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Krugmenistan vs Trumplandia: Backflipping into a Depression

In this return to Krugmenistan [1] we’re going to return at a topic everyone loves: Federal Reserve interest rate policies. Yay [2]! If that sounds boring, note that we’re specifically going to examine Donald Trump’s plans for the Federal Reserve so it’s guaranteed to be crazy. And ominous. Does that sound boring? How about plans to intentionally collapse the economy. Does that sound boring? No, this is Donald Trump’s policies we’re talking about. It’s anything but boring. Or sane.

***************************************

Now that we’re in the “final stretch” part of the 2016 election season, and since it’s still unclear if Donald Trump is even capable of not acting like a crypto-Nazi [3] on a near daily basis, it’s worth reflecting back on the campaign just about five months ago. Why then? Because it was just about five months ago, April 21st to be precise, when we got the reports that Trump’s new campaign manager, Paul Manafort pledging to GOP mega-donors that Trump was really just “projecting an image” for the primary season and not going to continue “being Trump” after he secures the nomination and goes into the general election season. Yes, it was just five months ago when, if you really, truly wanted to believe that Donald Trump wasn’t going to continue behaving like a crypto-Nazi on a near daily basis forever, you could still sort of believe that. It was still a foolish belief at the time, but at least it wasn’t as yet proven wrong. Instead, we’ve seen Trump dropped the mask even more if that’s possible, replace Paul Manafort with the Alt-Right’s media champion Steve Bannon as his campaign manager [4], and make it clear that he can’t go more than a week without a melt-down of one form or another. His general election strategy is to go Full Trump with an Alt-Right flair.

What a difference five months makes. An age of innocence. *poof* Gone. April was the good ol’ days [5]:

The Associated Press

Trump team tells GOP he has been ‘projecting an image’

Originally published April 21, 2016 at 12:42 am Updated April 21, 2016 at 5:15 pm

Ted Cruz conceded publicly for the first time that he doesn’t have enough support to claim the nomination before the GOP’s national convention, but he also vowed to block Trump from collecting the necessary delegates as well. Many party loyalists fear an all-out Republican civil war.

By STEVE PEOPLES
and THOMAS BEAUMONT

HOLLYWOOD, Fla. (AP) — Donald Trump’s chief lieutenants .told skeptical Republican leaders Thursday that the GOP front-runner has been “projecting an image” so far in the 2016 primary season and “the part that he’s been playing is now evolving” in a way that will improve his standing among general election voters.

The message, delivered behind closed doors in a private briefing, is part of the campaign’s intensifying effort to convince party leaders Trump will moderate his tone in the coming months to help deliver big electoral gains this fall, despite his contentious ways.

Trump’s newly hired senior aide, Paul Manafort, made the case to Republican National Committee members that Trump has two personalities: one in private and one onstage.

“When he’s out on the stage, when he’s talking about the kinds of things he’s talking about on the stump, he’s projecting an image that’s for that purpose,” Manafort said in a private briefing.

“You’ll start to see more depth of the person, the real person. You’ll see a real different guy,” he said.

The Associated Press obtained a recording of the closed-door exchange.

“He gets it,” Manafort said of Trump’s need to moderate his personality. “The part that he’s been playing is evolving into the part that now you’ve been expecting, but he wasn’t ready for, because he had first to complete the first phase. The negatives will come down. The image is going to change.”

The message was welcomed by some party officials but criticized by others who suggested it raised doubts about his authenticity.

“He’s trying to moderate. He’s getting better,” said Ben Carson, a Trump ally who was part of the GOP’s front-runner’s RNC outreach team.

While Trump’s top advisers were promising Republican leaders that the GOP front-runner would moderate his message, the candidate was telling voters he wasn’t ready to act presidential.

“I just don’t know if I want to do it yet,” Trump said during a raucous rally in Harrisburg, Pennsylvania, Thursday that was frequently interrupted by protesters.

“At some point, I’m going to be so presidential that you people will be so bored,” he said, predicting that the size of his crowds would dwindle if he dialed back his rhetoric.

Trump also said the plan to swap Jackson for Tubman on the $20 bill is an act of “pure political correctness.

““He’s trying to moderate. He’s getting better,” said Ben Carson, a Trump ally who was part of the GOP’s front-runner’s RNC outreach team.”

Ahhh, the good ol’ days. It was a simpler time back then. A time when anything was possible:

Trump’s newly hired senior aide, Paul Manafort, made the case to Republican National Committee members that Trump has two personalities: one in private and one onstage.

