'Rubbish': Robert Reich dispels 'Trump and his lackeys' hand-wringing over the economy

06 August 2024

When the stock market experienced a major selloff on Monday, August 5 and the Dow fell by over 1000 points, Donald Trump responded with an overwrought post on his Truth Social platform — and blamed Democratic presidential nominee Kamala Harris, calling the selloff a "Kamala crash."

Trump posted, "Stock markets are crashing, jobs numbers are terrible, we are heading to world war three, and we have two of the most incompetent 'leaders' in history. This is not good!!!"

But the next day, Barron's reported that "U.S. stock futures are rebounding in early trading."

In his August 6 column for The Guardian, liberal economist Robert Reich lays out some reasons why the August 5 selloff does not signal a recession.

Describing Trump's Truth Social post as "rubbish," Reich writes, "The United States is not facing imminent recession. The American economy is still growing. There is no reason to panic."

The former Clinton Administration labor secretary continues, "Trump and his lackeys would like an economic panic because nothing else they've thrown at Kamala Harris is working. Could Trump's billionaire supporters try to bring on a crash by suddenly withdrawing their assets from the stock and bond markets? That would be difficult to pull off. They couldn't do it without suffering massive losses. And where would they put their assets in the meantime?"

Reich argues in favor of the U.S. Federal Reserve initiating a rate cut but stresses that it doesn't have to happen right away.

"The Fed's current 5.3 percent prime rate is too high," according to Reich. "The Fed's goal of 2 percent inflation is too low. But there's no reason for the Fed to make an emergency rate cut right now. Doing so might be seen as a sign that the Fed is worried about the economy falling into recession, which itself could cause a panic. Instead, (Federal Reserve Chairman Jerome) Powell should make it clear that the Fed is likely to cut the prime interest rate by half a percentage point at its September meeting."

Robert Reich's full column for The Guardian is available at this link.

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