Here’s Why The Fed Rate Cut Makes Trump ‘Very Happy’ But Signals Trouble For America

Donald Trump joined his Coronavirus Task Force for their press briefing on Sunday. He took the podium and began his remarks by saying that “I think we have some great things to talk about.” That’s a bizarre opening for a briefing where medical experts are about to disclose how many more Americans are infected and dead, and how much worse it’s going to get before it gets better.

Donald Trump, Stock Market

The reason Trump could start off so upbeat is that he wasn’t there to talk about the coronavirus. He immediately launched into the news that the Federal Reserve Board just announced an emergency cut in the interest rate and the intention to purchase up to &700 billion of treasury bonds and mortgage-backed securities (quantitative easing). For much of his presidency, Donald Trump has been railing against the Fed for not being a mindless functionary that obeys his every command (like his incompetent Cabinet and the GOP jellyfish in Congress). What he obviously doesn’t understand is that there is a reason that the FED was designed as an independent agency that is insulated from pressure by the White House. Their objectives are often not aligned. Nevertheless, he was giddy about this rate cut and burst into celebration (video below):

“I’ll start by discussing the Federal Reserve. As you know, it just happened ten minutes ago, but to me, it makes me very happy. And I want to congratulate the Federal Reserve. For starters, they’ve lowered fed rate from what it was, which was 1 to 1.25 and it’s been lowered down to 0 or 0.25. […] That’s really great for our country. It’s something that we’re very happy, I have to say this, I’m very happy.”

Trump has good reason to be happy. Contrary to his thoroughly bogus branding, Trump is failed businessman who has racked up hundreds of millions of dollars in debt, much of it with variable-rate loans. When he took office in 2017 he was the most indebted president in history, owing more than $350 million to Deutsche Bank alone. That debt is expensive to service. But when interest rates go down, so do the costs of servicing debt. Bloomberg reports that prior rate increases “may raise President Donald Trump’s cumulative cost from the U.S. central bank’s hikes since his inauguration to $6 million per year.”

So Trump has a distinct personal financial benefit when interests rates decline. He also seeks a political benefit due to rate cuts artificially (and temporarily) goosing the stock market. That’s something he has been relying on to advance his reelection prospects. He often uses the market as a gauge for the health of the economy. That’s a viewpoint that only someone utterly ignorant about these matters could hold. The performance of the stock market only tells you what institutional investors think about the valuation of equities, which fluctuate independent of the broader economy. The economy, on the other hand, is comprised of many other factors such as consumption, employment, wages, trade, and inflation.

Along with his joyful reception for the rate cut, Trump also made a prediction that “People in the market should be very thrilled.” Maybe not. Shortly after the announcement was made the Dow Jones futures took a dive, forecasting an opening decline of more than 1,000 points on Monday morning. That’s because investors recognize that the Fed’s decision to make this emergency cut is confirmation that there is economic trouble on the horizon. [UPDATE: Trump’s foolish craving for a rate cut and quantitative easing didn’t produce the results he hoped for or predicted. The market opened sharply down Monday, dropping as much 2,500 points]

Trump’s slaphappy elation notwithstanding, professionals understand that rate cuts are a reaction to negative economic conditions. It could mean that we are headed downhill. Home sales, wage stagnation, depressed treasuries, illiquid credit, and the exploding debt, are all indicators that generally forecast a recession or worse. Which explains why futures have cratered in the few hours since the announcement. And little of this has anything to do with COVID-19. These economic realities were in place before the virus began to spread. It was just a trigger and an accelerant.

As usual, the people who would be hurt most by that would be the lower and middle income families whose savings would deplete and whose jobs would disappear. The rich would suffer a decline in their net worth, but would remain rich and well positioned to profit when the economy turns around. That is a built-in inequity in our economic system that advantages the wealthy by design. And Trump is purposefully exploiting it for personal financial and political gain, without the least bit of consideration for the harm it will cause to millions of working Americans. Even worse, he’s celebrating it.

How Fox News Deceives and Controls Their Flock:
Fox Nation vs. Reality: The Fox News Cult of Ignorance.
Available now at Amazon.

