Last week, Donald Trump volunteered that he would not reappoint Jerome Powell as chairman of the Federal Reserve. This seems a defensible point. His reasons, at least from a conservative perspective, find no defense.
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“I felt that he was not good,” the former president told Larry Kudlow about Powell. “In fact, I was very tough on him, and if I wasn’t I think we would have had much higher interest rates for much longer.”
Powell, under pressure from Trump, kept interest rates unnaturally low during his presidency. In the summer of 2019, he called Federal Reserve governors “boneheads” for not lowering rates to — in all caps in case anyone misunderstood his point — “ZERO, or less.”
Or less? That means he wanted lenders to pay for the privilege of renting out their money. The rate essentially sank to zero in early 2022. This easy money — low rates along with quantitative easing to fund deficit spending — remains the alpha and omega for inflation exploding in the United States (and the absence of all that remains the alpha and omega for why inflation stayed low in Switzerland, Saudi Arabia, and Vietnam).
Trump reveals himself a captive to his parochial interests as a businessman, when money rented on the cheap benefited him greatly. That worked for Trump Inc. It does not work, at least for any long period of time, for countries.
Trump’s continued push for loose money, after all the United States went through in 2022 and continues to some degree to go through, suggests he makes the same errors the second time around. It also shows his instincts as thoroughly anti-free market with regard to monetary policy. His outlook comes closer to William Jennings Bryan and John Maynard Keynes than Milton Friedman and Ludwig von Mises.
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