Trump’s Reelection a "Threat to the U.S. and Global Economy"

-edited

William Dudley, former NY Fed President, wrote a Bloomberg blistering editorial attacking President Trump.

Please consider The Fed Shouldn’t Enable Donald Trump by William Dudley.

U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?

If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach.

Fed Chairman Jerome Powell has hinted that he is aware of the problem. At the central bank’s annual conference in Jackson Hole last week, he noted that monetary policy cannot “provide a settled rulebook for international trade.” I see this as a veiled reference to the trade war, and a warning that the Fed’s tools are not well suited to mitigate the damage.

Yet the Fed could go much further. Officials could state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions.

Such a harder line could benefit the Fed and the economy in three ways. First, it would discourage further escalation of the trade war, by increasing the costs to the Trump administration. Second, it would reassert the Fed’s independence by distancing it from the administration’s policies. Third, it would conserve much-needed ammunition, allowing the Fed to avoid further interest-rate cuts at a time when rates are already very low by historical standards.

I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

Trump Responds

That response is very mild. I expect more later.

Trump a Threat to the Global Economy?

Of course he is. Trump is clueless about trade and monetary policy.

Central banks are also clueless. Three consecutive economic bubbles are proof enough. So Trump is correct when he calls the Fed clueless.

Moreover, there should not be a Fed in the first place.

But history shows that when governments take over monetary policy, hyperinflation is frequently the result.

Poll: Trump a Threat?

Poll: Trump More of a Threat Than the Fed?

Mike "Mish" Shedlock

Comments (107)
No. 1-30
spitituscanus
spitituscanus

your anti Trumpism has deranged your thinking

2banana
2banana

So the Fed admits it will meddle in elections.

Will a special prosecutor with an unlimited budget be appointed to look into this?

Indictments? Jail? Testimony in front of congress?

When did the role of the Fed include meddling in elections?

Or does it not count if they only meddle to help democrats?

Webej
Webej

Poor old USA. Responsible for half of all military spending globally and entitled to seignorage on the world's monetary base, but being the lone kid picked on by the rest of the class. So unfair.

Tony Bennett
Tony Bennett

Rule #1 ... Never Trust a (ex )Goldman Sachs-er

Rule #2 ... See Rule #1

Mish
Mish

Editor

Kurtellis nails it: "mish has always been pro free trade, anti-government meddling in the economy and pro balanced budget."

My statements are about economic policy. Trump is an outright moron on trade.

Moreover - he did not get us out of Afghanistan and is warmongering Iran and Venezuela

His budget is a disaster

Finally, I voted for him and would do so again vs Hillary

RonJ
RonJ

"This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?"

Housing bubble comes to mind. It was a manufactured disaster, the FED taking lending standards to ZERO, while holding the interest rate at 1%. Greenspan even thanked bankers for getting people into homes they could not afford.

There has been a lot of offsetting stimulus to mitigate the damage done by reckless bankers during the housing bubble. Years of ZIRP coupled with multiple rounds of QE.

Blurtman
Blurtman

He’a. Russian cyborg!

JonSellers
JonSellers

Mish has this one right. Both are disasters.

Maximus_Minimus
Maximus_Minimus

Let's consider the idea on its merits: crash the economy by raising rates just in time for elections. Dudley apparently believes that the next contraction will be like a mild flu, and the soup kitchen lines will stay orderly.

abend237-04
abend237-04

Huge blunder by Dudley attacking Trump at this very late date. All he has accomplished by it is incitement and alienation of Trump voters, of which I am not one. He could have helped Powell by lobbying for his publicly stated past positions on key issues, such as Powell's opposition to Bernanke's qe3 boondoggle. Instead of attacking Trump directly, he could also have helped by hammering hell out of two hugely disastrous developments occurring on his watch:

1.We're ten years into an expansion and running a 5% budget deficit.

2.The national debt has near-tripled on Dudley's watch, but debt service cost is up only 15%, lulling everyone into complacency.

A truly alarmed, helpful Dudley would have resigned in outrage prior to Trump's arrival. And, yes, Trump continues to be the bull in the China shop that he always was and the only electable thing in sight at the time better than Hillary.

Realist
Realist

Certainly, Trump is a disaster for the US and the world economy. Plus, I agree with Mish that free trade is worth working towards, and is much better than Trump’s protectionism.

And I find it hilarious that many Trump supporters, who used to complain about government interference in the economy, are now rabid fans of Trump trying to interfere in the economy, picking the winners and losers, and “hereby ordering” what companies should do. What a bunch of hypocrites.

It would be great if we lived in an ideal world with ideal leaders. But we don’t. And we would likely be better off without Central Banks. But the reality is we have Central Banks and we have incompetent leaders like Trump.

So, at some point you have to stop pleading for an ideal world, and start dealing with the world you have. Don’t get too hung up on worrying about things you can’t change.

I certainly can’t affect who becomes your President as I don’t get to vote in your country. All I can do is deal with the reality of who you elect. Sorry that you elected such a moron. But we are all stuck with him. Now, I have to get back to focusing on my own matters. Cheers all.

Matt3
Matt3

The Fed has done an excellent job, along with all of the free trade agreements and technology transfers to China. It has made all of those involved very rich. Trump is absolutely a threat to the continuation of these policies. That's why all of the established organizations are against him. It's also why he was elected.

RonJ
RonJ

"There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives."

Some 250 TRILLION dollars in global debt threatens the U.S. and global economy. As Mish would say, we are choking on it.

The FED lost its independence under Woodrow Wilson, who as Martin Armstrong reminds, ordered the FED to buy government debt to support WW1.

