Why Trump Has the Most to Lose From Falling Stocks
Why Trump Has the Most to Lose From Falling Stocks by Bill Bonner – Bonner and Partners
BERLIN – We’ve looked at the past: $20 trillion added to the world’s monetary base over the last 20 years… $250 trillion of debt worldwide… U.S. stocks pushed to record highs…
We’ve looked at the present: sales, pre-tax earnings, and incomes all going nowhere… sluggish GDP… trade war… $1 trillion deficits… and, over the last two days on Wall Street, nearly a 1,400-point sell-off in the Dow…
Today, we look at the future.
And we begin with America’s president, Donald J. Trump.
POTUS says the Fed is to blame for falling stock prices. It’s “gone loco,” he claims. It’s “out of control,” he charges.
He’s right. But the Fed went loco a long time ago. When he was a candidate for the White House, Trump saw it clearly.
The Fed had “created a false economy” with lower interest rates, he charged. Trump – always the fighter – said they did this in order to make Obama look good. He said it had created a “big, fat, ugly bubble.”
He’s right about almost everything. Except the Fed didn’t create the bubble to make Obama look good. The Fed lowered rates to make itself look good – as the savior of the economy.
It was just part of its classic Three Mistakes Policy: 1) Keep interest rates too low for too long, 2) Raise rates to try to offset the damage from Mistake #1, and 3) Cut rates in a panic when markets fall.
Once elected, however, Mr. Trump came to like Mistake #1. If the Fed could make Obama look good, he reasoned, it could damn well make him look good, too.
No president likes Mistake #2. It sets up a correction… and risks defeat at the polling stations. But Mr. Trump is especially vulnerable. And today, no one stands to lose more from a stock market crash than he does.