Trump Tweets for Zero Interest Rates

It’s all about the debt.

Early Wednesday morning President Trump tweeted that the Federal Reserve should slash short-term interest rates to “zero or less,” referencing the fact that the European Central Bank currently holds overnight rates at negative 0.40%.  Trump wants the Fed to drop rates so the U.S. can refinance its debt with lower interest rates.  He also wants to issue bonds with longer maturities than the current 30-year term.

There has been widespread discussion of the U.S. issuing 50-year, or even 100-year (called “century”) bonds to lock in the current, exceptionally low interest rates.  Trump called out Fed Chair Jay Powell for missing what Trump referred to as, “A once in a lifetime opportunity.”

Trump tweeted:

“The USA should always be paying the … lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing.”

With the ECB announcing monetary policy on Thursday, followed by the Federal Reserve and Bank of Japan next Wednesday and Thursday, it’s possible that rates fall further.

Contrary to the President’s tweets, the Fed doesn’t directly control long interest rates, which are the ones that determine the cost of long-term bonds, and the Fed doesn’t issue bonds for the U.S. government.  That’s the job of the U.S. Treasury, which reports to the president.  If Treasury Secretary Mnuchin doesn’t talk about issuing longer bonds soon, he might risk showing up in a Trump tweet storm.

6 Comments

  1. Now he wants zero interest rates? What happened to buying Greenland, or trade wars are easy to win, or etc, etc. It is seeming more and more apparent that our president doesn’t have a clue. All he is doing is hurting his supporters and the American people with his tariff war. People were finally starting to get some interest on their money in the bank, and he is even screwing that up! If the democrats could find a real candidate, instead of the ship of fools that they have now, Trump would lose in 2020!

  2. Mongo says when it comes to understanding interest rates Trump is a blooming ass. Perhaps he thinks we need to be just like Japan. I’ve got a better idea, the government needs to stop spending money we don’t have.

  3. Well, wouldn’t it be nice if all banks and lender would be forced to cut their interest rates in half, for a year? For consumers, corporations, student loans? For those in deep debt doodoo, this would do WAY MORE than a weird sort of nutty negative interest rate on bonds that most Americans do not buy. Only bond funds, that are required to buy bonds, will do so, and buy at a premium over the maturity value. And may be some smarty pants options speculators. For the rest of us, there is nothing to be had in this negative interest rate idea.

    It reminds me of that old Arabian fable, where the king had two sons, and he said to them:
    “Here, you will ride from Mecca to Damascus, and the one whose horse is slowest, will become
    king after I die” So the two start riding, each on their own horses, but as they get closer
    to Damascus, they start getting slower and slower, coming to a standstill, because the slowest horse would win.. There was a wise man sitting there, and they told him their story, and the
    guy said: “Exchange your horses!”, and “zippedidoodaa, they were off to a flying start!
    Because each needed to outdo their horse, riding the other’s horse.

    That’s what negative interest rates look like.

    Apart from that, isn’t it really crazy that a 10 year US government pays about 1.7 percent per year, while the average consumer/borrower is hit over the head with rates ranging from 12% to 30% ?

    Does anyone here remember when your bank account paid 3% and your loans were at 5% to 6%, and somehow, the banks were able to live on the difference. Now the banks pay 0.01% to 1%, and the charge 12% to 30%, and it’s still not enough for them. There has to be an end to this madness. I don’t know how.

    Not that I expect Trump do do anything about that, because he can’t, and he doesn’t care either.

    Negative interest rates are something that works “in theory” only, but not in practice, as you can see from the experiments of that in Europe. It makes people move their money out of banks. And big investors into, for example, Euro-Bonds feel like going elsewhere too. This makes the currency lose value against other currencies, which makes imports more expensive.
    To me, a guaranteed loss for both bank deposit owners and consumers does not make sense.
    Am I the only one who sees it this way? Yup, because I am not a politician.

  4. I don’t get Trump’s play here. Is it that he just doesn’t know how his own economy works or is it just another smokescreen to deflect a deeper issue. Surely he would know that the personal target of the tweet has little or no control of the issue at hand – ie long term debt. If he wants to remove the Fed then surely there are better ways to do it. Maybe someone can enlighten me?

  5. To PresidentTrump if you drop the interests to 0 what will us old people do for income we worked hard all our lives to save enough to live on when we retired interest is what we what we use to pay our bills. If we need to start drawing on the principle we soon will not have enough to live on! And look at the money you will lose!

  6. Trump is doing all he can to keep the economy up. And he sees what other countries are doing. We are not the only ones with problems, so it is necessary to adjust every time the world economy changes. Playing economics with others countries is not easy. We need to be patient and wait to see what is next. Wasting billions in illegals for example, contribute to debt. Any wise idea to cut that? MAGA.

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