Futures are in a nasty mood tonight except for a new record high in gold.
Trump wanted a weaker dollar to help exports. His wish is granted.
Stocks are falling and bond yields are rising.
US 30-Year Treasury
Euro
Gold
Lower Dollar Wish Granted, Now What?
Trump wants the Fed to cut interest rates. This is another matter on which Trump seems clueless.
If the Fed cut rates, yields on the long end would likely rise further.
But hey, the dollar would continue plunging, the US stock market would be less attractive, and inflation would rise.
This would be described as “winning”.
One could guess certain macro logic behind what Trump is trying to do, although, a false (even childish) sense of proportion probably makes it futile. Deport foreigners -> reduce housing cost -> inflation(-). Tariff imports -> reduce consumption of imported goods -> more money remains circulating in US economy (services) -> more tax revenue. Bring down energy prices -> inflation (-). Bully high added value production to US (drugs, electronics) -> trade balance + export potential. Reduce consumer confidence -> inflation (-). I think the main target is motivating FED lowering the interest rates, because of the looming debt spiral (tick tock).
Take the ‘economics’ test below, and reply with your answer (without GOOGLING):
“You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer.
Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50?”
For extra points, what % of economics professors got the right answer?
Gold’s looking good. I wonder if it is part of a pattern. /sarc
IMHO, the causal factor is NOT tariffs, or Trump, or Powell. It’s the end of an era of living beyond means and wealth redistribution about to implode, compounded by a downturn in the business cycle.
The depreciation of the dollar is the clearest sign yet that Trump’s tariff stupidity is indeed based on fake reasons cooked up by economic illiterates. If the tariffs would indeed help lowering excessively high US imports and help correct the external deficit, the dollar would have appreciated.
weaker dollar = higher inflation
$1 trillion defense budget + mismanaged federal workforce disruption = higher deficits = higher inflation
An example of the mismanagement: Slashing the IRS workforce is going to result in chaos and lower incoming tax revenue. Expensive private contractors are going to be brought in to repair the damage. The damage will cost billions on top of the resulting lost revenue. But more deficit spending will solve the problem.
Try visiting a few Federal offices. Pick any of them and you’ll find incompetence, sloth….. Among my favorites,
In Trump 1, euro started around 1.10, went into the low 1.20s, declined to 1.10 again and rose to around 1.20 by his departure. The difference this time, however, is a worldwide loss in appetite to hold US assets. If you thought tariffs would bring inflation, wait for a decline in the dollar to add some gasoline to the fire.
Think of it as flushing the toilet. The question is can the US innovate like it used to
Just one of the absolutely priceless, irreplaceable assets of OURS being thrown with the dice by this riverboat gambler.
the US Dollar is a priceless asset? It’s been a joke since the 70s-the last time we defaulted on debt
First the US dollar is not the same as US debt.
Second, if you don’t want your “joke” US dollars – like everyone else in the world does, I’ll take them off your hands for free LOL
The stock market everything bubble needs to be blown, Mish has, or had, been saying that for years. Now he’s complaining. He’s been calling for a recession since ’23, now he might get one and he’s complaining.
Some people are never happy.
Considering what he just went through I understand why he is in a bad mood.
Well, the best analogy is weather forecasting. A weatherman can issue a tornado warning, but that doesn’t mean he wants a tornado or is happy that a tornado destroys everything.
About time! The high Dollar is a killer for US companies. It was almost at parity at Christmas and parity is not normal. It has been as weak as 1.40 Dollar to the Euro but the normal rate is around 1.20 to 1.25. If your only criteria is your European vacation then you prefer the over-strong Dollar.
There are always two sides of an economic coin
Yes, if you are the small business owner, stockholder or employee of a US company that exports to other countries, you should be ecstatic the US dollar is getting stronger vis-a-vis other currencies.
On the other side of the coin…
If you are a company that imports (like aluminum for cars) or a consumer of anything that is entirely or even partially made abroad, you will get ticked off as everything just got more expensive with the declining value of the dollar.
It’s not even close to being about fancy European vacations…
Yes I know about the difference between micro and macroeconomics. Mish was talking about macroeconomics so I responded with a macroeconomic answer. I think it should be obvious that some will get hurt by the Dollar going lower but the great majority of manufactures who export will benefit from it.
Are you sure you understand the difference between micro and macro?
Focusing on US “manufacturers who export” is quite micro-oriented. That goods amount shipped abroad was about $2 trillion in 2024. That’s a small percentage of ‘winners’.
