2024-08-18 21:42:47
The Republican Trump does not just want to move into the White House after the elections. He apparently wants nothing less than to tie the US currency to himself. But experts warn against such a step.
Donald Trump is confident in himself, that’s no secret. He considers his first term as US President to be extraordinary – and is not sparing in his self-praise when it comes to his own entrepreneurship. For a second term, which – if Trump himself has his way – he already has in the bag, he wants to use his expertise as a company manager.
His plan: nothing less than to take control of the US dollar. Trump wants to have more influence on the country’s monetary policy in order to be able to devalue the dollar.
The consequences of such a step would be enormous. Europe and Germany in particular, but the USA could also suffer. Trump’s “preference for a weak dollar could have far-reaching effects on the United States and the global economy,” writes the New York Times.
“I think the president should at least have a say,” Trump recently told reporters. The reason: “I think in my case I’ve made a lot of money, I’ve been very successful, and I think I have better instincts than in many cases the people who are at the Federal Reserve or the chairman.” Trump did not mention that his companies have defaulted on interest payments and filed for bankruptcy several times over the course of his career.
His vice presidential candidate, JD Vance, also supports Donald Trump’s call for US presidents to have a say in decisions made by the US Federal Reserve (Fed). “We should give America’s elected leaders a say in the most important decisions facing our country,” Vance told CNN.
Trump’s demand is nothing new. Back in the spring, the Wall Street Journal reported on plans by Trump’s advisors to take over the Fed after an election victory. In an extreme case, the US president could even get a seat on the central bank’s decision-making body. Trump later denied such plans and backtracked.
Such a step would be “a big change,” as Vance puts it. After all, the US Federal Reserve is actually a largely independent monetary policy institution.
Although the US president appoints the members of the Fed board, previous administrations have largely taken the view that interfering in monetary policy decisions can create short-term political pressure that harms the US economy in the long term. But that has not stopped presidents from occasionally complaining about the Fed’s stance.
Trump’s challenger promptly intervened: Kamala Harris complained that she did not agree with the demand. “The Fed is an independent institution and as president I would never interfere in the Fed’s decisions,” she told reporters in Arizona.
In addition to lower interest rates, which could cause the US dollar to fall, the Trump team is apparently planning another, complementary step: intervening in the dollar exchange rate. As Politico reported in the spring, this idea is apparently being pushed forward by Robert Lighthizer, former trade representative in the Trump administration and candidate for the post of Treasury Secretary. What such an intervention might look like in concrete terms is still unclear.
But what does Trump want to achieve by influencing the Fed? His argument is that falling interest rates increase investments because, to put it simply, loans become cheaper for companies. This stimulates the economy. Niklas Taft, an economist at the German Economic Institute, also tells t-online that behind such a step “is primarily the desire for strong economic development.”
And with a weaker US dollar, Trump wants to improve the trade balance, says Taft, “by making imports more expensive and exports cheaper.” For a protectionist like Trump, who is known for a rigorous tariff policy, that would be ideal.
The problem: Such a step could significantly increase inflation in the USA. Experts are already worried that inflation will rise sharply in the event of an election victory, for example because Trump introduces high import tariffs. A devaluation of the US dollar due to the influence of the Fed has not yet been factored in.