Why Trump Wants a "Recession"
What Trump wants, Trump gets?
It may be hard to believe, a President who is obsessed on growing the US economy is looking forward to a US recession in the short term.
Why I believe Trump wants a "recession"?
First of all, I don't necessary believe Trump wants a recession.
What I do believe is that he wouldn't mind a recession to get what he wanted.
What does he want?
He wants the Federal Reserve to lower the interest rate.
For Canadian readers, Federal Reserve is Canada's version of Bank of Canada.
As a self proclaimed "King of Debt", Trump has once said on an interview "I’m the king of debt. I’m great with debt. Nobody knows debt better than me"
In the same interview with Norah O'Donnell on "CBS This Morning"…
I’ve made a fortune by using debt, and if things don’t work out I renegotiate the debt. I mean, that’s a smart thing, not a stupid thing
“How do you renegotiate the debt?” O’Donnell followed up.
“You go back and you say, hey guess what, the economy crashed,” Trump replied.
https://www.politico.com/story/2016/06/trump-king-of-debt-224642
Trump has been going after the Fed and Jerome Powell
Here are what Trump has said about the Federal Reserve and/or the Fed Chair Jerome Powell:
"Mortgage rates are actually down slightly, even though I have a guy in the Fed that I'm not a huge fan of. But that's all right, these are minor details. Don't tell him I said that, please," Trump said of Powell during a speech at the White House.
https://www.businessinsider.com/trump-takes-another-shot-at-fed-chair-jerome-powell-2025-5
"'Preemptive cuts' in Interest Rates are being called for by many," Trump wrote in a post on Truth Social.
"With these costs trending down so nicely, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," he continued.
Trump said at a press conference on Thursday that Powell "should do the rate cuts" because the European Central Bank has cut interest rates, adding, "I'm not happy with him – I let him know it. If I want him out, he'll be outta there real fast. Believe me."
https://www.foxbusiness.com/economy/trump-slams-powell-mr-too-late-calls-fed-chairman-major-loser
Debt size is irrelevant at a lower interest rate
Most of you understand that lower interest rate greases the economy.
It helps businesses finance their operation, helps countries finance their debt, incentivizes more investments.
What it may not be so obvious is the relationship between low interest rate and everything else.
Since the great recession in 2008, we've seen a steady drop of interest rate especially on the long term bond rate.
To most people, a gradual decrease in interest rate may not feel like much.
But when we experience a bigger drop in rate, we really see those things show up around us.
Real estate prices, growth or even risky stocks shot up during the pandemic.
At one point, people could get mortgages for only 0.99% interest in Canada:
In December 2020, for example, HSBC became the first Canadian bank in history to offer a mortgage rate under 1.00%. That rate—0.99% for a high-ratio insured 5-year variable mortgage—was still in effect as of early April 2021.
That caused the real estate prices to skyrocket.
When interest rate was that low, the size of the debt became irrelevant.
The difference between a 1 million dollar mortgage or 2 million dollar mortgage was only $9,900 a year more in interests.
Comparing that to 50k of interests in differences at a 5% rate.
Why not get a bigger mortgage if it doesn’t cost much more?
Debt size becomes irrelevant.
The US is carrying a debt size at a size the world has not seen before - almost 37 Trillion dollars of debt with Trillion more not counted in the Federal Debt - States, Municipalities, social welfare programs such as Social Security and health care (Medicare, Medicaid).
The total debt is over 100+ Trillion.
That unfathomable amount of debt is irrelevant if the interest rate is low.
There are only so many ways for the Fed to lower the rate
The Federal Reserve has 2 mandates:
1. Maximum Employment
2. Stable Prices
#1 means keeping the level of employment that's considered normal in a healthy economy
#2 means keeping inflation in a manageable range, usually around 2%
As much as Trump is going after Jerome Powell, his hands are literally tied by the dual mandates.
As of now, the prices have stabilized a bit since the pandemic, the employment data has been coming in strong.
A recession will certainly motivate Jerome Powell to lower the rate as companies start to lay off people.
DOGE laying off thousands of government employees will also move the Fed closer to lower the rate.
Man made recession on its way
The longer the Fed is holding its ground and not lowering the rate, the more actions I believe we're going to see from Trump.
I expect more whiplash on tariff announcements, change of plans, cancelling partial or pausing tariffs.
Just when we think the past few months are intense, prepare yourself for the next few months for even more dramatic events.
Trump may get his lower rate, but not without causing some collateral damages along the way.
The stock market certainly are not reflecting the potential risks that are to come.
In fact, individual investors have been rushing back to the market, buying up stocks while many professional investors and money managers are exercising caution.
During times like this, I believe extra caution is warranted.
Are you preparing for a recession?
Do you think a recession is coming? How are you preparing for the coming recession?
I’d love to hear.
Reply and let us know your thoughts.
If you like my work, I invite you to share it with others.
Eric Chang
Edmonton, Alberta
May 6, 2025
Copyright © 2025 Why Alberta Now.
No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.
The information provided herein is believed to be accurate and reliable, but Why Alberta Now does not guarantee its accuracy or completeness. The content is for informational purposes only and is not intended to be a substitute for professional financial advice. Why Alberta Now is not a financial advisor and does not provide personalized financial advice. The views and opinions expressed in this publication are those of the author and do not necessarily reflect the official policy or position of Why Alberta Now. The content may be subject to change without notice and may become outdated over time. Why Alberta Now is under no obligation to update or revise any information presented herein.
Investments involve risks, and individuals should consult with a qualified financial advisor before making any investment decisions. Prospective investors should carefully consider the investment objectives, risks, charges, and expenses of any investment before investing.