Employment and inflation objectives- which manage to usually be out of reach. How many years did it take the FED to reach the objective of full employment, after the Great Recession? A stopped clock is right twice a day, without doing anything. Nor is 2% inflation stable prices. Along a time line, the cost of everything doubles. It's the old trick of placing the frog in warm water and hoping it won't realizing the temperature is rising 2 degrees at a time.

Maybe someone should ask the FED what their monetary policy is going to be in the face of a rising Chinese empire. After all, BOE's Mark Carney noted that low interest rates lead to war.

Ted R
Ted R

I think Trump will easily be reelected. He can always blame the Federal Reserve and China for any economic downturn and most people will believe him. The Russia Probe has come and gone and Trump is still here. Actually it is time to audit the Federal Reserve and stop looking at Trump so closely.

Tengen
Tengen

Obviously the Fed is a far greater threat to the global economy than Trump. The Fed has been a malicious force for a century whereas Trump is some guy who burst onto the scene a few years ago and doesn't know what he's doing. Our myriad problems started long before Trump thought it might be fun to be POTUS.

Until recently I thought Trump would win reelection easily, but now I'm not as sure. It probably doesn't matter, the DNC will not allow an outsider to grab the nomination (no Bernie, Tulsi, or Yang) so they'll put forth a status quo puppet who will continue our march to oblivion if elected.

The only way Trump could be a larger threat is if he blunders into a world war, but that seems very unlikely. He's an ignoramus on diplomacy, but he doesn't seem to want any major conflicts. He won't start a war with China, and HOPEFULLY he won't start anything with Iran.

1410
1410

If not Trump then who ? Communists ? Socialists ? Liberals ? Rainbow minds ? Mafia? Thieves ? Pedophiles ( like Mr.E.) ? Who, Mr Dudley ! Who is good for America and for Americans ?

caradoc-again
caradoc-again

Reading his comments he's inviting an end to the Fed if they now DON'T support Trump. The suspicious will be out there that any act to prove Fed independence is now an anti-Trump act to influence 2020.

What was he thinking?

Stressing the need to act independent of political influence is correct, suggesting there is an argument to act to determine the outcome of an election is quite another thing.

I'm quite shocked.

Mish
Mish

Editor

"Why would you vote again for Trump? Can anybody else be worse than Trump The Chosen One?"

Because I believe Hillary is an even bigger war monger than Trump. Hell bells, even McCain praised he foreign policy. And if you look her statements on trade were similar. Finally, one must consider Supreme Court picks. Trump made two good ones.

Mish
Mish

Editor

"Finally, I voted for him and would do so again vs Hillary Of course you would. Doing otherwise is tantamount of admitting that you were wrong."

I am wrong about a lot of things and admit it. Your apology is accepted in advance

Mish
Mish

Editor

"I agree a person that has found what a fraud Trump is and still would vote for his is totally derange..."

The deranged person is one who cannot at least consider the possibility that Hillary just might have been worse.

FromBrussels
FromBrussels

RIDICULOUS to think that one human crapper(Trump) could change the Sapiens Ape's economic destiny... The Sapiens' eternal economic growth fantasy world is now mostly, not to say entirely, debt driven, the financial system is definitely on the brink of total collapse, on top of that the planet is being destroyed like never before which will eventually lead to horrible international conflicts....I am afraid not even the gold illusion will safe our asses this time....(and I do own some ingots )

Schaap60
Schaap60

Trump is baffoon, but we have him in large part because the U.S. economy has been a crapper for tens of millions of Americans for several decades. Dudley is a moron for not recognizing (admitting?) the Feds role (blowing repeated bubbles, financialization of the economy) in bringing Trump to power. The Fed, Hillary, and a large 2016 Republican field were the perfect storm that brought us this mess.

caradoc-again
caradoc-again

If the economy is reasonable in 2020 Trumps chances improve.

So think about that.

He's saying there's an argument for the Fed to create an economy that hinders Trump.

Forget their mandate, hinder Trump.

I suggest he didn't engage his brain and that says a lot given his previous role.

This is a nail in the coffin of the Fed imho.

Sechel
Sechel

Don't like how Dudley put it, They shouldn't work against Trump but neither should they be trying to subsidize bad trade policy. President needs to be accountable. If Trump insists on pouring gasoline and lighting a match on our economy its not for the Fed to constantly apply the hose

Herkie
Herkie

Could not vote because I terminated Twitter last week, but I say with no doubt he is more of a threat, because he has more powers and is a loose cannon in a world that requires stability. The Fed is evil and greedy and bad for us all, but at least you can count on them to do what they always do, protect the assets of the wealthy.

cottontrader
cottontrader

Yet the world continues to pour money into the USA....Why is that Fishmish???...You buffoon

Expat
Expat

The Fed has cost the US economy trillions (various bubbles and crashes and handouts to banks). Trump has also cost trillions (trade wars and tax cuts to the rich). So far the Fed has cost more, but they have been around longer. The Fed costs money and helps the ruling elite warp the economy and society to increase the wealth of the rich and enslave (through debt) the rest of us. But it's only money. Trump has turned much of America into an overtly racist, xenophobic, intolerant, anti-education nightmare. He has alienated the world aside from a few despots and tyrants. Can that be corrected so easily? Perhaps.

The Fed is corrupt but I would rather have the Fed than let the Market set rates. The Market does not exist; the Market is a cabal of traders and banks who manipulate rates.

The Fed needs to be unprivatized (Oh, God! Socialism! LOL.). Trump needs to develop acute pancreatic cancer (and Pence because OMG he's the only person worse than Trump.)

stillCJ
stillCJ

Editor

It seems a twitter account is required to vote. Mish should consider that the vote may be skewed due to many people like myself never going to do twitter.

Leoxes
Leoxes

A threat to humanity period. Should be up there with Supreme Leader of Iran, his mate Kim Jong Un etc