WHY TRUMP IS TAKING OVER THE FED

Why Trump is taking aim at the Federal Reserve

President Trump has gone and done it now.

Two weeks before the next Federal Reserve policy committee meeting, the president, who fights with everyone, took on the Fed.

This isn’t the first, second or even third time a president has butted heads with the Fed. But when Trump does it, everything old is new again, as the late Peter Allen said.

And while Trump made sure to say something nice about Fed Chairman Jerome Powell — “he’s a good guy” — the president was clear about his beef with the Fed. Trump doesn’t like the Fed raising interest rates to slow down an economy that he thinks he just got speeded up.

At the end of this week, we’ll know how true that is. The gross domestic product’s first reading for the second quarter is coming out and is expected to have grown at a 4 percent annualized rate thanks, in large part, to the dangerous tax rate cuts pushed by Trump.

Now comes the interesting part. As I’ve been saying — and Trump probably was reading — the US economy wasn’t just weak but also broken. And by that, I mean that the extraordinarily low rates put in place over the last decade meant that the Fed would be forced to raise rates aggressively once the economy showed even a small sign of life.

That’s what is happening now.

The Fed’s policy-making committee will meet on July 31 and Aug. 1, but a rate hike isn’t expected at this time. But one is likely coming after the meeting on Sept. 25 and 26. Another hike in December was a 50/50 shot before Trump acted up.

The White House seemed to say that Trump is OK with the September hike. But he doesn’t want the fourth hike of the year in December. By criticizing the Fed so publicly this week, Trump almost guaranteed a December hike since Powell will need to assert his independence from Trump, the guy who appointed him earlier this year.

While the media went nuts when Trump looked as if he was trying to interfere with Fed matters, the fact is that this isn’t so unusual. True, the Bushes, and President Clinton and President Obama pretty much left their Fed chief alone (but only because Alan Greenspan, Ben Bernanke, and Janet Yellen went along to get along), but the history of White House clashes with the Fed are legendary.

President Harry Truman met with the Fed of his day, which was under Marriner Eccles because the White House didn’t want interest rates increased. In 1965, Fed chief William McChesney Martin clashed with President Johnson about interest rates, and President Nixon wanted Fed chief Arthur Burns to keep borrowing costs low leading up to the 1972 election.

And no elected official was pleased when Fed chief Paul Volcker raised interest rates to unheard-of levels in the late 1970s to fight back inflation during the Reagan administration. President Carter probably lost the 1980 election because of the Fed’s policies.

The current Fed has said it will continue to raise interest rates, but that’s a tricky proposition. With rates remaining very low for a very long time, savers in the US are under pressure. So higher rates not only fight inflation and give the Fed ammunition (in the form of rate cuts in the future) but also put a ceiling over how much borrowers will have to spend and how well the economy can do.

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Yep, Trump can say all the nice things he wants about Powell. But there will be more clashes.

Source:>>>>>>>>>>>>>>>>>>>>Here

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