“Now I’m just saying the same thing that I would have said as a private citizen. So somebody would say, ‘Oh, maybe you shouldn’t say that as president.’ I couldn’t care less what they say, because my views haven’t changed.”
So says Trump, the presidential private citizen, in response to the usual “independence from presidential criticism has long been a hallmark of the Fed’s existence,” or as Fed Chairman Jerome Powell said, they are “independent of all political concerns.”
Of course, completely independent. And of course, there is nothing whatever political about the increase or decrease of money supply. That’s just a technocratic thing, with no conflicts of interest whatever especially as it concerns the partially commercial bankers owned Fed.
All that debt these bankers lended at nearly 0% now has to be paid back. If they can raise it to 2%, 5% or maybe even more, so receive more money by effectively doing nothing, then why on earth would they not.
“The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?”
So says the private citizen. He went to Wharton, so he probably knows a thing or two about economies, how they work, and so on. At least as far as classical liberal economies are concerned.
He also probably knows how money is created, that being through debt when you borrow from banks. Of course when borrowing is cheap at low interest rates which currently stand at 2% for the base Fed line, you borrow more, which means more money is created, which if all else remains equal should mean the value of the dollar against other currencies or assets falls.
If borrowing is expensive at say 5% base rate, which can translate to some 7%-10% for a mortgage and maybe 20% or more for a loan, then less borrow and therefore less money is created. That means the value of the dollar rises against other currencies or against assets.
A strong national currency means buying things from other countries is cheap, but the things you produce are too expensive for other countries to buy.
A weak national currency like China’s Yuan which the private citizen effectively says it has been “due to illegal currency manipulation,” means your products are very cheap, but buying a nice American or German car is expensive, so you produce your own and sell those.
That simplified explanation has plenty of complications. One of them is prices. If money supply increases then prices increase too, especially of assets like houses which are necessary for people to live in and always in demand, but also more basic things like food might see prices go up.
It is here where there’s a great debate in economics which continues. That is whether inflation is preferable or deflation.
In the current Keynesian world, there is a “consensus” that prices should increase at 2% a year. That would be fine if wages kept up, but they don’t. The reason is because no one wants to pay more than they have to, making wages a bit sticky.
In real terms, wages have not increased since the 70s. They have just about kept up with inflation, but our parents used to see their wages go up 5% and even 8% in real terms.
It so happens that in the 70s money was actually backed by something, that being scarce gold. There was debasement of money then too of course in changing just how much gold a dollar is backed by, but there was a limit to the amount of money that can be printed.
Without some anchor, and with interest rates going from 5% or more in 2006, to 0 or negative in 2012, to now perhaps 5% or more again, you’re basically just creating booms and busts. Boom, when people borrow, and busts when they can’t pay it back any longer because they borrowed at 0% not 5%.
Then, as far as the government is concerned, there’s the public debt of $21 trillion, which really means Americans have to pay an additional $21 trillion in taxes on top of their current taxes.
At current interest rate that debt is or was free money, but cunning bankers of course give with one hand and take with the other. They give it out at nearly 0%, so all you have to pay back is the capital, and then they want one trillion dollars per year on top of the capital by raising rates to 5% or higher.
There’s nothing political about that, just business. And presidents of course should have no opinions on such matters which may even risk bankruptcy, but Trump is just a private citizen.
As for the title question, your guess as good as ours.