Day 806: Trump’s flip-flopping about Fed and interest rates are laughably transparent

In the middle of the Great Recession, the Federal Reserve — an independent and non-partisan entity — opted to keep interest rates low. Keeping rates low is one of the few ways to get an influx of money back into the economy during troublesome times. Economists largely agreed that it was basically the only option for the U.S. struggling to emerge from the financial crisis.

Donald Trump, however, disagreed with the strategy.

While it’s true that keeping interest rates too low can cause inflation, there weren’t a ton of options. Additionally, that “record inflation” that Trump was worried about never really happened. And it was far from “reckless” in 2011 to keep interest rates low when the economy was still in a perilous position and unemployment rates vacillated between 8.5% and 9.2%

Now, despite the fact that the bull market has eclipsed the 10-year mark, Trump seems to have changed his tune. Even though the S&P, Dow and NASDAQ indexes sit at more than double where they were at the time of Trump’s 2011 tweet, housing prices have rebounded (and more) and the economy has continued to grow largely from many of the policies made by Barack Obama and the Fed at the time of the recession, Trump is lamenting the Fed raising rates.

The reason inflation has not risen is primarily two-fold: 1) as Trump’s 2011 tweet confirms he knows, raising interest rates tends to keep inflation at bay and 2) the economy’s growth rate has slowed.

The Fed was doing their job being cautious about raising rates during a recession but has been more aggressive as the economy moved toward inflationary trends. The fact that Obama was president during the former and Trump during the latter is not why the Fed made or makes decisions.

Trump’s desire in 2011 was to see Obama fail and in 2019 it’s to see his own economic prowess lionized, despite the fact that many of Trump’s decisions — such as tariffs and varying economic threats —have caused market fluctuation and uncertainty. And others that he tries to take credit for — stock markets rising, unemployment rates dropping — have continued on the same trend line that Obama saw for nearly eight years.

Trump’s flip-flopping has nothing to do with economic theory or actual concern about inflation, it’s about pure ego.

806 days in, 656 to go

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