Donald Trump has been badgering Federal Reserve Chairman Jerome Powell for months, begging for lower interest rates. Yesterday, he took things to another level, saying that the “boneheads” at the Fed need to push rates into negative territory.
In his podcast, Peter Schiff said negative interest rates are boneheaded.
Trump used a pair of tweets to push for negative interest rates.
The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet………The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads.’
Peter said he can’t think a more boneheaded thing to do than to push interest rates negative.
Trump is basically saying negative rates would allow the federal government to refinance its debt. It could roll over short-term debt into longer termed bonds and lock up the low rates. But as Peter pointed out, interest rates are already near historic lows.
If President Trump actually cared about refinancing the national debt and lengthening the maturity of the debt – the duration – and locking in these low interest rates, lock them in! They’re already super low.”
Peter said if the Fed did cut rates to zero or lower, he thinks yields on long-term bonds would actually start to go up because the market would begin factoring in higher inflation.
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