Trump wants the Fed to cut interest rates to weaken the dollar and boost exports. But that’s not what helped him get elected.
Conflicting Dollar Goals
It’s impossible to get what you want when you have conflicting goals.
Inflation was a key reason Trump won the election. In isolation, a weak dollar would help exports, but at the expense of rising inflation.
Tariffs are a tax on consumers and will slow the economy. Trump wants a strong economy.
Also, countries retaliate against tariffs which does not help exports. Nor does rising anti-US sentiment, especially in Canada.
Conflicting Interest Rate Policy
Trump wants the Fed to cut interest rates. That would weaken the dollar, but tend to cause yields on the long end of the interest rate curve to rise.
Mortgage rates would rise. Housing is already in the gutter. Factor in tariffs on lumber, and steel framing.
Slow Economy or a Strong Economy
The Census Department reports two new records trade deficits in January.
A slowing economy would reduce imports, but Trump does not want a recession. And improvements in trade balances during recession are fleeting anyway.
What About BRICS and the Reserve Currency?
On February 13, Reuters reported Trump warns BRICS Nations Could Face 100% Tariffs.
U.S. President Donald Trump said on Thursday that BRICS nations could face 100% tariffs from the United States “if they want to play games with the dollar.”
“If any trading gets through, it’ll be 100% tariff, at least,” he said in response to a question about the BRICS nations – Brazil, Russia, India and China – setting up their own currency.
Ridiculous for Four Reasons
- Reserve currency status strengthens the currency of the reserve nation, but Trump wants a weak currency.
- No nation other than the US really wants to have reserve currency status because it is both an advantage and a curse, and no one wants the curse.
- No nation is in position to challenge the US dollar because no nation other than the US qualifies for reserve currency.
- Trump fails to understand that trade is between individual, not nations.
The Reserve Currency Curse
Points one and two are related. A Q& A will explain.
Q: Why do foreign central banks hold US dollar reserves?
A: The US runs a trade deficit. The foreign exporters receive US dollars, but those exporters need local dollars for purchases. In China, the Chinese exporters trade the dollars for yuan, and the central banks accumulate dollars as a result.
For all its moaning, China does not really want to have reserve currency status because it would mean the end of its export mercantilism. Germany is in the same position.
What Would it Take for a BRIC-Based Currency to Succeed?
Regarding point three above, please consider What Would it Take for a BRIC-Based Currency to Succeed?
Lost in the hype over nations clamoring to join the BRICS block is a question I have not seen anyone address.
What Would it Take for the “Brick” to Succeed?
- The Brick would need to float freely. The yuan doesn’t.
- The Brick have to be a genuine reserve currency to achieve widespread use.
- A functioning Brick-based bond market. This requirement is also for widespread use.
- A significant desire by individuals to trade in Bricks and accept Bricks rather than local currencies or the dollar.
- Willingness of China to stop export mercantilism.
- No capital controls.
Note that the Euro fails because there is no central asset, no Eurobonds. There are German bonds, Italian bonds, French bonds. etc, all with different interest rates and liquidity.
Trade is Between Individuals, Not Nations
Fundamentally, trade is not between nations.
Aggregate reporting of trade deficits such as the persistent US deficit with China, makes it appear otherwise. But the deficit is really a result of a sum of individual transactions.
For example, you or I go to a store and buy a tool at Home Depot. More likely than not, it’s made in China. A Toyota may be assembled in the US or Mexico with parts from Japan, China, or Mexico.
Taking a step back, the intermediate buyer, say Home Depot, makes big orders with various Chinese manufacturers.
The same applies to a Brazilian Store Owner (BSO) dealing with China.
To place its order with a Chinese merchant, the BSO would need to convert Brazilian currency to Bricks, place an order with a Chinese Manufacture willing to accept Bricks, then the Bank of China would swap Yuan for the Bricks and then what?