“When he’s out on the stage, when he’s talking about the kinds of things he’s talking about on the stump, he’s projecting an image that’s for that purpose,” Manafort said in a private briefing.

“You’ll start to see more depth of the person, the real person. You’ll see a real different guy,” he said.

Just wait and see! Like a butterfly emerging from its cocoon, the real Donald Trump was going to emerge. That was Paul Manfort’s message. Then Trump dumped him and hired the Alt-Right’s media champion to replace him. Say hello to the real Trump. You’ve previously met.

That other Trump article from April 21st
But it’s also worth noting that on the very same day that the above AP article about Paul Manafort’s behind-the-scenes pledge that the “real person” was going to emerge from the Trumpian hate cocoon, Fortune Magazine came out with a long interview of Trump. It’s an absolutely priceless interview of Trump that’s the gift that keeps on giving. It also had a very “real Trump” feel in the sense that it was Trump being Trump. The Trump we now know is never going away. Including the part when Trump pledges he’s never going to rebrand. He’s going Full Trump forever [6]:

Fortune

Donald Trump In His Own Words: Atlantic City to the White House

by Stephen Gandel

April 21, 2016, 10:30 AM EDT

Fortune interviews the GOP frontrunner.

The following is a transcript of an interview Fortune conducted with Republican presidential candidate and businessman Donald Trump on Tuesday, April 19, the night of the New York primary, in his office at Trump Tower on 5th Ave. in Manhattan. Fortune reached out to Trump’s campaign three weeks before our publication date, seeking an interview about his business career. After originally agreeing to meet, Trump’s team canceled the interview and said the GOP frontrunner would not participate in Fortune’s article, which can be found here: Business the Trump Way [7].

But just four days before the deadline for our May issue, Trump agreed to sit for the following discussion:

Donald Trump: I looked at the numbers that you are giving Hope [Hicks, director of communications for Trump’s campaign] and they are totally wrong. I mean they are so far off.

Fortune: I didn’t give the numbers to Hope. Right now the plan is there are two articles. There’s one . . .

This is Alan Weisselberg, chief financial officer.

Hello.

Weisselberg: Hello. How are you?

There’s the article that some other Fortune writers have been working on for a while and there’s this Q&A, which is your say on who you are as a businessman and a politician.

But how could they be working on an article about me and my private company—and you can put this in my Q&A or before my Q&A—which has hundreds of deals under negotiation all over the world and taking in tremendous amounts of money that they have no idea about because these are private deals.

I don’t want to spend too much time on this. But—

Well it’s an important point. I looked at your numbers and your numbers are ridiculous.

So another person at Fortune reached out as part of that article.

I never heard about.

OK. Well I don’t know. So I reached out to you because again we had the relationship when I covered New York real estate for Crain’s New York [Business] and thought you might be willing to talk to me.

Your article is going to be fine because it’s question and answer and that’s fair. But I don’t know how another group could be doing an article about a private real estate company that has hundreds of deals under negotiation and in many cases licensing deals. There’s no investment [coming from The Trump Organization]. The name [Trump] is the hottest it’s ever been right now. Fortune is a magazine I respect by the way. In fact, your sister magazine [TIME] I have been on the cover of quite a few times in the last few months.

Do you respect them [TIME] this week?

I respect them this week, and I hope I will respect them even more next week, because I think maybe they are doing another one. Let’s see what happens. They [Fortune reporters] don’t know anything about my company. We have an unbelievable company. We have very little debt. We have some of the most iconic assets in the world. We have a tremendous cashflow. We have the kind of assets that sell like a great painting would sell.

I think they have done the best job they can based on the fact that you weren’t cooperating. But let’s move on..=

Let’s go.

What makes a businessman great?

Proper instinct—so important. Knowing the limits that they can go. Imagination, so important.

Do the things that make a businessman great make a president great?

They help—but it’s another step. You have to have a lot of different skills in addition to those of a businessman. You need great communication skills, which a businessman does not need. I have friends of mine who are tremendously successful but they don’t communicate well. But they have other assets. You do need a lot of heart; businessmen don’t necessarily need heart.

You’ve said you plan to pay off the country’s debt in 10 years. How’s that possible?

No, I didn’t say 10 years. first of all, with low interest rates, you can think in terms of refinancings, and get it down. i believe you can do certain things to pay off the debt more quickly. The most important thing is to make sure the economy stays strong. You can do it in smaller chunks. You can do it in larger chunks. And you can do it in refinancings.

How much of the debt could you pay off in 10 years?

You could pay off a percentage of it.

What percentage?

