Trumps Authoritarian Instincts

As  Donald Trump’ presidency  unfolds  he continues to discover how to apply his authoritarian instincts and apply them to the power he has  to his benefit and to the detriment  

of others. An increasing number  of events has recently  revealed  how Trump is accruing authority, abusing his power, threatening to violate the law, thwarting the checks on his office, and undermining US institutions  empowered by  by Congress.

China have been labelled currency manipulators by an acquiesent and previously rational US Treasury department full in the knowledge that the recent depreciation of the yuan below the historical benchmark of 7 to the US$ was neither an act of intervention by the Peoples Bank or met the firmly established criteria  for currency manipulation. The task of evaluating currency manipulation is the sole preserve of  US Treasury Departmentand its decision to label China a manipulator has weakened the credibility and robbed the US Treasury Dept of its proffessional integrity. It is yet another example of Trumpian destruction of established rules  of engagement, most of which were authored or sponsored by the US.

For a little over a decade from 2003 China kept the renminbi substantially undervalued. The Chinese authoriy's policy was to  frequently intervene to slow down the currency’s market-driven appreciation. During this period  the renminbi still appreciated by over 30% against the US dollar. It is that period which has been used by the Trump Administration to create the myth which if oft repeated and endorsed by US institutions seems to morph into an a priori truth.  The facts establish a very different narrative. The Chinese  actively intervene to slow downthe depreciation of the currency. In 2015 and 2016, the People’s Bank of China spent  in excess of $1 trillion in foreign-exchange reserves  in an effort to prop up the exchange rate – by far the largest intervention in history to support the value of a currency. 

After a year of being barracked, pestered  and threatened Jay Powell the Chairman of the Federal Reserve finally caved in to Trump's demand  to reduce interest rates. Trump was unimpressed. Though the move was widely anticipated it was universally regarded as uneccessary. Powell stated the rate cut was to ward off down side risk but with unemployment low, consumers still spending and the stock market doing well the only possible downside risk is the global economic slow down provoked by Trumps own policies. He went on to explain further "The ongoing uncertainty is making some companies more cautious about their capital spending,”. He  also cited weak manufacturing and business-investment data a coded subliminal dig at Trump's  2017 tax cuts which were supposed to boost these sectors. 

Lowering the target range for the benchmark rate a quarter point to between 2% and 2.25% was the very least the Fed could do in capitulating to Trumps demands whilst limiting the risk of igniting inflation or creating asset bubbles caused by expanded corporate borrowing ( though inflation is still below the FOMC 2% target). But it also announced the premature end of quantative tightening  (QT)  without achieving its stated objective of reducung the Fed balance sheet to $3.5 trillion down from $4.5 trillion. 

These actions lead to legitimate questions about the FOMC's independence and are a further example of President Trumps policy of compromising the integrity and undermining the ability of the institution to act imdependently and without undue political inteference. The essence of the Trump Administration is an authoritarianism of the sort which conflates genuine policy differences with  loyalty to the President.  A President that is busy damaging the long term inyerests of the United States globally. 

Fed Chief Jerome Powell wanted to reduce the balance sheet to $3.5 trillion down from $4.5 trillion so the Fed is $279 billion shy of this objective. The total unwind since the end of September 2017 is $721 billion. For the week ended July 31, the Fed drained $24 billion from the banking system, reducing the balance sheet to $3.779 trillion. What good is transparency when you change plans overnight?

  and signaling that more cuts may (or may not) be in the offing. The move, while widely expected, was seen as largely unnecessary, given that unemployment is low, consumers are still spending, and the stock market is doing well. In his remarks Powell said that today’s action was to protect the economy “against downside risks”,” like a slowdown in the global economy, and, largely, the policies of...one Donald Trump. Powell cited weak manufacturing and business-investment data—which, oops, the 2017 tax cuts were supposed to turbocharge—and fears surrounding Tariff Man’s ongoing trade war. “The ongoing uncertainty is making some companies more cautious about their capital spending,” he said. In other words, the president’s pointless, self-defeating trade war got him exactly what he wanted, like a small child whose tantrums finally break his handlers.

lready there are concerns about too much risky corporate lending, and lower rates are only likely to encourage more of those loans,” adding that using up the tools the Fed has at its disposal now leaves the central bank with fewer ways to counteract an actual economic contraction down the road.

Fed chairman Jerome Powell announced the lowering of the rate by a quarter-point to just below 2.25% on Wednesday, saying the nation’s top bank would take all measures to “sustain the expansion” after the 2008 Great Recession.

But, wary of igniting inflation amid Trump’s record-setting Federal Government deficit, Powell said the decrease was a one-off: “Let me be clear. What I said was, it’s not the beginning of a long series of rate cuts.”

Trying to portray economic growth through the 2020 Presidential election — but facing the bursting of the bubble from the $1.5 trillion tax cuts in December 2017 — Trump has attacked Powell and the Fed for months, claiming that