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Trump attacks Federal Reserve, Powell over economy, GM, rate hikes

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President
Donald Trump and Federal Reserve Chair Jerome
Powell

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  • President Donald Trump laid into the Federal Reserve and Fed
    Chairman Jerome Powell once again.
  • So far, I’m not even a little bit happy with my
    selection of Jay. Not even a little bit,” Trump said, using
    Powell’s nickname.
  • Trump also blamed the Fed for the layoffs at General
    Motors and the stock market’s recent wobbles.

President Donald Trump continued to point the finger at the
Federal Reserve for any and all bad economic news during
an interview with The Washington Post
published Tuesday.

The president blamed the Fed’s interest rate hikes for the recent
stock market wobbles and
General Motors’ big layoff
and factory closure announcement,
according to The Post.

“I’m doing deals and I’m not being accommodated by the
Fed,” Trump said. “They’re making a mistake because I have a gut
and my gut tells me more sometimes than anybody else’s brain can
ever tell me.”

Trump also used the opportunity to once again blast Fed
Chairman Jerome, or Jay, Powell.

“So far, I’m not even a little bit happy with my selection
of Jay. Not even a little bit,” the president said. “And I’m not
blaming anybody, but I’m just telling you I think that the Fed is
way off-base with what they’re doing.”

The Fed began a slow and steady
interest rate hiking cycle in December 2015
 — well
before Trump took office — due to the relative strength of the US
economy.

But ever since the stock market has stumbled in recent
months and the economy has shown some signs of strain,
Trump has blasted the rate hikes
as the source of America’s
economic ills. The president has even gone so far as to call the
Fed’s rate hikes “loco” and the “single biggest threat” to the
economy.

Trump has also singled out Powell on multiple occasions for
continuing to support the rate hikes. In fact, Treasury Secretary
Steven Mnuchin is
reportedly now the subject of Trump’s ire
because Mnuchin
supported Powell during the selection process.

While the stock market’s uneven footing is due to a variety
of factors, one of those being the rate hikes, the GM
announcement appears to be unrelated. The automaker
announced
that four US plants in three states would be idled
due to falling demand and
industry trends moving away
from the products made at those
factories.

Trump’s attacks raise decades-old fears

Trump’s attacks on the Fed generally worry economist and other
market watchers because the abuse
harkens back to President Richard Nixon’s
pressure on
then-Fed Chairman Arthur Burns.


Read more:

Trump keeps bashing the Fed, calling the central bank ‘loco’ and
‘crazy.’ An ugly economic lesson from the Nixon administration
shows why his criticism is so worrying

Though done in private, Nixon pressured Burns to keep interest
rates low before the 1972 election in order to keep the economy
humming. In basic economic theory, the Fed’s interest rates make
it more expensive for companies and consumers to borrow money.
This helps to fulfill the Fed’s goal of keeping inflation low,
but also slows economic activity.

Nixon was successful
in convincing Burns
to keep rates low, which helped to
contribute to the disastrous stagflation of the 1970s and damaged
the US economy in the long run.

While Trump’s pressure may not be as tactful as Nixon’s — and may
in fact backfire — the spectre of the incident still looms large
over president-Fed interactions.

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