Aug 29, 2019

Fed tweets show Trump doesn't understand central banking

Trump announces Powell as his Federal Reserve nominee in November 2017. Photo: Drew Angerer/Getty Images)

President Trump's latest tweets have continued a pattern of attacking the Federal Reserve and his handpicked chairman Jerome Powell for months using a mix of half-truths, mischaracterizations and hyperbolic fantasies, such as a claim that the stock market would be 10,000 points higher if not for the Fed.

Driving the news: On Wednesday morning, Trump said on Twitter that the Fed "cannot 'mentally' keep up with the competition - other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money - ZERO INTEREST PLUS! No Clue Fed!"

Reality check: German government bonds yields and interest rates in Europe are much lower than those in the U.S., but that's because their economies are so weak. Germany's economy shrank in the second quarter, while the U.S. economy grew by 2%. The eurozone economy as a whole grew by 0.2%, about 1/10th the rate of the U.S.

Central banks raise interest rates to hold off inflation and prevent asset bubbles from forming. A major contributor to the 2008 global financial crisis was the bubble in the housing market that made its way through the banking system and burst.

  • Trump also has attacked China's central bank for too-low rates, even though the People's Bank of China holds interest rates about twice as high as the U.S.

Between the lines: The president's recent suggestion on Twitter that the Fed lower interest rates by 50-100 basis points "over a fairly short period of time" and add "some quantitative easing" demonstrates further lack of understanding.

  • Lowering interest rates that much in a short period of time would signal a massive panic by the Fed and send stocks, bonds and the dollar sharply lower, causing hundreds of billions in losses.
  • Quantitative easing is an extreme measure central banks take only in times of severe crisis to jumpstart the economy and forestall a potential recession.

The Fed's job is to reduce unemployment and keep inflation contained. Restarting quantitative easing or introducing European-style negative interest rate policies has the potential to do more harm than good.

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U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

More than 62,300 U.S. health care workers have tested positive for the novel coronavirus and at least 291 have died from the virus, the Centers for Disease Control and Prevention reported on Tuesday. COVID-19 had infected about 9,300 health professionals when the CDC gave its last update on April 17.

By the numbers: More than 98,900 people have died from COVID-19 and over 1.6 million have tested positive in the U.S. Over 384,900 Americans have recovered and more than 14.9 million tests have been conducted.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 11:00 p.m. ET: 5,589,626 — Total deaths: 350,453 — Total recoveries — 2,286,956Map.
  2. U.S.: Total confirmed cases as of 11:00 p.m. ET: 1,680,913 — Total deaths: 98,913 — Total recoveries: 384,902 — Total tested: 14,907,041Map.
  3. Federal response: DOJ investigates meatpacking industry over soaring beef pricesMike Pence's press secretary returns to work.
  4. Congress: House Republicans to sue Nancy Pelosi in effort to block proxy voting.
  5. Business: How the new workplace could leave parents behind.
  6. Tech: Twitter fact-checks Trump's tweets about mail-in voting for first timeGoogle to open offices July 6 for 10% of workers.
  7. Public health: Coronavirus antibodies could give "short-term immunity," CDC says, but more data is neededCDC releases guidance on when you can be around others after contracting the virus.
  8. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 18 mins ago - Politics & Policy

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

There are no COVID-19 patients in hospital in New Zealand, which reported just 21 active cases after days of zero new infections. A top NZ health official said Tuesday he's "confident we have broken the chain of domestic transmission."

By the numbers: Almost 5.5 million people have tested positive for the novel coronavirus as of Tuesday, and more than 2.2 million have recovered. The U.S. has reported the most cases in the world (over 1.6 million from 14.9 million tests).