Merry Christmas! I saw an article about the market crash that puports to explain how the market crash is the result of the Fed raising rates. Unfortunately this is a false narrative driven by Trump and some conservatives so it is sad that we are giving it credence. I have been following the markets closely everyday. The Fed has been raising rates for a while and telegraphed further raises in 2019 as well which were all priced in. The Fed raised rates for several years during the 90s and 2000s as the economy expanded.
What is different this time is that the markets have no confidence that interest rate raises (tighter monetary policy) will be properly countered by sound fiscal policy that uses government spending and resources to drive innovation that improves productivity and spread wealth to consumers. Also there is no confidence that the normal bumps in this process can be managed by an administration of bumbling idiots.
Even conservative outlets like CNBC and mainstream outlets like the NYTimes are recognizing that. See below for the three main headline stories from different publications. Please let us not score a self goal 2020 by spreading Trump’s line that this is about the Fed. Remember that he himself tied his fortunes to stock prices and forced Yellen out and handpicked Jerome Powell to manage the Fed.
Trump has unsettled Wall Street and Washington, and it will likely get worse
- Characteristically, President Trump responded to bad news on Christmas Eve by blaming others. As battered markets slumped again, he faulted the Federal Reserve.
- The end of 2018 makes clearer every day that the president himself represents a fundamental problem for America’s economy and national security alike, writes CNBC’s John Harwood.
NY Times article
Economy Is Strong. Leadership Is Shaky. Which Will Win Out in 2019?
Moves like Mnuchin’s phone calls to bank C.E.O.s could create a broader crisis of confidence.
The real risk is not that insurmountable challenges knock the economy off course. It is that poor leadership converts moderate economic shocks into a crisis.
The combination of erratic behavior from the president and a thinly staffed government in the United States; the potential crises facing other major economies; and the lack of trust amid allies and major trade partners could make routine economic challenges turn into something worse.
NY Daily News
Dow Jones suffers worst Christmas Eve crash in history amid Trump administration chaos
The Dow Jones industrial average suffered its worst Christmas Eve crash in history Monday after the Trump administration sent out confusing market signals and a crippling government shutdown entered its third day.
Stocks started plummeting at the opening bell but plunged even deeper after President Trump thumbed out an aggressive tweet claiming the Federal Reserve is “the only problem our economy has” and comparing the central banking system to a bad golfer.
This is a Creative Commons article. The original version of this article appeared here.