00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes.
00:07Joining me now is Clifford Winston, economist and author of the upcoming book,
00:11Market Corrections, Not Government Interventions, A Path to Improve the U.S. Economy. Clifford,
00:17thank you so much for joining me once again. Nice to be here. Good talking to you again.
00:21Last week, there were reports that President Trump was thinking about firing the chair of
00:26Federal Reserve Jerome Powell. Trump later addressed that reported plan, saying that it was highly
00:31unlikely that he would fire Powell, quote, unless he has to leave for fraud. So what do you make of
00:38those reports that he was even mulling this over? And what do you make of that caveat there? Probably
00:43won't fire him unless there's fraud involved. Right. So given what we're going to be talking
00:49about, let me let me just take this from a somewhat bigger perspective in terms of, you know, what is
00:54Trump saying that he may fire the head of the Fed, Federal Reserve, say about his views about
01:04government? Okay. In other words, you know, one thing could be that, no, I don't believe that the
01:13government should even be in charge of the Federal Reserve, that the private sector should print money
01:19and they should decide who gets it in terms of loaning it out. Right. What do we even have the
01:24government involved in this? You know, that could be one perspective. It's not a popular one. And I
01:29don't think anybody's advocating, but it starts our thinking about it. Alternatively, you can say,
01:36okay, no, the Federal Reserve should be in charge of interest rates and loaning money to the member
01:42banks, so on and so forth. But, you know, we need to have them do it better in some way
01:49that really isn't defined. Because after all, the Federal Reserve draws on many people to help them
01:57in making their decisions. So when Trump starts talking about firing the head of the Fed, what
02:04really is he saying? Is he saying, well, I want to just change how we do monetary policy in the United
02:11States and rely more on the private sector? Or do I want to reform it? And it's hard to say that he
02:18really cares about either of those things, as much as he just doesn't like doing it the way
02:24the Fed chairman's doing it. So it starts to open the question, does he really have a nihilistic
02:31approach to government? That is, I don't really believe in government. I don't believe in the private
02:37sector. I just believe in doing it my way. And I think that is what's raising concerns
02:42about him saying that he wants to fire Chairman Powell.
02:47And we're going to get into what you call a nihilistic approach to government in a little
02:52bit. But I think there are two separate questions when you're talking about the potential for the
02:57president to fire the chair of the Fed, because the Fed is by nature nonpartisan. So A, what type of
03:05precedent would this send, say a president fire the chair of the Fed? And B, this is separately,
03:11do you think Jerome Powell is doing a good job as chair of the Fed? So let's talk about the first
03:17part of that question. What message is this sending?
03:19A terrible message. It'll basically just say that, you know, there's really no reason to have a long
03:27term view of monetary policy. It basically is going to go at the wings of the president and all the
03:33things that you want in monetary policy, certainty, predictability in terms of what's happening,
03:41at least so that you can make plans for investments and so on and so forth, are out the window,
03:47because they can change at the president's whim. So it's a very dangerous policy when you're dealing
03:54with so many variables that depend on expectations, interest rates, exchange rates, all sorts of assets
04:02where you have to look to the future, you have to have some sense about what's going to be going on,
04:08and then you make your decisions accordingly. If you have no confidence in what's going on in the
04:12future, you're just going to sort of fold up business and say, I'm going to wait. I'm too concerned
04:17to spend. I'm too concerned to invest. So basically, it could freeze the economy if we really get the
04:24sense that all we're going to be doing is thinking about the short term. And I'm sure, let's say you're
04:30a Republican, and let's say you don't think Fed Chair Powell is doing that good of a job, but would
04:34you want a Fed chair that kowtows to the president's whim? Would you want someone, because then a Democrat
04:41will eventually be president again in this country, I'm sure. And then would we be, would that Fed chair
04:47be concerned then that, oh, this president could fire me too, because it's happened before to Powell
04:52or it's happened before to another guy? I mean, what do you make of that? Exactly. No, that's, again,
04:57this is an area where there should not be any political division, because either party can be
05:04vulnerable. And even somebody who's, quote, their own, of their own party could decide, well, no,
05:10I'm not going to do this. And after the fifth time, he has to change what he's doing in,
05:17in less than a few months, then he's saying, no, I'm going to do things my way. And it'll cause a lot
05:23of chaos. So I don't really see any intellectual argument for this. And I'm not even clear that
05:31anybody's making it. I mean, you can say, I don't like the job that Chairman Powell is doing, but what's
05:39your standard? Right? I mean, this is a problem that we've been dealing with effectively for
05:45centuries in the sense of what is the optimal interest rate? No one knows the answer to that.
