The Secret History <br>Of Trump’s Decision <br>To Challenge the Fed

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The New York Sun

Bullseye. That’s my reaction to Donald Trump’s charge — made to reporters on Labor Day — that the economic recovery Hillary Clinton and President Obama have been boasting about is a “false economy.”

The Donald did this when he welcomed reporters onto his campaign jetliner. He accused the Federal Reserve of, as Reuters put it, “keeping interest rates low to help President Barack Obama.”

“They’re keeping the rates down so that everything else doesn’t go down.” By “everything else,” he was referring to the stock market, the Obama housing bubble and even the employment rate. “We have a very false economy,” he said.

Millions of Americans know that’s true. It’s a big reason why, though President Obama’s personal approval ratings are above 50 percent, vast majorities tell pollsters the country is moving in the wrong direction.

Officially, the unemployment rate is below 5 percent. But that’s because the labor-force participation rate is at its lowest point in decades. After eight years of this president, millions are still too discouraged to look for work.

The government, beguiled by the Federal Reserve’s near-zero interest rates, has borrowed and spent like a drunken sailor (no offense to the Navy). It has racked up more debt than all previous governments of America combined.

Yet the average growth rate during the Obama-Clinton years has been less than a measly 2 percent. Now we taxpayers are stuck with all the debt and feeling stranded in what Trump calls a false economy.

The amazing thing is how Hillary Clinton is reacting. Trump, she said Tuesday, “should not be adding the Fed to his long list of institutions and individuals that he is maligning and otherwise attacking.”

Well, why not? Is there some law that says the Fed, currently led by Janet Yellen, is perfect, immune from all criticism? Famed economist David Malpass, a Trump adviser, has long warned that the Fed’s aggressive policies have boosted Wall Street and quashed lending on Main Street. He calls Mrs. Clinton’s attempt to squelch debate “ridiculous.”

To put it mildly. It seems that Mrs. Clinton wants to rule out of bounds the entire question of the Federal Reserve and its performance. The truth is that she doesn’t trust the voters or those damned markets.

“Words move markets, words can be misinterpreted,” she frets. Her position is that “you should not be commenting on Fed actions when you are either running for president or you are president.”

Maybe Mrs. Clinton wasn’t paying attention during, say, Democrat Jimmy Carter’s 1976 campaign against President Gerald Ford. The hapless Ford had tried to beat soaring prices by handing out buttons that said “WIN,” for “Whip Inflation Now.”

In a debate, Jimmy Carter laced into the Fed’s then-chairman, Arthur Burns, for showing “a typical erroneous Republican attitude.” When Mr. Carter got elected, he eventually put in his own Fed chief, Paul Volcker.

The Great Volcker conquered inflation by pushing interest rates to nosebleed levels. That enabled President Reagan and the Congress to bring down tax rates and touch off what became known as the Reagan boom.

It’s no coincidence that one of the architects of Reagan’s triumph, economist Lawrence Kudlow, is now coaching Mr. Trump. And that this week Mr. Kudlow is bringing out a new book on how Reagan’s strategy was similar to John F. Kennedy’s.

It’s called “JFK and the Reagan Revolution: A Secret History of American Prosperity.” It focuses on how both presidents put through radical tax cuts and helped our central bank focus on a strong and stable dollar.

So Donald Trump knew just what he was doing when he went after the Federal Reserve. (No doubt he reads The Post’s John Crudele, another Fed critic.) Mr. Trump has quietly surrounded himself with economists who understand this down to the ground.

These include, among others, Kudlow, Malpass and another class-A economist, Judy Shelton, who joined the Trump team in August. Exceptionally articulate, she has been fighting for years for an honest American dollar.

Ms. Shelton joined Mr. Trump’s team August 11 and then published an important piece declaring that “voters deserve to know what candidates think of the Fed.” A week later, Mr. Trump made to reporters his remarks blaming the Fed for the false economy.

The gold value of the Federal Reserve Notes we all use for currency is down more than 36% since Obama was first sworn in. No wonder Hillary Clinton wants Mr. Trump to shut up. His remarks about the Fed are right on target.

This column first appeared in the New York Post.

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