1-800-822-8080 Contact Us
Select Page

 

Written by Chris Marcus of Miles Franklin

In the past two weeks, President Donald Trump has been criticizing the Fed again for raising interest rates too quickly. Which he cites as the reason for the recent correction in the financial markets.

Which like many political statements has some elements of truth mixed into a larger context that doesn’t truly reflect what’s actually going on.

While Trump said he’ll let Powell keep his job (for now, at least), the president tripled down on his claim that the Fed is responsible for the Dow’s 1,700 point drop from the highs, saying that the central bank is being “too stringent” and they’re “making a mistake.”

“It’s a correction that I think is caused by the Federal Reserve,” President Trump says, when asked about the markets.

“I think the Fed is far too stringent and they’re making a mistake”

On one hand, Trump is exactly correct. That the real estate market has finally slowed down this year, and that now we are seeing unusual volatility in the stock market is no accident. As I’ve written in the Miles Franklin blog and stated in numerous interviews, the more rates rise, the more likely the bubbles are to pop. And the sooner that is to happen.

Yet what Trump failed to mention, is that the alternative is to just print more money to keep interest rates lower. And given that we just experienced almost a decade of 0% rates, unprecedented quantitative easing, and even a decade later we’re still only at 2%, if the economy is still not strong enough for a normalized rate yet, when will it be?

Keep in mind that after former Federal Reserve chairman Alan Greenspan lowered interest rates to 1% for a year back in 2003, he raised the Fed’s rate up to 5.25% in 2006. Back in 1980, in order to fight inflation, then Federal Reserve chairman Paul Volcker raised interest rates to 20%.

Yet now Trump is talking about how raising rates to 2% even a decade after the last crisis is too quick.

And in another comment that will aggravate policy makers (the Treasury in particular) and dollar bulls alike, Trump sounded less-than-enthusiastic about the dollars’ strength so far this year, saying that “frankly” the strong dollar “doesn’t necessarily mean all good.”

“The dollar is very strong, very powerful,” President Trump tells reporters in the Oval Office amid continued criticism of the Fed’s interest rate policies. “And that causes just a little difficulty with doing business, frankly. Strong dollar doesn’t necessarily mean all good. But we do have a very strong dollar.”

Given the bizarre policy of the past year, as well as how it continues to emerge how the mainstream narrative is often divergent from what’s actually going on, I wonder if some of these comments are truly reflective of what Trump believes.

Earlier this week I was fortunate enough to have Dr. Dave Janda join me for an interview, that perhaps puts all of these seemingly non-fitting pieces into perspective. In that there’s what is presented on TV, and yet behind the scenes, there’s a wild battle playing out between Trump and the Deep State. So to the degree that Trump may be saying things that are based more on playing an intricate chess game, rather than on what he truly believes, perhaps this is an example of that.

But if Trump really does feel that we have a “very strong dollar”, I sure would love to know what he bases that on. Because at the same time he talks about the strong dollar, he’s also out criticizing the Fed for not printing more of them.

Maybe he does realize the whole thing is a bubble, and just wants to place the blame on the Fed before it collapses. And in due time, perhaps we will find out for sure.

But what Trump does point out that does not require any deep analysis or crystal ball reading, is that this economy is going to have an extremely difficult time with any sort of higher interest rates. And given how the Federal Reserve continues to maintain that it plans to continue raising rates, you can see where this is headed.

If there’s a way that this financial structure can sustain any sort of fair market interest rate, I sure can’t find it (although if you have, or have any other questions about how the situation might unfold, as always you can email me at cmarcus@milesfranklin.com).

Which is why despite not knowing when exactly the breakpoint will occur, gold and silver are still very much position to be the beneficiaries of the resolution. In whatever fashion that plays out.

Chris Marcus

To buy or sell gold and silver call Miles Franklin today at (1-800-822-8080).