Interest rates

Trump Demands Zero Interest Rates From "Boneheads" at the Federal Reserve

Such a move would emulate other economies, risk inflationary bubbles, and benefit his businesses.


President Donald Trump tweeted this morning that "The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet………The USA should always be paying the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn't allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of 'Boneheads.'" (The president has long made it clear that obedience to his whims is the most important quality he seeks in members of the Federal Reserve Board.)

Those who approach monetary policy from a free market perspective mistrust—and see as inherently artificial and manipulative—using Federal Reserve interest rate policy to satisfy short-term political goals.

George Selgin, director of the Center for Monetary and Financial Alternatives at the Cato Institute, said in an email this morning that Trump's "repeated badgering of Fed officials, calling for them to ease monetary policy despite near-target inflation, robust spending growth, and low unemployment, has one thing to be said in its favor: assuming that these statistics don't change dramatically, it offers the Fed a unique opportunity to prove that its much-ballyhooed independence is, after all, not just a fairy tale."

Selgin further writes that, contra Trump's implication, "it simply isn't true that there is no risk of inflation, or that the Fed isn't capable of generating it. It's true that rate settings consistent with the Fed's 2 percent inflation target are much lower than they would have been some time ago. But the Fed can still go too low; and every usual indicator suggests that setting rates at zero, let alone below, would be setting them way too low."

"Although U.S. inflation numbers have tended to be slightly below 2 percent," Selgin adds, "'slightly' is the operative word. A difference of a few tenths of a percentage point from target is hardly enough to call statistically significant, let alone enough to justify a policy rate setting change of two or more percentage points!"

Robert Murphy, a senior fellow with the Mises Institute, says in an email this morning that, from his Austrian perspective, in which "interest rates are market prices with an important job to do," Trump is playing with fire: "It was artificially low interest rates that helped blow up the housing bubble and led to the financial crisis in 2008. President Trump's call for zero or even negative (!) interest rates would not be medicine, but in fact poison, for the long-term health of the economy."

Murphy is not persuaded by folks who point to other countries that have tried or are trying what Trump proposes. "Some are pointing to Japan as a country that's had large deficit spending and aggressive monetary stimulus for decades without a breakout of price inflation," Murphy says. "Even on its own terms, at best this is saying, 'We too could have a stalled economy for 30 years here in the U.S., let's follow their model.'"

(For some insights from a market-oriented economist on how policies such as the one Trump is advocating played out in Japan in past decades, see Benjamin Powell's "Explaining Japan's Recession.")

From the more mainstream press, USA Today observes that:

If the Fed cuts rates dramatically when the economy is still sturdy, consumers and businesses likely would view the move as a sign of trouble, prompting many to pull back spending and possibly leading to the growth slowdown they fear.

"I think that's a panic move to (lower rates) that severely," says Jacob Oubina, senior economist at RBC Capital Markets, who thinks the Fed should continue to cut at a moderate pace to shift the yield curve to a traditional status with short-term rates below long-term ones. Investors "will think the Fed knows something the market doesn't know."

CNBC reminds us that such a move would throw under the bus those who dare to merely save and not speculate. The Washington Post, meanwhile, wonders how much debt-riddled businessman Trump could save if he pressures the "boneheads" at the Fed into doing his whim.

The New York Times gives the larger global economic context: "The European Central Bank is expected to cut a key interest rate to a record-low negative 0.5 percent and roll out additional stimulus measures at its meeting on Thursday, in a bid to shore up very-low inflation and waning growth in important economies like Germany. Central banks around the world have been lowering their policy rates, partly because Mr. Trump's trade war is combining with Brexit jitters and a global manufacturing slowdown to threaten growth in many nations."

NEXT: Trump's Ban on E-Cigarette Flavors Endangers Public Health

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet………The USA should always be paying the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads.'”

    That sounds less like a demand to me and more like him expressing personal opinions in an open forum, but hey, Orange Man Bad.

    1. Open forum, state-controlled messaging channel, private company… you (don’t) decide!

    2. It’s just ignorance signaling aimed at the slack-jaws who adore him.

      1. Do you actually orgasm when you fantasize about orally raping people after winning the “culture war” or is it more of a Kama sutra delayed thing?

        Never mind I don’t really want to know.

    3. That sounds less like a demand to me and more like him expressing personal opinions in an open forum

      Mmmmkay. Still a dumb opinion.

      1. Shhhh. Orange blog bad.

      2. I don’t disagree that its dumb, I’m just saying that if someone, like say, Obama, did the same thing, we wouldn’t be having hysterical articles about how he’s a fascist forcing the poor Federal reserve do his evil bidding.

        1. I mean, the article actually says very little about Trump beyond giving a full version of the tweet in question, and then explaining at length why this is a terrible idea, with support from respected economists.

          I’ll agree that it casts some shade at Trump for railing at the Fed, but it casts further shade at that assertion that the Fed is somehow politically independent. I’ve seen plenty of examples of the Derangement Syndrome in the press, but this ain’t it.

