Sunday, President Trump said that actions by the Fed have hobbled economic growth and stock market gains by perhaps 30%, and that it should begin pumping money into the economy as it did during the Y’s 2007-2009 recession.
President Trump’s latest hammering Twitter attack Vs the Fed came as European Central Bank head Mario Draghi and other international officials publicly expressed concerns that a Fed politicized by his new board nominees would rattle a USD-based global system.
“If the Fed had done its job properly, which it has not, the Stock Market (DJIA) would have been up 5,000 to 10,000 additional points, and GDP would have been well over 4% instead of 3% with almost no inflation,” President Trump said in his Tweet.
“Quantitative tightening was a killer, should have done the exact opposite,” he said, referring to the Fed’s monthly withdrawal last year of $50-B monthly of the bonds it acquired during the worst economic downturn since the 1930’s Great Depression, thus draining the liquidity from the system.
President Trump’s suggestion the Fed return to QE would put the central bank in the position of adding monetary stimulus and expanding its presence in debt markets in an economy growing solidly and with historically low unemployment.
The Fed decided to halt the draw-down of its security holdings as of September after concluding that the size of its asset holdings, likely around $3.5-T then, would be adequate given the demand by commercial banks to hold central bank reserves, the public demand for cash, and the other uses to which its assets are put.
The Fed raised interest rates 4X in Y 2018, but also has put that process on hold, leaving the target policy rate at a range of between 2.25 and 2.5%, below historical averages.
Trump was angered last Fall by Fed Chairman Powell’s missteps that contributed to a 21% fall in the DJIA from October through December.
That loss has been almost completely erased as the Fed shifted gears, and the DJIA is now 1.5% below the record it set on 3 October. The S&P 500 has reclaimed it loss in the frame and is in positive territory as of last Friday’s close.
President Trump is still ‘hot’ at Chairman Powell, and indicated he will name 2 political allies, economics commentator Stephen Moore and businessman Herman Cain, to fill the 2 open seats on the Fed’s board of governors.
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