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Donald Trump, the self-proclaimed “King of Debt,” had some advice for the Fed today.
Most of it doesn’t hold up to the slightest scrutiny.
THREAD
bloomberg.com/opinion/articl…
Most of it doesn’t hold up to the slightest scrutiny.
THREAD
bloomberg.com/opinion/articl…
Zero or negative interest rates would probably do more harm than good right now.
They would likely cause an immediate problem for banks. And it’s a very open question whether Americans would take negative yields sitting down. They’ve never had to before.
They would likely cause an immediate problem for banks. And it’s a very open question whether Americans would take negative yields sitting down. They’ve never had to before.
The U.S. doesn’t “refinance” its debt in any meaningful way. The federal government isn’t like a company that issues bonds that can be bought back if borrowing costs fall. For the most part, higher-coupon bonds just eventually roll off the books.
The Fed can only control short-term rates. Longer-term yields are dictated by market forces. If slashing the fed funds rate during a time of economic growth boosts inflation, 10- and 30-year Treasury yields could actually move higher and raise interest costs.
(By the way, if this idea sounds familiar to those who read the Wall Street Journal op-ed section, that’s because it is.)
wsj.com/articles/refin…
wsj.com/articles/refin…
President Trump wants a weaker dollar, which, if done recklessly, could imperil one of America’s great strengths: Controlling the world’s reserve currency.
Stronger economies pay higher interest rates.
Also, Germany technically has better credit ratings than the U.S. and also doesn’t run a massive budget deficit. It’s no surprise that just about the entire German yield curve is negative.
Also, Germany technically has better credit ratings than the U.S. and also doesn’t run a massive budget deficit. It’s no surprise that just about the entire German yield curve is negative.
Low inflation? Yes. But "no" inflation?
Core CPI is projected to rise to 2.3% YoY in August, which would be close to the fastest growth in the past decade. It’s fairly modest relative to the historical average, but it’s not nothing.
Core CPI is projected to rise to 2.3% YoY in August, which would be close to the fastest growth in the past decade. It’s fairly modest relative to the historical average, but it’s not nothing.
Accent marks? 👀
The Fed is being prudent and letting data dictate its interest-rate decisions. Officials are cutting gradually and giving the expansion more room to run.
The ECB and BOJ probably wish they were in the Fed’s position right now, off the lower bound.
The Fed is being prudent and letting data dictate its interest-rate decisions. Officials are cutting gradually and giving the expansion more room to run.
The ECB and BOJ probably wish they were in the Fed’s position right now, off the lower bound.
