Trump favors teasier money
Does Trump favor tighter money or easier money? Neither, he favors teasier money. He likes to tease us with ambiguity.
Here’s what we know so far. He’s a “debt guy” who likes low interest rates. And he’s complaining that the Fed’s low interest rate policy is hurting the economy, or helping Obama, or something.
Ramesh Ponnuru emailed me the following comment after the first debate:
if you didn’t watch it, you missed the part where Trump said our currency is overvalued and then called for an interest-rate hike.
Judy Shelton (a hard money advocate) has been advising Trump on money, and has a piece in the Financial Times explaining his views:
Donald Trump has broken a cardinal rule in US presidential campaigning by openly questioning the effectiveness of the Federal Reserve. He believes that the low interest rate regime engineered by America’s central bank has not stimulated real growth but has rather created a “false economy” that could lead to the next global financial meltdown. Moreover, he questions the motives of Fed officials. “The Fed is being more political than Secretary Clinton,” he said in Monday night’s presidential debate.
OK, so he doesn’t like Fed policy—so what are Trump’s views on money? Shelton clarifies things at the end of her piece:
By focusing on the Fed, Mr Trump raises the importance of restoring monetary integrity. The dollar should be the world’s most trustworthy currency.
Can the pursuit of sound money at home be reconciled with the notion of American economic leadership on the world stage? Mike Pence, Mr Trump’s running mate, has called for a rethinking of the international currency system — even proposing that perhaps the time has come to have a debate over gold and the proper role it should play in monetary affairs.
Mr Trump has not publicly embraced any such idea, although he has mused: “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful.” No one anticipates that a Bretton Woods-style conference will soon take place at Mar-a-Lago, the exclusive Trump resort in Florida. Still, as Mr Trump often urges: it is time to start thinking big once again.
The writer is a member of the Trump economic advisory council
So what are Trump’s views? Very simple. For elderly savers, Trump favors higher interest rates. For big developers, he favors low rates. For consumers, he wants a strong dollar. For exporters, he wants a weaker dollar. Each group will get what they want, but not all in the same universe. You see, Trump’s monetary views are best described as a wave function, which will collapse to a single outcome on January 20th. Trump is the first post-modern candidate, the first to understand that truth is what the voters let you get aways with, and that the multiverse offers the possibility of achieving seemingly irreconcilable aims.
The same is true in the realm of tax policy. Trump’s new tax proposal, recently unveiled, eliminates the earlier proposal for a sharp cut in business taxes on passthrough entities. But the new proposal also maintains the earlier proposal for a sharp cut in business taxes on passthrough entities (which cuts the top rate for family businesses from 40% to 15%). Isn’t that impossible? Not at all. The elimination of the tax cut only applies to the deficit hawks at the Tax Foundation, who estimate the cost to the federal budget. The proposed giveaway to big developers still applies to business associations. Here is the NYT:
The campaign then told the Tax Foundation, a conservative-leaning Washington think tank it asked to price the plan, that Mr. Trump had indeed decided to eliminate the tax cut.
Call it the trillion-dollar lie: Both assertions cannot be true.
At issue is whether Mr. Trump’s plan would tax small businesses, partnerships and other “passthrough” entities at the same 15 percent rate as large corporations, as he proposed last year, or whether they would continue to pay individual income taxes, at rates as high as 33 percent.
The campaign’s conflicting accounts of its own proposal are particularly remarkable because Mr. Trump and his advisers have taken months to refine the details, which Mr. Trump, the Republican presidential nominee, unveiled in an economic policy speech on Thursday in New York.
In this case, however, telling two versions of the same story benefited the Trump campaign.
Dropping the tax cut was central to Mr. Trump’s optimistic claim that his plan would not increase the federal debt. But by simultaneously promising to keep the tax cut, the campaign won the support of the National Federation of Independent Business, an influential small-business lobbying group.
“We’re comfortable” that Mr. Trump is committed to preserving the tax break, Jack Mozloom, a spokesman for the group, said Friday morning. “We have it directly from his campaign.”
The Tax Foundation was not so comfortable.
“There is a disconnect between the plan as understood by us and the plan as understood by the N.F.I.B.,” said Alan Cole, an economist at the foundation who worked on the cost estimate that Mr. Trump cited in his speech.
