Presumptive Republican nominee Donald Trump has made headlines with comments he made to CNBC on monetary policy and the debt.
Yesterday I had written an article praising Trump for past statements on the dangers of the Fed’s current low interest rate policy. Unfortunately, The Donald then went on to make a strong endorsement of the monetary status quo, indicating that his main criticism of Fed Chairman Janet Yellen was her political party:
I have nothing against Janet Yellen whatsoever. I don’t know her. She’s a very capable person. People that I know have a very high regard for her. But she’s not a Republican….
She’s a low-interest-rate person, she’s always been a low-interest-rate person. And I must be honest, I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.
The good news is that it seems certain that a Trump Fed would be Yellen-free.
The bad news, he has apparently forgotten his earlier sound insights into the devastating consequences the current low interest rates and the impact it has on normal people who are forced to choose between putting their savings into a frothy stock market or receive nothing in return from their bank account. Of course, there is no reason to expect this to be his final position on what he would like to see from a potential Trump Fed. Throughout his campaign, he has spoken of his desire to be both “unpredictable” and “flexible.”
What is predictable is that Trump’s embrace of low interest rates has earned him the praise of the New York Times’s Neil Irvin, who described Trump’s statements as demonstrating “clarity and consistency in talking about monetary policy and the dollar.” These may be the kindest words Trump has received from the paper over the course of the campaign.
The Time’s was less kind to his comments on restructuring the debt. But, as Peter Klein points out:
[T]he idea that the US can never restructure or even repudiate the national debt — that US Treasuries must always be treated as a unique and magical “risk-free” investment — is wildly speculative at best, preposterous at worst.
Of course, this is exactly the sort of economic analysis we expect from a paper that continues to publish Paul Krugman.