False economy

Interest rate policy has been setting us up for potentially the most devastating “correction” in history. Among those who are plugged into the news is Donald Trump. This is from an editorial in The New York Sun titled, The “False Economy. I must tell you he seems to get it in a way almost no one else I read does.

With Donald Trump’s use over Labor Day of the phrase the “false economy” we finally have a candidate who is getting to the bottom of the so-called Obama recovery. On the one hand the President’s approval ratings are above 50%. On the other hand, vast majorities think the country is moving in the wrong direction. Official unemployment is below 5%, but because the job participation rate is at its lowest point in decades. The government has racked up more debt than all previous administrations combined. Yet it has eked out growth of less than 2%.

To millions of Americans this is just unreal — and Mr. Trump, in the most important and even radical feature of his demarche, lays the blame at the clay feet of the Federal Reserve. The GOP nominee, speaking to newspapermen on his campaign plane, accused the Fed, as Reuters paraphrased him, “of keeping interest rates low to help President Barack Obama.” He’d been asked about interest rates. Said The Donald: “They’re keeping the rates down so that everything else doesn’t go down. We have a very false economy,” he said.

I will just say to you that if you are interested in a different perspective on interest rates, you should spend the $8.90 and buy the latest issue of Quadrant. Some significant proportion of our economies across the world have no solid support for their structure of production. Low interest rates are the only prop which even gives them the appearance of growth. The readjustments necessary to put the economy on a solid base are massive and I have to tell you the thought of what is required is frightening. I wonder if he, or anyone, really appreciates what is about to hit the world’s economy.

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