Total GDP (macro) in the US was over $29 trillion. And the majority of that will be bought by US consumers. If they (or their jobs) are negatively affected by a declining dollar, that’s a significant percentage of potential ‘losers’.
Looking at the whole picture of winners and losers combined is macro. Focusing on only one component – “manufacturers who export” – is micro-based. And a significant reason many people are wary of Trump’s tariff policies.
Macro and micro econ are conveniences, the result of the scientific method that reduces a complex world by atomistic thinking–where everything is studied in minute detail-SEPARATELY. Atomistic thinking enables greater depth of knowledge while it (unintentionally) reduces external relationships.
Atomistic thinking has become embedded in society, and in education in particular, People who are capable of holistic thinking (DaVinci brains) are few and far between.
Applied to ‘macro econ,’ largely biased by pre-WW2 economics, we have today’s world, with a poor understanding of interrelationships and emerging factors.
My point, after all of the above… The Fed has lost control; although it never really had control–just dependents on Wall Street.
No one here has heard of the Plaza Accord? Apparently not judging by the down votes I just got.
Trump’s 2025 tariffs have significantly strained relations with G7 nations
The dollar is neither strong nor weak compared to long term exchange rates. Since 1/1/87, Usd/Dem has averaged 1.6790 [using the Euro entry ratio to compute post Eur, 1 Eur = 1.95583 German mark]. It stands around 1.7200 today, 1.6790 ~ 1.1650 Eur/Usd
What did JD Vance do to the pope?
https://www.msn.com/en-in/news/world/jd-vance-s-meeting-with-pope-francis-before-his-death-sparks-conspiracy-theories-fumed-netizens-ask-what-did-you-do/ar-AA1DjhUw
Like I said, the Four Horsemen of the Trumpocolypse™
This Pope has generated more dislike from Catholics I know than any other Pope.
They don’t need to like, they just need to obey, that is the C way.
But they don’t obey. From what I understand it is sort of like guidelines and not a law.
Kinda like speed limits, more of a suggestion.
Kinda like speed limits, more of a suggestion.
Correlation with the Pope being more tolerant and inclusive than his predecessors. No surprise at all that would piss off Catholics.
That was might immediate reaction , an audience with Trumps henchmen and you expire less than 48hrs later. Even more toxic than I anticipated. Perhaps JD should visit Putin and fatboy in Pyongyang, maybe even Bibi.
It all comes down to timing. The Age of Pisces is ending. The Age of Aquarius is dawning. Big changes all around.
1.57 in 2008. 1.24 in 2018. 1.22 in 2020.
Is trump setting up to take possession of the U.S. gold? /under the auspices of an audit can his henchmen remove it for “safekeeping”?
Nothing is out of question with this administration as he wants to destroy our dollar and banking system. He ha already introduced his own currency.
Welcome to the Dark Ages of trump…
As regards gold’s rise in the background of the tariff war? Gold is going up at such a rate as to defy even wild expectations! Mining stocks deserve an analysis as their margins are exploding while AI stocks margins are going lower.
History gives us the extraordinary example of Homestake Mining throwing off substantial dividends during the Great Depression.
Show us the gold, Trump.
China probably has twice or more of what we claim to have. They’re just smart enough not to declare it. Yet.
Where’s the gold? Germany’s conservatives sound the alarm over reserves in the USGermany keeps over €100 billion worth of gold reserves in the New York Federal Reserve. https://www.politico.eu/article/gold-germany-conservatives-sound-alarm-over-reserves-usa/
Here is Trump’s list of trade barriers to be removed before tariffs are lifted.
You mean driving the value of the dollar down? That type of manipulation?
;-)))))))
What is your definition of cheating, and what rules are being broken? Pray please enlighten us oh wise one
Incredible, the # down votes. Is anyone actually thinking?
trump is being paid to crash the economy again as he did during the covidiocy hoax.
For what other reason are you going to hire a man who has bankrupted every casiono he ever owned? Trump voters seem to think that’s a good thing???
Trump voters are as crazy as Trump just in a different way.
“Chaos-onamy”???
“Order in Chaos” studies may help in explaining the unexplainable
Potus might be finding Order in Chaos.
Hey, I’m just reporting.
If you don’t agree than come up with something better.
trump is confusion and ignorance causing chaos.
Trump is mentally ill. That’s more realistic than Order in Chaos. MAGA = AINO (American In Name Only)
I think it is less about ‘order in chaos’ than dealing with uncertainty by experimentation. Maybe, if we are lucky, Keynesian ‘theories’ will end up in the dumpster, with real free markets taking over.
Then, it’ll be compete (innovate) or die.
