It’s not entirely clear why Donald Trump has been in an extended public and private meltdown these last weeks, but his behavioral downturn seems to coincide with increasingly grim-looking economic news suggesting the United States may not be far off from another recession. This is unacceptable news for Trump, who has made nonsensical bluster about having the “greatest” economy ever one of his core talking points. Unfortunately for him, he is an idiot, he has surround himself with other idiots, and nobody involved has a clue about what might be done to put an end to it—say, by not doubling and tripling down on new trade wars.
The one thing Trump does seem to have internalized is that low interest rates from the Federal Reserve boost the economy and higher rates slow it down. This has been enough to cause him to obsessively demand that the Fed lower rates now, right now, immediately, on his say-so. This continued today with a tweet-declaration that the Federal Reserve, and specifically chairman Jerome Powell, are “Boneheads,” and that the Reserve “should get our interest rates down to ZERO, or less, and we could then start to refinance our debt.”
Aside from the (again) grossly unpresidential freak-out, there are, ahem, a few things wrong with this plan, but it is noteworthy that Trump is for the first time suggesting not just a 0% interest rate, but a negative one. That means purchasers of U.S. government bonds would be billed for buying them, rather than being paid interest, over the life of the bonds. It’s an intentional bad deal, a method of discouraging savings and encouraging an uptick in consumption: If you’re going to lose money by keeping your savings in a bank, you might be better off buying that boat now instead of waiting five years (free financial advice: Do not buy a boat).
In other words, Trump is demanding that the Federal Reserve take a stick to savers, goosing spending now in an attempt to delay that oncoming recession. (Another complication here is that it’s not clear negative rates in Europe and Japan are doing even that, in part because banks are understandably wary of passing on negative rates to their own customers.) But if the recession still comes, the Federal Reserve would then be out of luck and out of options—you can’t lower interest rates to boost yourself out of a recession when you’re already at zero or negative rates before it ever starts. That would turn things dire indeed.
It is not likely Trump cares about that. The point is to boost today’s talking points, and tomorrow’s economy is for tomorrow’s suckers to deal with. And given that Trump has been making those same demands for lowered interest rates for the majority of his presidency, we can’t dismiss the possibility that Trump isn’t obsessed with lowering interest rates out of an interest in fudging his way out of a 2020 or 2021 recession at all, but instead is attempting to steer federal policy to line his own pockets. Trump is heavily—very heavily—in debt, and reducing interest rates to zero would mean he, personally, could refinance his own business and personal loans and save himself a bundle.
There’s little chance that a man still deeply involved with his own self-named business ventures is unaware of that. And Trump has not been shy about using government policy in ways that boost his own fortune: The Wall Street Journal reports that Trump is meeting with his economic advisers today on another plan that he has long been considering, one to reduce capital gains taxes by executive fiat.
Who would that plan benefit? Donald Trump and other members of the extravagantly wealthy class, that’s who. We have given Donald Trump the power to lower his own taxes with the stroke of a pen; you’d have to be dim to believe he wouldn’t be boorish enough to use it.