What does Binyamin Appelbaum mean by saying “both assertions cannot be true”? Has he never heard of quantum mechanics?
Given the closeness of the election, it seems almost certain that Trump will win in at least some universes in our multiverse, and Clinton will win in others. In fact, I think nature has “rigged” things that way. And in some of the Trump winning universes the 15% rate will be implemented, while in others it will not.
I used to think QM was too complicated for me to understand, but with Trump’s help I’m beginning to get the hang of it. Don’t worry, it’s all going to happen anyway . . . somewhere.
PS. You might wonder why other candidates haven’t adopted this strategy. It appears that most are deficient in a very important substance that scientists call “gall”. Just look at Jeb Bush, you can see in his pale skin a clear deficiency in gall. In contrast, Trump’s orange complexion is just bursting with gall. He must take gall enrichment vitamins every morning. Bush was only able to come up with a pathetic 2 “pants on fire” lies during the debates, while Trump destroyed the rest of the field with 48. Jeb tried putting an exclamation point after his name, but even that didn’t work.
PPS. Trump assured us that while he knows nothing about government policy, he would get the “best people” to advise him. I guess that means Peter Navarro on trade, Judy Shelton on money, and Larry Kudlow on tax policy.
HT: Ravi
Tags:
28. September 2016 at 14:24
I couldn’t make a lick of sense out of what Trump said about the Fed during the debate.
28. September 2016 at 16:39
Trump is the first post-modern candidate, the first to understand that truth is what the voters let you get away with.
…
You might wonder why other candidates haven’t adopted this strategy.
Since so-called “fact checks” are so trendy now I rate these statements half-true (and half false). The statements are true in so far that Trump lies a lot, most likely more so than other candidates. But he is hardly the inventor of this strategy (lying is basically the oldest strategy in politics), other candidates have adopted this strategy as well and Trump is also not the first to understand that truth is what the voters let you get away with.
28. September 2016 at 17:00
If Trump is truly post-modern than why doesn’t he prefix more nouns?
28. September 2016 at 17:29
The “me” that lives in any universe where Trump wins is going to have to rethink some of my preconceptions.
I’d been planning to vote for Johnson for many months but Trump has pushed me to the point where I have to vote for Clinton.
28. September 2016 at 17:53
Very Interesting – from the FT
Japan revamps GDP numbers over accuracy fears
Bank of Japan report suggests huge understatement of growth in 2014
https://www.ft.com/content/4a2d1624-8559-11e6-a29c-6e7d9515ad15
28. September 2016 at 17:55
Trump will have the first spaghetti presidency – after having thrown so many things against the wall to see what sticks. At least nobody could rightly refer to Trump as an ideologue.
As opposed to “tax and regulate the rich” to pay for a score of trillions in debt on top of tons of new programs that will have plenty of new recipients after opposing printing money under any circumstance because everyone knows that is what got us into the mess in the first place and caused the financial crisis, perhaps having plenty of different ideas is better than tried and failed policies that rhyme with Hugo Chavez without so much as the printing press morphine.
Might as well face it. We are screwed no matter the outcome in November.
28. September 2016 at 18:06
@bill: you only have to vote for Clinton in a swing state. I’m not in one so I’m Feeling The Johnson. Sumner has posted the same thing.
28. September 2016 at 18:47
Sad to see such a promising candidacy—Trump’s—devolve daily into mush, instead of evolving into a real option for voters.
There was fleeting moment when Trump appeared ready to take on GOP warmongers, and thought out loud about paying down the national debt through QE (not a bad idea, btw). He talked about taxes and regulations that work for the middle class. Trade policy? No worse than Reagan’s.
Sadly, Trump has badly lost his way, and was always unappealing as a personality. (Reagan was very appealing).
But life is funny: George Bush jr. looked “reasonable” in 2000, and then turned into the worst president since Buchanan. He left the country in two unwinnable but fantastically expensive occupational wars, a rapidly growing but out-of-control federalized foreign policy-national security complex, and with a collapsed financial system.
Making predictions is hard, especially about the future.
While Clinton and Trump are not promising, both are cupcakes compared to a President Xi, Jung, Putin, or guys in green uniforms running a SE Asian nation.
If this is the worst American can offer, be happy.