It depends on how aggressive you want to be. I’d rather not be so aggressive. Don’t forget: We have to rebuild the infrastructure of our country. We have to rebuild our military, which is being decimated by bad decisions. We have to do a lot of things. We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.

So you like the fact that interest rates are low? Some of the candidates have said that’s wrong. Do you think interest rates should be as low as they are?

I always like low interest rates, certainly as a developer. The problem with low interest rates is it’s unfair that people who’ve led the American way of life—the true American way of life—that have saved every penny, that have paid off their mortgages, that have done everything they were supposed to do, and they were going to retire with their beautiful nest egg, and they were going to get interest on their money, and now they’re getting one-eighth of 1%. I think that’s unfair to those people, who have led their lives in the way they were supposed to.

Should the Fed be raising interest rates? Has the Fed and Janet Yellen done a good job?

People think the Fed should be raising rates. What’s a scary prospect is if you start raising rates and you have to borrow money as a country, and if the rates, instead of where they are now, the rates are substantially higher, where the rates are 3% and 4%, or whatever it may end up being. That is a very scary prospect for this country. When you start adding that kind of number to an already reasonably crippled economy, certainly in terms of what we produce, that number is a very scary number for a lot of people to be looking at. And if you notice they don’t look at it. Because they want to keep interest rates down. A frightening scenario is that interest rates go up and we have to refinance the debt at higher rates, as apposed to paying very little like we are now.

Do you think Janet Yellen is doing a good job?

I think she’s doing a serviceable job. But you never know if they’re doing a good job until about five years after they leave office.

Would you reappoint her?

I don’t want to comment on reappointments. I would be more inclined to put other people in.

Are you for the audit the Fed movement, that the Congress would be able to audit the Fed’s decisions?

Yes. Totally.

First, note how much Trump generally supports the current Federal Reserve interest rate regime. While he laments the impact it has on savers (a lament that ignores the generally far bigger risk to savers that comes from the Fed killing the recovery by prematurely raising rates), he’s still generally approving of the Fed’s ultra-low rate policies and Janet Yellen’s performance. Keep that in mind for the articles below.

Continuing…

A lot of business people do believe having debt is a good thing. Higher leverage leads to higher returnns. And you have talked about wiping out the debt. Why is it bad for the U.S. to have debt?

Oh, I would rather not have debt. But we are stuck with it. If I had a choice of taking over debt free or having $19 trillion dollars—which, by the way, is going up to $21 trillion soon, because of the omnibus budget, which is a disaster—I’ll take no debt every time. I can look at myself. I have lived a life where I have a lot of debt and like now I have very, very little debt and I’ll tell you it’s more pleasant with very little debt.

But you may take over this country where some people think we have a lot of debt.

No, where everybody thinks—every sane person thinks we have a lot of debt.

Some people have called you a bully. Are you?

I don’t think so at all, no.

But you’ve also talked about your tough negotiating skills?

I don’t talk about them. Other people talk about them. I don’t say that I am tough. I say that I know how to negotiate. I’m a smart person. I look at the deals our country has made. This Iran deal is one of the worst negotiations I’ve ever seen of any kind. Our trade deals are horrendous. Carl Icahn endorsed me. Many other people endorsed me. Great business people endorsed me. I would use our great businesspeople to negotiate those deals. Right now we have political hacks doing it. And they are negotiating the biggest deals in the world. Deals with China and Japan. And deals with Mexico. We have people who don’t have any ability, who don’t have business instinct negotiating these deals. I would use the best business minds, and we have the best in the world. I would use our best people to negotiate those deals, many of which have endorsed me.

Note that it’s unclear if the businessmen Trump wants to use to negotiate all sorts of sensitive deal (trade deals, nuclear disarmament deals, etc) would become government employees or if we’re going to just start letting active CEO start negotiating our deals. Hopefully someone follows up [8] with Trump [9] on that.

Continuing…


The hard business tactics, the tough negotiations, the brinksmanship in hostile M&A deals for instance, that happen in business, would that work in politics. As an example, you have said that you would impose 45% tariffs on China. Is that what you really want or is that an negotiating tactic?

First of all I never said that. I made a statement to the New York Times to the editorial board. And that was not said. Something different was said. I would talk to China and probably be able to get them to do what to do what they should be doing. China has zero respect for our country. They have zero respect for our president and our leadership. I would tell China that the devaluation [of the Chinese yuan] is destroying our businesses. We are losing tremendous amounts of business. Not only China. You look at what Japan is doing with the yen. You look at what others countries are doing with the devaluation and manipulation of their currencies. Something of which our leaders have no idea what’s happening. And they are systematically. I just left upstate New York, You look at Pennsylvania and Indiana where carrier just left for Mexico. I would tell China that either you start playing by the rules, or we will be imposing tariffs on your products coming in. That doesn’t mean I am doing it, because in my opinion if they believe it they are going to play by the rules. But they have to believe it.

