Commentary by Stephen Macaulay
Numbskull.
Moron.
Fool.
Knucklehead.
Stupid guy.
Really dumb.
Total stiff.
Those are just some of the terms that Donald Trump has used to describe Jerome Powell, chairman of the Federal Reserve.
“You talk to the guy, it’s like talking to a nothing. It’s like talking to a chair. No personality, no high intelligence, no nothing.”
Oh, and it is worth noting that Powell was first appointed chair by. . .yes, Donald Trump, back in November 2017.
He picked the guy.
The Justic Department is threatening the Federal Reserve with a criminal indictment. Why, you might wonder is Team Bondi suddenly interested in the central bank?
Well, the alleged reason is because of testimony Powell made this past summer about the $2.5 billion building renovation project for the Federal Reserve HQ.
Yes, we all remember last fall when the president of the United States stood in front of the General Assembly at the United Nations and held forth:
“Many years ago, a very successful real estate developer in New York, known as Donald J. Trump, I bid on the renovation and rebuilding of this very United Nations complex.
“I remember it so well. I said at the time that I would do it for $500 million, rebuilding everything. It would be beautiful. I used to talk about, ‘I'm going to give you marble floors, they're going to give you terrazzo." The best of everything. "You're going to have mahogany walls, they're going to give you plastic.’ But they decided to go in another direction, which was much more expensive at the time, which actually produced a far inferior product. And I realized that they did not know what they were doing when it came to construction and that their building concepts were so wrong, and the product that they were proposing to build was so bad and so costly, it was going to cost them a fortune. And I said, ‘And wait until you see the overruns.’ Well, I turned out to be right. They had massive cost overruns and spent between $2 and $4 billion on the building and did not even get the marble floors that I promised them.”
(The absurdity of his going on about that to the General Assembly is an indicator of the man’s thinking.)
Perhaps Powell’s real crime is not hiring the Trump Organization for the building project at the Fed.
There are probably terrazzo floors.
On Sunday, January 11, Jerome Powell posted a video on social media.
In it, Powell claims:
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
A word about what the Federal Reserve is.
It describes its purpose:
“The Federal Reserve System performs five key functions that serve all Americans and promote the health and stability of the US economy and financial system. It conducts the nation’s monetary policy, promotes financial system stability, supervises and regulates financial institutions, fosters payment and settlement system safety and efficiency, and promotes consumer protection and community development.”
Stability.
One of the things that is widely accepted that Trump’s economic approaches aren’t is stable.
Look at the roiling that has occurred vis-à-vis tariffs on countries.
Look at how impetuousness drives his so-called policy.
A recent example: Trump calls executives from oil companies to the White House on January 9 to discuss the Venezuelan oil industry, a decrepit, broken system that needs billions of dollars and many years to reconstruct before it starts showing any kind of an ROI.
ExxonMobil CEO Darren Woods, who probably knows more than a little more about the oil industry than Trump, called the situation “uninvestable.”
So what did Trump say during a press gaggle on Air Force One Sunday, January 11?
"I didn't like Exxon's response. You know, we have so many that want it. I'd probably be inclined to keep Exxon out. I didn't like their response.”
He didn’t like their response. A response that’s based on knowledge of the oil industry.
Let’s not let facts get in the way of how things are run.
Which brings us back to Powell and the Federal Reserve.
Trump has repeatedly said that the Fed needs to make more, deeper cuts to the interest rates it controls.
Trump’s idea is that if the Fed rate is cut that will lead to reduced rates for consumer loans.
In other words, money would be “cheaper” for consumers, who would then go out and buy big ticket items, which would juice the economy.
And this is a case of the classic “yes, but.”
Yes, they might be inclined to buy more things, but can they afford them?
Consider that at present, 20% of new vehicle buyers are paying more than $1,000 a month for that shiny new vehicle — which won’t be shiny or new when it is paid off because the average length of a loan is 69 months.
That means the average price being paid is $69,000. The median household income in the US is $83,730.
So that $69,000 is 82% of that median income.
Now the average auto loan rate is 6.7%. Even knocking that down a couple percentage points is not going to make it all that more affordable.
It is worth noting that the repo rate, 1.73 million vehicles per year, is the highest it has been since 2009.
Is it a good idea to encourage people to take on more debt?
You may recall Trump floating the idea of 50-year mortgages. That would have the effect of slightly lowering the monthly payment — but nearly doubling the amount of interest paid over the life of the loan. It doesn’t address the real reason that housing costs are high: Low supply.
But fixing something like that isn’t as easy as putting something on the so-called Truth Social.
Because the Fed, an independent federal agency, provides stability to the US financial system, foreign countries are confident in the US financial system so they buy securities from the US Treasury.
This is real money. Like Japan buying as much as $1.15 trillion, the UK $899 billion and even China $784 billion.
Powell:
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
What happens when these countries determine that the US central bank is being manipulated by the political whims of the president? They’re probably going to be inclined to start cashing in some of those notes. And how is that going to work out for the economy?
Not only does Trump show himself to be infantile by calling Powell the names listed above (and let’s face it: there are plenty of other people he’s called worse things), but there is an impetuousness to his actions that are not helpful.
Nor is it helpful that it is absolutely clear he is using the Department of Justice to go after people he doesn’t like (e.g., James Comey, Letitia James, Jack Smith, Adam Schiff, etc.).
In the case of Powell this is much worse because it is putting in doubt “the full faith and credit of the United States.”
Something the country can ill afford.
Macaulay is pundit-at-large for The Hustings, where he writes primarily for the right column.