Comparison of Trump vs. Clinton on Sound Money Issues

November 7th, 2016

If Donald Trump wins tomorrow’s election, voters will have a pretty good idea what to expect when it comes to issues such as border enforcement and trade deals. His campaign rhetoric has been consistent and clear on a few things. Monetary policy, however, isn’t one of them.

Earlier in his campaign Trump made noises about returning to a gold standard. He apparently owns some physical gold and understands something about why it is a good idea.

For the most part, however, he spoke in more positive terms about what the Fed has been doing. He once claimed that raising interest rates “would be a disaster.” Trump told the Wall Street Journal he had “great respect” for Yellen in May. In the same month, he shared the following with the New York Times:

“She’s a low-interest-rate person, she’s always been a low-interest-rate person, and I must be honest, I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.”

By September, something apparently changed in his thinking. Trump completely reversed his rhetoric and began sounding more like an advocate for sound money. He told CNBC Janet Yellen “should be ashamed of herself.”

He declared in the second debate with Clinton that the U.S. economy is in a “big, fat, ugly bubble” and said he expects stock prices to crater as soon as interest rates rise. And he has accused the Fed of playing politics – artificially propping up markets to make the Obama administration (and therefore Hillary Clinton and the status quo) look better.

So what exactly should investors expect from Donald Trump if he wins tomorrow? There is no telling for sure. Our guess is that Trump hasn’t actually formed a philosophy when it comes to money and central banking...

The best case would be his criticism of the Fed in recent weeks is a sign that his thinking has genuinely evolved. At worst, Trump is incoherent and uncertain about what Janet Yellen and the Fed have been doing and will simply defer to the same establishment economists and bankers who hold sway in Washington today.

Trump is a wildcard when it comes to monetary policy. That is still preferable to Hillary’s undoubted devotion to the status quo. She rarely talks about the Fed, other than to criticize Trump for threatening the Fed’s sacred independence... or even implying that Janet Yellen, or any of the other wise and benevolent sages making policy there, could stoop so low as to engage in politics.

Central bankers and politicians have been cultivating the myth of a non-political Fed since it was created. It is safe to say Hillary will be happy to re-appoint Yellen to carry on with centrally planning interest rates and supporting stock prices.

Trump, on the other hand, at least offers the chance of appointing someone less bent on intervening in markets. A President Trump would also be more likely to sign the Audit the Fed bill, assuming the Senate (which Republicans hope to retain control over) finally passes it.