Jerome Powell Is Trump’s Scapegoat

Federal Reserve Chairman Jerome Powell has become Pres. Donald Trump’s favorite scapegoat. As “his” stock market gets more and more volatile, Trump needs somebody to blame — especially during election season. The Fed chair makes the perfect target.

That’s why every time the stock market dips, Trump takes aim at Powell and the central bank. In the wake of the big stock market plunge earlier this month, Trump said, “The problem I have is with the Fed. The Fed is going wild. They’re raising interest rates and it’s ridiculous.” He also said the Fed is “going loco.” The next day, the president doubled down, saying “I’m paying interest at a high rate because of our Fed. And I’d like our Fed not to be so aggressive because I think they’re making a big mistake.”

Trump caught a lot of flack for criticizing the “independent” Fed, but instead of ratcheting down the rhetoric, Trump escalated his attack during a recent interview with the Wall Street Journal. The president essentially blamed the central bank for the recent volatility in the stock market and told the WSJ that it’s “too early to tell” if he regrets nominating the Fed chairman.”

The Fed is supposed to be an “independent” institution, operating above the political fray. We all know this is a charade, but most politicians at least endeavor to maintain the illusion. Not Trump. He told the WSJ  he is “intentionally sending a direct message to Mr. Powell that he wanted lower interest rates,” and indicated he wasn’t going to sit back and let the central bank wreck the economy.

I’m just saying this: I’m very unhappy with the Fed because Obama had zero interest rates.”

Ah. And therein lies the rub.

Obama got a full eight years of accommodative monetary policy and the benefit of the “stimulating” effect of low rates. Trump gets it. After all, he accurately called the stock market a “big, fat, ugly bubble” during his run for the presidency. And that’s what this is all about. Trump wants his own big, fat ugly bubble. In fact, he needs the bubble to stay inflated because he’s spent the last 18 months taking credit for the “booming economy.” As the WSJ put it:

The president’s caustic comments about Mr. Powell came as Mr. Trump repeatedly described the economy in personal terms. He referred to economic gains during his time in office as “my numbers,” saying, “I have a hot economy going.”

He described his push for growth as a competition with former President Obama’s record, saying that increases under his Democratic predecessor were skewed because of low-interest rates.

[…]

Citing the rate increases, Mr. Trump said, “How the hell do you compete with that? And Obama — remember this, it’s very important — Obama had zero interest,” the president said.

Trump knows rising rates are going to pop the bubbles. He knows the boom is breathing its last breath. And he knows the Democrats are going to blame him when the bubbles burst. He needs a scapegoat and Powell fits the bill.

In an article published by the Libertarian Institute, Alan Mosley called it “a trillion dollar game of hot potato.” As Mosley put it, it’s easy to get excited about the president attacking the Fed. And in a broad sense, he’s right. The central bank has caused the coming crash. But it’s not because Powell decided to raise rates. It’s because the Federal Reserve kept rates artificially low for nearly a decade. Trump has no desire to address the real problem – endless Federal Reserve (and government) meddling in the economy. He just wants the central bank to prop up his own political ambitions.

Mosely sums it all up this way.

In the broad view, it is perfectly reasonable to be angry, but it’s important to be angry at the right people for the right reasons. When President Trump publicly decries the Fed as an adversary, the ‘End the Fed’ crowd might be quick to cheer. After all, it is by the power of the monetary printing press that the Federal Reserve is able to finance the welfare/warfare state, while simultaneously bankrolling any number of projects for wayward politicians fulfilling their promises to the special interests that got them elected. Such government growth and subsequent cronyism wouldn’t be possible without the Fed’s monetary mechanizations. But President Trump’s barbs are hardly the strike at the root that is required because he has no political interest in taking the Fed on outright. With his swiftness to claim the most recent financial bubble as proof positive of his economic brilliance, the president has entered into a trillion dollar game of ‘Hot Potato,’ and being the one holding it when the bubble bursts could spell disaster for his party and administration.”

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