Fed Chairman Powell says that despite uncertainty, the economy continues to be in a good place, and we have to wait to see the effect of tariffs; although he warns that Trump’s tariffs will likely feed inflation and slow economic growth. They can also lead to a recession which Trump is likely to mismanage into a depression.
We came close to one during the Great Recession of 2008, but Presidents Bush’s and Obama’s cabinets had qualified and experienced advisers who nearly every economist said saved from a depression . In contrast, Trump and his most unqualified cabinet in our history are incapable of saving us.
Bush and Obama tapped Treasury Secretary Henry Paulson (previously Goldman Sach CEO), Fed Chairman Ben Bernanke, and NY Fed President Tim Geithner to save us. They convinced Congress to bail out the banks and pass an economic stimulus package in the face of public outrage against saving Wall Street but not Main Street. Every one of them had deep experience in US and international monetary policy and were deliberative and experienced in dealing with financial crises.
Who will save us next time? Not Trump. He’s anything but deliberative. He’s impulsive and acts out of random anger without considering the consequences. He launched his 2017 steel tariffs when he became “unglued” over Hope Hicks’ testimony about Russia’s election interference and his chief of staff dropping his son-in-law’s security clearance. There were no approved explanations, no strategy to alert foreign trade partners or Congress of the tariffs, and no vetted communication plan other than an email that was never approved by White House advisers. Not a single person at the State, Treasury or Defense Departments were told that a new policy was about to be announced.
Neither will his most dangerous, unqualified cabinet in American history save us from a depression. They are there only to condone his decisions. The only helpful expert around Trump today (because Trump can’t fire him) is Federal Reserve Chairman Jerome Powell who won’t accommodate Trump by lowering interest rates to boost the economy because it would also boost inflation. Quite predictably, Trump tore into Powell. Just hours after he announced the Fed would pause interest rate cuts, in a display of either ignorance or mendacity, Trump posted on Truth Social, “If the Fed had spent less time on DEI, gender ideology, “green” energy, and fake climate change, inflation would never have been a problem.”
To get a sense of the challenge Trump would face, look at what team Bush and Obama had to do to save us. They coordinated the major central banks to announce then lower interest rates at the same time. Even China was persuaded to join in. Then the Fed and five other central banks announced cross-border dollar liquidity through currency swaps.
What would Trump do? First he may assure us that “it will disappear like a miracle,” just as he promised during the Covid pandemic. He couldn’t coordinate other countries because they’ve lost all trust and confidence in him, leaving our relationships in tatters. A recession requires presidents to channel their best geopolitical intuitions. Trump doesn’t have any. Instead, he’ll follow his most aggressive and destructive instincts.
Fed policymakers manage uncertainty by trying to predict the different ways the economy could evolve based on economic models using a vast array of data. Just like in 2008, however, the Fed’s model missed the mortgage excesses that lead to the Great Recession. Today’s Fed model doesn’t input Trump’s reckless and dangerous behavior.
There are three explanations why Trump could lead us into a depression:
First, it won’t hurt him, he will always take care of himself and his American oligarchs;
Second, he’s a sociopath, defined by mental health professionals as people incapable feeling empathy or caring about others, who act impulsively without considering the consequences, and are incapable of feeling guilt or remorse;
Third, his presidency is only his first step to a world order dominated by him, Putin and Xi, so he’s intent on destroying America’s status as a superpower.
Certainly, these characteristics and motivations are hard to believe or recognize. That’s because only 4.5%. of the adult population are sociopaths. But don’t default to an oh-that- can’t-be-true denial. It’s happening now.