What precisely does the Bank of China do with all the Bricks it is accumulating given that Bricks are a trading currency, not a reserve currency?
Are there any Brick bonds? No, because the Brick only a trading currency.
There is no Brick-based bond market and thus no way to collect interest holding Bricks. There is an increasing lack of trust in dollars, but no reason to have any faith at all in the Brick.
Also see BRICS+ Is Forecast to Dominate the World’s GDP, But What Does That Mean?
Here’s a major irony. If and when the “Brick” succeeded as a reserve currency, US deficits would shrink. But there is no chance of that for reasons stated.
Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”
On March 10, I noted Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”
Don’t worry, it’s just a little more pain and inflation disturbance before tariff greatness begins.
Economy Could Be ‘Starting to Roll a Little Bit’
On Squawk Box, Treasury Secretary Bessent said the Economy Could Be ‘Starting to Roll a Little Bit’
And Trump Declines to Rule Out Recession.
Lutnick vs Trump
“There’s going to be no recession in America,” Commerce Secretary Howard Lutnick said on Meet the Press on NBC News.
Somehow Trump and Bessent did not get the message from Lutnick.
Hoot of the Day: House Republicans Suddenly Like Clean Energy Tax Breaks
On March 14, I commented Hoot of the Day: House Republicans Suddenly Like Clean Energy Tax Breaks
21 House Republicans now like Biden’s Inflation Reduction Act incentives.
One way to get a weaker dollar is for the US to run huge budget deficits and for the Fed to not follow through with interest rate hikes.
But that conflicts with Trump’s promise to balance the budget. And balancing the budget would strengthen the dollar.
Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
On March 12, I commented Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
Lutnick: “We’re going to make the External Revenue Service replace the Internal Revenue Service.”
I ran the math on that ludicrous idea. Team Trump only needs to bring in $7 trillion in tariffs on $3.3 trillion in total imports.
Then we need to faithfully collect 200 percent tariffs on everything with of no trade frictions, no retaliations, and full compliance.
See above link for detailed analysis.
Trumperland Miracles
Trump simultaneously promotes a strong and weak dollar, and proposes we collect huge tariffs while reducing imports.
We will allegedly balance the budget by running huge deficits while having a Detox recession and not having recession.
In Trumperland, contradictions have no meaning, so this is entirely possible.
“Tariffs generate other revenue than the tariff itself. Tariffs incentivize foreign manufacturers to build here. ”
Let’s discuss “Tariffs incentivize foreign manufacturers to build here.”
Where does that money come from?
Hint: Trade Deficits and Capital Account Surpluses (investing in the US) are two sides of the same coin. Identical in size, opposite in sign.
That is an identity that few understand.
Second, The idea that price hikes makes the US more competitive is idiotic if the goal is to increase exports. So which goal do you want?
========
Nations don’t trade, Individuals trade
For two individuals to trade (or a company on behalf of individual consumers) both sides have to agree that it is a good deal or there is no deal.
If China is subsidizing exporters, then Chinese consumers pay that tax and it is to the benefit of millions of US consumers who like a good deal.
Tariffs tell US consumers they can’t have a good deal. Tariffs are a tax on consumers.
It is idiotic to believe China pays the tax. Either the US importer eats the tariff (less profit), or consumers pay the tax, or a combination.
It is also possible there is tariff avoidance or the dollar appreciates.
A combination of all 4 happened in Trump I. Avoidance and dollar appreciation are not as likely under Trump II. So who pays the tax?
If there was a genuine national emergency then tariffs might be a good idea. But there isn’t. And even stupider, we are putting more tariffs on allies than enemies.
We expand our industrial base for our own needs – not for export to China and Vietnam. We build it to employ highly skilled workers and for our national interest. The want of dollars will rise.
Much of the trade deficit is due to subsidization by China. Tariffs seem to be the interim solution. Tariffs need to be product specific rather than country specific.
I have some questions.
1) I have heard that all wars are economic. Whether that is true or not, how does war factor into the economic situation in the world today?
