Yes, lower interest rates is what Trump wants.
But he naively thinks that it is the Federal Reserve that sets the interest rates.
The general public, as clearly demonstrated by Trump, does not understand how the interest rates work in the US.
Here's a thought experiment. Suppose that tomorrow the Fed sets its funds rate to zero. What will the 10 year treasury yield be?
The answer, likely higher than today and certainly nowhere near zero or even near 2%.
This is because the actual rate is set by supply and demand, not by the central bank. If the Fed sets the rate to zero, at the next auction the buyers still decide how likely the average inflation is going to be over the next 10 years. Foreign buyers will additionally decide what the likely currency changes will be. Then they will calculate their alternatives and make risk adjusted bids for the treasuries.
This is exactly what has been happening anyway. And in no uncertain way, the world has been telling you that the US treasuries and the USD are worth a lot less than what the average American thinks they are worth.
Now the Fed could, if it is arm twisted, buy enough treasuries to push the rates to zero. This is what happened in 2020. It is called yield curve control. But that doesn't change the real value of the bonds.
So my question to you, again, is that if the US markets are all that Trump and many Americans think them to be, then why aren't the US yields comparable to those in other advance economies? |