But does tough negotiations like that, where you are risking a trade war with China, does that work?

What’s a trade war? How are we losing? We already have hundreds of billions of dollars of trade deficit. So we have massive trade deficit with China.

Similar, saying we will pull out of NATO, is that a negotiating tactic. And if so, does that work?

I never said we were going to pull out of NATO. You have 28 countries in NATO, it’s 68 yrs old. It’s obsolete. Right now we have to be focusing on terror. It was set up for the Soviet Union. Russia’s still a problem, but Russia is not the Soviet Union. NATO is obsolete and the problem is we’re carrying NATO. You have many countries, known fact, that can afford to but they have decided not to pay their way. We’re protecting countries within NATO and they’re not paying their way. And I’ve said, they have to pay their way. If they don’t pay way their way, we’re not going to be protecting them. They wil pay their way if said to them in the right manner.

That’s not said in a touch manner or a soft manner. It’s just said. They owe us a great deal of money from delinquencies and past payments that haven’t been made. In many cases, the only reason they haven’t made ‘em in many cases is they have no respect for our country. They have no respect for our leadership.

But many of the NATO countries are not carrying their weight. This is a known fact. When I said NATO is obsolete and when I said the second part about not carrying their weight financially, at first there was an uproar and then if you notice a lot of people are saying, ‘You know, Trump is right,’ and I’ve gotten a lot of credit for saying it.

Just take a moment and soak in that gem of a NATO rant: in response a question about whether or not prior Trump’s comments on pulling out of NATO were part of a negotiating tactic, Trump argues that NATO is indeed obsolete now that there’s no more Soviet Union but also that there’s a problem with NATO members paying their dues and that he’s not going to actually respect the NATO treaty if they don’t pay up. And then he justified his first argument – that NATO is obsolete – with his his second argument – that members are behind on payments – which he in turn justified by observing that many people said “you know, Trump is right” about his second argument.

Skipping down…

So as a business man you have made the deals that were the best ones for you. As president of the United States how do you transition to putting the people of the country first and not Mr. Trump. How should people know you’ll do that?

The country will always be first. I built a great company. You don’t know anything about my company. I built a company that is worth a tremendous amount of money, has a tremendous amount of cashflow—its a never ending cashflow. But it is a business that is very unimportant to me if I won the presidency. My executives and my children will run the co and they’ll run it well. It’s not a hard company to run. We are dealing now with over 121 deals world wide for licensing. Tell him about the hotels, Eric.

In light of the recent questions over how exactly Donald Trump plans are transferring his business empire into a blind trust run by his kids, note the claims Trump just made about his business: It makes tremendous amounts of money, a never ending cash flow, and his kids will run it. But it’s not a hard company to run. And it’s current in over 121 deals world wide “for licensing”.

Also note what he said earlier in the interview: “Your article is going to be fine because it’s question and answer and that’s fair. But I don’t know how another group could be doing an article about a private real estate company that has hundreds of deals under negotiation and in many cases licensing deals. There’s no investment [coming from The Trump Organization]. The name [Trump] is the hottest it’s ever been right now. Fortune is a magazine I respect by the way. In fact, your sister magazine [TIME] I have been on the cover of quite a few times in the last few months.”

So Trump himself acknowledged in this interview that the bulk of Trump’s never ending cash flow comes from licensing the “Trump” name but his kids will run the business for him. This is Trump’s idea of a blind trust [10]. Yep [11].

Continuing…

Eric Trump: We are opening up four this year. The remainder of the year we are opening up Old Post Office on Pennsylvania Ave. [in Washington, D.C.]. We are opening up the tallest building in Vancouver, which is 100% sold out, and the highest price ever seen in Vancouver. We are opening up at Turnberry in Scotland, and we are opening up in Rio right before the Olympics. We are also working on two deals that are in the hotel pipeline in Bally and Jakarta. And we’ve got a million others.

You’re so good at being a real estate developer, and running hotels, and buying properties. Why haven’t you stuck to that over your career? Why get into the airplane business, or do the steaks, or all the others stuff?

You are right. But I make a lot of money. Like the water company, I make a lot of money with the water company. But more importantly I supply water to all my facilities. Steaks and all of this. It’s just auxiliary. It’s simple, but it works well with my company.