05:52And there are some very smart people who've gotten Nobel Prizes for their answer, but it's not a
05:59definitive answer. And even today in the Times, you saw op-ed by both Bernanke, who did win a Nobel
06:08Prize, and Janet Yellen, who's a first rate economist, is saying, look, these are hard
06:14problems. We can make mistakes, but you really have to let us sort this out. And I think that's
06:21just the wide view of virtually all economists and people who are seriously thinking about this.
06:28I think that this is one of the riskiest things that Trump has been playing with.
06:33As I said, the implications go way beyond what he thinks they go beyond. It's not just our
06:40budgetary issues and how much debt we're going to pay back. This is going to affect the global economy
06:46if you start messing around with the credibility of our monetary policy.
06:52I mean, dive a little deeper here and paint that picture. What does the global economy look like
06:57should a president boot out the Fed chair?
07:00So look at the other things that are affected. OK, what about exchange rates? Right. Interest rates
07:08then are going to be cut all of a sudden down to what, one percent that Trump wants. I don't know
07:13where he got that number, but let's just go with it. And so exchange rates are going to fall in the U.S.
07:20and people say, oh, great. But what does that mean? It means that, yes, our exports are cheaper,
07:26but our imports are a lot more expensive. And so you're going to get inflationary pressures there.
07:31Then you're going to say, well, at least we can buy our domestic product. Sure. But you don't think
07:36people are going to raise prices once all of a sudden people start switching away from French wine to
07:42California wine in a much bigger way than they've done in the past? They're going to raise their prices.
07:47So you're going to get all these inflationary pressures. Right. And then you're going to say,
07:52oh, I've got to raise interest rates again, but I just cut them. Right. I mean, that's the kind of
07:58example that you have that once you start thinking about the broader global economy.
08:04And you talked about this, what you called nihilistic approach to President Trump,
08:08President Trump has to policy, to perhaps government. You wrote about that earlier about Trump's big,
08:15beautiful bill. You said it shows, quote, Trump's anti-government, but not pro-market approach to
08:20policymaking. It's nihilistic and does not bode well for the nation's material quality of life.
08:26Talk to us a little bit about what you mean there.
08:28OK, so again, you know, what I think all economists have been trying to do is trying to figure out
08:33what is it that really drives Trump? Because he's very unusual. We've not really had a president like
08:38this that, you know, either clearly believes in markets or clearly believes in what we would call
08:45efficient government policy reform. That is, you recognize that government has flaws, but
08:51you believe that government can play a constructive role and it just needs to be told the right thing
08:56to do. And you as president are going to do that. The problem that I think we've been having with Trump
09:01is we can't figure out where he stands. He goes ahead with this major bill and talks about deregulation.
09:09Now, that has meant something to us for several decades under many presidents.
09:15Deregulation means removing regulations on entering an industry, exiting an industry and pricing in the
09:25industry. The government sets all that. And when we deregulate industry like we did with airlines,
09:31railroads, natural gas, many things, that's what we're thinking about, economic deregulation.
09:37And every president up to Trump did something of that sort. And then you add that a form of deregulation
09:44with free trade. Other presidents, Obama, Clinton, moved in that direction. OK, Trump has not done that
09:52in anything. And he's had the opportunity to do it. He could have deregulated ocean transportation
09:58and gotten rid of the Jones Act, which he seriously considered doing, but he decided not to do it
10:03in the end. He can do the same thing in international airline transportation. We do not allow foreign
10:10airlines to serve American routes, which could be a source of competition. It also could make
10:15international travel easier because you could have seamless travel. In other words, you could use an
10:22American carrier all the way to Europe and including connecting flights. That could be deregulated,
10:28but we don't have that. So it's hard to point to deregulation. Yet he then says, we're going to
10:35deregulate environmental policies. I think it's a wrong use of the term, but let's again, let's go with
10:42it and say, we're going to get rid of subsidies for electric vehicles. OK, but that gets us on. All
10:50right, let's think about efficient government policy reform. I agree with Trump on that. I would too
10:58like to get rid of subsidies for electric vehicles because they're a bad, inefficient policy for trying
11:05to encourage purchases of electric vehicles. In other words, what you really want to do is discourage
11:14people who are doing the polluting, right? Buy cars that obviously are more fuel efficient and don't emit
11:24as much pollutants and ideally even getting some people to switch to electric vehicles, charge them,
11:31a tax, disincentivize people for doing that, and raise money that you could use for the deficit
11:38instead of spending government money and subsidies to reward people for buying EVs. So that would be
11:45an efficient policy, but he's not even doing that. So where is he on this? Well, what about markets?
