Don't Worry, Guys, Trump's Got This Whole ECONOMY Thing HANDLED
In Trumpland, all things are true at once. This is simultaneously the greatest economy ever and a fragile flower in need of emergency stimulus from the Federal Reserve. The US is totally prepared for the coronavirus outbreak, which is anyway a Democratic hoax which will magically disappear when it gets warm in April, and also NEEDZ MOAR RATE CUTZ PLZ to counteract the economic drag of a global pandemic. Take two aspirin and call 911 in the morning.
Last night, Donald Trump tweeted out his demand for the Federal Reserve to cut interest rates, couched, as usual, in in attack on his hand-picked Chair Jerome Powell.
Leave aside for the moment the baseline assumption that the richest country on earth "must" be at a competitive advantage to everyone else. Australia just suffered devastating fires, its unemployment rate is almost two points higher than here in the US, and it has 33 confirmed cases of coronavirus out of a population of 25 million people, many of whom have strong ties to China where the virus originated. But other than that, these two things are exactly the same.
Donald Trump insists that the Federal Reserve must open up the money spigot, turbocharging the economy in the run-up to the election. Not to improve his election prospects, of course, but FOR AMERICA.
And lo and behold, even though Powell was quick to insist that,"We never are going to [make] any political considerations whatsoever," Trump got his wish. Here's Chairman Powell announcing a huge half-point rate cut this morning at 10 a.m.
And here's the S&P 500 for the day so far via Marketwatch.
Because when the Fed chair says this:
We do recognize a rate cut will not reduce the rate of infection, it won't fix a broken supply chain. We get that. But we do believe that our action will provide a meaningful boost to the economy. More specifically, it will support accommodative financial conditions and avoid a tightening of financial conditions which can weigh on activity and will help boost household and business confidence.
The markets hear this:
Because not only are they acknowledging what we all already know, i.e. that this coronavirus thing isn't going away any time soon and the economic effects could be devastating, but also in reality the Fed doesn't have that much economic joy juice left in the cupboard if shit goes really sideways. Interest rates are now just under 1.25 percent after yesterday's cut, which was the biggest since 2008 right after Lehman Brothers collapsed. And that's when Alan Greenspan was Fed chair, and everyone assumed he would act to protect the American economy, not the president's personal fortunes.
We don't have a lot to throw at this pandemic thing if the economy really goes sideways. Because fifty basis points here, and fifty basis points there, and before long, you wind up with negative interest rates. And you don't have to be Paul Krugman to see that the bank paying you money to borrow is not a sign of a healthy economy.
No one could be stupid enough to waste our remaining emergency supplies when things are basically fine, right?
Well, shit, why not a tax cut while we're at it? Just rub some supply-side economics on that coronavirus, and you'll be right as rain in the morning.
THIS IS FINE.
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Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.