Why has Trump taken such an interest in Fed Chairman, Jerome Powell, for so long? He has berated him for years for not dramatically lowering interest rates in accordance with Trump’s wishes. The latest benchmark for the Fed rate was 3.75 percent. Trump thinks it should be more like 1.5%.
The job of the Fed is to regulate monetary policy with two primary goals; 1) keep inflation in check with a target of about 2% and, 2) maintain maximum employment, which is usually defined as an unemployment rate of about 4 percent. There are other things like regulating banks, ensuring a sound financial system and research but inflation and employment are its top objectives. They analyze a wide spectrum of economic and employment data before making a decision to increase or lower the Fed funds rate.
If they raise the rate, that impacts all types of borrowing, making it more expensive for both individuals and corporations and that, in turn, can lead to a decrease in spending and investment which would cause an increase in unemployment. On the other hand, if they lower the rate, borrowing costs are reduced, which can lead to increased spending and investment which may also lead to an increase in employment. In short, it is a very delicate balancing act complicated by the fact that the results of any given decision won’t have an immediate impact on the economy. They need to keep inflation in check but if they raise rates too aggressively in pursuit of that goal, it can adversely affect employment. In short, the Fed makes their best assessment of what, if anything, they need to do with the Fed funds rate based upon the data available to them at the time but, as any economist will tell you, it’s far from an exact science.
So, why is Trump so obsessed with the Fed funds rate and Jerome Powell? Does anyone really believe that Trump cares about or even has a grasp about the economy of the United States and its impact on the global economy? The fact is, Trump is, first and foremost, a real estate developer. And what is one of the most important factors for all real estate transactions? Interest rates! Anyone who has purchased a house, or even a car for that matter, understands the importance of interest rates.
Trump and the Trump corporation also have a lot of debt! Some estimates are in the billions of dollars. A point lower on the interest rate will have a substantial impact on debt payments and, hence, profitability. At one point, Trump referred to himself as the ‘king of debt.’ Many of Trump’s real estate transactions are heavily leveraged which means their profitability is dependent upon the interest rate they are paying on the loans!
Virtually every credible economist, including every living past Fed Chairperson, has stated that a dramatic decrease in the interest rate on the order of what Trump wants would be disastrous for the overall economy and lead to higher inflation and higher unemployment. It would also have simultaneous adverse impacts across the globe. But who would benefit from substantially lower interest rates – non other than Donald J. Trump and his corporation.
This is yet another classic example of Trump being out for Trump and Trump alone. Does he care that the American people will once again be left holding a Trump bag of crap (inflation and unemployment)? Did he care about the creditors and contractors left holding his bag of crap when he filed for bankruptcy six times? Hell no! He wants to be able to refinance all his debt at a substantially lower interest rate and if the economy goes to hell in a hand basket because of that, he just does not care.
The one universal truth about Trump is simply the fact that when you examine almost each and every action he takes and you peel the onion far enough, there is a direct benefit to him personally or to his corporation. If those actions adversely affect the American people in the process – tough sh$t! The one thing that is an absolutely sure bet is that Trump is looking out for Trump above everything else.
Quite frankly, anyone who believes his ‘America first’ rhetoric is an idiot! It is now and always has been ‘Trump first.’ His sham investigation into Jerome Powell is just another in a very long list of examples of situations where people will not take actions demanded by Trump that will personally benefit Trump and his company and they become a target for his vindictiveness.
