Donald Trump is no stranger to controversial statements.
But the media and rival politicians have grown so accustomed to Trump’s penchant for exaggeration, unbelievable promises, and flip flops that sometimes they feign outrage at statements that are actually rather ordinary.
The latest such comment came Monday, when Trump responded to a question from a reporter about the potential for a Federal Reserve interest rate hike this year. “They’re keeping the rates down so that everything else doesn’t go down,” Trump said, according to reports. “We have a very false economy.”
“At some point the rates are going to have to change,” Trump added. “The only thing that is strong is the artificial stock market.”
Hillary Clinton was aghast that Trump even commented at all on the Federal Reserve. “You should not be commenting on Fed actions when you are either running for president or you are president,” Clinton said to reporters on her campaign plane, according to Reuters. While it makes sense that presidents should refrain from influencing the actions of a Fed Chair once they are appointed, the fact that the president must appoint a Fed Chair should make Fed actions fair game for a candidate to comment on. Voters, after all, have the right to know what kind of Fed Chair their president will be looking to appoint.
But other commentators, like Ben White of Politico took umbrage at the content of these statements, writing Tuesday that:
Trump’s comments are predictably absurd. The economy is close to full employment and wages are showing some strength. The Fed kept rates low to try and create these conditions, which is its job. Stock prices are not especially high compared to historic multiples and other asset prices. But he’s correct – because of course he is – that rates will have to rise.
But how absurd are these statements actually? The Fed states expressly that one of the benefits of keeping interest rates low is to push asset prices higher, thus making investors wealthier and more willing to spend. This is not the only reason for low interest rates, but it’s an important part of the Fed’s thinking. And at some point, the Fed is going to have to raise interest rates, and Donald Trump isn’t the only man in America who is nervous about the economy’s ability to withstand that process. Warren Buffett has warned about the potential for a horror-show-like outcome as well.
Meanwhile, the idea that the U.S. economy is “false” is not exactly one that is foreign to many people on Wall Street. Some investors, analysts and economists have been criticizing the Fed for years, arguing that its policy is distorting financial markets and setting the U.S. economy up for a painful transition once rates do eventually rise. Whether or not you agree with this analysis, it can’t be disproven, and it’s believed by a long line of successful and respected financiers and academics.
As for the idea that we’re “close to full employment and wages are showing some strength,” both these points are debatable as well. Sure, the unemployment rate has fallen to historical lows, but whether or not this represents the technical definition of full employment is anyone’s guess. The labor participation rate and other broad measures of unemployment remain elevated, while wage growth still remains pretty tame. Trump is correct that the only unambiguously positive statistic that one can point to when talking up the economy is the stock market, and it’s difficult to say where stock multiples would be if central banks around the world weren’t so vigorously pumping liquidity into the system.
That’s not to say that Donald Trump is right in his analysis of the economy, or that the Federal Reserve is doing a bad job. It’s just that Trump’s analysis of the situation is far from the sort of laughable whopper that Trump has been known to let loose in his more freewheeling moments. His critique of Fed policy sounds pretty much like what you’d expect any Republican candidate to offer, and perhaps even a Democratic one, if he were running against an incumbent.