To Wall Street denizens, it’s alarming to hear President Trump say Federal Reserve policy is “crazy,” “loco,” and “going wild.”
But Trump isn’t trying to dictate Fed policy. He may even feel the Fed is doing the right thing. What Trump wants is a villain he can blame for negative turns in the economy, thereby exempting himself.
Trump blasted the Fed after an ugly day in the stock market on Oct. 10, basically arguing that the Fed’s policy of raising interest rates is harming the economy. “They are raising interest rates and it’s ridiculous,” Trump told Fox News. “There is no reason for them to do it and I’m not happy about it.”
Hardly anybody who pays attention to monetary policy agrees with Trump. The Fed has been gradually raising interest rates, which remain unusually low, to head off inflation and return to levels more in line with historical norms. Presidents usually leave the Fed alone, since political interference with monetary policy can be disastrous, as it was when Richard Nixon manipulated Fed policy in the early 1970s. Nixon wanted the Fed to stimulate the economy prior to the 1972 election, which it did, at his behest—but the badly timed stimulus ended up worsening inflation and contributing to other problems that took a decade to clear up.
Finding a villain
Fed watchers now worry that Trump is trying to strong-arm the Fed into reversing its policy of gradually raising interest rates, after a decade of radically easy monetary policy. But Trump is probably thinking of something else completely: lining up a convenient villain he can point to if and when markets turn negative and the economy slumps. It fits perfectly with Trump’s modus operandi.
Trump, for instance, has been relentlessly bashing the Robert Mueller investigation into Russian interference in the 2016 election. Mueller, so far, has had precisely nothing to say about Trump himself. So there’s been no need at all for Trump to defend himself against Mueller, up till now. But by repeatedly calling the probe a “witch hunt,” Trump is preparing for the eventuality that Mueller will some day impugn him. Trump is trying to preemptively invalidate the probe, in the mind of the public, by the time it actually touches him.
Trump, in fact, is something of an expert on scapegoating. He blames immigrants and China for the falling living standards of working-class Americans. He blames companies such as Harley-Davidson and Amazon for rational responses to his own harmful economic policies. And of course he blames Democrats for illegal immigration and many other national problems.