Trump Lacks Basic Economic Understanding Says Yellen, Days After Chinese Trade Envoy Laughs in His Face

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U.S. President Donald Trump looks on during a meeting with China's Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer (R) in the Oval Office at the White House in Washington, U.S., February 22, 2019
U.S. President Donald Trump looks on during a meeting with China's Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer (R) in the Oval Office, February 22, 2019 Credit: REUTERS/Carlos Barria/File Photo

Former Federal Reserve Chair Janet Yellen says she doubts that President Donald Trump has a good grasp of economic policy or even knows the Federal Reserve’s mandates.

“I doubt that he would even be able to say that the Fed’s goals are maximum employment and price stability,” Yellen said in an interview with radio program “Marketplace.”

She said Trump has made various inaccurate remarks about the Fed such as that the central bank has an objective for the exchange rate for the dollar that is aimed at supporting the president’s trade policies.

She said comments like that show a “lack of understanding of the impact of the Fed on the economy and appropriate policy goals.”

Asked in the interview released Monday if she felt Trump had a grasp of macroeconomic policy, Yellen said, “No I do not.”

"And when I continually hear focus by the president and some of his advisers on remedying bilateral trade deficits with other trade partners, I think almost any economist would tell you that there’s no real meaning to bilateral trade deficits, and it’s not an appropriate objective of policy," continued Yellen in an apparent reference to Trump's ongoing trade war with countries like Chine and Germany.

Trump met with top Chinese trade officials on Friday in the Oval Office in an exchange which went viral after Chinese vice premier Liu He laughed out loud as Trump sparred with his top trade negotiator Robert Lighthizer.

"I don’t like MOUs (memorandums of understanding) because they don’t mean anything," Trump said during the exchange, "To me, they don’t mean anything."

Lighthizer tried to clarify, "An MOU is a contract, it's the way trade agreements are generally viewed... an MOU is a binding agreement between two people. It's detailed. It covers everything in great detail. It's a legal term. It's a contract."

"By the way, I disagree," Trump quickly shot back, to which Liu burst out laughing.

Yellen stands strong

The comments marked Yellen’s most pointed criticism of Trump since he decided not to nominate her for a second term as Fed leader. She left the Fed a year ago and was succeeded as chairman by Powell.

Yellen is now a distinguished fellow in residence at the Brookings Institution in Washington.

Yellen said she did not think that Trump’s sharp attacks on Powell and the Fed last year were having a significant impact yet on the Fed’s ability to manage the economy. But she said if the attacks continued, Trump could “undermine confidence in the Fed and I think that would be a bad thing.”

Trump last year was sharply critical of the Fed’s string of interest rate hikes, saying they were depressing stock prices and represented his biggest threat.

However, since the Fed signaled in January that it planned to be “patient” in moving rates higher, an announcement that has triggered a stock rally, Trump has softened his comments. He had what was described as a cordial dinner with Powell and Fed Vice Chairman Richard Clarida earlier this month.

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