        2. That’s ridiculous. Trump suggested something. Doherty wrote an article pointing out how stupid that suggestion was. It happens every day. The exact same thing happened during Obama. And, just like your moronic attempt to defend Trump, there were other morons here in the comments section defending Obama. But those were hysterical articles about how he was a socialist and forcing blah blah blah.

  2. While the article mentions free markets once in awhile on secondary subjects, it never says that the free market should control the interest rates.

    Ab obvious libertarian point, IMHO.

    1. “interest rates are market prices with an important job to do,”

      Does quoting an economist count?

      1. That does not recommend that they be controlled by the free market

        At best it only says what a free market doez

  3. He just wants free markets. I’ve heard that he’s quite the libertarian.

    1. Yup, very Libertarian-ish.

      He asks for the Central Bank of the USA to manipulate interest rates like they have for almost 100 years supposedly based on economic factors.

      If they approve the change, he gets what he wants.

      Tiny and limited government.

      1. Tiny, very tiny.

        1. Well the Japanese have oh so tiny interest rates unlike big American interest rates.

        2. Tiny Mushroom Dick according to Stormy.

          1. So you are basing this on the word of a washed up porn actress who signed a contract then decided to renege on aforesaid contract for her own benefit. Seems like a reliable source to me.

            1. Come on. We all know Trump has a tiny dick, because otherwise he would be whipping it out to prove us wrong.

              1. Says the man that fantasizes about putting his dick in a wood chipper.

                1. Eunuch gonna eunuch

      2. Yup, very Libertarian-ish.

        We missed your analysis of Trump’s libertarian bona fides in the e-cig article.

        1. Hey, LovesCons has a dick to suck!

          1. Dildo fantasizes about dicks getting sucked.

            I know it’s a libertarian comment section and everything goes, but I think you’ll be happier going on other websites and talking about this.

  4. If the goal is to lower the borrowing cost on 22T of debt, then it would make sense to ‘refinance for rate’. Issuing a long-term negative interest bonds essentially lowers the net debt at maturity. Emphasis on ‘if’.

    1. But why would someone want to invest in anything that would return less than what they have now, unless they were so spooked by the existing economy that they think the money will go away otherwise? This happened briefly during the financiapocolypse when people would rather lose a guaranteed small amount of money than risk it in banks that were in danger of going insolvent.

      But in the current economy, I just don’t see how we could refinance all our debt in this manner. Who is going to take a US dollar today and buy a bond from the US that pays 99 cents in 5 years? Are other countries THAT hard up?

      1. Overt….lots of reasons people buy bonds. The fact is, people (and institutions) do buy intermediate-term negative yield bonds currently. You must think that investing is a purely rational exercise. 🙂

  5. Such a move would emulate other economies, risk inflationary bubbles, and benefit his re-election.


  6. Worked for Obama and the media didnt say shit about it for 8 years.

    1. Obama didn’t lean on the Fed and call them idiots; you fucking moron.

      1. He leaned on the fed, but didn’t call them morons. He just labeled anyone to his right as clingers.

  7. Such a move would emulate other economies

    And how have those economies dabbling in negative interest rates been doing?

    Remember when the ECB went negative and finger-wagged the Fed for not following suit?

    Their economies took off while ours stagnated, right?

  8. Trump knows more about interest rates than the Fed. He went to Whoretown Business School, you know. That’s where you learn that interest rates don’t matter when you have no intention of paying off the debt anyways.

  9. When I was growing up I was always hearing about this magical thing called compound interest. If you put 10% of your take home in a passbook saving account at age 20, you could retire a millionaire. Good times.

  10. Did someone mention Trump? Supreme Court Gives Green Light To Trump Administration’s Asylum Rules.

    The Supreme Court of the United States on Wednesday said the Trump administration is allowed to deny asylum to those who refused to seek refuge in another country first before coming to the United States, the Associated Press reported.

    Justices Sonia Sotomayer and Ruth Bader Ginsburg dissented with the rest of their colleagues.

    The decision comes after a federal judge in California implemented a temporary, nationwide injunction on the asylum rules on Tuesday.

    1. Saw that.


      1. how dare the california court do that. As LC1789 knows, there’s only one court with national jurisdiction. He is a judiciary expert, ask him anything!

  11. Off topic:

    ““We want to thank our friends at the Atlanta Hawks, Atlanta Falcons, Whole Foods, Georgia Beverage and Atlanta Pride for partnering with us for Drag Queen Story Hour,” tweeted One Atlanta, the Mayor’s Office of Equity, Diversity and Inclusion….

    ““Thank you to everyone who joined us at today’s Drag Queen Story Hour with Mayor Keisha Bottoms and Miss Terra Cotta Sugarbaker,” read a tweet posted by the City of Atlanta’s Official Twitter account.”

    1. We also spent $200k painting the crosswalks at 10th and Piedmont as rainbows.
      Looks cool, but I feel like it could’ve been less expensive.
      And I went to the pride parade a few years ago – an astonishing amount of corporate virtue signaling/sponsorship

      1. In between the twinks gyrating with dildos sticking out their asses, and the topless, aged Dykes-on-Bikes with their tube-tits flopping by their waists, was a great Tide detergent float.

