Trump is channeling his inner-Ron Paul in his criticisms of the Federal Reserve. The astonishing thing is, he may be able to actually change it. Analysis of the policies implemented by the Federal Reserve during the Trump administration reveals a potential bias. Trump has taken this opportunity to break a presidential norm by commenting on the policies of the Federal Reserve. “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,” Trump said.
Immediately after the election of President Barack Obama, on December 16, 2008, the Federal Reserve. lowered the Fed Funds rate by an entire percent, from 1% down to 0%. The Fed had not lowered the Fed Funds rate by such a large amount (1% ) since at least before 1990, if ever. The Fed kept this 0% rate for most of Obama’s eight years in office.
President Obama oversaw seven years of the most accommodative monetary policy in U.S. history from the Federal Reserve. The Fed Funds rate was at a shocking-low zero for the great majority of Obama’s time in office. Finally, in December 2015 after the Fed announced its first increase in the Fed Funds rate during the Obama Presidency. Even that was only an increase of 0.25 percent.
Although Obama benefited from the lowest possible interest rates possible for seven of his eight years, he still doubled the US Debt from $10 trillion to $20 trillion. If Trump got the same special treatment Obama did, and there were no rate increases in interest rates, President Trump would have a balanced budget by now.
The only Fed Funds Rate increases since 2015 were after President Trump was elected President. The Fed increased the Fed Funds Rate six times.
The “Fed Funds Rate” greatly impacts the economy. This is due to the fact that lower interest rates make borrowing easier, thus usually spurring the economy by making corporate and consumer borrowing easier. Higher interest rates, however, are intended to slow down the economy by making borrowing harder.
Increases in the Fed Funds Rate increase the cost of borrowing, and the U.S. Government is by far the largest borrower in the world. With $20 trillion in debt, a 1% increase in interest payments equals about $200 billion in annual interest payment increases.
President Trump acknowledges this, in an interview with CNBC, and says he’s not happy with the raising of interest rates by the Federal Reserve and suggested the central bank is working at cross purposes with his administration’s economic program.
In spite of calling Jerome Powell(Chairman of the Fed), whom he picked to replace Janet Yellen, a “good man” Trump said he didn’t care that he was breaking a precedent under which presidents do not comment on the Fed so as to safeguard its independence.
“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,” Trump said.
“Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time, I’m letting them do what they feel is best.” He continued, “But I don’t like all of this work that goes into doing what we’re doing.”…“I don’t like all of this work that we’re putting into this economy and then I see rates going up,” Trump said.
Second-quarter GDP is estimated to run at an annual rate of at least 4%.
The only thing stopping President Trump from balancing the US Budget and keeping the economy on fire is the Fed’s rising rates. The Fed seems to be playing politics.
However, Trump may have the opportunity to change this. The Board of Governors of the Federal Reserve is required to have seven members. Currently, It has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are stilling awaiting confirmation by the Senate. After these two are put on the Fed’s board, the president will then nominate two more members to follow them. In essence, it is possible that six of the seven Board members will be put in place by Trump. The Federal Open Market Committee has 12 members and sets the nation’s monetary policy. Seven of the 12 are the members of the Board of Governors. Five additional are Federal Reserve district bank presidents. Except for the head of the Fed bank in New York, who was nominated by the president, the other four can only take their positions as district bank presidents if the board in Washington agrees to their hiring. One of these, the Fed Bank president in Minneapolis, Neel Kashkari, is already arguing for no further rate increases.
The alteration and even audit of the Federal Reserve could spell certain doom for players in the upper echelon of governments that have taken advantage of the policies for personal gain.