11:53Who would be the real major competitor to the U.S. to stimulate market competition? The Chinese.
12:03Chinese have the largest share of electric vehicle sales in the world. Let them compete,
12:09but let them compete in the U.S. This is what we did with the Japanese in the 80s when they came and
12:14built plants here and basically transformed the industry with fuel efficient vehicles that the public
12:21like. Same idea. Chinese invite them, so to speak. Let them build plans and compete here. There'll be
12:30conditions. They can't get subsidies from the Chinese government to give them a competitive advantage over
12:36the domestic firms. They're going to have to meet security terms of the government. And of course,
12:44by building them here, they'll be using American workers. All right. Once we have that, we compete with
12:50them. This is going to lead to an increase in sales of EVs, no question about it, and hopefully help the
12:58industry to become more competitive. Do you think Trump wants that? No way. So what does he really
13:05believe in? Hard to say. Not markets, that's for sure. And he doesn't even believe in efficient
13:13government reform. So that's where I come out on this and say, this is just nihilistic.
13:18So what you're saying, it's anti-government, but not pro-market approach. Once again, what is the
13:24impact of that on the global economy? Makes things very chaotic. And I think that's exactly how people
13:31are reacting. They just don't know what to make of this guy. And it makes things very difficult to plan.
13:36It makes it very difficult to approach him. But somehow, people are rolling with it. The stock
13:45market's doing very well. I can't say that all this chaos is showing up somewhere in the stock market or
13:53any other financial market yet. But I think that's what our concern is yet. It's becoming increasingly
14:01clear that it's very hard to figure out where Trump is coming from. There's lots of reasons to have
14:07insecurities about what this world's going to be. And of course, even just throwing out these various
14:12things that he's doing is very, let's say, destabilizing. And of course, you don't know when
14:19you're going to go back to things. Like, what happened to our invasion of Greenland? What happened to
14:24our invasion of Canada? When's that coming back? Right? So there's sort of this strange
14:30thought of the day. And maybe people are just getting used to it and say, look, don't take
14:35any of this seriously. We're going to do what we do. And thus far, the market is suggesting that's
14:39exactly what they're doing. But if he does some of these things, it's going to be scary. So we'll
14:45just have to hold on. But it's just not the way that a president really should be trying to guide an
14:51economy. I don't know how to feel talking to an economist saying, you know, brace for impact.
14:56It hasn't we haven't seen much yet, but it's to come. I mean, what do you make of when should
15:03people expect that to come? When do you think that that shoe will drop and we'll really see it in the
15:08market? Oh, now, look, if I knew that, I wouldn't tell you. You definitely wouldn't tell me. And yeah,
15:14you probably wouldn't be talking to me right now. You'd probably be doing something else.
15:16I'd be making money. Exactly.
15:18I'd be knowing what to shorten the stock market and making money on all this. So it's probably not
15:26a good idea ever to ask an economist to give that kind of forecast. But I think the question really
15:32is, is once we can get a sense of a committed path, in other words, once tariffs are locked in,
15:40you know, once he decides once and for all, who's going to be a Fed chair, he may drag this out,
15:46trying to make Powell as miserable as he can, hope he quits, he won't quit, but then he picks
15:51somebody. You know, if he picks somebody who's clearly a lackey, that's going to be a commitment
15:55and that's going to be something that people are going to worry about. So I think at this point,
15:59there's just too much speculation. And I think the time to sort of, you know, get a little more
16:04concerned is, OK, he's really committed to this path. He's really committed to these tariffs.
16:10They're going to be in for a while. He's really committed to having a big say in,
16:16interest rate policy by the Fed, because he's picked this person who's just going to say,
16:21you know, how high should I jump when you tell me to jump? Right. It's not that kind of thing
16:26that's going to happen to give us a better sense of preparation. But look, every day is different.
16:33I mean, every day is a new day with him. So, you know, I think we have to at this point
16:38play it out accordingly.
16:40Clifford, you're so right. Every day truly is a new day. And as there are developments,
16:45which I'm sure there will be plenty, I hope you can come back on and break them down. Clifford
16:51Winston, thank you so much for joining me. You're welcome back anytime.
16:54Thank you for having me. Look forward to talking again.
Comments