Thread by @kurteichenwald

1. Listening to Trump talk about economics is like listening to a 1st grader talk about astrophysics - the words all may mean something, but the sentences are gibberish.

So, let's revisit his attacks on the Fed and why what he wants is irrational and dangerous....

2...Trump has been calling for interest rate cuts for many many months, even as he boasts that economy is stronger than it has ever been. He seems to believe that interest rates are just things arbitrarily set, like tax rates. In a booming economy, rates go up. Falling, down....

3...but there is something that makes this far worse, and once again puts us in the position that we were in in 2008: The @GOP has wiped out the ability to use rational fiscal policy to manage a downturn. That leaves only monetary policy.

The details: Back when the 2017 tax...

@GOP 4...cut was introduced, I was ranting that this was dangerous as hell because cutting taxes at the time of a strong economy with high debt was absolute suicide, which is why it has never been done in the history of the world. By blowing up the deficit in a strong economy....

@GOP 5... @GOP flipped Keynesianism on its head - juicing up the economy with fiscal policy at a time of strength - for a short term sugar rush of prosperity. It was, once again, the GOP trying to get economic boost that would last - they hoped - through one term and get reelection...

@GOP 6...but economies turn. It doesnt matter if it happens now or after 2020 - expenditures have to go up in a downturn because of required outlays, which increases the deficit even more. Unemployment grows, etc. If you DONT increase outlays, then you are again doing....

@GOP 7...Keynesianism in reverse by withholding cash when it is needed. BUT, we also don't have the availability of tax cuts to flood the economy with cash and help a recovery - those tax cuts have already been used up during strong economy. Cutting even more would also explode the...

@GOP 8...deficit beyond comprehension. The result of that: debt piled up faster, interest on the debt as a percentage of the budget growing astronomically. That could easily lead to a death spiral.

So, with fiscal policy unavailable, monetary policy is all that is left. In a normal..

@GOP 9...environment, without trade wars, the Fed would have been managing the economy easily, with rates possibly a little higher now. But the supports under the bridge are rotting, so cuts are happening. (Lowering the interest rates decreases the cost of money, meaning businesses...

@GOP 10...can expand at lower expense, people can buy houses for less, etc etc. So that is a way to prompt spending.)

We are now at 2.25% on rates. Trump - while saying the economy is great - wants that cut to 1.25%, showing that he literally has no...

@GOP 11...understanding of role of interest rates, or simply wants to give the economy another sugar rush to get him through 2020, and then deal with the crash later (it's the first one: As Ive said, I covered business for decades and he is the dumbest businessman I have ever met)...

@GOP 12...so, let's assume Fed knuckles under and cuts interest rates to 1.25% at a time when (if Trump is right) the economy is doing great. The business cycle turns - it always always does. When it turns, we have literally nothing left to manage it.

Fiscal policy is gone - we....

@GOP 13...already cut taxes and exploded spending during a strong economy. Do it again in a big downturn? Deficits could conceivably reach 2 trillion a year or more.

But if interest rates are at 1.25%, all the fed could do is lower it just a little bit more than Trump wants them...

@GOP 14...to do right now. We would have 1.25% to play with, down to 0%. Of course, once we reach 0%, foreign interest in our debt would collapse too. THAT is what led to the subprime loan disaster - Wall Street, with foreign customers demanding better yield - put together these...

@GOP 15...insane financial products that were high risk so they could snag yield that could not be obtained through normal mortgage and debt instruments. So we crashed.

The GOP has driven the economy into the ditch once before. Trump wants to do it again, but on a massive scale...

@GOP 16...simpyl so he can win an election. And if you think farms & factories are shutting down now, wait to see what happens when people have far less money and the fed can't do anything to try and prime the pump (a phrase that existed for decades, but that Trump said he created)..

@GOP 17...tax cuts are nice. Increasing spending is nice. Low interest rates are nice. Ice cream for dinner is nice. Hell, maybe heroin is nice. But if you use them all the time, you are wrecked.

Trump is calling for the destruction of America: tax cuts and low interest rates in a..

@GOP 18...mostly healthy economy. Yes, we will have a recession because - no one has suspended the business cycle. When it will happen is uncertain. But if we have no tools to manage it anymore because the GOP threw them all away, there will be no possibility of a soft landing. It...

@GOP 19...will be hard and it will be brutal. And if Trump has his way - doing the opposite of what Freshman economics calls for - it might be unrecoverable.