Lots Of Misunderstanding Rooted In Lots Of Myth

President Trump famously described Fed Chairman Powell last week as a “major loser.” Trump never disappoints, does he？ Whatever his style, Trumps disappointment with Powell, the disappointment of the polite and economically serious with Trump, and the overall discussion of a fight that Trump ultimately walked back revealed lots and lots of misunderstanding and myth.

To begin, it‘s useful to address Powell’s assertion that Trump‘s surely misguided tariffs are “highly likely” to cause what Powell deems “inflation.” No, that’s not inflation. To say that rising prices are highly likely to cause inflation is like saying wet sidewalks are highly likely to cause rain. Causation is being reversed.

Furthermore, a tariff is a tax that artificially pushes up prices. Which means, by the very description of tariffs, prices of some goods must fall for others to go higher. Economics is about tradeoffs, after which a tax is a tax. To say its also inflation is like saying blue is also yellow.

From there, was economics always this ridiculous？ Powell heads up the worlds biggest employer of economists, yet underlying his perfectly reasonable disdain for tariffs is an odd notion that the Fed must fiddle with the price of credit as a way of allegedly softening the blow of higher prices borne of tariffs. No thanks. In truth, . Prices must reflect reality, including the reality that tariffs are right up there as some of the dumbest economic solutions ever conceived.

That tariffs are so foolish points to why Powell is partially right about their implications, but hopelessly wrong and confused in his expressed view that what he and his fellow central planners do at the Fed can somehow mitigate the errors of tariffs. Channeling Trump, what a loser view.

That is so because the biggest driver of falling prices, and nothing else comes remotely close, is the growing number of hands and machines cooperating with one another in the creation of market goods. Yes, division of labor. Henry Ford manufactured cars for “the great multitude” via the division of labor, and that same, ever expanding division of work across hands and machines continues to push prices of everything down.

It quite simply insults minnow to describe the Fed as the minnow relative to global labor division on the matter of prices. For Powell to ascribe to the Fed a role in pushing back against Trump‘s expressed economic ignorance reveals Powell as Trump’s equal on the matter of economics, and equally delusional. Same goes for the “serious” economic thinkers who sided with the supposedly sober Powell over the unhinged Trump on the laughable notion of the central bank maintaining “price stability.” Since prices are what organize a market economy, how awful if the Fed could do what it plainly cannot do whereby its central planners would engineer their fake decline.

Pivoting to Trump, Powell is or was supposedly a “major loser” because he won‘t reduce interest rates. Except that Powell can’t reduce interest rates. Does Trump seriously think the second most important price in the world is centrally planned by people like Powell？

What about the myriad Trump critics who got the vapors over the president trying to strong-arm Powell？ Can we please stop？ If the Fed could control the cost of credit even a little, then there would be no economy or credit to centrally plan.

Which brings us to the dollar. Just as President Roosevelt was able to plan its value versus gold in the bathtub, just as President Nixon was able to sever the dollar‘s link to gold altogether, so does President Trump have the power to reverse Nixon’s devaluation error from over fifty years ago or, as the markets think, Trump has the power to do as Nixon did in devaluing the most important price in the world even more. There‘s your reality, and there’s arguably the source of market convulsions last Monday.