  12. Here’s an idea, Mr. President. If you want the economy to return to the growth levels we were seeing in 2017, then back off on the tariffs. Just return back to where everything was. If the economy was roaring like it was in 2017 (due largely to your own tax cuts) you would certainly win reelection.

    There’s a reason the markets went stagnant in 2018 and seem to gain and lose depending on whatever the trade news of the day is. Be a leader, Mr. President, not a narcissist obsessed with winning a war you never should have started.

    1. The tax cuts didnt take effect until FY 2018.

      The USA was still in the Great Recession in early 2017.

      All zero interest rates did was keep the economy chained in place until Trump took a few chains off the economy. It started to expand soon after and it still expanding.

      1. The investments and the impact to the Dow and S&P500 in 2017 were the markets signaling that they knew the cuts were coming… they were a cornerstone to his campaign. That and the deregulation that was already happening. The markets were happy to have a pro business President again. You can see that in the run up that started, not surprisingly, in November 2016.

        If Trump thinks his reelection hinges on the economy (I certainly do), then rolling back his own tariffs is something that could easily boost the markets. Trump is signaling that he wants the economy to grow again by badgering the Fed. He doesn’t care about the debt, or else he wouldn’t be signing bloated spending bills, and asking for even more spending. He’s asking the Fed to pump up the economy for him. He has the sole power to do it himself, if he could just admit he was wrong about tariffs.

      2. Also, the US wasnt in a recession in 2017. We had positive GDP growth starting in 2010. Albeit, we never saw the normal 5%+ growth following a recession under Obama that we have historically seen following recessions.

        GDP growth was increasing since 2016 as well. The rate of growth began slowing in 2018, no doubt in part because of the tariffs which have dominated economic news since January 2018.

        1. Don’t respond to that fucking idiot. LoveTrumpsTinyMushroomDick1789 is just here to suck off Trump.

          1. Whereas you are known for your commitment to deep intellectual and non-partisan debate style.

            1. Dildo likes to shove his head up his own ass then complain that everybody’s making poop jokes.

  13. I tend ro give OrangeManBad a break, because reasons. But this is pure dumbassery. Interest rates have been kept artificially low for a decade plus, now, ever since the housing bust in aught something or other. A policy of penalizing saving is a bad policy. Now, while the economy is good and unemployment is at historic lows, would actually be a good time to raise interest rates.
    Of course, the government is up to it’s eyeballs in debt, and a higher interest rate would quickly put it underwater.
    We’re living on borrowed time: the credit cards are maxed, but our credit score is still good enough to take out another loan…
    We’re so busy trying to resist, or to “own libs”, or yelling about what bathrooms to use or how many ways Global Warming can kill us, that we’ve squandered our ability to actually pay the contractor who can stop our house from collapsing.

    1. *applause*

    2. Umm… isnt the fed setting interest an artificial floor? You seem to have the correlation backwards.

      1. The fed rate is the rate that banks are charged interest on. They will then compete to offer the lowest loans that they can profit from. If, of course, making that money available for loans is actually profitable, compared to say, investing elsewhere. If the interest rate the fed charged was 10%, then banks would charge at least 10.1%. Meaning that your savings account would actually earn money.

        1. That was poorly written. The fed charges banks to borrow money at x rate. Banks loan out money at x+profit. When fed rates are low, there is no reason to save money.

          1. Still poorly written, maybe worse. Authorities claim alcohol was involved.

  14. “Such a move would emulate other economies, risk inflationary bubbles, and benefit his businesses.”

    With all respect, if there isn’t anything the Fed should do specifically because it hurts Trump’s businesses, then there isn’t anything the Fed shouldn’t do specifically because it might benefit his businesses either.

    The libertarian dream is to replace government with private enterprise, and if you wait to make that transition until doing so doesn’t benefiting anybody’s businesses, then we’ll never make the transition.

    The move away from communism can’t be made, realistically, without benefiting powerful politicians and the people who are well connected to them, and the idea that economies shouldn’t transition away from communism because of that fact is childish.

    I hope that the government spins off every asset they have that’s not associated with the military, police, or the judicial system tomorrow, regardless of whether doing so benefits Donald Trump in some way, but then I’m a principled libertarian capitalist.

  15. Benefit his businesses

    Yeah , the “King of Debt” would love some cheap money.

    Fuck the Con Man.

    and fuck every redneck idiot that voted for that piece of shit

    1. See there is that higher level of non-partisan debate style I was talking about.

    2. You should call your case manager about getting your dose increased ASAP.

  16. “Boneheads” at the Federal Reserve?
    Should be, “Bonerheads” at the Federal Reserve.
    Get it right, Mr. President.

  17. “The president has long made it clear that obedience to his whims is the most important quality he seeks in members of the Federal Reserve Board.”

    that’s not really fair. that’s actually the quality that he seeks in the entire cabinet, executive branch, US government, and nation as a whole, not just the members of the Federal Reserve Board.

Please to post comments

Comments are closed.