For years it was the unspoken consensus that president Trump would sooner or later be the fall guy for a decade of central bank monetary lunacy which, courtesy of $15 trillion in freshly created liquidity and record low interest rates, has blown the world's largest asset bubble yet.
Then, over the past week, Trump appeared to successfully flip the table on this narrative - and the Fed - and after several public criticisms of Fed Chair Jerome Powell's monetary policy (which is merely a response to Trump's $1.5 trillion fiscal stimulus which has pushed the economy into overheating mode), the president's anti-Fed tirade culminated with several accusations that the latest market rout was entirely the result of the Fed which "has gone crazy", and whose rate hikes are "out of control" causing the stock market to fall.
On Thursday morning, Trump told reporters in the Oval Office that he knows monetary policy better than the Fed's leaders, and continued criticizing them for interest-rate increases. "The Fed is out of control,” Trump said. “I think what they’re doing is wrong." The market plunge is “a correction that I think is caused by the Federal Reserve", Trump said.
While the president repeatedly criticized the Fed over the past 24 hours as markets plunged, market analysts have continued to attribute the stock decline to concerns that Trump’s trade war with China could escalate. Trump, however, resolutely placed blame squarely with the Fed.
One person who was impressed by Trump's strategy was DoubleLine's Jeff Gundlach, who during his latest CNBC appearance said that Trump is "crazy like a fox" for blaming the Fed for the latest market rout. Gundlach first laid out his views on whether the Fed was no longer accommodative as the most recent FOMC statement implied. Needless to say, Gundlach was not convinced:
"I would say that problem was that maybe the Fed was far too dovish for far too long, keeping rates very, very low and now they’re trying to make the difficult journey getting back to a so-called normal rate. I thought the fed’s statement was really weird when they dropped the word accommodative. It seems to me you’re accommodative, neutral or restrictive. When the Ded says that the neutral rate is far higher than where we are today, well, then I guess you’re not at neutral and you’re certainly not restrictive, so I guess you must be accommodative. But oddly, they dropped that.
The DoubleLine founder then complimented the president, saying that "when it comes to president trump it’s clear to me that he’s being crazy like a fox with this fed rhetoric where he doesn’t want to take the blame, if the fed overtightens and leads to a problem in risk assets, which you know, is starting to come out in real-time in the last week or so, so he’s basically saying if the market goes down, it’s on the Fed."
And while Trump said that he is not "going to fire Powell", who can legally only be fired for cause, it wouldn't be the first time that Trump, who built a TV career around the phrase "you're fired" has shocked the nation with his staffing decisions.
As for whom Trump might appoint, the answer is simple: himself. On Thursday Trump suggested that he could do a better job than Powell, when he said that the Fed’s interest rate increases are "not necessary in my opinion and I think I know about it better than they do."