But is it right to say that you haven’t been as good at those other things as you have been at being a real estate developer.

I do them largely for my own company, so it all fits together. Like water, it’s not a big deal for me, one way or another, but we sell it to the company. Steaks, which we do branded steaks, but it’s not a big deal.

Eric Trump: How about the wine. We are now the largest winery on the East Coast of the United States. We sell 45,000 cases of wine a year. We just won double gold in San Francisco, so we beat every other Californian winery there. So there is lots we do ancillary to company and our main core which is build buildings like this that are enormously successful. [Fortune note: It has been widely reported that Donald Trump no longer owns Trump Winery. It is now owned by Eric Trump.] Look at the Apprentice. We ran one of the most longest running reality TV show in history. That’s the ancillary business.

Donald Trump: Still running. They wanted me to do two more seasons but I said, “I can’t do it,” because I am running for president.

Do you know what you don’t do as well as other things? Do you know where you are not as strong as in other areas?

No. I think I’m good in areas where I want to focus. In my life, where I want to do something I’ve done it well. I started this company with one million loan, and the company is worth much more than $10 billion right now.

Yes, when asked what his weaknesses are, Trump responded that he doesn’t have any. He can do anything. Isn’t this interview awesome? You can see why the press seems to want Trump to be president so badly. It would be one endless telegenic trainwreck. Endless cash flow!

Continuing…


As president, do you think you will know what you don’t do as well to other things, and will get advisors, and lean on them?

Totally. I believe in getting great people and getting people who are the absolute best. As an examples for negotiating trade deals, some of the people who you interview are the right people to get. But unfortunately, we don’t use in many cases those people. We use people with absolutely no ability. When China comes at us, they come with groups of 20 and everyone one of those people is trained to take every penny out of the United States that you can take.

What’s dirtier: Business or politics?

Politics.

If you get the nomination, would you self fund in the general election?

I haven’t made a determination of that yet. Haven’t really looked at it yet. I am totally self funding my primary campaign. I have not made that determination.

You have a high unfavorable rating for a front runner. Do you have a plan to re-brand the Mr. Trump brand in the minds of voters.

I’m not going to rebrand.

Can you make yourself likable?

In poll after poll when you look at the numbers it will show, and starting to already that I will beat Hillary. Or as I call her, ‘Crooked Hillary. I will do very well. I’ve had 55,000 negative ads against me. Other people like Kasich and Cruz have had virtually no negative ads, and despite that they can’t beat me and despite that I will beat Hillary. And I will beat her very easily.

Ok. But that’s enough questions.

A version of this article appears in the May 1, 2016 issue of Fortune with the headline “Q&A: the Donald Speaks.”

“I’m not going to rebrand.”

That was Trump’s message near the end. No rebranding. And, of course, that massive mess of an interview came out the same day we got reports about Paul Manafort promising that the “real person” is going emerge and make his moderate popular appeal. Trump would become a non-scary clown. He’ll rebrand. Just you wait.

Credit Where Credit’s Due. Trump Supported Cheap Credit For a Sluggish Economy as He Should. At least Back in April
It’s a pretty hilarious juxtaposition of Trump campaign articles to come out on exactly the same day. Or would be hilarious if he wasn’t this close to actually winning and trashing the future. But note that one of the areas where he was actually surprisingly sober in that interview was actually a pretty important one. It was a notable ray of sanity and if one was inclined to hold out hope that Trump’s primary-season antics were all just a ruse for the rubes, it would have been something to hold onto: Trump basically supports (or supported back in our April of Innocence) Federal Reserve Chair Janet Yellen and the current ultra-low rate regime that the right-wing normally rails against [12]:

The Week

Donald Trump is shockingly sane on the Federal Reserve

Jeff Spross

April 26, 2016

It’s almost decision day at the Federal Reserve. On Wednesday, the Fed officials who vote on monetary policy will conclude one of their semi-regular meetings [13], and announce where they want to set interest rates for the next month and a half.

When it comes to what the Fed should do, we’re hearing something like sense from the most unlikely of sources: Donald Trump.

What’s important here is that Trump is running for the Republican nomination for the presidency. To say the GOP has lost its mind when it comes to the Federal Reserve would be putting things rather mildly. House Speaker Paul Ryan has made a side career [14] out of hapless predictions that low interest rates and quantitative easing would deliver hyperinflation. Ted Cruz has called [15] for a return to the gold standard [16]. John Kasich claimed [17] in January that low interest rates are one of the reasons wages are stagnating.

