Featured Image credits: The White House
Not to say that we in the UK don’t have our own share of clownish politicians, but the phrase “hypocritical Donald” isn’t exactly an oxymoron. How about the fact that he’s pro-life and yet not disclosing how many abortions he’s paid for (hint: he should be saying zero). Or what about when he criticised Obama for playing golf while in office before playing even more golf himself in the same time period while in office? Regardless of all these, though, I’m here to talk about quite a recent example of hypocrisy from the 73-year-old’s Twitter. The tweet, from yesterday, read:
Where to begin with this? Trump’s rationale (presumably, at least; do we ever really know?) is that Draghi’s statements that the European Central Bank (ECB) could enact stimulus measures (including cutting policy rates further) in the future adds further negative pressure on the euro. This in turn makes US manufacturing uncompetitive with respect to that of Europe, and thus has the potential to depress the US economy through reducing exports and increasing imports. This is because the dollar appreciating vis-a-vis the euro makes exports from the US more expensive for foreign buyers, and makes imports into the US less expensive for US buyers.
While this train of thought is logical, it ignores the myriad of other reasons why the ECB would try and cut rates. Growth in the Eurozone has been flagging, due to, among other factors, the risk of a disruptive Brexit and a global trade war; OECD projections state growth as most likely around 1% for the year. While I’m not denying that a part of Mr Draghi’s army of reasons to act this way would be to add downwards pressure to the euro, Occam’s razor suggests that the currency argument isn’t the primary reason why Draghi is considering such action. Moreso, it’s not as if what the ECB is doing is unconventional; monetary authorities have been using interest rates as a tool to manage the economic cycle for decades.
However, it is also true that Trump never explicitly said that the intention was to depreciate the euro; he merely said it was unfair to the United States. Does this absolve him of any blame for the statement?
I don’t think so, for the following reason: Trump has repeatedly maintained his opposition to the mildly hawkish tone of the Chairman of the Federal Reserve, Jerome Powell, with respect to interest rates. If it’s so unfair that the ECB may cut rates in case of future economic stagnation, then why is it not also unfair for the Federal Reserve to cut their interest rates instead of raising them? The world Trump lives in, where interest rates are a primary tool of exchange rate warfare, is a world where there is every action is an act of hostility. If Trump really believes his own tweet, he should expect a barrage of European criticism once he inevitably again tries to persuade Powell to halt his hawkish tone on rates.
It’s not as if Draghi is actually cutting rates right now either; his point is that they remain a tool in case Eurozone growth slows even further, a perfectly rational position to take. Draghi’s speech was somewhat reminiscent of his “whatever it takes” speech in 2012, which is widely credited for saving the euro. If Trump means that even suggesting that interest rates should be used to curb a potential recession (or decrease in growth) is unfair, he means that a central banker looking out for the interests of those he or she governs (as Draghi did in 2012) is unfair as well. In this case, one has to ask: isn’t all this “America First” nonsense that Trump keeps spouting wildly unfair as well?
The fact I’ve read so deeply into what is probably an off-the-cuff tweet from one of the most volatile Presidents in US history is a carry-forward from previous administrations. A tweet (or any sort of official statement from the President) used to be taken seriously by all, and was almost always well crafted and thought out. It speaks volumes about Trump that more and more, his tweets are beginning to look like jokes, and the markets his personal see-saws to tip up and down as he wishes. I suppose Trump being a hypocrite isn’t exactly a groundbreaking observation, but the blatant ignorance that comes with a tweet such as this is something that I felt I had to comment on.