The Federal Reserve as Trump's Scapegoat


What has seemed obvious to me for several months has not been discussed in the press coverage of the President. At least not that I have seen.

Interest rates have been so low in recent years they are in what is called real terms, zero. That is if interest is 2% and inflation is two percent the borrower pays the interest by an increase in the prices he/she receives for whatever she sells.

The Federal Reserve has been raising and lowering their own interest rates (and reserves available for loans to banks) for several years with no discernible impact on the economy. The President saw an opportunity to pull off a ruse and it has worked until now.

He made a demand of the FR which he wanted it to turn down. To make sure they turned it down he made a request far outside anything the FR would consider. He requested the FR cut in half the interest rate which was already zero in real terms. The FR has never cut interest rates in half.

It seemed clear the reason he made this sure-to-be-rejected request is to set up the FR as a scapegoat. If the economy tanks he can blame the FR.

This ruse has finally been recognized by a long-time columnist on economics, Robert Samuelson. It would be helpful to the public's understanding of this if the dozens of other columnists who write about economics would recognize this obvious political gamesmanship.

The link also explains the limited influence the FR has on the economy. The article explains that the FR only influences about 40% of economic change. It ability to influence is best when there is a simple threat and a somewhat simple solution. Chairman Volker made loans so hard to get and so expensive it was influential in turning back inflation during the Vietnam War. Since then there have been another time or two it might have been important. In recent years it has been unimportant.

Unimportant except it serves as a straw man for President Trump's reelection.

Comments

Post a Comment

Popular posts from this blog

Maybe the "Original Sin" Should be Reassigned

Image
We can all agree most Catholic priests are fine people and not guilty of sexual abuse. What Catholics must face, however, it that their church harbors executives who are dishonest . There is an incredible story about the Argentine Bishop Zanchetta. The Pope worked with him in Argentina and they are considered friends. Around 2015 Zanchetta sent nude pictures of himself and they began circulating world wide. He also was too friendly with young seminarians and some left because of him.  Three different officials say they made formal complaints to the Vatican about Zanchetta between 2015 and 2017. Yet, in 2018, the Vatican claimed it was unaware of any complaints about Zanchetta. This might be a good time to repeat the Catholic hierarchy claims to have the sole authority handed down from Jesus to what the faith stands for. It condemns as sinners those who practice birth control, have abortions and gay sexual relationships. Handing the hierarchy this responsibility would make som
Read more

The Religious Capitol Invaders May Yet Win

Image
So much about U.S. society and religion can be learned from the Civil War and what happened afterwards. After its defeat, the South started a myth about the unethical soldiers from the North. The South fought for principles of God and states rights. The North did not. It was the South, this propaganda told the country, that had the high moral ground.  The Capitol invaders, encouraged by Trump, swallowed the myth that Biden's election was stolen. Thus, they think they held and still hold the high moral ground. This was reinforced by the cross and prayers during the invasion. Even with Trump is gone, we will see political opportunists like Senators Ted Cruz and Josh Hawley stroking crowds and feeding the same lies as Trump. Like "the South will rise again" these gullible followers will talk of victory over the unclean. After the Civil War the South rallied around the phrase, Lost Cause. For decades, and maybe to this day, there are ceremonies remembering fallen martyrs, Re
Read more

Father Frank Pavone, the Ultimate Crook

Image
Recently, the Vatican defrocked Frank Pavone. His diehard fans are outraged. This is because he cleverly manipulated his fans and the press all the while living well from donations and, apparently, abusing some women. By making abortion the "sin" of the century, and himself the main opposition to this one sin, he himself could get away with any sin he pleased.  As the link points out, Pavone was the perfect priest for the Trump era. Trump is so self-important laws have no role in his life. He felt accountable to no one. Women were there to be had. Pavone and Trump are interchangeable.  Pavone was very successful raising money. In his mind, abortion was so important in Catholic beliefs and he was so important in anti-abortion the money he raised opposing it was his to do with what he liked. The Catholic Church, the brand name he used to raise this money, thought the money belonged to it. When he gave the Vatican the bird, it gave him walking papers. With polls showing the majo
Read more