Donald Trump Likes Low Interest Rates But Says He'd Replace Yellen

Fortune ^ | April 19, 2016 | Stephen Gandel

[expat_panama]

The GOP frontrunner says low interest rates are good for America, even if the Fed Chair isn’t.

Donald Trump likes Janet Yellen’s low interest rates, but not the Federal Reserve Chairwoman herself.

“I think she’s done a serviceable job,” Trump tells Fortune. “I don’t want to comment on reappointment, but I would be more inclined to put other people in.”

As he’s said in the past, Trump tells Fortune that he would “absolutely” support proposals that would take power away from the Fed, and allow Congress to audit the U.S. central bank’s decision making.

That said, Trump seems to like what the Fed is doing with monetary policy.

“The best thing we have going for us is that interest rates are so low,” says Trump, comparing the U.S. to a homeowner refinancing their mortgage. “There are lots of good things that could be done that aren’t being done, amazingly.”

In fact, if the Fed were to raise interest rates now it could be disastrous, Trump says, because the country would be forced to pay higher interest rates on our debt, and that would be very “scary” for the economy.

“People think the Fed should be raising interest rates,” says Trump. “If rates are 3% or 4% or whatever, you start adding that kind of number to an already reasonably crippled economy in terms of what we produce, that number is a very scary number.”

It’s not certain that raising the fed funds rate would result in higher borrowing costs for the U.S. government—Treasury yields might fall if higher rates cause the economy to tip into recession—but other Republican candidates, like Ted Cruz, have said that low interest rates are hiding the cost of the nation’s debt. And if you were to raise interest rates that would force the government to stop spending, and cut the deficit.

But Trump doesn’t seem to be focused on that. Instead, Trump says he would like to take advantage of lower interest rates in order to refinance the debt and spend more money to rebuild the military and the country’s infrastructure. Trump did acknowledge that he thought we need to reduce our debt, but it was one of a number of things he thinks we need to do.

“The problem with low interest rates is that it’s unfair that people who’ve saved every penny, paid off mortgages, and everything they were supposed to do and they were going to retire with their beautiful nest egg and now they’re getting one-eighth of 1%,” says Trump. “I think that’s unfair to those people.”

And while Trump boasts about making America great again, he no longer has a plan, or a desire, to make the country debt free. In an interview with The Washington Post earlier this month, the GOP frontrunner said he’d be able to get rid America’s more than $19 trillion national debt “over a period of eight years.”

But Trump softened that stance in an interview Tuesday afternoon at his offices at Trump Tower.

“You could pay off a percentage of it, depending on how aggressive you want to be,” he says. “I’d rather not be all that aggressive. I’d rather not have debt but we’re stuck with it. If I had a choice of taking over debt free or having $19 trillion – which by the way is going up to $21 trillion very soon because of the omnibus budget, which is a disaster. If I had my choice I’ll take no debt every time.”

Trump made the comments about Yellen, the Fed, and the national debt to Fortune in a wide-ranging interview on his business career and how that would translate to his potential presidency. Fortune will publish a transcript of the interview later this week, accompanying a cover story in the magazine on how Trump runs his business, and what it says about how he would lead the country.

[expat_panama]

Whether or not we prefer some other nominee, our investing choices have to include the fact that Trump's very likely to be the next president nine months from now.  That said, we need to also realize that six months ago the headline was Trump Says Yellen Keeping Rates Low To Protect Obama 10/18/2015 .

[dp0622]

Before the fed reserve, who set interest rates?

or was it always around?

AUD keeps moving up against USD.

the plan has Failed. let’s suffer for about two years and get the pain over with FOR REAL this time.

[norwaypinesavage]

Low interest rates are great for real estate developers. They’re not so great for retirees, especially those who spent a lifetime of work saving for retirement, and now get zilch interest.

[expat_panama]

Happy Mid-week everyone!   Gold'n'silver continue well (now at $1,249.53 and $17.03) while stocks closed yesterday mixed a fraction of a % in rising trade volume.  Forward looking futures traders see stock indexes up a bit +0.17% and metals up a LOT +3.00%!  

This morning's announcements: MBA Mortgage Index, Existing Home Sales, and Crude Inventories.

New FR econ threads:

• Nordstrom is cutting hundreds of jobs, confirming a terrifying new trend among wealthy shoppers
• Simple Math Shows America Is Headed for an Economic Disaster
• Rich States, Poor States: 9th Edition
• If anything, globalization increased the cost of meat in America
• If I were a shill for industry ...

Enjoy!

