Trump Blames the Federal Reserve Chair for His Stock Market Debacle


Say what you will about Donald Trump, he is entertaining. If one wants to hear policy as stand-up comedy, he is the star.

The stock market has been in free fall as we all know. While there are a gazillion pundits making comments everyday about the market there is one fact everyone agrees upon. It is that the stock market is about making money. When profits and high and interest rates and inflation low stocks go up. This is not every day, of course, but over some months. When individual investors are making money they have money to buy stocks. 

And the opposite is also true, when no one makes money, or thinks they will make money, the market goes down. Trump has some simple but wrong ideas about the economy. He thinks China will pay the tariffs. The federal government will receive this tariff revenue; lower taxes and the stock market and economy will thrive. The opposite is happening because Trump has raised taxes instead of lowering them. Companies think their sales and profits will fall and investors sell stocks instead of buying them. 

Not wanting to face his role in this debacle, Trump scanned the horizon and noticed there was a Federal Reserve and its chair, Jerome Powell. "Good," Trump thought, "I'll blame him." 

Presidents, Senators and Congress members all blame the Federal Reserve for unemployment of inflation every year. But I have never seen today's circumstances where there was a dramatic tax increase and a President blamed someone other than himself for businesses thinking they will be making less money and investors thinking they will have less money to invest. 

While Trump's notion of how the economy works is humorous, it inevitably will have a lot of support in Congress and among the public. As a wise elderly professor in my economics grand school observed, "Never underestimate the ability of the public to latch onto a bad idea."

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