28. September 2016 at 19:45
“But he is hardly the inventor of this strategy (lying is basically the oldest strategy in politics), other candidates have adopted this strategy as well and Trump is also not the first to understand that truth is what the voters let you get away with.”
No, other candidates really don’t lie like Trump. They don’t lie like this. They don’t hear iron-clad facts about the past and then interrupt the other candidate by yelling “WRONG” with no further argument. This isn’t normal politician stuff.
28. September 2016 at 19:53
Sumner’s dream of the state counterfeiting operation becoming owners of all capital in the country just got one step closer.
In response to South Carolina Republican Mick Mulvaney’s question to Janet Yellen on whether the Fed will will openly (as opposed to indirectly via Citadel) buy stocks, to wit “there’s been some attention in the last few months about the resent decision by the Bank of Japan to start purchasing equities and my question to you is fairly simple. Is the United States Federal Reserve looking at the possibility of adding the purchase of equities to its tool box as it looks at monetary policy?”
Janet Yellen responded in a “just give me the go ahead” manner:
“Well, the Federal Reserve is not permitted to purchase equities. We can only purchase U.S. treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer term issues and difficulties we could have in providing adequate monetary policy. Accommodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider, but if you were to do so, it’s not something that the Federal Reserve is asking for.”
Or as monetary crank Benjamin Cole often quips: “Inflate until the printing presses catch fire!”
28. September 2016 at 19:59
http://money.cnn.com/2016/09/28/investing/china-wang-jianlin-real-estate-bubble
This article is sure to generate cognitive dissonance in the insane asylum that is this blog. Attack it because it speaks to a bubble? Or praise it because it is coming from an elite Chinese real estate developer? Or maybe attack it because the guy is a wealthy businessman? No, better praise it because he is warning about removing the alcohol from the punch bowl too fast.
Decisions decisions…
28. September 2016 at 20:22
Honest politicians promise $2500/year in health insurance savings, and if you like your doctor, you can keep your doctor.
Con men make vague unattainable promises, like you will like your health care bigly, and no one will by dying in the streets.
Of course Hillary is neither honest nor a con man. For one thing, she’s not a man. Also, everyone knows she was sincerely for TPP before, sincerely against it until election day, and will be sincerely for it again once the voters are neutered. So, she is the most transparent candidate ever!
28. September 2016 at 21:02
Remember that the Obama plan was first proposed by Cato Institute in 1989. McCain supported that plan and Obama may have been silent, and then did the cabal’s wish. So, it was the cabal’s plan to get that passed.
So, if you take that away from the conversation Steve, you are left with a gal who may be a crook, but said that the foundation money was for her husband’s library right upfront. Or you are left with a man who is a fricken, out of his mind, maniac. He may as well be wondering in and out of traffic. He is a deeply flawed human being, and being a billionaire has totally corrupted him.
He is a mental case, and the more you watch him the more you realize it. Ben Cole was right, he started out with high ideals, but the cult of Trump took over.
Cole is wrong in saying he is not the worst America can offer. He is the worst, because he simply is not playing with a full deck. Anyone who observes him realizes he sets no bounds for himself, he cannot apologize. He cannot do what most adults can do. He doubles down on everything, Steve. He doubles down if he is right or if he is wrong.
We cannot have such an unstable soul, driven by self. Libertarianism talks about the invisible hand of self interest.
Trump has a very visible hand of perverse self interest that wants government to benefit him first and anyone else if it happens to do so. He is not the kind of guy that Adam Smith would use as an example. Trump is the ultimate libertarian gone bad, and in fact, has probably set back the cause of libertarian thought by a thousand years.
Trump’s idea of the invisible hand is to cheat, by using the laws of the land to stiff his workers. I can’t imagine Adam Smith talking about one as low down as Trump, morally, being what he would advocate.
Trump is an immoral, even decadent, individual, who simply doesn’t pay taxes because he says he is “smart”. I wonder how many people will cancel trips to his hotels because they detest his clever wickedness? I hope many.
28. September 2016 at 21:04
Correction, it was the Heritage Foundation, not CATO.
28. September 2016 at 23:03
Yawn. Given that money is nearly neutral (FAVAR paper, 2002, Bernanke et al) this entire post is nearly irrelevant.