[VitacoreVision]

Replace Yellen?

I have a better idea: Abolish the Federal Reserve.

[knarf]

The money quote;

"As he’s said in the past, Trump tells Fortune that he would “absolutely” support proposals that would take power away from the Fed, and allow Congress to audit the U.S. central bank’s decision making."

Trump has been .. and is .. a threat to "the way things have always been done" and though I (personally) may not be able to see clearly the future Trump proposes, I DO see clearly the past and what a future with IT in control can and will do to America.

[Zuse]

When interest rates rise, the entire debt built up by B0 Stevedunhambarrysoetorobathhousebarryhusseinsoebarkah will come crashing down. He won’t be around long enough to get the blame for it.

What B0 wants is negative interest rates so he can cash in on having a huge debt — a whole new way to create imaginary money!

[expat_panama]

...rates are great for real estate developers. They’re not so great for retirees...

Retirees may complain a lot when rates go down so they'll continue to demand even more gov't welfare to be paid by the young.  They need to realize though that the value of whatever interest they're getting depends only part on the amount of interest and also part on what inflation's done to their buying power.

imho American old people are doing fine --no matter how much they complain.

[taildragger]

"When interest rates rise, the entire debt built up by B0 Stevedunhambarrysoetorobathhousebarryhusseinsoebarkah will come crashing down."

Yes, what they did is brilliantly devious. So lower rates and "twist" the yield curve down ( so that building a "bond ladder" now looks stoopid, but let that go ) so that you sell all your debt short term at horribly low rates for the T-Bill holder. In the mean time the Global markets ( remember the German Bank that downgrades us?, Not anymore! they took them out of the equation! ) do not hound you for your indebtedness as you print more, spend more ( HHS is where I think it is going IMHO ) and Wall St has to say "Yes Sir can I have another".

When it whip-saws and someone says you have to cut expenses ( 30 to 50% IMHO ) to get your house in order, the game of Musical Chairs stops.

IMHO this is the issue of our lifetime, aka DC's downsizing etc to live within it's means, and whether Trump gets to it is a different issue, frankly I don't think anyone in DC wants to go their, and America is too dumbed down to have that come to Jesus discussion as sober Adults. Look at Ryan being a shill for the immigration lobby which leads me to believe he knows SSI cash flow is worse than they will admit. They need anyone contributing, citizen or not...

[mac_truck]

Low interest rates are great for real estate developers. They’re not so great for retirees, especially those who spent a lifetime of work saving for retirement, and now get zilch interest.

Low interest rates are also good for property values, which should be more valuable to retirees than the interest on their savings.

[arthurus]

Donald Trump does not understand basic Economics. He understands Finance which is a different thing. He says he will get the proper experts, the best minds in their areas to advise hijm when he is President. The problem is that he does not recognize the existence of the area of Economics. He will get the best minds available in Finance, thinking that is Economics, and thus elevate a sub category of Economics over Economics which is essentially what the nation has been doing since FDR with the exception of the time of Reagan’s term. Hussein’s reign has seen that approach pushed to unprecedented levels.

[yuleeyahoo]

Isn’t Yellen in office until 2018? I do believe that the Chair can not be replaced at whim.

[Bloody Sam Roberts]

Replace Yellen?

The president of the United States cannot remove the chairman of the Fed.

The Chair of the Federal Reserve Board of Governors, nominated by the president, is limited to four year terms. After he/she is confirmed the president has no authority to remove him/her unilaterally.

[taterjay]

Property is worth 0 if you don’t intend to sell it.

[norwaypinesavage]

"Low interest rates are also good for property values"

That's the problem. You have to sell the property in order to gain the value. Then you don't have it any more, and you can't make any money on the principle you gain, so you loose principle. You can't eat property values.

[DoodleDawg]

In the space of one article Trump contradicts himself at least twice and shows he has little understanding of the Fed, the economy, or the national debt.

[Lurkina.n.Learnin]

“I have a better idea: Abolish the Federal Reserve”

What do you propose in it’s stead?

[dp0622]

Agreed.

[expat_panama]

Yeah, Feb. 2018 right at the beginning of Trump’s second year of eight. Just the right amount of time for everyone to get used to things.

[DoodleDawg]

Isn’t Yellen in office until 2018? I do believe that the Chair can not be replaced at whim.

As Fed chair she serves until October 2018. But she remains on the Board of Governors; that appointment is for a 14 year term. And no, Trump can't fire her. Though in his defense he was speaking about not reappointing her at the end of her term rather than firing her.