2) While I agree that tariffs stifle global trade (I believe have read @Mish that global trade is good). Is all trade actually good? If a country is willing to trap it’s citizenry in poverty to gain leverage with global trade is that actually good? I agree that if one country grows corn and another mines steel that trade helps them both – bit if country A produces “omniwidgets” using impoverished slave labor and another country B tries to offer a living wage for their citizenry then minus some incentive from the Govt, either B impoverishes their citizenry or loses their ability to produce “omniwidgets” locally (IMHO this is a big reason that the US defense is so expensive, they try to produce everything in the US (for security reasons) and much of the infrastructure for that is only to support the military which makes it expensive. Wouldn’t it make more sense to compete by making country A’s discounted labor cost equal to if they were making a living wage for their citizens?
I am really interested in your response. I am want to know what angle I am missing (and am guessing that I didn’t do a very good job of expressing my qureries.
To really make a Bric currency successful would be to have it backed in gold or silver forever. Otherwise people would be right to suspect that it wouid sooner or later begin to be debased.
It will never be backed by anything.
Time to re-evaluate this abstraction called “the consumer.” But this so called consumer drives our economy! Consumer has become a rhetorical canard for economists. Just as “surplus labor” in Marx is a theoretical fiction which nonetheless was deemed the engine of capitalism’s destruction by Marxists.
So…
Strong USD = low price rises (“inflation” as you call it, except it’s not).
Strong USD = US exports expensive abroad, and unemployment rises
Strong USD = bond yields rise, interest rates rise, mortgages and debt price rises
Strong USD = bond prices fall as bonds are sold, money goes where?
Strong USD = foreign currencies in export-orientated economies tank, higher local interest rates, more expensive US debt, local economies go downhill (e.g. APAC)
Weak USD = US exports up, jobs up, real pay down, booming economy?
Weak USD = Price Rises (what you call “inflation” up), does money supply grow?
Weak USD = debt can kicked down the road, inflated away, slow-mo default?
Neither of these things seem to be increasing wealth and actual growth.
Maybe that’s why mass immigration to increase the demographics is a strategy?
Neither of these things seems to fix the debt and demographics problem.
Surely you need expansion of credit to have growth? Where is that?
Who’s getting debt to grow companies and increase output? Where’s the customers with disposible income to consume that, to create demand?
am I missing something?
fill in the blanks, I’m all ears…
Fwiw i don’t think offshoring gave us lower prices of goods. Companies never passed on the savings and instead boosted their profits. This boosted the stock market but did nothing for consumers. Companies don’t want to bring industries back to the US because it requires spending in higher value currency and eating profit margins and burning cash
Mish is always right
Chainsaw Ilan sent the Dow tumbling down. Spineless Chucky might send the markets up until Apr 2 in short covering. Sept 11 fractal zone might be tested again. [1M] Apr might be a small green inside bar.
Investors trust a gov that cut its debt. If the Fed will cut rates it will ease debt payment and reduce mortgage rates. The want of the dollar will rise. The dollar will be strong relative to most other currencies. In states where RE taxes are high RE transactions will be dead even with a 2,5% mortgage rate.. The only transaction will be the transfer of money from the pockets of homeowners to the states. These states rob their citizens to cover the cost of retired police, firemen, teachers and other bureaucracies, In those states there is no incentive to build bc there is no incentive to buy. A few homeowners will abandon their houses and leave, They will be occupied by the homeless and pimps. Lower rates are incentive to build multi rental units. A glut will reduce rent. When skilled and highly skilled workers wages will rise and inflation will chew up RE taxes ==> RE transactions will be back.
Add: insurance, maintenance, repairs, electricity, water, security, fines, legal…plus roads and school improvements and a few other cities and counties bureaucratic tricks. Add the cost of rental co fees if u rent it and RE transactions if u sell it.
