The Latest On What Trump Means For Sound Money
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Here are some educated guesses of what to expect when it comes to sound money issues, based on what we know as Trump’s administration kicks off.
The Federal Reserve
Donald Trump became very critical of Janet Yellen and the Fed during the final months of the campaign. He accused the Fed of supporting the Obama administration and, by extension, Hillary Clinton by inflating a bubble in the stock markets and keeping interest rates artificially low.
That was before the election. Shortly after the election, Trump signaled he would be inclined to let Yellen finish her term as Fed chair. He must now wrestle with the same dilemma faced by everyone in a position to influence monetary policy. Removing the stimulus by allowing interest rates to float higher is a recipe for real economic pain in the short term. And politicians, in general, care most about winning their next election.
Trump is taking credit for the rally in stock prices since his election, and he has certainly stopped talking about bubbles.
On the campaign trail, Trump expressed support for auditing the Federal Reserve. Neither he, nor his people, have taken a public position on the latest incarnation of a bill to audit the Federal Reserve backed by Rand Paul.
Given the incoming administration is showing little inclination to take on the Fed since winning the election, odds are Trump and company will be hands off with regards to monetary policy – at least as long as the Fed keeps markets propped up.
Federal Deficits and Debt
Trump is advocating for tax cuts and increased spending on infrastructure and defense. He expects his plans will drive strong economic growth. He says growth along with reduced waste and fraud will allow government to avoid major deficit increases. We’ll find out soon enough if this is anything more than campaign rhetoric.
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