Donald Trump believes the Federal Reserve is beholden to political interests and this is the reason why the United States central bank is keeping interest rates so low for so long.
Speaking in an interview with CNBC on Monday, the Republican nominee accused Fed Chair Janet Yellen of doing what President Obama wants. He explained that the Fed is a very political institution and that Yellen should be “ashamed” of what she’s currently doing.
Trump also made quite the accusation: the Fed is far from being an independent organization.
Under the present monetary policy initiatives, the Fed, says Trump, is producing a “false stock market.”
“Any increase at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy … raise interest rates … and watch what happens in the stock market,” said Trump. “[Obama] wants to go out. He wants to play golf for the rest of this life. And he doesn’t care what’s going to happen after January.”
The real estate billionaire mogul was also correct in his assertion that the Fed’s easy money policies are hurting the nation’s savers. Through price inflation, currency debasement and low interest rates, middle-class savers are seeing their wealth deteriorate.
“The ones who did it right — they saved their money [and] they cut down on their mortgages, … and now they’re practically getting zero interest on the money,” said the GOP nominee.
He did say that as a business he loves low interest rates, but he doesn’t believe that it’s good for the country to maintain historically low rates.
“If I refinance something, I can get money for almost nothing,” Trump said. “These crazy, low interest rates, they’re not always going to be this way … because of market [conditions].”
Although Trump is mostly accurate about the Fed, he has been consistent in flip flopping on the Fed for most of 2016. He noted that he wants to keep rates low, he confirmed that he thinks Yellen is doing a good job and he said that auditing the Fed is no longer a high priority (SEE: Donald Trump assures Janet Yellen he’s not her enemy, Federal Reserve audit isn’t high priority).
Despite Minneapolis Fed President Neel Kashkari dismissing the notion that the Fed is a political institution, it really is a tool for the executive branch residing in Washington, D.C.
When it comes to Trump’s latest comments on the Fed, the mainstream media is treating it as some sort of conspiracy theory being purported by the presidential candidate. But the Fed has been a political institution for decades. Whether it’s President Nixon, President Bush or President Obama, the Fed acts in the interests of the White House or Congress.
During the 1960s, for example, President John F. Kennedy demanded greater money creation. What did Fed Chair William Martin do? He expanded the money supply by nearly three percent. Kennedy’s successor, Lyndon Johnson, wanted even faster money creation to pay for the Vietnam War. Martin agreed and grew the money supply by five percent.
This trend continued during the Nixon administration when Fed Chair Arthur Burns raised the money supply by 10 percent. When President Gerald Ford wanted money growth to slow down, Burns complied and lowered it to 4.7 percent.
In the 1990s, Fed Chair Alan Greenspan kept the money supply open to help President Bill Clinton avoid impeachment. We can’t neglect to mention Ben Bernanke’s involvement in the Bush and Obama administrations! We all personally witnessed that story.
The Fed has been doing this for so long. Here is what Thomas DiLorenzo writes at the Mises Institute:
“The Fed operates for the benefit of its executive branch controllers, the banking industry, and Fed employees themselves, at the expense of the rest of society which suffers from the economic instability it creates. Worse yet, many Americans have been conned into believing that the Fed Chairman operates like the Wizard of Oz, hiding behind dark curtains, pulling levers and pushing buttons to make the economy operate smoothly. So-called “scientific socialism” may have been the most absurd and destructive idea of the twentieth century, but it is nevertheless the guiding ideology of central banking.”
No, the Fed is not an independent institution. It hasn’t been since the 1930s, when President Franklin D. Roosevelt transformed it into a political tool. Trump may say a lot of inane things, but his accusation of the Fed being political is dead on.
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