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This is Why Trump Wants Zero Rates

  1. The global economy is deteriorating and access to credit is tightening. This could force a lot of companies into default if borrowing costs go up.
  2. Corporate America is operating with high levels of debt.
  3. A lot of the the mergers and deals you’ve been hearing about for the past ten years were funded by too much debt and some have already imploded (e.g. GE).

There you have it! The 2020 presidential election is just around the corner and Donald Trump does not want to be the one holding the bag if the economy falters. But zero rates are no guarantee that a recession can be averted, specially if we end up with some inflation and zero growth as a consequence of the trade war. That’s because tariffs on Chinese goods will make products more expensive, but productivity and employment will decrease. That’s a nightmare scenario for the Fed.

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