Article / 06 September 2016 at 12:00 GMT

Trump slams Fed – 'it's a bubble!'

Editor / Saxo Bank
  • US election represents a ballot on the current order
  • Trump accuses Fed of creating a bubble with 'free money'
  • Continual QE among the least popular elements of the status quo

By Michael McKenna

Beneath the froth and the fury, the US election is essentially a binary referendum on the way things are. This was true of Brexit, was true of Angela Merkel's recent home-state defeat in Mecklenburg-Vorpommern, and will be true of the upcoming Italian constitutional referendum.

All across the Western world, restive populations are questioning the worth of the economic, military, and cultural order erected in the wake of the Cold War (or perhaps even the Second World War). 

Is it a still-fragile step towards a borderless world of peace, plenty, and mutual consideration? 

Or is it a teetering Babel of naked emperors buying time with printed money?

Pieter Bruegel the Elder's Tower of Babel
"If no one kicks up a fuss, because most people don't understand what has been decided, we continue step by step until there is no turning back" – Jean-Claude Juncker

In the US, partisans of the first claim will support Democratic candidate Hillary Clinton, whose campaign represents a smooth continuation of present norms regarding the economy, foreign policy, and the post-1960s social order. 

Donald Trump, by contrast, is the candidate of fierce rejection, and is campaigning on a nationalist platform that breaks with both Democratic and Republican policies, earning him the enmity of longtime right-wingers from Mitt Romney to Michael Bloomberg to a host of hawkish neoconservatives.

Fed up

Today, Zero Hedge reports that Trump has extended his broadside against the status quo to include Janet Yellen's Federal Reserve.

"So far, I think [Yellen has] done a political job... the only thing that's strong is the artificial stock market", says Trump, adding that equity markets are "only strong because it's free money, because the rates are so low." 

"It's an artificial market," concluded the Republican candidate; "it's a bubble."

Trumps remarks, of course, align with the thoughts of many mainstream financial analysts and pundits, with only his accusation that the Fed is playing politics possibly straying into rough ground. 

During the Republican primaries, Trump accused the Yellen Fed of keeping rates low to help the presidency of Barack ObamaEarlier this month, when questioned by reporters over the much-discussed chances of a rate hike at the September 20-21 Federal Open Market Committee meeting, he said that "they're keeping the rates down so that everything else doesn't go down."

Behind the rhetoric

According to Saxo Bank head of forex strategy John J Hardy, Trump's comments largely represent a helping of red meat for his anti-globalisation base. "The Fed is an easy target, as those who vote for Trump have lost the most in the rising inequality", says Hardy; 

"This inequality is aggravated by Fed policy that boosts asset markets but doesn’t do much for the regular economy."

On the subject of the Fed's political involvement, Hardy tells us that it's a bit more complicated than the Republican's remarks suggest. 

"The Fed can’t avoid politics – Alan Greenspan was famously political [while] Ben Bernanke generally tried to avoid politics but was the first to really come under fire," says Hardy, adding that the charges against Bernanke were "somewhat unfair in the beginning, as it was the long arc of Fed policy started by Greenspan that was the root cause [of his difficulties as Fed chair]"

Concerning former Fed chair Paul Volcker (1979-87), who undertook a series of broadly successful anti-inflation measures in the early '80s, Hardy notes that in contrast to the lifelong Democrat's conflation with then-president Ronald Reagan's rhetoric of economic optimism, "Volcker was very forcefully independent and often worked against [the president]".

Easy targets and weak links

Of all his many swipes at the status quo, however, Trump's Fed criticisms may find the feeblest opposition. After all, there are many who will defend the US' high levels of immigration, and even its high levels of illegal immigration.

(Libertarian party candidate Gary Johnson, in fact, would strongly prefer that you not use that term at all, calling it 'incendiary'.)

Similarly, there are many – including the hawkish Clinton – who will defend the US' multiple military incursions into the Middle East on the grounds of 'humanitarian intervention'.

In an election that essentially asks Americans to cast a thumbs-up or a thumbs-down on the current order, there remain many who feel as though what openDemocracy (a publication funded by George Soros' Open Society Foundation) calls "cosmopolitan, socially liberal modernity" is viable and worth defending, whatever its present ills.

George Soros speaking in Malaysia
Soros has donated over $25 million to help Clinton and other Democratic candidates and causes in the belief that the 'political stakes are exceptionally high' this year. 
Photo: Wikimedia Commons

Of all of this social model's many current supports, however, continual central bank money-printing could very well be the least popular.

The presidential campaign has seen Trump swing very wildly at targets ranging from Mexican judges to Rosie O'Donnell, but with his latest jab at the Yellen Fed, the upstart Republican has connected with the very vein of economic discontent his campaign is centred on – whatever the truth of his claim.

Michael McKenna is an editor at


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail