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A report in Saturday’s Wall Street Journal indicated that “Former Trump administration officials” have been discussing “a range of proposals,” including “a long-shot assertion that the president himself should play a role in setting interest rates.” It’s hard not to laugh while typing this, but apparently “a small group of the former president’s allies” has “produced a roughly 10-page document outlining a policy vision for the central bank” such that the low-rate loving former (but perhaps future) president would be “consulted on interest-rate decisions” made by the Fed.

Where to begin?

To start, with the possible exception of the dollar, interest rates are the most important price in the world. They are simply because no one borrows money, rather they borrow what money can be exchanged for. Which means actual market interest rates are arrived at every millisecond of every second of every day, and all based on the staggeringly sophisticated cooperation of hands, machines and minds around the world feverishly producing infinite goods, services, inputs, and labor all day and every day.

When individuals, businesses and governments borrow “money,” they’re borrowing goods, services and labor from around the world. In other words, credit is produced. Always and everywhere.

Please keep this in mind with Trump’s oft-stated assertion to aides that he “likes low interest rates.” Ok, many of us not Trump like low-priced Ferraris, sub-eight figure beachfront properties, and cancer-curing pills that retail for the cost of an aspirin. There’s so much we would like for less, but for the market reality is that it’s very costly to produce the myriad things we desire, and that we will desire in the future.

Let’s also not forget that on the matter of savings, compound returns are the seventh, eighth or realistically the first wonder of the world. That they are is a reminder that while we all theoretically “like low interest rates,” there’s a lender for every borrower. And lenders never, ever blithely hand over their future for nothing. See “compound interest” and “wonder of the world” yet again if you’re confused.

What this tells us is that while Trump surely likes borrowing cheaply, and would prefer to centrally-plan an outcome that would allow all Americans to borrow cheaply, the markets stand down to no one. So while Trump may well desire to “play a role in setting interest rates” as an “ex officio” FOMC member, interest rates will be set in actual markets, and as a direct consequence of global production along with currency policy in the United States.

Speaking of currency policy, how interesting that Trump likes low interest rates given his preference for a weak dollar. About the latter, does he or the aides who feed his rate delusions really think interest rates will stay low if Trump pursues dollar devaluation? Hopefully the question answers itself.

Where what’s laughable will become funnier concerns the likely opinion pieces that will emerge from the news about Trump and the Fed. Washington Post columnist Catherine Rampell’s surely witty and haughty response awaits about the evisceration of the central bank's crucial credibility by Trump, as do replies from right-of-center editorial pages who still imagine the Fed capable of decreeing “easy money” and “costless” credit.

Which is why the joke is on Trump’s critics as much as it is on Trump. No doubt it’s nutty for a would-be president to ascribe to himself rate-setting powers, but if his critics bite about the horrors of Trump centrally-planning prices, they’ll merely associate themselves with their own delusions about the Fed’s alleged powers over the cost of and amount of credit in the real economy.

That’s the case because while it’s most certainly the stuff of laughter that Trump wants “a role in setting interest rates,” this same obnoxious conceit doesn’t die when the central planner’s last name is Volcker, Greenspan, Bernanke, Yellen, Powell, or perhaps Warsh or Hassett.

The role makes zero sense for anyone, which is the point. Or should be. Trump’s delusions, and the gnashing of the teeth of his critics, are yet another reminder that the Fed’s powers over interest rates are vastly overstated. Thank goodness for that, and regardless of who wants “a role in setting interest rates.”

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, released on April 16, 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership

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