Image: © The White House via Flickr

Trump is “very unhappy” with America’s central bank.

The President of the US is annoyed that the central bank keeps raising interest rates, because he thinks they make the economy worse. 

What it means: Trump is having beef with the Fed (which is the nickname for the Federal Reserve, America’s central bank). Figuring out what’s going on here can be pretty confusing, because there’s a lot of jargony economics happening. But let’s try and break it down.

Most countries have their own special bank, called a central bank, whose job is to make sure the country’s finances stay stable and prices don’t move up or down too quickly. That’s pretty important! Think of the last thing you bought and imagine how you would feel if tomorrow it halved or doubled in price. We need to feel relatively confident on how much things cost so we can budget our money and figure out how much we need to earn to maintain a certain standard of living.

One of the big tools central banks have to keep prices stable-ish is interest rates. You’re probably familiar with what these are - it’s the extra money your bank gives you for stashing your savings in their account, or the extra money you pay them back when you take out a loan. (It’s always stated as a percentage). Central banks influence what everybody’s interest rates are by setting a 'base rate' which commercial banks use as a basis for setting their own.

When interest rates are high, people and businesses tend to save more money. When interest rates are low, we usually borrow and spend more money. When people and companies spend lots of money, the economy ‘grows’: the more things people want buy, the more businesses can open, the more companies spend money on things like employees and machines, the more jobs are created the more things they can create. But according to popular economic theory, if too much money is being spent (as opposed to being saved) then prices start rising (technical term: inflation) and the chance of big bad recession increases.

Trump, however, thinks that when it comes to the economy, bigger is better. He doesn’t agree with the Fed that growing it very quickly will send prices up or risk recessions - he thinks it’ll just make Americans richer and America Great Again. Lots of the stuff he’s done, like cutting taxes, is intended to get people spending more, so he sees the Fed as undermining his plans by raising interest rates.

Read our explainers on central banks, monetary policy and economic growth.

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Reader Comments

  • WhereAreTheVikings

    What a terrible, terrible shame. Western Civilization nurtured capitalism, and now capitalism is destroying it. And these young people seem to welcome the invasion of their homeland. The media and schools have been very efficient in wiping out all traces of blood and soil.

    • prollawalllynotahumanoid

      Capitalism isn’t the problem. It’s corrupt politicians taking bribes and kickbacks from Globalists and the Chinese.

      • WhereAreTheVikings

        Maybe I should have said crony capitalism. Although Italians importing Chinese to make “Italian leather” shoes is not crony capitalism. It is capitalism, pure and simple.

        • prollawalllynotahumanoid

          That would be crony capitalism and globalism combined. They aren’t concerned with the affect their policies have upon their citizens, the health and welfare of their society and culture or their economy. What it isn’t is fair-free trade to further national interests.

          • WhereAreTheVikings

            I’ve always seen them as one and the same, but perhaps they need to be named individually, just to bring home the point.

      • WhereAreTheVikings

        But now that travel is so easy and borders are virtually down through H1bs and the like, theoretically you can’t blame capitalists for the pursuit of cheaper labor, although I do heartily blame them not being more patriotic than that. Perhaps the emerging nationalism will force them to voluntarily do what they should have morally been doing all along, and that is employing business practices that preserve their countries and nationalities. The government should be doing everything it can to encourage that, to the extent that small government should do anything but guard the borders and strictly, drastically, limit immigration.

      • Henry Lam

        It is China with its corrupted mindset affecting the world.

        • prollawalllynotahumanoid

          No it is not. Capitalism is the fairest and least corrupt system of all.

          Socialism and communism is based on authoritarianism, coercion and police intimidation. It has and always will be rife with criminality, bribes and kickbacks.

          Corruption can be anywhere but it is the very basis of socialism and communism.

    • Henry Lam

      The government is too weak. They do not understand the mindset of communists and how they educate their people. Those communist people are only loyal to their country and could be dangerous. The immigration law should only accept those who accepted multiculturalism and taught from a democratic education system. This virus events clearly has shown how stupid to take China as a friend.

      • WhereAreTheVikings

        The government is not too weak. Just weak-minded about some things.

  • Gabi Rodrigues

    For how many days can a country maximum close their borders to foreigners maximum? Like now, with the virus, everyone is using 30 days. Can it be more?