In short, the field is just saturated with nonsense.

If you read the interview [6] Trump gave to Fortune last week, you can tell he feels the weight of this ideological junk. He suggested he’d replace Fed Chair Janet Yellen, while admitting she’s doing a “serviceable job.” And he brought up the usual Republican talking points about how low interest rates hurt savers and the need to audit the Fed.

But you get the sense Trump’s heart isn’t really in it. For one thing, he has experience as an actual businessman, which means he knows one of those basic economic realities that politics tends to obscure: Namely, that low interest rates make economic activity easier. They mean higher rates of job growth and higher rates of wage growth. “I always like low interest rates, certainly as a developer,” Trump said.

This is one of those things you can’t repeat enough. The express purpose [18] of hiking interest rates is to slow down rates of job creation and wage growth — to keep inflation from rising and “overheating” the economy. But here’s how inflation has behaved [19] since 1960 — as measured by the common-used CPI (in red), which tends to be erratic, and the Fed’s preferred measure of core PCE (in blue) which tends to be smoother.
[see plot of inflation [20]]
By either measure, does it look to you like we have an inflation problem to fight? Yeah, me neither.

In fact, financial markets expect [21] the inflation rate to be around 1.6 percent in five years. And that’s high compared to the five-year rate they’ve expected over the last 10 months.

In the Fortune interview, Trump goes through the motions of pointing out that low interest rates make life more difficult for people who have saved and now rely on their investment portfolios for income. Of course, such people tend to be older, so it’s worth noting the considerable [22] age [23] gap [24] between the parties: The GOP’s obsession with keeping interest rates high speaks to a voter base that benefits from high interest rates. You can almost see Trump wiggling uncomfortably under the unspoken logic that we should wreck the livelihoods of workers in order improve the livelihoods of the retired.

Finally, as a businessman, Trump probably also can’t help but acknowledge that low interest rates are a market signal: They mean borrowing is cheap, so now is the time to borrow and invest. That’s as true for the country as it is for individual companies. “The best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly,” Trump said.

Again, being a Republican, Trump emphasized spending more to build up the military. That’s ridiculous: American military spending is already larger [25] than the next 10 biggest countries combined. But Trump also mentioned infrastructure, and that’s where he has a good point. The United States’ infrastructure may not be terrible [26], but it needs some serious improvements [27]. And with an unemployment rate still hovering around 5 percent, and historically depressed [28] labor force participation, there are plenty of Americans who could be put to work.

Meanwhile Ted Cruz [29] irresponsibly suggests the Fed is “hiding” the “true” cost of the nation’s debt. And when Kasich says low interest rates are contributing to low wages, he’s literally describing the opposite of how it works.

Shockingly enough, when it comes to the Federal Reserve, Donald J. Trump is the only one of the bunch who even sounds halfway sane.

“Shockingly enough, when it comes to the Federal Reserve, Donald J. Trump is the only one of the bunch who even sounds halfway sane.”

Yes, shockingly, Donald Trump wasn’t a complete nut job like the rest of his GOP peers when it came to the Federal Reserve in that he gave a rather mealy-mouthed endorsement of Yellen. But hey, by today’s standards that’s significant:


If you read the interview [6] Trump gave to Fortune last week, you can tell he feels the weight of this ideological junk. He suggested he’d replace Fed Chair Janet Yellen, while admitting she’s doing a “serviceable job.” And he brought up the usual Republican talking points about how low interest rates hurt savers and the need to audit the Fed.

But you get the sense Trump’s heart isn’t really in it. For one thing, he has experience as an actual businessman, which means he knows one of those basic economic realities that politics tends to obscure: Namely, that low interest rates make economic activity easier. They mean higher rates of job growth and higher rates of wage growth. “I always like low interest rates, certainly as a developer,” Trump said.

It looks the construction side of Trump’s business would have at least one positive side-effect during a Trump presidency: it’s not really in his personal business interests to succumb to the contemporary GOP’s macroeconomic dementia and endless calls to jack up interest rates and force a period of mass liquidation in order to cure the economy through a mass purging. At least back in April it looked like that might be the case. And then it changed. Again. So, yes, if it seems like Trump’s relatively tame stance on the Federal Reserve’s ultra-low rate regime was actually a flip-flop on an attack Trump made on Yellen back in October that’s because it was a flip-flop.

The Great Fed Flip-Flop-Flip to Make America Great Again. Via a Planned Economic Crisis, aka the Bellyflop Backflip of Doom
And a few days ago he flipped again [30]:

The New Yorker

Trump and the Truth: The Interest-Rate Flip-Flop

By Adam Davidson , September 15, 2016

This essay is part of a series The New Yorker will be running through the election titled “Trump and the Truth [31].”