Oh, and if Trump really wants other nations to keep using our “privilege/curse”, stop using it as a bludgeon against other nations who even get the teensiest bit sideways with the fed gov.
It’s called Quantum Economics where everything in the economy is in multiple states simultaneously.
The dollar remains a secure beautiful store of value.
Pay no attention to that DEBT behind the curtain.
We can produce excess debt forever. The world will buy it forever.
See everyone is happy now.
Its going to be YUGE. Then in 2029, it will be Re-Swamped.
Sincerely,
The United States of America 2025
USD as a reserve currency is a curse.
Other less mentioned curse is consumption.
70% of US economy is consumption.
In theory, the more you consume the more production, the higher GDP and the stronger economy.
In practice, the more you consume the more import and the weaker economy eventually.
Consumption is strong but production is weak.
Tariff alone can’t make the production competitive.
Selective tariff, weak currency, etc needed
There is no good option/choices as there will be negative feed back loop.
High tariff/ weaker currency leads to higher price, higher inflation and lesser consumption and weaker economy.
Sounds like whack-a-mole.
Poltical parties playing pass the parcel, trying to be the one that’s in when it’s upswing, and hand over the bag o’ shi’ to the opposition to blame them for it.
In terms of reciprocal trade tariffs, the USA collects more in tariffs than does Canada, so to equalize, it would need to pay Canada.
The trade imbalance is puny when you add up goods & services relative to GDP or mutual trade turn-over.
Who is talking about the BRICK.
I don’t recall the Brics mentioning this nor an alternative reserve currency?
They seem interested in trading in their own currencies and payment channels that circumvent American control. Note that you can well trade in (virtual) dollars without actually settling in dollars controlled by American bank channels.
Trump is all marketing, with only lip service toward any kind of coherence in terms of structural issues like these. His fans, I mean, voters aren’t testing this rigorously. But if not, it will test them (us). I doubt the right kinds of lessons will be derived; to the contrary. This is an old playbook, and when flaws appear at pocketbook levels, blame-gaming will be the next refuge.
The public has deep inflation fatigue. Nothing will arouse them more, and quicker, than inflation. Even the willfully heedless can’t ignore rising prices, right in their faces the first day it happens.
Re: Tariffs. It takes 6 years + to build, staff and put in production a new factory. Trump is only in for 4. Why would a company spend to build a new, noncompetitive factory in the US when the next administration will likely just dump tariffs altogether? They’ll just wait it out and raise prices in the short term. If Trump were smart (and he isn’t) he would have Congress legislate tariffs so that they would last past him. But that doesn’t make him look “strong” to the base.
China could never accept a real trading currency. It has a persistent trade surplus, and that would drive up the value of the Yuan relative to it trading partners currencies, reducing its competitiveness.
correct – at least for now and the last 35 years
The paradox is to be reserve currency a trade deficit is required. How else can the currency be distributed?
They’ve been on the top of the S curve for the past 10 years, just in denial, churning out more debt and fake data to try and pretend it’s business as usual – it ain’t. The wheels are coming off for them, big time – they must grow quick, crash quick, or endure Japanification.
Fun fact: Swamp creature Howard Lutnick (now a MAGA hero) once belonged to the Democratic faction of the Uniparty.
In 2015, He held a fundraiser for Hillary Clinton at his townhouse in NYC which was right next door to Jeffrey Epstein.
It’s a small world, isn’t it?
Yeah, but that was probably just because he wanted to bang minors.
Trump used to be a fan of the Clintons before he started to insult them: https://www.vox.com/2016/8/16/12452806/trump-praise-hillary-clinton-history
The problem with unilateral tariffs is retaliation — everyone raises tariffs in a trade war. International trade drops and everyone suffers. Prisoner’s dilemma.
