Paul Krugman this weekend issued a damning critique of what he described as Donald Trump’s “obsession” with seizing management of the Federal Reserve and its financial coverage.
“For my sins, I actually do, fairly often, look at Trump’s Truth Social feed, and this is not a guy I would allow within three miles of making monetary policy. This is just horrifyingly irresponsible,” the famend economist informed MSNBC’s Ali Velshi.
Krugman, the 2008 winner of the Nobel Memorial Prize in Financial Sciences, famous how America is at present experiencing “at least a mild case of stagflation,” when excessive inflation combines with stagnant financial development and rising unemployment. Friday’s jobs report was not excellent news for Trump.
The Fed will “for sure” reduce rates of interest — as Trump is demanding — subsequent month, he predicted. However that received’t “fix the underlying problem” or “deliver the kind of wonderful economy that Trump claims we have,” he warned.
Horacio Villalobos by way of Getty Photos
Stagflation normally outcomes from exterior pressures, stated Krugman. However throughout Trump’s second time period it’s “all self-generated … self-inflicted. This is ‘Trump-enomics’ has done this to us,” he stated.
Krugman expanded on the theme in the most recent challenge of his Substack publication, arguing that when explaining Trump’s cause for slashing charges “one should never rule out the role of sheer ignorance.”
“Trump may imagine that lower short-term interest rates will lift him in the polls, while ignoring the high likelihood that such a steep fall in short-term interest rates will raise expected inflation and, as a result, long-term rates will go up, not down,” he wrote. “And sometimes he seems to think of interest rate reductions as a sort of trophy, like an award you get for supposedly winning a golf tournament.”
“But there is another reason that might explain why Trump wants to end the Fed’s independence — and this reason makes economists very, very nervous,” he added. “For it’s likely that Trump is seeking to establish ‘fiscal dominance’ of monetary policy — a policy regime in which the Fed’s actions are dictated, not by an effort to achieve low inflation and full employment, but by the desire to avoid hard choices on taxes and spending.”
Learn Krugman’s full evaluation on Substack.
