If Donald Trump were to become president, one of his many important responsibilities would be appointing the governors of the Federal Reserve, who set monetary policy and drive interest rates in the United States.
This week, Trump gave an interview to Fortune Magazine in which he discussed how he might approach this task. The interview is about as enlightening as you would expect.
First, Trump made a strong argument that low interest rates are good:
We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.
He continued, noting that low rates are bad:
The problem with low interest rates is it’s unfair that people who’ve led the American way of life — the true American way of life — that have saved every penny, that have paid off their mortgages, that have done everything they were supposed to do, and they were going to retire with their beautiful nest egg, and they were going to get interest on their money, and now they’re getting one-eighth of 1%. I think that’s unfair to those people, who have led their lives in the way they were supposed to.
Then, expanding further, he also pointed out that high rates are bad:
What’s a scary prospect is if you start raising rates and you have to borrow money as a country, and if the rates, instead of where they are now, the rates are substantially higher, where the rates are 3% and 4%, or whatever it may end up being. That is a very scary prospect for this country. When you start adding that kind of number to an already reasonably crippled economy, certainly in terms of what we produce, that number is a very scary number for a lot of people to be looking at.
None of Trump’s statements, technically, are contradictory. They boil down to a banal observation: low interest rates are good for borrowers and bad for savers.
Seeing Trump talk about monetary policy reminds me of a time when, due to breaking news, I had to discuss football on national television, despite my lack of expertise on the subject.
What, I was asked, would Tom Brady’s Deflategate suspension mean for other players in the NFL?
Well, I replied, Tom Brady is a very good quarterback. So, his suspension would be bad for the New England Patriots and good for players on other teams. You can fault my answer for its depth, but you cannot fault it for accuracy.
The main difference between me and Donald Trump is that I am not seeking the job of NFL commissioner.
Still, I have an idea about how Trump can turn his banal observation about the interest-rate trade-off into a concrete policy proposal. Why not a policy of low rates for borrowers and high rates for savers?
In most areas of policy, Trump is unconstrained by the trade-offs that bind mortal politicians. He is the candidate of more and less high-skill immigration; of huge tax cuts but no changes to Social Security and Medicare because he’ll “make us so rich” that won’t be necessary; of a border wall that somebody else pays for.
If we can have all those things, why can’t we have high and low rates at the same time? President Trump, please make interest rates great again, for borrowers and savers alike.