29. September 2016 at 00:57
“Monetary policy is at the end of the line
BY EDWARD HARRISON / ON 23 SEPTEMBER 2016 AT 08:54 /”
https://pro.creditwritedowns.com/2016/09/confused-thinking-about-the-power-of-monetary-policy-wonkish.html
29. September 2016 at 05:07
Morgan Stanley employs idiots;
http://www.wsj.com/articles/trump-tees-up-a-necessary-debate-on-the-fed-1475102579
————–quote———–
Mr. Trump argued that an increasingly “political” Fed is holding interest rates low to help Democrats in November, driving up a “big, fat, ugly bubble” that will pop when the central bank raises rates. This riff has some truth to it.
Leave the conspiracy theory aside and look at the facts: Since the Fed began aggressive monetary easing in 2008, my calculations show that nearly 60% of stock market gains have come on those days, once every six weeks, that the Federal Open Market Committee announces its policy decisions.
Put another way, the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days.
This is a sign of dysfunction. The stock market should be a barometer of the economy, but in practice it has become a barometer of Fed policy.
————endquote———–
I remember when (during the ‘Monetarist Experiment’) the Fed moved its money supply announcements from Friday afternoons to Thursdays so Wall Street execs could get away for long week-ends. But, that aside, this guy is another ‘money is easy because interest rates are low’ type. And he’s, ‘chief global strategist at Morgan Stanley Investment Management’.
29. September 2016 at 06:08
Trump is clearly the Schrodinger’s cat candidate
29. September 2016 at 09:57
@bill and @msgkings My thoughts exactly. Am closely watching the WI numbers…
29. September 2016 at 11:04
@Philip: I think WI has to be considered too close to vote for a third party candidate if you are really anti-Trump (or Clinton for that matter)
29. September 2016 at 12:11
“Trump is the first post-modern candidate, the first to understand that truth is what the voters let you get aways with, and that the multiverse offers the possibility of achieving seemingly irreconcilable aims.”
While true, you miss the most Trumpain aspect. He then insults anyone who attempt to point out the contradictions of his promises. Of course he can cut taxes for the rich and the middle classes and raise revenue at the same time. You must be too stupid to get it!
29. September 2016 at 13:14
Off topic but I think this will interest Scott and his readers…
Matt Yglesias says that Lars Løkke Rasmussen of Denmark is one of the world’s most libertarian heads of state.. (feelings on that ?)
”
”
So the head of one of the world’s most generous social welfare states is headed by one of the world’s most libertarian leaders.
That’s a notable contrast…
http://www.vox.com/2016/9/29/13111136/gary-johnson-admire-world-leaders
29. September 2016 at 13:28
I gotta ask: was that misspelled on purpose too?
29. September 2016 at 13:47
I’m losing a lot of respect for republicans over this election; they KNOW they accidentally elected a dangerous crackpot…and yet are sticking with him over a centrist because, hey, lower marginal tax rates!
29. September 2016 at 14:24
Thanks JimP, That’s one of the most bizarre graphs that I’ve ever seen.
29. September 2016 at 14:27
Tom, No one who cannot spell ‘unveiled’ is qualified to be President. I officially drop out of the race.
29. September 2016 at 14:43
Lol… well, maybe you can bone up on your spellin’ skillz for 2020.
O/T: This actually doesn’t surprise me too much (because I dipped my toe into Twitter recently and witnessed many memes of Pepe the Nazi alt-Reich frog whose propagators are no fans of alt-Lightists corrupting the alt-Right “movement” from the inside with their Jewishness), but you might get a kick out of it:
http://www.salon.com/2016/09/29/alt-right-catfight-daily-stormer-wages-holy-crusade-on-breitbart-because-milo-yiannopoulos-is-part-jewish/
29. September 2016 at 14:44
seriously good stuff… Fun to read.
Remember…always ponder the multiverse…
29. September 2016 at 15:06
veil,vail,vale. Happens to me a lot. Or is it alot? Vail is archaic, but it is still a word.
I learned rain, reign, rein, though. Very proud of myself.
The multiuniverse is where Janet Yellen may live as well. I don’t know. Did you know that the song, Happy Days Are Here Again was written by a Yellen? That must have some significance.
29. September 2016 at 15:11
Doug M,
Look into the Laffer curve.
