What Bonehead Appointed These Boneheads?

President Donald Trump continues to boast about creating the best American economy ever, but he also continues to urge the Federal Reserve Board to pursue the sort of monetary policy usually reserved for recessions and depressions. On Wednesday he “tweeted” that the Fed should be setting zero or even negative interests, and lamented about “A once in a lifetime opportunity that we are missing because of ‘Boneheads.‘”
We can’t claim to be Milton Friedman-level experts on monetary policy, but we think we understand the basics better than Trump seems to, and we’re cautiously hopeful that the “boneheads” at the Fed know best.
Trump’s “tweet” suggests he wants those unprecedented-in-American-history zero or negative interest rates so that he can rack up further trillion-dollar deficits at a lower cost, and perhaps allow him to refinance what America owes its international creditors. The self-proclaimed “King of Debt” believes he can negotiate the same kind of deal that left him rich even after six corporate bankruptcies cost his investors hundreds of million dollars, but we worry that the country would the have the same problem getting a line of credit that Trump has had ever since his casinos went under despite having house odds.
The “tweet” enviously notes that other countries have gone to zero or negative rates, but all of those countries are going into recession, partly because of the slowdown in the global economy that has followed Trump’s trade wars with just about everyone. Recessions require interest rate cuts and deficit spending, at least according to the consensus of economists on both the left and right, which has proved pretty reliable over the past many decades, but the best economy ever should be able to cruise along on the very low interest rates the Fed has lately set. Should the recent slowdown in the American economy slide toward recession, the Fed will need to be able to make cuts, and needs to keep that ammunition in reserve.
The “tweet” didn’t mention it, be we will note that four of the five Fed board governors and the Fed chairman — the aforementioned “boneheads” — were appointed by Trump. Trump also spent much of Wednesday denigrating newly defenestrated national security advisor John Bolton, the third man to hold the post in less than three years, calling him “not smart” and blaming him for starting the Iraq war, and Trump has had similarly unkind things to say about many of the people he appointed to powerful positions.
In his election campaign Trump promised he’d only hire “the very best people,” and he’ll probably repeat the claim during his reelection campaign, but that’s like saying the best economy ever needs negative interest rates.

— Bud Norman

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