Could #Trump Audit The FED ?
Is Trump going to usher in a new era of prosperity and innovation, or is he going to be the one standing in the center ring when the circus tent comes down? Remember some voted for Trump as political molotov cocktail.
“Trump is a business man” you say, “he’s going to make things happen”. Cut taxes, cut regulation, invest a trillion dollars in infrastructure (including a ginormous wall), punish companies that move factories overseas, rebuild the military, restore relations with Russia, start a trade war with China. And you know a new arms race would create jobs.
There’s a lot to unpack there, and those are debates worth having, however much of this hinges on a variable that Trump doesn’t control: the Federal Reserve.
The Federal Reserve has held interest rates near zero for close to a decade. They also engaged in quantitative easing from 2009 to 2014, accumulating 4.5 trillion dollars worth of mortgage backed securities and treasury notes (they are still holding those assets by the way). This inflated stock and bond market bubbles of historic proportions.
When a friendly face is in the white House, crashes are typically attributed to a war, a terrorist attack or some other external variable (for example 9/11, which masked the unravelling of the tech bubble in 2001). The Trump administration, however, is an excuse in and of itself.
Word is the Fed is leaning towards increasing interest rates aggressively in 2017, and may engage in anti-inflationary measures to offset Trump’s infrastructure stimulus plans. That means that the flow of money and credit is about to be tightened. It also means the Fed is setting itself up for a showdown.
If Trump plays by the rules, he will have to wait until 2018 to replace Janet Yellen. A lot can happen within that timeframe.
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