Will President Trump Take the Blame When Stock Markets Crash?Ron Paul
Stock markets continue to reach record high levels, but it’s only a matter of time before they crash back to earth. When they do, there will be a lot of finger pointing at those deemed to be responsible for the crash. Given the current political climate, President Trump will undoubtedly come in for criticism. But will that be a fair criticism?
President Trump is certainly taking the credit for the hot stock markets, and his supporters view this as market approval for his allegedly pro-growth economic policies. Trump’s critics will undoubtedly seize on something to criticize him when stock markets crash, no matter how flimsy their case may be. All of this obscures the fact that Presidents just don’t have that much of an effect on the economy, at least not in the short term.
For one thing, Congress is responsible for passing the federal budget, one of the biggest drains on the economy. Sure, the President can submit a budget proposal, but ultimately it’s Congress that determines just how many trillions of dollars are siphoned away from taxpayers and shuttled into non-productive endeavors.
Where Presidents are most responsible for affecting the economy is in their selection of Federal Reserve Board members, particularly when they pick a chairman. The chairman ultimately determines the direction of monetary policy, which has far more effect on the economy than anything else the federal government does.
This stock market bubble has been years in the making, a natural consequence of the trillions of dollars that the Federal Reserve System has been pumping into financial markets. It’s not a surprise either, at least to those of us who adhere to Austrian economics and understand that the Fed’s response to the last financial crisis would result in another larger bubble.
President Trump has a chance to change things for the better at the Fed if he appoints a chairman who will upend the Fed’s traditionally loose conduct of monetary policy, although that doesn’t appear likely. But no matter who he picks now, the wheels for the next crisis were set in motion years ago. It was the monetary policy of Ben Bernanke and Janet Yellen that will bring about the next financial crisis, so the blame should fall squarely on the shoulders of Presidents Bush and Obama who appointed them.
Nothing President Trump or his appointees do now will stop the next financial crisis, they can only react to it. How they react should certainly be subject to critique, but placing the blame on President Trump for something that he inherited will be a classic case of playing politics – attacking the President for something he didn’t do, while continuing to obscure the Federal Reserve’s role in monetary malfeasance.