Advertisement:

2 thoughts on “Here’s Why The Fed Rate Cut Makes Trump ‘Very Happy’ But Signals Trouble For America

  1. Readers know when you say opinionated B.S. like this (like his incompetent Cabinet and the GOP jellyfish in Congress)… it maybe true, people may agree, but this is not a news piece. It’s another hit job. That’s why after a day only 3 people shared thos trash. I happen to agree with you but stopped reading right after because this is not a fact based article. Save your opinions for the end when reader are almost done… You can send payment for your writing class to the email I’m being forced to provide to distribute this knowledge.

  2. My, my… aren’t we just a wee bit “stuck on ourselves”??!
    I (the reader) knew 2 things before I finished your 1st sentence (& a very long 1 it was!):
    #1.) Contrary to your assertion that you “actually agree with” Mark – you actually do not. The phrase, “opinionated BS”, gave you away right off the bat. (Sorry, dude.) Some other giveaways in your comment were… Calling it “another hit job”, followed by a reference to “trash” ~ your choice of words, dripping with disdain at this point.
    ~(I will skip over the obvious typo.)~
    #2.) Grammar & use of punctuation are not your “thing” — though you are able to be understood, just the same. Exhibit A: “…when reader are almost done.” Mixing singular pronoun with plural verbage — noun & verb should match; “reader is”, or “readers are”, please. Exhibit B: “…but stopped reading right after….” (?) You stopped reading right after… after what, exactly? Please clarify such remarks, so recipient isn’t left wondering.
    ~ You stated that you stopped reading cuz’ this wasn’t a fact-based article? Oh contrare! This article that Mark NC wrote is most assuredly “fact-based”! That is, based on facts. Not ” fake news”; not fantasy, nor made up lies. FACT ~ Trump’s Cabinet IS incompetent & we see that so often in how things are handled (or mishandled) by his own people in White House. Trump got rid of all the competent, experienced people in WH & throughout his gov’t when they did not agree with him, or told him “No”. Trump wants undying loyalty TO HIM ALONE. No matter what he does/says – cuz’ it’s all about him! He’s like a dictator, firing experienced people & replacing with people loyal only to Trump & what Trump wants, whether they know anything or not. It isn’t their fault that they’re incompetent, but they are. Trump is the MOST incompetent of the bunch, for knowing nothing about how our gov’t works, disregarding rules, laws & protocols he doesn’t like & NOT appointing & listening to advice of those who DO KNOW all that he doesn’t & which he doesn’t bother to even learn! 3yrs in & he still does not know what’s expected of US President; thinks/says he can do whatever he wants. So yes, they’re an incompetent bunch & that fact is proven on regular basis. Jared & Ivanka are NOT qualified advisors on running the gov’t, or on any useful topic; they are there cuz’ they’re family & are loyal to Daddy.
    Also FACT ~ Senate GOP have shown themselves to be “jellyfish”, in that they have no spine or brains, when it comes to their fearful leader. No matter what Trump does, even when GOP doesn’t like what he says/does, they say/do nothing about it & blindly follow along, defending the indefensible! Spine of a Jellyfish, alright. GOP made impeachment trial a SHAM & didn’t try to hide it — chose Trump over our Country.
    These are sad facts of the matter. This Country will never be quite the same again after Trump. It’s been broken by someone who doesn’t even know how it worked & doesn’t care. Systemic corruption reigns.
    It’s a FACT that Trump IS the WORST U.S. President EVER!! And 16,000+ lies — so far.
    Those of us who have been around for 60+ yrs (like me) are aghast & cannot believe what we see happening to USofA. So, save your dismay, disdain & chastizing for those who DON’T “tell it like it is”; it is they who fall short of the mark, not NewsCorpse!
    I think of NewsCorpse as fact-based analysis of news & our leaders in ‘a world gone temporarily mad’! A thinking person’s site for sharing news & views (- with maybe a hint of snark? Smile.)
    Oh! I don’t think you should expect payment for your “writing class”….your use of punctuation is atrocious! LOL

Leave a Reply

Your email address will not be published. Required fields are marked *

*
*
Website

This site uses Akismet to reduce spam. Learn how your comment data is processed.