The problem with unilateral weakening of the currency is a currency war (also known as competitive devaluation, e.g. capital controls, QE). A multi-lateral agreement to let the dollar fall (like the Plaza Accords of the mid-80’s) avoids this. However, those were the days when the U.S.’s main trading partners were friends (Europe and Japan). To do something similar today would require the cooperation of China, which might be possible if the U.S. gave concessions to China, e.g. on Taiwan. Well, why not?
Trump could do a grand multilateral “bargain”. Perhaps this is his goal? Maybe, to get our trading partners in the right mood he has to create some shock and awe to wake them up to the fact that these huge trade deficits can’t continue. But that assumes Trump is capable of thinking several moves ahead.
Alas, the “curse” — Triffin’s Dilemma — was a warning the Belgian economist Robert Triffin gave us sixty years ago that we’d be in precisely this position, as holder of the world’s reserve currency. Probably the only way out is something like Keyne’s floating basket of currencies, which he dubbed the “Bancor” (first proposed at Bretton Woods). But that would end the U.S. “exorbitant privilege”. Ending it would probably be a good thing for U.S. workers and the U.S. economy as a whole. But Wall Street and our Representatives drunk on visions of U.S. empire wouldn’t like that at all.
Ironically, raising tariffs has the effect of strengthening the dollar further.
Where’s the vision?
The vision? I’m waiting to see basic financial literacy.
Do you long for the days of financial literacy displayed by FJB? Or BO? (no, not body odor..)
Or, any president in the last 25 years?
Current account deficit since we became a debtor nation in 1985
-63,635.356
billions of dollars.
Balance on current account (IEABCN) | FRED | St. Louis Fed
”In economics, the current account measures the nation’s earnings and spendings abroad and it consists of the balance of trade, net primary income or factor income, and net unilateral transfers, that have taken place over a given period of time”
63 trillion invested in the balancing items, our stocks, bonds, real estate etc.
FWIW, it appears many of the heads of departments have turned against Elon. They are tired of him taking a wrecking ball to something that only needed a scalpel. Elon continues to lose money wants to turn America into to the South Africa he grew up in. Peter Thiel, Musk and his mother see a North American Magnate similar to pre-WWII Germany stretching from Greenland to Columbia. Musk has taken Trump so far off the original intent of MAGA that I think Trump is now losing the average MAGA voter. The tech magnates want to import more tech labor via visas and dominate in a way that would be bad for Americans. I think the best thing that Trump could do is deport Thiel and Musk when it all goes south if he wants to recover. But Trump’s health won’t up much longer imo. I will be shocked if he makes it past year 1 of this term.
What’s worse, Trump’s mental heath could trail off, leaving a vacuum the conniving palace courtiers would scramble to fill. This could make presidential edicts even more inconsistent (or less electorate-aligned) than the wildness now. When Woodrow Wilson was out of action, or even Biden to some unknown degree, there seemed some consistency.
like your mental health, you mean?
You mean a vacuum, like FJB’s Vacuous but magnificent utterances?
zzz …you are a bot, continually inserting off-topic propaganda to serve your agenda.
Did you get rid of your Tesla? I thought that was how we were supposed to save the planet.
“MSNBC host Lawrence O’Donnell whined to his colleague Rachel Maddow that he is so exhausted from reporting on President Trump that he is taking some time off.”
It’s not Trump’s health that isn’t holding up. He is running others ragged, due to his vigor.
I don’t know how reasonable it is for the actions by Columbia University. But it sure looks like they submitted to monetary funding threats together with targeted law-making. They are helpless it would appear. Someone will call the Trump administrations bluff, but it will not be from home, it’ll be another country, and obviously out of necessity to survive..
I hope somebody is minding the store with, say, cyber security. I quake if not.
Applogies, that comment was cryptic on my part. I think the point is, was freedom of speech revoked in this (quite old) case using various means? If so, those types of protests cannot be carried out at home out of fear of reprisal. Another country can bring up the topic if they already have nothing left to loose. (still having trouble wording this….)
