AGF Logo
  • Home
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Français
  • AGF.com
  • InstarAGF.com
Skip to content
AGF logo
Insights and Market Perspectives
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Contributors
  • Français
  • Search
Search
Close
What Donald Trump Doesn’t Understand About Negative Interest Rates

  • Industry and Expert Views

For Print Only Logo
Insights and Market Perspectives

What Donald Trump Doesn’t Understand About Negative Interest Rates

Author: Greg Valliere

September 11, 2019

GET OUTSIDE OF THE WASHINGTON BELTWAY and talk with real voters, and you get an earful on several topics, including a consistent refrain that interest rates are too low. Most Americans are conservative investors who prefer to save — but the saver class is increasingly frustrated by low yields.

AS EVERYONE IN THE FINANCIAL SERVICES INDUSTRY KNOWS, the quest for higher yields is pervasive, so we think the idea of negative interest rates is politically toxic. Yet Donald Trump bashed “boneheads” at the Federal Reserve yesterday, calling on them to move quickly to zero percent — or negative — rates.

THERE’S NO CHANCE that rates in the U.S. will approach zero any time soon, but the mere injection of this idea into the debate by Trump is bound to upset senior citizens and other savers who want higher rates. This just ratchets up the economic uncertainty, a constant theme in this administration.

THE IDEA OF ISSUING 50-OR 100-YEAR BONDS is different; it might reduce U.S. debt servicing burdens (over $500 billion in this fiscal year) and as many Keynesians now believe, infrastructure outlays and other spending could be financed with ultra-low rates. We think a 50-year bond could be unveiled later this year.

BUT TRUMP’S DESIRE TO RESTRUCTURE DEBT by getting to zero percent would invite all sorts of unintended consequences — intensified fears of recession, a potential aversion to U.S. investments by foreigners, the threat of an inflationary bubble in real estate and other interest rate-sensitive sectors.

OUR FOCUS THIS MORNING is on the political ramifications — senior citizens vote, and they are very vocal: they want higher rates, not lower. Someone needs to tell this to Trump or he could lose altitude with still another crucial demographic group.
* * * * *
TONIGHT’S DEBATE IN HOUSTON probably won’t have high ratings, but it’s worth watching on several fronts: Joe Biden and Elizabeth Warren will be on the same stage for the first time in the campaign; there will be differences on issues like guns and health reform; and someone in the second tier — Andrew Yang perhaps? — could have a breakout moment.

THE NOMINATION IS STILL JOE BIDEN’S TO LOSE but we’ve argued for months that his gaffes and lack of energy eventually may doom his campaign. Politics isn’t always fair; the media harps on Biden’s minor gaffes, even though Trump’s transgressions are far more egregious. This infuriates Biden’s advisers, who are convinced that the media is biased against him.

NEVERTHELESS, THE MEDIA WILL FOCUS AFTER THE DEBATE on Biden’s ability to counter-punch, and a genuine gaffe — or inability to find the right word — will be amplified. Perhaps, in this pressure cooker, another candidate could break out; when we talk with young people, they express real interest in Yang and Pete Buttigieg, two unlikely candidates in these uncharted waters.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2021 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

Also Read

  • Investing and Market Views

Everything Is Not Awesome

January 21, 2021

  • Industry and Expert Views

What We’re Doing the Nights Before (and After) Christmas

December 18, 2020

  • Investing and Market Views

An Investor’s Cheat Sheet on the Vaccine

December 14, 2020

  • Industry and Expert Views

Building Back Stronger: A Post-COVID Roadmap for a Better Toronto

December 10, 2020

Get perspectives straight to your inbox.

Subscribe now

More articles like this.

Greg Valliere, Chief U.S. Policy Strategist

  • Industry and Expert Views

Covid Relief Bill is in Trouble — Already

Greg Valliere | January 22, 2021

Timely insights from inside Washington.

Read More
Greg Valliere, Chief U.S. Policy Strategist

  • Industry and Expert Views

A Smooth Start — Except With Canada

Greg Valliere | January 21, 2021

Timely insights from inside Washington.

Read More
Greg Valliere, Chief U.S. Policy Strategist

  • Industry and Expert Views

Today’s Theme — Unity — Will Be Difficult to Attain

Greg Valliere | January 20, 2021

Timely insights from inside Washington.

Read More
AGF Logo
Categories
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Subscribe
Follow AGF

AGF Web Site Pages © 2021 AGF Management Limited. All rights reserved.

Links
  • Terms & Conditions
  • Privacy
  • Privacy For EU Residents
  • AGF.com
  • InstarAGF.com