Here are a few indications of the esteem in which Trump holds Powell:. My biggest threat is the Fed.
Trump, speaking to Fox Business Network, October 16, Trump said on Wednesday. Trump said. Those comments came after Mr. Trump on Monday accused the Fed of botching the job.
Blew it! Trump said on Twitter. The New York Times , June Yet even as Mr. The New York Times , July 6. On the basis of the above, one might conclude that Trump thinks rates should always be low. But there was at least one instance when he thought rates were being held too low:. In late then-candidate Donald Trump accused Janet Yellen, chair of the Federal Reserve, of being part of a political conspiracy. Yellen, he insisted, was keeping interest rates unjustifiably low in an attempt to help Hillary Clinton win the presidency.
The truth is, there are ways in which low rates are undesirable and potentially harmful.
They include these:. What seems lost in the policy assessment is a careful discussion of the risks of overly accommodative monetary policy.
Doing so would risk adding even more uncertainty to the outlook. Alternatively, higher labor costs from an overheated jobs market might squeeze company profit margins and lead to a pullback in investment and hiring. The juxtaposition of the above lists of positives and negatives shows that low interest rates — just like most other aspects of economics — have both pros and cons. This is illustrated by one of the greatest cartoons from my collection:.
That cartoon is 38 years old. Just days earlier, strong data on the job market had the opposite effect on stocks. The weakening outlook for the economy means, in all likelihood, borrowing costs are coming down — and in the right circumstances, this can be good for stocks. The New York Times , July Many people think of an economy as a dependable machine that operates according to diagrams and rules, and of central bank actions as levers that can be pulled to adjust the functioning of that machine.
But, instead, I believe a lot of uncertainty and variability exist regarding the functioning of economies and central banks. I think a recent article from The Times provides a great picture of how challenging the job is, and how many ways there are to be wrong.
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Heading into their policy decision and news conference Wednesday [June 19], there were a lot of ways Federal Reserve officials could have messed things up. One possibility was a repeat of the meeting in December, when markets judged Chairman Jerome Powell and the Fed to be oblivious about negative forces building in the markets and in the global economy, and sold off precipitously over the next days.
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But the opposite risk was present as well — that out of fear of repeating the December episode, Mr. Powell would exhibit too much of a hair-trigger reaction to recent signs of a slowdown in inflation pressures and industrial activity. Powell over interest rate policy. The relatively muted reaction of financial markets suggests that Wall Street viewed the move [i. The stock market was up, but only a little, which helps reduce the sense the Fed is just acting to prop up stocks, while bond yields fell further as markets became more confident that rate cuts were on the way.
But the flip side of that is that some lingering questions have been put off to another day. Deciding to wait for more evidence is a decision, too. It would be a doozy of an adjustment to bring them into alignment. If the sharp drop in rates that has taken place since November were to reverse quickly, it could cause huge damage to interest-sensitive sectors like housing and automobiles.
The Fed usually acts in response to the overall outlook for the economy: hundreds of millions of transactions entered into by Americans each day. In particular, the Fed has to anticipate and cope with the possibility of a trade war, probably the greatest source of economic uncertainty today.
It has to make interest rate and quantitative easing decisions based on its judgment as to what Trump will do and its impact. Certainly little of this can be thought of as scientific or reliable. Powell was asked at the news conference about academic research suggesting that when interest rates are near zero, a central bank actually should be more aggressive, rather than less, about cutting rates in the event of a slump — to maintain credibility that it will not let deflation take hold. When a rate cut is announced, people take it on faith that it will cause the economy to strengthen and markets to rise.
Do the lower rates cause the rise, or is it belief in the efficacy of rate cuts?
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Clearly, prevailing opinion regarding Fed management matters a great deal in the efficacy of its actions. Not only does the Fed have to figure out what actions it should take to keep the economic machine humming, but also whether people will react positively and trust in them to work. In other words, psychology, not just economics. So did the Fed get it right Wednesday with the balanced, nuanced approach Mr.
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The answer is: Ask in a few months. On one hand, our economy is still expanding. Monetary stimulus via rate cuts just like fiscal stimulus via deficit spending is in order when the economy is weak and failing to create jobs. But stimulus may be somewhere between unneeded and counter- productive at times like today, when the economy is growing acceptably, the unemployment rate is at a year low, wages are rising, and the recovery has just become the longest in history.
The economy today is healthy.
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But the Fed has to worry about whether it will remain so, and in particular whether there will be a full-fledged trade war with China. Thus, on the other hand, people are concerned about the potential for economic weakness. Should it try to produce perpetual prosperity and permanently ward off a correction? Are there risks in its trying to do so? It all depends on which hand is doing the weighing. Legal Information and Disclosures. This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Oaktree has no duty or obligation to update the information contained herein.
Further, Oaktree makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. In truth, no Stewardship person has ever not accepted a pledge even if it came in late, but keeping to the timeframe did remind the pledger of the urgency to follow through.
There were times, however, when there were issues needed to be addressed, whether a person was no longer in a position to make a pledge or was upset with something going on in the church locally, diocesan-wide, or nationally. These calls were made by knowledgeable Stewardship committee members who could tactfully respond to the needs or concerns of the parishioner.
While it is easy to remember to say thanks to the big pledger, it is just as important to say thank you to the small one. Even if it was only a dollar a week, every pledge was thanked in writing. Finally, at the end of Pledge Season was a celebration. It was a day when all outstanding pledge cards were due in and students completing any of the "Disciple" classes received their pins. A tremendous amount of planning went into running the Pledge Season, but then, the Stewardship Committee was charged with raising a tremendous amount of money.
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