A fall in our exchange rate will not correct our trade deficit problem. To be effectively competitive in foreign markets, requires that we sell lower unit costs and higher quality products. This means concentrating on production, innovation, and product quality. It means giving workers a financial stake in increased productivity (share in profits, etc.).
The Malcom Baldrige National Quality Award follows the long-standing tradition of Japan’s Deming Prize. Musk is using the wrong criteria.
In Trumperland, contradictions have no meaning, so this is entirely possible.
—
Some kept telling people we have/had Trump Derangement Syndrome. Many people who knew Trump was incompetent were called out as having TDS. We knew he would go off the rails on this second term and that is what we are seeing now. I don’t think Trump survives past the summer and neither does Musk. After that it will be the JD Vance/Peter Thiel show .Same show but different actors.
Trump at least occasionally remembers there are actual humans in the loop. I think Thiel and Musk are hell-bent on correcting the equations on that. And Vance can be played like a cheap fiddle.
because you know.
Make your mind up, is he stupid, demented, evil, or what?
The problem you have with your propaganda, is the lack of a consistent theme.
You over-egg it, trying to say he’s all of the bad things that they are, so you lose credibility.
James Carville predicted Trump’s administration would ‘collapse within 30 days’.
That was 25 days ago. In the meantime, they’ve passed a CR, rolled Chuck Schumer, and pushed a ceasefire to the forefront with Ukraine, and Trump is scheduled to call Putin tomorrow, while bombing Yemen.
Looks like the continuous predictions of Trump’s downfall could be a huge industry all on their own. Maybe we could tariff those?
Tariffs generate other revenue than the tariff itself. Tariffs incentivize foreign manufacturers to build here. This creates jobs and US produced products leading to increased state, federal and local taxes. Tariffs also make domestically produced products more competitive resulting in increased sales of domestically produced products along with the associated tax revenues.
“Tariffs generate other revenue than the tariff itself. Tariffs incentivize foreign manufacturers to build here. “
Let’s discuss “Tariffs incentivize foreign manufacturers to build here.”
Where does that money come from?
Hint: Trade Deficits and Capital Account Surpluses (investing in the US) are two sides of the same coin. Identical in size, opposite in sign.
That is an identity that few understand.
Second, The idea that price hikes makes the US more competitive is idiotic if the goal is to increase exports. So which goal do you want?
You are theoretically correct if you look at a single tariff in isolation. A 25% tariff on foreign auto imports might incent foreign auto companies to build new auto plants in the US if that was the one and only tariff in place.
But that isn’t what Trump is doing. He is also putting tariffs on all the inputs that our domestic auto manufacturers import. Steel, aluminum, electricity, and parts that arrive from all over the world. If the combination of all those tariffs raise the cost of autos by $8000 to $12000 per vehicle, then foreign manufacturers would think twice about building in the US.
If Trump wants to encourage domestic manufacturing, he should be enacting policies that will lower their costs and make them more competitive. He is doing the opposite.
Mish posted an article on aluminum recently. The US imports the majority of its
Aluminum. By placing a 25% tariff on this aluminum, we are placing our domestic manufacturers at a competitive disadvantage because they will pay more for aluminum than their foreign competitors.
But it will not encourage new aluminum production in the US because we don’t have the necessary cheap hydro electricity to produce aluminum at competitive prices. And even if we could, it would take a decade to build it out.
As Mish says, Trump’s policies are a conflicted mess.
Tariffs will definitely lead to increased state, federal and local taxes for the consumer for the jobs created and overall it is a net negative. Using the proposed Century Aluminum Kentucky plant as an example, I fail to see at a minimum how just power bills do not rise at a minimum 10% yearly for all Kentucky Power customers to subsidize the plant.
It is a rarity that a company intends to build the highest production cost plant in the world but that is what Century aluminum smelter would be if it is built. Century just closed an aluminum plant in Kentucky last year citing “high energy costs”. Century Aluminum requires an enormous amount of energy for the green (lo carbon) smelter which Kentucky doesnt have. The electricity required is more than is used for the biggest city in Kentucky Louisville.