It is possible for tax rates to be cut and for total tax revenues to increase. Since our corporate tax rate is one of if not the highest in the world, it is not as if it is so trivial or obvious that cutting taxes can’t ever be associated with higher tax revenues the way you are insinuating.
29. September 2016 at 19:35
“Honest politicians promise $2500/year in health insurance savings, and if you like your doctor, you can keep your doctor.”
Here is where the $2,500 number came from.
http://www.nytimes.com/2008/07/23/us/23health.html?_r=3
It didn’t have iron-clad evidence, but it wasn’t made up out of whole cloth either. The post-Obamacare healthcare cost data says overall health care costs have in fact seen lower cost growth, partly for reasons that were included in the $2,500 number.
“If you like your doctor, you can keep your doctor” is misstating the conservative argument. It’s “if you like your plan, you can keep your plan.” The ACA did grandfather in plans if the insurance company kept the whole plan. The plans famously cancelled in 2013 were cancelled by the insurance companies, not by the law. No matter how the Obamacare law was made, there was no way that Obama could guarantee that every private insurance company would not change their private business practices no matter what.
In other words, ACA was put to an absurd standard and, for political gain, there was not honest work on Republicans’ part to create a solution to individuals not having access to insurance. The law could have been a lot better, Republicans could have been honestly free market and ended the tax treatment of employer insurance. But for political convenience, meaningless slogans like “death panels” replaced any meaningful action. BTW, “meaningful action” does not include tort reform or selling insurance across state lines, since the preexisting condition issue is not solved.
29. September 2016 at 20:15
Scott, you might like this: https://www.youtube.com/watch?v=3yBGE80covk
29. September 2016 at 23:28
OT – Today’s news: “The Bank of Japan may have shaken up its strategy to jump start inflation, but on the ground, there’s little sign change is coming. Headline consumer inflation remained negative in August, down 0.5% from the year earlier, making Japan the only major economy still so deeply in negative territory. More dispiriting, the central bank’s preferred gauge of core inflation likely dropped to 0.4%, the lowest level in 18 months.”
Sumner is shouting from the rooftops: ‘Japan’s monetary policy is too tight!’. Analogy: somebody puts lipstick on a pig (monetarism) and wonders why the pig is not as beautiful as a pretty girl. So somebody shouts: ‘put more lipstick on!’. Money is neutral folks. Not only does it not have any real effects, printing money even has no nominal effects. Only fiscal policy can result in increased GDP, and that’s assuming people don’t start saving more in response to increased government dis-savings (spending), which itself is an assumption.
30. September 2016 at 00:58
OT – does the below sound familiar to loyal Sumner readers? I think so. Sumner is Keynes’ madman, if you understand the analogy. – RL
Classical Macroeconomics by Ahiakpor – (quote): By this process, Wicksell suggests the possibility that “banks can raise the general level of prices to any desired height” simply through their credit creation policy (111), an argument that has influenced particularly the work of Irving Fisher (1922) and J.M.Keynes (1930). Wicksell’s argument also minimizes the role of savings in the form of bank deposits in determining the supply of loanable funds or “capital” and its role in the determination of interest rates. He declares, “we have not…come across anything which corresponds to the customary method of explaining how the rate of interest is determined by the supply and demand of ‘capital.’ It would appear rather that the rate of interest…is completely subject to the discretion of the Bank” (1898:75). Wicksell (1906) later modifies some of these claims, see Ahiakpor (1999b) and Chapter 7.
30. September 2016 at 07:41
‘The ACA did grandfather in plans if the insurance company kept the whole plan. The plans famously cancelled in 2013 were cancelled by the insurance companies, not by the law.’
That’s specious, as Richard Epstein pointed out back in 2009, the fine print in the ACA made THE PROMISE a fraud;
https://www.youtube.com/watch?v=d-6ppmuBmkQ
The ‘absurd standard’ was Obama’s (dishonesty).
30. September 2016 at 11:20
Tom, Excellent. Everyone should listen to that, especially Harding, if his brain has not already turned to mush.
30. September 2016 at 11:21
I know there’s really no sport in pointing out all the loony things that our resident troll Ray Lopez claims. Still, somewhere there ought to be a hall of fame of Lopez idiocy, and I want to be sure this one isn’t overlooked: “printing money even has no nominal effects“
30. September 2016 at 21:26
Don Geddis, every comment you make is from Troll central.