Some baby-boomers like myself or those who are music aficionados remember the rock group Blood, Sweat & Tears. In 1968 they produced a hit called “spinning wheels.” It was a melodic tune that caught your attention.
“What goes up must come down
What must rise must fall
And what goes on in your life
Is writing on the wall!
In the world of Donald Trump those lyrics are a no-no especially when it comes to communicating about the economy as well as regulators who are charged to keep our system running smoothly. The economy is cyclical. Some metrics which guide it are up, meaning others must be down in order to maintain fluidity.
As the economy improves regulators such as Jerome Powell who is chair of the Federal Reserve must guide against inflation or pumping too much money into it. At the same time, when the economy is struggling as was the case with our financial meltdown of 2008, the Feds were charged with lowering the discount rate to make funds more affordable for commercial banks. Now that the economy is doing well there is very little justification it needs a boost or having the rate lowered.
Unfortunately, that is not the case in Trump world. He likes to tout everything is the best, the greatness on and on, so in his mind Powell needs to lower the discount rate immediately. It is no surprise that president’s in the past understand the protocol of the Fed and make it a point to allow them to operate from a non-political position.
“Trump is not planning to demote Powell.” Larry Kudlow, director of the National Economic Council
For the past year Trump has intimated his disappointment of Powell while suggesting he might fire him. This is due to the Feds raising the rate as a protection of maintaining a strong economy. Fortunately for Powell, his position is not a cabinet level. However, just as Trump harassed and badgered Jeff Sessions, James Comey and other leaders within his administration until they finally departed, he appears to be using the same antics against Powell.
Imagine waking up everyday hearing or reading the boss is unhappy with your performance, even though there is no justification, let alone using common sense to communicate the decision.
Today and tomorrow the FOMC (Federal Reserve, Federal Open Market Committee) is holding their regular meeting to discuss monetary policy. The bottom-line announcement usually follows the conclusion of the meeting. While Trump has communicated his desire that rates must be immediately lowered, most financial experts agree that is unlikely. They do look to the meeting in July with the assumption things stay the way they are; there may be a lowering in the discount rate.
In the meantime, as for economic issues Trump should hum the lyrics of Spinning Wheel to appease his desire to invoke another rash move