Over the past year, Donald Trump, who famously never backs down, has attacked, backed down, and then again attacked Janet Yellen, the chair of the Federal Reserve. He has done it in his way, never acknowledging when he says precisely the opposite of what he has previously said. (Yellen, for her part, has ignored the whole thing.)

Trump’s Yellen cycle began in October, when, in an interview [32] with The Hill, he accused Yellen of keeping down the Fed’s key interest rate, known as the Fed funds rate, because President Obama “doesn’t want to have a recession-slash-depression during his administration.” (This raised the question, of course, Who expects a President to want a recession-slash-depression?) By the spring of this year, Trump had revised his thinking about Yellen. “I have nothing against Janet Yellen whatsoever,” he told [33] CNBC, on May 5th. “She’s a very capable person. People that I know have a very high regard for her.” Trump explained his newly rosy view by endorsing the very policy he had mocked a few months earlier. “She’s a low-interest-rate person; she’s always been a low-interest-rate person. And I must be honest, I’m a low-interest-rate person.” A couple of weeks later, Trump reiterated his happy view of the Fed chair. In an interview with Reuters [34], he said, “I’m not a person that thinks Janet Yellen is doing a bad job.”

This week, Trump was back on the attack. On Monday, he told CNBC [35] that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said [36]. “Beyond anything I would have ever thought possible.”

It’s impossible to reconcile Trump’s conflicting statements on Yellen and the Fed’s interest-rate level. Low interest rates can’t be both smart policy and evidence of corruption, just like Yellen can’t be both “very capable” and a shameful Obama stooge. But beyond the contradictions, Trump has betrayed a basic misunderstanding of how central banks work. Take his statement that he and Yellen are both “low-interest-rate” people. Yellen, he said, has “always been a low-interest-rate person.” Central bankers like to say that the entire point of the Federal Reserve is to “lean against the wind,” meaning that, when the economy is growing so fast that it risks inflation, the Fed raises its interest rate, and, when economic growth is sluggish, the Fed lowers it. In the context of central banking, Yellen is often identified as a “dove,” which means that she is generally a bit more concerned about lowering unemployment than about the risks of inflation. But calling Yellen a “low-interest-rate person” is like calling a doctor concerned about a patient’s high fever a “low-temperature person.” Yellen, like all central bankers, is not a low-interest or high-interest person. She’s a person for whatever interest rate is appropriate, given economic conditions. In her two decades of votes as a senior Fed official, she has voted for higher rates plenty of times.

Where Trump is most clearly and dangerously wrong is in his accusation of political interference by the White House. Yellen doesn’t make decisions about the interest rate on her own. As chair, she has one vote on the Federal Reserve’s twelve-member Open Market Committee, which is currently made up of five members appointed by President Obama and seven members who come from regional Federal Reserve banks and who are chosen by their own boards, made up of bankers, businesspeople, and, in some cases, community representatives. It’s a diverse lot—several members of the committee have shown no particular loyalty to the President. What’s more, the board’s decision-making process about the interest rate is public. We know how each of the twelve members vote at each meeting of the committee. The Fed even releases a “dot plot,” which shows how the different members expect to vote over the coming years.

This publicness has been designed for good reason. The Fed funds rate is the interest rate at which banks lend money to one another for overnight loans. In practice, this rate sets the tempo of the entire global economy, and changes to it ripple through every aspect of our economic lives. Sudden and unexplained moves would create panic. That the Fed hasn’t raised its rate since December cannot be explained as some nefarious plot jointly concocted by Obama and Yellen. It is fully explained by a board of technocrats studying the data and coming to pretty much the same conclusion that nearly everybody else who looks at the data reaches: our economy is still in a period of sluggish growth and, despite Tuesday’s cheery economic [37] news, a Fed-induced tightening could send millions of Americans back into unemployment and generally wreak havoc on the economy—a point Trump himself endorsed in his brief pro-Yellen phase a few months back.

The Fed is far from perfect and has earned its share of fair criticism. But what makes Trump’s views on central-bank policy particularly troubling is that it is impossible to know where they are coming from. The next President will be able to select a Fed chair and several Federal Reserve governors. By this point in a Presidential election, the major-party candidates’ economic preferences are typically well established, and usually embodied by their economic advisers. Whether you embraced them or despised them as candidates, since the nineteen-seventies, the major-party candidates have made it relatively easy to know how they would approach the Fed if elected. Notably, candidates in recent decades have all shown enormous deference to the Fed as an independent, nonpartisan institution. Reagan, Clinton, George W. Bush, and Obama all reappointed the Fed chair of their cross-party predecessor. Trump has said he will not reappoint Yellen to a second term. So how would he pick her successor? What framework would he use?

