Imagine your doctor’s name is Steven Mnuchin. You see him because you have a slight fever, swollen glands, a sore throat, and a runny nose. You don’t feel 100%. However, you’ve felt worse in the past, and you know it will be over in a week or two.
The only type of illness on your mind is a cold, or perhaps a mild flu. However, Dr. Mnuchin says:
“I have checked with six different experts – I got lots of second opinions – and they don’t think you have terminal cancer.”
Would you find Dr. Mnuchin’s words reassuring? Or would your heart miss a beat as a cold chill worked its way up your spine?
Steven Mnuchin made the situation much worse
This is exactly what U.S. Treasury Secretary Steven Mnuchin did. However, in his case, he was talking to investors and members of the public across America, and also overseas.
He tweeted that he had spoken to the bosses of America’s six largest banks to make sure that they were liquid. He then assured everybody that there was no liquidity problem.
Until he mentioned the word ‘liquid’ and ‘largest banks,’ nobody was worried about liquidity problems. The stock market decline in December, most investors thought, was a correction that would soon bottom out.
Mnuchin’s talk about liquidity made the heart of each investor miss a beat. His comments also sent a chill up their spines.
Rather than make investors feel safe, he made everybody wonder why he had mentioned liquidity. “Why did he have to talk to six CEOs of the country’s largest banks about their liquidity.? What is going on?”
Before he spoke, nobody was thinking about banks having liquidity problems. After he spoke, talk about liquidity spread like wildfire.
Imagine a financial crisis with Trump and Mnuchin at the helm
In 2007/8, there was a Global Financial Crisis that triggered the Great Recession. The Great Recession was the longest period of economic decline since the Great Depression eighty years ago.
If another financial crisis is coming, America must have strong, courageous, and intelligent leaders at the helm. Otherwise, we are all screwed.
Donald Trump has shown himself to be hopeless in times of crisis. For example, when Puerto Rico needed help after a devastating hurricane, he clearly had no idea what to do.
If Mnuchin’s latest attempt to reassure investors is anything to go by – heaven help us!