Trump’s Biggest Enemy Is The Fed

Right on the heels of Donald Trump’s stunning election victory, Democrats began to diligently work on undermining his presidency. That should surprise no one. It’s just par for the course in partisan D.C.

However, what appears to be downright striking is that the Keynesian elites may have found a new ally in their plan to derail the new President… the U.S. Federal Reserve.

First, it’s important to understand that the Fed is populated by a group of big-government tax and spend liberal academics who operate under the guise of an apolitical body. For the past eight years, they have diligently kept the monetary wheels well-greased to prop up the flat-lining economy.

However, since the election the Fed has done a complete about-face on rate hikes and is now in favor of a relatively aggressive increase in its Fed Funds Rate. And I use the term relatively aggressive with purpose, because the Fed raised interest rates only one time during the entire eight-year tenure of the Obama Presidency. Technically speaking, the second hike did occur in December while Obama still had one full month left in office. But coincidentally, this only took place after the election of Donald Trump.

Keep in mind a rate hiking cycle is no small threat. The Federal Reserve has the tools to bring an economy to its knees and has done so throughout its history of first creating asset bubbles and then blowing them up along with the entire economy.

Remember, it was the Fed’s mishandling of its interest rate policy that both created and burst the 2008 real estate bubble. By slashing rates from 6.5 percent in January 2001, to 1 percent in June 2003, it created a massive credit bubble. Then, it raised rates back up to 5.25 percent by June of 2006, which sent home prices, stock values and the economy cascading lower.

In the aftermath of the carnage in equity prices that ended in March of 2009, the Standard & Poor’s 500 stock index soared 220 percent on the coat tails of the Federal Reserve’s money printing and Zero Interest Rate Policies. But during those eight years of the Obama Administration, the Fed barely uttered the words asset bubble. In fact, it argued that asset bubbles are impossible to detect until after they have burst.