Trump’s economic advisers can for the most part be placed in one of three groups. In the first are Larry Kudlow and Judy Shelton, the intellectuals of the bunch, and both advocates of a return to the gold standard. While it has become popular among some Republicans in the past few years, returning to the gold standard is dismissed as a discredited, fringe idea by nearly all economists and market participants. And, for their part, gold-standard supporters typically reject the very idea of a Federal Reserve, so if Trump were to appoint Kudlow, Shelton, or another gold-standard supporter to the Fed, it would be the most radical and potentially damaging economic move since the dawn of our modern economic system, after the Great Depression. (Just how awful an idea returning to the gold standard would be is difficult to convey in a short space, but it’s worth pointing out that, under the gold standard, recessions and deep depressions were frequent, and the central bank and government officials had no ability to respond.)

The second group of Trump advisers is, famously, made up of businesspeople: all those Steves—Feinberg, Mnuchin, Roth, Calk, and the others who come from real estate and finance. As a group, they, like Trump, have not expressed great knowledge of or interest in monetary policy.

Finally, there’s the group represented by Stephen Bannon, the former Goldman Sachs banker and Breitbart News chief now heading Trump’s campaign. Bannon has not talked much publicly about his views of the Fed. But his deep association with the alt-right is worth examining: some on the alt-right have expressed contempt for the very idea of a healthy economy. A guide to the alt-right [38], published by Breitbart in March, identified a subset of the movement, known as “natural conservatives.” For these people, the authors explained, a strong economy isn’t necessarily something to wish for. “Culture, not economic efficiency, is the paramount value,” the guide states. “More specifically, [natural conservatives] value the greatest cultural expressions of their tribe. Their perfect society does not necessarily produce a soaring GDP, but it does produce symphonies, basilicas and Old Masters.” This outlook was contrasted with the views of “an establishment Republican,” who has an “overriding belief in the glory of the free market, [who] might be moved to tear down a cathedral and replace it with a strip mall if it made economic sense.”

Reading these passages helped me understand something that I had found confusing. In reading stories on Breitbart and other sites connected to the awful alt-right movement that Trump has embraced, I found it impossible to identify any overarching view of how the economy should work. There were sloppy and occasional potshots at Obama or Yellen, and a general contempt for the many institutions of modern liberal society. But there were no coherent economics. Which brings us back to Trump’s own views. He has no coherent plan, no view that can be mapped onto the common range of established discussion, whether left, right, or center.. On Thursday, Trump’s campaign released his “economic policy [39].” Amid the assertions that a dramatic cut in taxes and regulation will lead to more economic growth and higher employment, there is no mention of the Federal Reserve. Instead, Trump has offered the public a general, instinctive contempt for the Fed and its policies.

On Thursday, at the Economic Club of New York, Trump was asked specifically how he would advise the Fed, and his answer was filled with as much narcissism and nonsense as any he had given before. “Well, as a real-estate person, I always like low interest rates, of course,” he said. “Obama wants to go, he wants to play golf, and he wants to leave. He doesn’t want to have any stock-market disruptions. . . . I think the Fed is totally being controlled politically.” He concluded, “I really believe if it was a political decision or the right decision, they’re going to go with the political decision every time.”

“This week, Trump was back on the attack. On Monday, he told CNBC [35] that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said [36]. “Beyond anything I would have ever thought possible.””

Donald Trump’s Great Fed flip-flop-flip is a conspiracy theory that Janet Yellen and Obama are conspiring not to tank the stock market and economy. That’s where we are. And we can’t confidently identify which adivsor might be pushing this split because he’s surrounded himself with such a variety of economic charlatans. Was it the gold bugs advising him to take this stance or Steve Bannon and the Alt-Right? Both? The answer isn’t obvious. But a re-rebranding clearly just took place that signals Trump is planning on replacing Janet Yellen with a Federal Reserve chair who is willing to tank the economy and stock market via a series of incoherently justified rate hikes.

So, all in all, it sounds like we can possibly trust that he really won’t allow his personal business interests to dictate a Trump administration’s policies, blind trusts are not. After all, he’s willing to tank the global economy for basically no reason at all. At least no reasons he can explain. And he’s willing to do it soon.

What a great businessman [40]. What a great leader [41].