Charlatan or Imbecile? A Case Study

So many rich veins course through the gold mine of Donald Trump’s foolishness that one hardly knows which one to excavate first. In honor of the appointment of Jerome Powell as the next Federal Reserve chairman, let’s pick (and shovel) a simple lode: interest rates. The choice is binary. You either like rates lower or higher.

Trump’s blatherings on interest rates over the last couple of years have been consistent in one respect: he will eventually contradict himself. Logic forces us to conclude that the President can’t be believed on this (or any other) matter. He cannot be telling the truth when he says he believes in low rates one day and condemns low rates the next. But these Trumpian contradictions aren’t news, and to point them out doesn’t do much to enlighten us.

Might it be more interesting to ponder whether Trump’s notions of monetary policy are cleverly deceitful or just witless meanderings? That sort of inquiry at least allows us consider the intriguing topics of political guile, gullibility, chicanery, and propaganda. It brings to mind that lovely Twain quote: “Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”

Trump has staked claims just about everywhere on the interest rate map. In 2011, he criticized then-Fed Chair Ben Bernanke as “reckless” for keeping interest rates low in the aftermath of the Great Financial Crisis. “The Fed has to be reined in or we will soon be Greece,” Trump declared with his characteristic bombast. The following year, apparently concerned about inflation, he took to Twitter to assert that the Fed’s program of purchasing Treasuries (quantitative easing) is “killing our children’s future.”

By April 2016, before he’d secured the Republican nomination, all that had changed. Trump told Fortune, “The best thing we have going for us is that interest rates are so low’’ and that to raise rates would be “scary.” The following month, he told CNBC that he had no quarrel with the policies of Bernanke’s successor, Dr. Janet Yellen, “She is a low-interest-rate person, she’s always been a low-interest-rate person, and let’s be honest, I’m a low-interest-rate person.”

Cut to September 2016. Trump, now the GOP nominee, tells Reuters in an interview that by keeping rates low, the Fed has created a “false economy” and an “artificial stock market.” Later that month, in the first presidential debate, Trump chastises Yellen, saying she is keeping rates low to prop up the economy for President Obama. “We have a Fed that’s doing political things,” said Trump. “This Janet Yellen of the Fed. The Fed is doing political — by keeping the interest rates at this level. And believe me: The day Obama goes off, and he leaves, and goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you’re going to see some very bad things happen, because the Fed is not doing their job.” A “big, fat, ugly bubble” will burst when the Fed raises rates, he added.

Almost lost in the confusion of Trump’s Mad Hatter riddles is the fact that he blithely slanders Yellen along the way. Taking his cue from conspiracy theorists in Congress and the gifted Gov. Rick Perry (who called Ms. Yellen “almost treasonous” for keeping rates low), candidate Trump repeatedly smears the Fed Chair as a person who would violate her oath, if not federal law. Crooked Janet Yellen, an economist with a Yale PhD who, in the aftermath of the worst financial crisis since the Great Depression, is surgically guiding the Fed back to its traditional monetary role without causing the economy or stock market to crack and implode — all while taking a paycheck than 113 other Federal Reserve employees. Drain the swamp.

Yellen is just one of 12 votes on the rate-setting Federal Open Market Committee (FOMC), but according to Trump, the Democratic Fed Chair, appointed by a Democratic president, “should be ashamed of herself” for doing “political” things to the economy. And how does candidate Trump propose to create a more independent Fed, free of such rank political interference? Simply by appointing a Republican, of course. Trump pinpointed Yellen’s problem during the campaign, explaining that “she is not a Republican.” Okay, nothing political there, especially considering that Eisenhower, Reagan, Clinton, and Obama all Fed chairmen belonging to the opposite party.

As one considers whether these incongruities of thought and utterance constitute cunning or harebrained ineptitude, it doesn’t take long to reach a disheartening conclusion: it really doesn’t matter whether Trump is a con man or just a “f__king moron,” as his Secretary of State concluded. It’s immaterial because whether we’re dealing with an imbecile or charlatan, the antidote is exactly the same. The problem isn’t Trump, it’s us.

Donald Trump may well be clueless, but he’s instinctive enough to know that interest rates, monetary policy, and the Federal Reserve are so little understood by the average voter that he can say just about anything he wants, contradictory or slanderous, and get away with it. He wields our ignorance to great effect. Who’s to stop him? Not the 11 other FOMC members, who could have stood before a bank of microphones after the presidential debate and called Trump out for spreading manure about the Fed and its Chair. Not Paul Volcker, Alan Greenspan, and Ben Bernanke (a Democrat and two Republicans), who could have jointly condemned the attack on Janet Yellen’s character. In the absence of courageous leaders, it falls to voters.

Fortunately, fewer and fewer of us are buying what Trump is selling. But it’s clear that, collectively, we need to be a little wiser, a little less gullible, a little more skeptical, a little better informed, a little bolder, and a lot more participatory. Twain put it this way in a 1905 interview with the Boston Transcript. “In this country,” he said, “we have one great privilege which they don’t have in other countries. When a thing gets to be absolutely unbearable the people can rise up and throw it off. That’s the finest asset we’ve got — the ballot box.”

Twain also said: “Politicians and diapers must be changed often, and for the same reason.”

Ex-financial writer/editor; ex-newspaper journalist in US and France. Opinions are mine alone.