Help the Country vs. Help the Ego

The stock markets like stability. Instability makes people take their money somewhere else that they think may be safer (or at least less risky). And as our economy has changed over the last two decades, the stock market is increasingly important to all segments of the US population since most people now have a 401(K) or an IRA. Stock ownership is not just primarily for the more affluent, as it once might have been.

Similarly, business owners like the ‘known’. Business conditions that are unstable or that may change in unpredictable ways make them nervous and fearful of investing in technology and additional jobs.

The stock market averages have plunged almost 30% in the past 2 weeks, prior to recovering a bit on Friday when some averages gained back 6-9%, in the first sign that the financial crash may be stabilizing.

What the markets and the economy need is a steady hand, and a consistent policy to address the current crisis, which is largely the result of the total unknown of how the current coronavirus pandemic will affect us and the economy.

So President Trump had an idea as part of his plan for helping the economy. This weekend he threatened to fire the Chairman of the Federal Reserve, which is the largest body making monetary policy in the world. Trump,  actually was the one who appointed Jerome Powell who is the current Chairman of the Federal Reserve less than a year and a half ago. However, he has been a critic of Powell for some time. And this weekend just seemed to be a good time to publicly do it again, but this time adding that he is considering firing him.

With the markets in the midst of the biggest collapse in a century, with the economy searching for answers, Trump threatens to cause the biggest disruption to the economy and to markets that could be imagined (outside of the unforeseeable current pandemic). The opinions of leading economists that commented over the weekend were unanimous (or at least if there was a dissenting opinion the author could not find it)—the President’s remarks would cause the markets to fall dramatically when they opened again today. Unfortunately, they were right, and the stock market today reverted to its collapse that seemed to have it in free fall prior to last Friday’s rally. And the cautious optimism of last Friday is replaced with a fear that there is no end of the financial crisis in sight.

Forget whether you have an opinion on the job the Chairman Powell has done. Those of us who may or may not understand what the Fed does, and expert economists who follow it closely, may have all different opinions and have good reasons for what they think. President Trump may be right in what he thinks about Powell, even though he is the one who appointed him. But why threaten to fire him now? And if you aren’t going to fire him  immediately, why talk about it and just make people uneasy for no reason?!

Everyone knew the effect the statement would have on markets and the economy at a time like this. President Trump didn’t care. He has decided that he doesn’t like Powell, or maybe that he needs a scapegoat or something. Whatever the reason, Trump did absolutely the worst thing he could possibly do for the economy at this point in time. That apparently did not enter into his thinking. Because HIS agenda is far more important than anything else, including the economic health of the country in crisis.

President Trump could not have made a more disruptive move. The fact that he doesn’t seem to care and did it anyway should make us worry.

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