The rhetoric has gotten hot between two people who are perhaps the most powerful individuals in the world in terms of impacting the economy.
When Donald Trump started his roller coaster tariff ride, Jerome Powell spoke of his concerns with tariffs contributing to inflation. Powell was correct in a sense that tariffs will likely make some consumer products more expensive than they otherwise would.
At the same time, it is rather rich for the chair of the Federal Reserve to be placing blame on anyone else for inflation. The Fed is inflation. If you go by the original definition of inflation (increasing the supply of money and credit), then it is only the Fed and the banks that are supported by the Fed that can cause inflation.
Even if we use the term price inflation, it is still the Fed that largely contributes to constantly rising prices. Sure, we can also blame taxes and regulations for higher prices. But it is the Fed that gives us chronic price inflation where prices go up virtually every year.
It was obvious that Jerome Powell was trying to use the Trump tariffs as an excuse for continued inflation problems. The problem for Powell is that we have already had really bad inflation problems. That is likely one of the reasons that Trump won the presidency back.
Even though Powell was his mild-mannered self in the way he said it, he was trying to shift blame to Trump for any future economic problems while Powell is still on the job.
Trump Hits Back Harder
Meanwhile, Trump in his usual blustering self has fired back at Powell. He actually called him a loser for not lowering interest rates. Trump is trying to pass the blame to Powell for the economic fallout from his tariffs.
https://truthsocial.com/@realDonaldTrump/posts/114376239725335883
It is likely we are headed for recession with or without new tariffs. That is largely because of previous Fed monetary policy being too loose. Still, Congress and the president (including past presidents) also share some blame because of the massive spending and deficits.
Trump is a low interest rate guy. He got lucky that the worst of the price inflation happened on Biden’s watch. Powell and the Fed were essentially forced to tighten in order to fight price inflation.
Most Americans would say that they are still suffering greatly with inflation. Even though we hear that inflation is going down, it is just the rate of price inflation that is going down. Prices are still going up on top of the already high prices.
Trump can say he wants lower rates, but what will happen if price inflation starts to accelerate again? The Fed never even got it back down to their supposed 2% target.
Trump messed up with his erratic tariffs. We almost instantly got a major downturn in stocks. Even if Trump’s tariffs are not to blame for the coming recession, Trump will get the blame. He idiotically instituted these tariffs, and he continues to be all over the place with them. It makes it incredibly difficult to do business not knowing what your prices are going to be from one day to the next.
It is not surprising that Trump is trying to blame Powell. Trump didn’t need to trigger this downturn in stocks. It may have happened anyway, but it is especially a bad look for him.
They Are Both Right, in a Sense
They are both right to place blame on each other because they are both at fault to some degree. Trump is actually partially at fault for what happened in 2020 when he approved trillions of dollars in spending to make up for the lockdowns that he endorsed. This was done in tandem with the massive monetary expansion by the Fed.
It is also interesting that Trump is attacking Powell this much and calling him a loser. Trump was the one who appointed Powell to his position in his first term. If Trump thinks Powell is a loser, then what does that say about Trump’s ability to recognize talent?
It is funny to hear the establishment financial media say that Trump is interfering with Fed independence. The Fed isn’t independent and it shouldn’t be independent. If it didn’t rely on a government-granted monopoly to create money and control interest rates, then maybe it should be independent, but that’s not the case.
Powell is right to blame Trump’s tariffs for turmoil in the market. Of course, we wouldn’t have this giant bubble if it weren’t for the Fed.
While Powell is chairman of the Federal Reserve, he is not going to do anything out of the ordinary to rock the markets. He is generally going to go along with the establishment consensus. He probably won’t not lower interest rates just to get revenge on Trump. If Powell wants to be political and get at Trump, he is probably better off lowering interest rates. The whole thing is going to blow up anyway, and then it will just make Trump look worse.
Powell can say, “Hey, I did my part and lowered interest rates to try to stimulate the economy. I can’t help it if the president had a reckless tariff policy that crashed the market.”
As the economy worsens, things aren’t going to settle down. Powell may end up stepping aside. He doesn’t need the headache anyway. Then Trump can get his new bad pick and he’ll have nobody else to blame but himself. Of course, he’ll still find somebody else to blame.
We were headed for recession anyway. It was a really bad political move for Trump to mess with these tariffs the way he did. It will only serve to make things worse and make him look worse.