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Republicans hit the panic button as the stock market plunges amid Trump’s chaos

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- Commentary

President Donald Trump is holding firm on his policies regarding building a US-Mexico border wall, fighting trade wars and opposing Federal Reserve Chairman Jerome Powell — even though doing these things is hurting the economy.

This article was originally published at Salon

A Tuesday article in The Wall Street Journal summed up the situation rather succinctly in its opening paragraph:

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President Trump criticized Federal Reserve interest-rate increases and said on Tuesday a partial U.S. government shutdown wouldn’t end until Congress funded a wall along the border with Mexico, holding firm on his policy stances against the backdrop of a global economic slowdown and an extended world-wide stock plunge.

According to the paper, “former senior economic officials have privately warned the White House that the president’s tweets and statements are making matters worse”:

They have told Mr. Trump’s economic advisers that his open criticism of the Fed is helping to trigger the steep market losses that have left him so aggrieved.

Gary Cohn, the president’s former top economic adviser, told the White House recently that Mr. Trump’s tweet declaring himself a “Tariff Man” was unhelpful and triggered substantial losses in the Dow Jones Industrial Average, people familiar with the matter said.

[…]

On Christmas Day, a former senior Republican Treasury Department official spoke to Mr. Mnuchin and told him that Mr. Trump’s tweets and “dysfunctional” governing style were causing stock indexes to plummet, the former official said.

This person suggested that Mr. Mnuchin tell Mr. Trump to stop tweeting—advice the president frequently gets and seldom seems to heed.

The Journal also reported that members of Trump’s administration are thinking of setting up a private meeting with the president and Powell in order to smooth over ill feelings between the two men. While Secretary of the Treasury Steven Mnuchin had to investigate whether there is precedent for such a meeting — the Federal Reserve takes institutional pride in its ability to remain separate from partisan politics — the damage that Trump’s attacks on Powell are doing to the markets is serious enough that such a meeting is considered at least plausibly warranted.

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The Journal also elaborated on the history of presidents meeting with Federal Reserve chairpeople:

Presidents have met with Fed leaders in the past. In 2005, President George W. Bush met with then-Fed chairman Alan Greenspan to discuss the economic impact of Hurricane Katrina, and President Obama met with then-Fed Chairman Ben Bernanke in 2011 amid market turbulence and a tepid economic recovery. Mr. Obama also met with Mr. Bernanke’s successor, Janet Yellen.

“The best thing is for the president to have a conversation with his Fed chairman,” said Larry Kudlow, Mr. Trump’s top economic adviser. “Why not? It’s happened all the time.”

Trump’s panic over the plunging stock market also seemed to contribute, if not cause, Mnuchin to make the controversial decision to contact the CEOs of America’s six largest banks and then write a public letter saying “the CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations. He also confirmed that they have not experienced any clearance or margin issues and that the markets will continue to function properly.” By raising the specter of banking problems, Mnuchin only further undermined faith in the economy and thus worsened economic conditions.

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Trump’s ongoing trade war is also problematic, a point that Ed Gerwin, a senior fellow for trade and global opportunity at the Progressive Policy Institute, told Salon by email in July.

“The Administration’s new trade taxes on items like auto parts, electrical components, and machinery will raise costs for American businesses, make it harder for them to compete, and destroy many more American jobs than they protect,” Gerwin explained. “And, even if American consumers don’t pay the tariffs directly, they’ll ultimately pay higher prices.”

As Yahoo Finance columnist Rick Newman wrote on Wednesday, “Why is the Treasury Secretary asking banks if they have enough cash? What’s wrong with the Federal Reserve chairman? And how’s the trade war going, anyway?”

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He added, “These are questions investors shouldn’t be asking. Yet President Trump’s chaotic presidency is creating new worries for financial markets beyond typical concerns such as corporate earnings and economic growth. Markets that normally shrug off political shenanigans are now pricing in the possibility that Trump himself is the biggest threat to profits and prosperity.”


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