Don’t be biased (It won’t be Trump’s fault)

17th June 2019 Off By binary
start trading binary options



How many pundits believe the following three things:

1. Trump is despicable, by far America’s worst President ever.

2. Trump’s trade war is stupid and hurts the economy.

3. If there is a recession in the next few years, it most likely will not be Trump’s fault.

I sometimes wonder if I am the only one who believes all three things, but perhaps there are a few others.

Most people engage in motivated reasoning, believing what they want to believe. I’d certainly like to believe that any recession is Trump’s fault, but I try my best to stick to the logic of my analysis, which says:

1. Most recessions are caused by tight money.
2. Presidents have little impact on the behavior of the Fed, even via appointments.

That’s not to say Presidents have zero impact.  The trade war obviously makes the Fed’s job slightly harder.  But if we make the mistake of blaming anyone other than the Fed for a demand-side recession, then we’ll never solve the problem.  Now if we had a recession despite stable NGDP growth (a real shock) that would be another story.  But I don’t expect that to occur.

Ironically, some of Trump’s defenders insist that appointments to the Fed are very important, and even that Ben Bernanke is personally responsible for the 2008 recession. Those Trumpistas will be forced by their logic to blame Trump for any Fed screw-ups. After all, he picked Powell.  

Will they follow their logic? 

In contrast, I believe the Fed has a lot of institutional inertia, that it follows the zeitgeist, and that no single appointment is all that consequential.

PS.  Here’s Yahoo:

The fallout from recent escalations in trade tensions could drag global economies into a recession within a year, according to at least one major Wall Street firm.

If the U.S. were to move forward with imposing a 25% rate of tariffs on about $300 billion worth of Chinese imports, and China were to retaliate, “the global cycle will be at risk,” Morgan Stanley chief economist Chetan Ahya wrote in a note Sunday.

“We could end up in a recession in three quarters,” he said.

A recession may or may not occur (I doubt it), but either way it won’t be Trump’s fault.

PPS. I’m not claiming to always avoid motivated reasoning, just that I try to avoid that sort of bias. You should too.

PPPS. I have a new post at Econlog discussing the optimal NGDP growth rate.




Read more about eu binary options trading and CFD brokers