Trump fails to see rate cut would hurt savers

Donald Trump just doesn’t seem to understand interest rates.

The president went on several tweet rants recently, his latest attempt to bully the Federal Reserve into cutting interest rates more than they probably will this week.

“Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically,” the president tweeted on July 19. “In other words, our interest costs are much higher than other countries, when they should be lower. Correct!”

He tweeted something similar yesterday, calling for a half-percentage point rate cut.

“We are competing with other countries that know how to play the game against the US,” he said. “That’s actually why the EU was formed … and for China, until now, the US has been ‘easy pickens.’ ”

Trump has also said that New York Fed President John Williams was right when he indicated recently that rates should come down fast. The Fed later tried to disavow Williams’ statement, but people in that position can’t un-say things.

I’ve already criticized the president for infringing on the independence of the Fed, so I won’t go over that. There can’t be a strong, politically-neutral central bank when the president is hurling orders at its chairman.

But here’s what the president also doesn’t seem to understand.

Yes, he’s right that interest rates were incredibly low during most of the Obama administration. But those low interest rates did NOT result in strong economic activity.

The US economy during the Obama years rarely broke above 2 percent annual growth. If low interest rates were so good for the economy, why didn’t business pick up when borrowing money was incredibly cheap and easy?

If those low rates had resulted in blockbuster growth, Trump wouldn’t be president today. The Democrats probably would have held on to the White House.

What’s Trump missing?

The fact that millions of Americans are savers and not speculators in the stock market. And while those low rates have produced great results for Wall Street — many, including me, would say they created a bubble — they hurt savers.

And people with money in the bank are more likely to spend. Why? Because it’s easier to take money out of a bank account or checking account to cover expenses than it is to sell stock when you need a new car or refrigerator or groceries.

Low interest rates have been a secret tax on millions of Americans for the last decade. And calling for even lower rates, as the president is doing, is just going to make those millions of savers angry.

And we know that a year before the next presidential election, Trump shouldn’t want to take the chance. So, Mr. President, cool it with the harassment of the Fed.

You might regret it for reasons that will only become obvious in Nov., 2020.

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