self-described “king of debt.” Then, he worried “if we raised interest rates and if the dollar starts getting too strong, we’re going to have some very major problems,” an implicit endorsement of the Yellen Fed’s low-rate policies.
That, in turn, conflicted with the view he espoused last November. At that time, Trump also claimed Yellen was holding down rates at the behest of the Obama administration to give the economy a boost at the tail end of his administration. Which is what he charged the Fed was doing earlier this week in a complete 360.
May 7, 2016
In an interview with CNBC, Trump said, “I am the king of debt. I love debt, I love playing with it. But, of course, now you’re talking about something that’s very, very fragile, that has to be handled very, very carefully.”
Nevertheless, given his record as a businessman who used bankruptcy to reduce his companies’ debt, Trump was asked whether the U.S. always needs to repay its debts at 100 cents on the dollar, or whether there might be ways the debt could be renegotiated. “Look, I have borrowed, knowing that you can pay back with discounts. And I have done very well,” he responded. “I would borrow, knowing that if the economy crashed, you could make a deal, and if the economy was good, it was good.”
Whether a President Trump would actually try to negotiate a deal to pay back Uncle Sam’s debts at less than full value is a matter of speculation. But he also pointed out, quite correctly, that a sharp rise in interest rates could potentially send the cost of the nation’s $19 trillion debt soaring: “What happens if that interest rate goes two, three, four points up? We don’t have a country.”
Indeed, Trump declared himself to be a “low-interest-rate person,” and not just to fund the national debt cheaply. “If we raised interest rates and if the dollar starts getting too strong, we’re going to have some very major problems,” he added. In that regard, Trump endorsed the policies of the Federal Reserve and its chair, Janet Yellen, but doubted he would reappoint her. “She’s a very capable person. People I know have a very high regard for her. But she’s not a Republican….When her time is up, I would most likely replace her because of the fact that I think it would be appropriate.”
Originally Posted by ProBlue33
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