Markets

Can Twitter Sway Economic Policy?

If a tree falls in the Twittersphere and no one is there to hear it (unlikely) did it make a sound?  That’s the problem with social media. It turns fantasy into reality, and now there are concerns that it’s poisoning the market and trumping facts and fundamentals. 

Welcome to the world ruled by Twitter. 

And in this case, the market appears to be calculating in Trump’s litany of Tweets targeting America’s (still) independent central bank, which is now teetering on the edge of retreat. 

The Fed is gearing up to give a big speech on Thursday, and Trump is using Twitter to sway the outcome. 

Some say it’s working, even if it shouldn’t be. 

On Friday , Trump tweeted: “Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest rates are much higher than other countries, when they should be lower. Correct!”

An hour later, he tweeted: 

“We are in a World competition, & winning big, but it is no thanks to the Federal Reserve. Had they not acted to fast and ‘so much,’ we would be doing even better than we are doing right now. This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don’t blow it!”

He also Tweeted about Federal Reserve Bank of New York president John Williams, during his Friday rant, saying: “I like New York Fed President John Williams first statement much better than his second. His first statement is 100% correct in that the Fed ‘raised’ far to fast & too early. Also must stop with the crazy quantitative tightening.”

He also hit the Tweet waves with this one: 

For anyone who is unclear on this, Trump would like the Fed to operate like it does in countries that America criticizes for tyranny. 

Speaking to  CNBC in June , Trump actually drooled over the brilliant setup the Chinese Communist Party has because it gives President Xi Jinping “his own fed”.

Americans are inventing their own tyranny, though, from the grassroots, up. 

When the markets succumb to this, then we know it’s taken effect. 

A number of experts have opined on the Twitter effect, and the verdict seems to be that it’s working. 

“The mantra used to be don’t fight the Fed, Now it’s don’t fight the tweet storm,”  MarketWatch  quoted Jim Glassman, JP Morgan Chase’s commercial banking head economist, as saying. 

“The Fed has to know if they don’t cut rates, it would be chaotic. And can you image the tweet storm after that?” Glassman said.

Likewise, MarketWatch quoted Vincent Reinhart, former senior economist at the Fed, as indicating that Twitter has already taken control, through Trump. 

Whereas the Fed, until this year, was the market’s guide and projecting a path of higher interest rates, following Trump’s Twitterstorm, the Fed has back down, with Powell saying it would stand by and be patient and allow policy to respond to data. 

By Michael Scott for Safehaven.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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