Read more at https://www.channelnewsasia.com/news/business/trump-attacks-on-fed-raise-specter-of-political-meddling-10549692
(Updated: )
Ricky Lim
In the early 1970s, President Richard Nixon pressured Fed chief Arthur Burns to keep interest rates low ahead of the 1972 presidential election, when Nixon won a second term. He said he preferred inflation to unemployment.
But as Oxford Economics recalled, "Loose monetary policy implemented by the Federal Reserve along with the oil price shocks in the 1970s would eventually push inflation to nine per cent in late 1973 and 12 per cent in late 1974."
Former Treasury Secretary Larry Summers warned of the dangers of undermining the central bank.
"This is as old as the history of banana republics," Summers said Friday on CNBC. "It does produce results and looks good for a while but ultimately it leads you into real trouble."
He called Trump's comments "a gross mistake," and said they also were counterproductive because it could force the Fed to raise rates more aggressively just to prove it is not swayed by political pressure.
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Posted on:- 20 Jul 2018 01:41AM
Ricky Lim
Trump is not aware that US Economy is overheating - due to its expansionary fiscal policies of cutting taxes when the Economy is already booming.
Fed raise interest rate to cool the Economy - to prevent overheating and to prevent forming bubbles that will cause Economic Boom and Bust.
Like · Reply · 1m · Edited
Ricky Lim
If Fed did not increase interest rate or worst reduce the interest rate - as what Trump suggest - the booming and overheating US Economy - will overheat very quickly and inflation will go over the moon - causing US Economy to bust very quickly ---- as consumers will overspent due to easy credit from the banks.
Banks will go bust very quickly as business over borrow and consumers over borrow due to easy credit and cheap interest - and then business cannot pay back due to oversupply with falling demands or consumers strain their credit limit too much but can't repay the loans.
But as Oxford Economics recalled, "Loose monetary policy implemented by the Federal Reserve along with the oil price shocks in the 1970s would eventually push inflation to nine per cent in late 1973 and 12 per cent in late 1974."
Former Treasury Secretary Larry Summers warned of the dangers of undermining the central bank.
"This is as old as the history of banana republics," Summers said Friday on CNBC. "It does produce results and looks good for a while but ultimately it leads you into real trouble."
He called Trump's comments "a gross mistake," and said they also were counterproductive because it could force the Fed to raise rates more aggressively just to prove it is not swayed by political pressure.
--
Posted on:- 20 Jul 2018 01:41AM
Ricky Lim
Trump is not aware that US Economy is overheating - due to its expansionary fiscal policies of cutting taxes when the Economy is already booming.
Fed raise interest rate to cool the Economy - to prevent overheating and to prevent forming bubbles that will cause Economic Boom and Bust.
Like · Reply · 1m · Edited
Ricky Lim
If Fed did not increase interest rate or worst reduce the interest rate - as what Trump suggest - the booming and overheating US Economy - will overheat very quickly and inflation will go over the moon - causing US Economy to bust very quickly ---- as consumers will overspent due to easy credit from the banks.
Banks will go bust very quickly as business over borrow and consumers over borrow due to easy credit and cheap interest - and then business cannot pay back due to oversupply with falling demands or consumers strain their credit limit too much but can't repay the loans.
Like · Reply · 1m
Ricky Lim
Posted on:- 20 Jul 2018 01:41AM
Ricky Lim
Trump is not an economist - he just follow what other Countries do - which may have different economic context - and try to play economist.
This is dangerous for US Economy - when Trump start to intefere with Fed (a professional Central Banker's job) - who have better understanding of the mechanics of the Economy - in administering Monetary Policies.
Ricky Lim
Trump is not an economist - he just follow what other Countries do - which may have different economic context - and try to play economist.
This is dangerous for US Economy - when Trump start to intefere with Fed (a professional Central Banker's job) - who have better understanding of the mechanics of the Economy - in administering Monetary Policies.
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