Trump praises negative interest rate policy as a "gift," Buffett: This is crazy, but it doesn't scare me

For a long time, President Trump has been criticizing the Federal Reserve (Fed) and its chairman Jerome Powell for being slow to react, claiming that compared to the more aggressive strategies of central banks in other countries, the Fed is completely out of sync. Recently, Trump tweeted again stating that the United States greatly needs a "negative interest rate" policy and, in a departure from his usual stance, praised Fed Chairman Powell as his MIP (Most Improved Player).

Negative Interest Rates Are a Gift

President Trump tweeted on May 12th, suggesting that the U.S. should embrace the "gift" of negative interest rates as long as other countries are enjoying the benefits they bring.

https://twitter.com/realDonaldTrump/status/1260206276216266754

Earlier in March, Trump emphasized that the U.S. should have the lowest interest rates, but it doesn't, putting the U.S. at a competitive disadvantage. He believes the U.S. should lead central banks rather than follow other countries in rate cuts. To this day, Trump still advocates for the implementation of negative interest rates by the Federal Reserve.

On the other hand, Bitcoin recently underwent its third halving event, reducing the block reward from 12.5 to 6.25 bitcoins, halving the supply once again, contrasting sharply with the near-zero interest rate monetary policies worldwide.

The crypto community expressed discontent with Trump's call for zero interest rate policies. Tyler Winklevoss, co-founder of Gemini exchange, pointed out on Twitter:

As the Fed embarks on a controlled Weimar policy (hyperinflation in Germany from 1923 to 1929), Bitcoin just completed its third halving.

Even Peter Schiff, a libertarian economist often critical of Bitcoin, acknowledged that negative interest rates are not a gift, as they turn savings into debt. Inflation makes negative rates a potential reality and would harm the working class, leading to a decrease in overall economic productivity and a lower standard of living.

Buffett on Negative Rates: It Doesn't Scare Me

Unlike the general sentiment in the crypto community, Warren Buffett remains relatively objective. In an interview with Yahoo Finance, he stated:

Negative interest rates are "really crazy" and confusing, but they don't scare me. I focus on what's known and important. Negative rates are the most important thing in the world to me, but I don't have the answer, and if I did, it wouldn't be important.

I'm not an expert in predicting interest rate movements, trying to predict the next rate move is pointless, but I think rates are very important to market movements. Negative rates do make assets more valuable, but they also imply a potential devaluation of cash.

In fact, Trump's call for negative rate policies has been met with skepticism by several Fed officials, including Chairman Jerome Powell, who have expressed that while the Fed will do everything to revive the struggling economy, implementing negative rates is unlikely.