I am waiting for the official post that conclusively asserts trump economics = Turdonomics™
Turdonomics™ = Economic ideas from dimwitted hillbillies that end up laying a turd on the global economic system.
I don’t think we’ll have longer to wait.
I’m all in with your turd-onomics!!!
Too funny!
Unless you don’t have two nickels to RUB together…
Then I’m sorry you voted for the very slightly more evil of the two evils….
Don’t be too hard on yourself.
Teflon Don is hard to hate!!!
Maybe don’t hate the person hate his actions?
Fuck it I hate Trump and all his henchmen. He is mentally sick and should be removed.
We all wanted a weaker dollar. We cheered rising home prices, larger bank accounts,
rising stocks, all requiring many more weaker dollars to buy the same stuff. Our Boomer dream came true. Many of us were finally millionaires. Inflation made it all happen.
The capital gains tax exemption on owner occupied housing has not increased since 1997. The current rules are more like a Boomer nightmare for those who have owned their homes for many years.
This capital gains tax exemption and the interest deduction should be eliminated.
Houses should not be considered “investments”. Doing so is what has caused the steep appreciation in housing prices over the last 40 years or so. Here in San Mateo, CA, the median home price is $2 million!
Houses should represent a shelter, a roof over one’s head, that has minimal appreciation year over year. It is only this way that young people will be able to afford houses.
You’re kidding. It’s like me saying there should be no capital gains tax on gold. It’s merely money!
Cry me a river. Jojo is right on this one. It used to be an exemption only while trading homes within one year, and the new home had to be equal or higher to claim the full exemption. The rules changed after the 2000 Nasdaq melt down and Sept 11 incident shortly thereafter. It was done to have real estate artificially expand the money supply with vast sums of money borrowed into existence. It all led to the 2008 bubble collapse. Artificial money supply expansion fomented the current correction.
And just when retirees think they only have a one time income tax payment, they get hit with higher IRMAA Medicare premiums the next year. Ouch
Based on interest rates, sure dollar appears weaker than Euro
But what is Europe’s debt to GDP ratio? And dont they have unfounded pension and medical liabilities just like USA?
Actually NO on the liabilities side. Both healthcare a pensions are financed differently in Europe. For instance in NL pensions are not the responsibility of companies or governments but of what are essentially non-profit companies that are strictly regulated as to the reserves they need to maintain (something like 90% of liabilities) and pensions DO go down when reserves decline. Healthcare is a different story but it does work differently, for the ‘poor’ there is a ‘government run’ program that is stringently regulated, for the ‘affluent’ there is private insurance that is also much more stringently regulated than in the US. And it helps that healthcare is MUCH cheaper overall (partially due to the fact that doctors don’t start their careers with massive debts they need to pay off).
Not to worry as trump will likely change his mind a number of times as he is doing with the tariff threats.
Will Trump’s team learn about the effects of a lower USD?
Manufacturing is relocating from the world to USA for lower cost of production, lower taxes, no tariffs, and affordable energy. The alternative market is shoes for barefoot Africans.
That is the most delusional TDS Type II post on this forum in a long time.
Lower cost of production in the US?!
What a hoot!
I guess the days of universal denouncing of China for cheating when it maintained an apparent cost of production advantage by having a low currency value are over.
Now that Trump is in office wanting to lower the value of the overpriced U.S. dollar, suddenly anyone saying that a lower valued currency helps exports and reduces imports is the same as announcing you have been certified as a moron.
And lower cost of production of some categories of important manufacturing than Europe? That is so obvious it hardly needs stating.
Yes, now explain to Mike how a lower dollar lowers the cost of production in US to whatever it takes.
How is managing one’s currency cheating? Please explain it like I don’t know what cheating is at all.
And your solution is to continue the financialization games until the country has reached the point where the 0.1% have everything and the 99.9% are all homeless?
‘Something will turn up’ is not an adequate response.
Let us know how that fantasy goes. I’ll await your update.
Will you please explain to us like we are fifth graders how relocating production to the USA is going to LOWER production costs? 99 out of 100 economists say this is so close to impossible only a fool would believe it.
If 99 economists out of 100 agree on something you can be sure the opposite of what they say is true.
We have the bestest robots!
The answer depends on what is produced, and how it is produced. If ever there was a time for innovation in the US, this is it. Unfortunately, US culture has not produced (m)any Henry Fords in recent years.
Basically, I think the US is screwed until the education system is totally revamped. Fewer ‘sports,’ trans, bankers, real estate agents, influencers, global alarmists, etc. More entrepreneurs, engineers, scientists,,,.