Thread by @unseen1_unseen

Think about this.

In Jan of 2018 the Trump tax cuts kicked in.

The tax cuts were planned to pump about $150 billion per year INTO the economy (that's $12.5 per month)

In OCT 2017, the FED began quantitative tightening policy.(QT) with plans to take OUT up to $50B/month

BY mid DEC, 2018 the FED has taken out $365 Billion from the economy.

By end of Dec, 2018 Trump tax cuts had put into the economy $150 billion.

Do the math: The FED took OUT $215 Billion more than Trump tax cuts put INTO the economy.

From Dec 2016 (Trump election) to Dec 2017, the FED hiked interest rates FOUR times.

From Jan 2018 to Dec 2018, the FED hiked interest rates an additional FOUR times with plans to hike an additional 2 to 3 times in 2019.

The FED has two main responsibility that Congress has tasked them with.

1. Maximum sustainable employment
2. Keeping inflation rate at around 2% to ensure moderate long term interest rates. .

During 2017-2018 the unemployment rate was dropping monthly and inflation was at 2.1%(2017), 1.9%(2018), and 1.8%(2019)

From the numbers on unemployment and inflation the FED had reached their mandate in 2017, 2018. So why were they INCREASING rates?

By 2019, it became clear that the FED overshot their goal as deflation began to be imported due to China and other nations devaluing their currency and lowering interest rates as well as pumping money into their systems to avoid tariffs impact.

Hindsight is a beautiful thing at times. The pieces tend to fit together better when you have most of them in-front of you.

So, at the exact same time that we had a POTUS enacting pro-growth policies (energy exploration, deregulation, tax cuts, government spending); we also...

...had the FED enacting anti-growth policies (QT and higher interest rates). Each move by the FED was EQUAL to or Bigger than the pro-growth polices of Trump. QT ($600B total) was bigger than the tax cuts ($300B) but about equal if you include the increase in federal spending.

The increases in borrowing cost were bigger cumulative than the reduction in gasoline/energy prices but if you throw in deregulation and other pro-growth policies(trade) it will probable come out about equal.

In other words, it really, really appears that the FED's goal was to LIMIT the economic potential of Trump's policies. There is not many other conclusions one can draw from the data. The FED's mandate was reached. Stable employment and inflation around 2%.

These mandates were reached at every point they raised rates. If your mandates are stable employment and 2% inflation rate and you hit those mandates, a normal response would be to do nothing. Yet, for some strange reason they INCREASED rates and INCREASED QT, every quarter.

The next logical question would be why. Why would the US Federal Reserve purposely attempt to limit US economic growth? The QT can be explained as a desire to balance their balance sheet. However, if their main goal was to get debt off of their ledger why were they raising rates?

If the goal was to balance the ledger the logical thing to do would be to allow the economy to grow and then do QT into a strong economy. Raising rates and doing QT at the same time is fighting against your ability to offload your debt. Both limit growth.

QT with stable rates is much better to clean up your balance sheet. Allow the growth to do the job for you. Doing both (raising interest rates and QT) at the same time? It defeats the purpose of cleaning up your balance sheet as you cap the possible growth. It's self limiting.

There is no case to raise interest rates since your mandate was met. Only if inflation was going above your 2% rate or if employment was becoming unstable (neither were) as the jobs reports showed moderate job creation and BLS numbers showed tame inflation.

The FED should have kept rates stable not increased them every quarter. There was absolutely no reason for the increase. They, in effect, were doing preventive rate hikes. In other words, they were purposely raising rates to stop/limit future growth.

Add in the QT that attempted to soak the stimulus ( tax cuts, low energy prices, deregulation, increase federal spending) out of the economy and the picture becomes very clear. the FED was playing prevent defense against Trump's pro growth policies. Why?

Globalism vs nationalism explains some of it. Protection of multinational companies explains some more of it. Protection of the world order put in place after WW2 and further cemented after the cold war explains even more of it (this includes trade policies)

The shocking thing for many of the establishment is that even with the FED fighting him every step of the way, even with Congress refusing to pass his MAGAgenda, even with the fake media talking down the economy, even with foreign countries like Germany and China fighting him,...

...even with all that and more the Trump economy still boomed. Unemployment still dropped to 50 year lows, companies still build new plants, inflation rate remained unchanged, consumers still spent, invested and saved. Yes, they might have limited growth somewhat but they....

...could not stop the boom. They were powerless and Trump & the deplorables destroyed their puny efforts. One of the main reasons Trump defeated them were tariffs on China and others & their actions because of them. By lowering their currency, they allowed us to import deflation.

This imported deflation kept prices down. It harmed the multinationals and exporting nations. It caused the FED to have to pause and then cut rates (the FED didn't want to sink the economy they wanted to limit it). If not for the tariffs the FED would still be doing QT and hikes.

It has also set up Trump to take on the FED which he is doing masterfully. By his tweets, press conferences and statements Trump is attempting to limit the FED's ability to limit his growth. If Trump is successful in chaining the FED from the importing of deflation then...

...we could be looking at the growth that we should have had over the last several years. Low inflation, high employment, a growing sustainable main street economic energy, better trade deals. Basically a reinflation the USA economic engine. It will be a long lasting process.