Fed comments, Trump watching stocks

by WARREN MOSLER

A falling stock market will get the Fed’s attention and trigger real economic weakness and aggressive rate cuts. But those rate cuts remove interest income from the macro economy, which doesn’t recover until after net deficit spending (public or private) gets high enough to support aggregate demand growth. And the last recession didn’t reverse until after the federal deficit rose to over 10% of GDP:

President Donald Trump has been consulting with his advisors to see if his trade policies are responsible for the volatility that has hammered markets in recent weeks, according to The Wall Street Journal.

The president still sees the Dow Jones Industrial Average as a significant benchmark for his performance, the report said, citing sources close to Trump. The blue chip index is up about 23 percent since Trump’s inauguration but turned negative for the year during another rough market session Friday.

One person close to the White House told the WSJ that the president is “glued” to the stock market.

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