The coal to solar switch isnt gonna cut it. The smelter requires enormous amounts of electricity 24/7. Hopefully alarm bells are going off. Yes green energy requires an equivalent amount of backup (fossil fuel) energy.
Billions of dollars in subsidies required to build the plant and billions in subsidies required for the continuous electrical supply. And tariffs required for the life of the plant. Americans will forever subsidize the plant through the Inflation Reduction Act and Kentuckians definitely going to see dramatically increased power bills subsidizing the aluminum plant if it is built. I would expect to see Kentuckians and Americans a lot lighter in the pocket book subsidizing the plant forever.
And the minute subsidies or tariffs end, the plant shuts down immediately. The whole project is an exercise in grift.
It might sound good politically to tout 1000 aluminum jobs but it is economic insanity in reality. Yet many cheer this on.
And should this exercise in grift proceed, you are likely looking at a min 8 years before the electricity supply (amazing no one knows what that is) and smelter is built. Are American companies in the meantime going to pay an extra 25% should tariffs last that long. And this will hardly put a dent in imported aluminum.
Im not understanding how that is a positive for the American economy but that is the direction it is going?
There must be bauxite in Kentucky? Or this is a recycling facility?
Trumps aim with 25% tariffs on aluminum is to bring back aluminum smelters to the US. An aluminum smelter basically goes hand in hand with a major electricity producer hopefully a hydro-electric low cost producer. Quebec has an abundance of cheap hydro-electric energy and the US has no such cheap energy blocks.
Century Aluminum proposes to take advantage or DOE and IRA to permanently subsidize a primary aluminum smelter in Kentucky.
Aluminum smelters are electricity intensive. The proposed smelter in Kentucky would be the largest user in the state.
It is unheard of for a company to propose to build the highest production cost plant in the world but here we are. It can only be described as an exercise in grift as it is forever dependent on subsidies and tarrifs.
It may sound good politically but it is insanity economically. The subsidies will be born by American and Kentucky consumers.
To add to the insanity of the subsidized electricity, the US is also facing an electricity crisis in the very near future. Google to your hearts content US electricity shortages. Americans face dramatically increased power bills already, never mind subsidizing an aluminum plant forever.
The top secret plans as to what will power the proposed smelter are just beside the JFK files.
A new green aluminum plant could bring jobs — and clean energy — to Kentucky | WEKU
“But Kentucky has very little carbon-free capacity available today.”
It isn’t about bauxite Harry. It’s about cheap electricity.
Canada has no bauxite mines. They import bauxite.
What they have is a LOT of incredibly cheap hydro electricity in Quebec. Electricity is 40% of the cost or aluminum. While bauxite is just 30% of the cost.
In the US we are electricity-constrained as it is. And our electricity is expensive. Fortunately we can get cheap electricity from Canada to help us out. Though Trump just put a 10% tariff on it!
A lot of Bauxite comes from APAC… Australia, Indonesia, China…
Yes. But most of Canada’s bauxite comes from Brazil.
US farmers didn’t sell more in Trump’s first admin tariff wars. Trump had to bailout farmers to the tune of 28 billion dollars.
https://www.forbes.com/sites/stuartanderson/2020/01/21/trump-tariff-aid-to-farmers-cost-more-than-us-nuclear-forces/
So states like Illinois are like Greece in the EU. Accumulate debt that they are Never gonna pay it back.
By Executive Order the bond market may be controlled. Maybe we only pay full interest to domestic bond holders and then to the foreign ones that we like at any given moment. Of course trust them breadth and depth would decline. But not if one HAD to by decree buy bond as a business tsking part of the USA infrastructure or a citizen.
Recession makes sense. Tariffs are like trying to run a smooth performing engine with little or no oil.
It may not seize up today. But it will get there a lot faster.
Id buy gold with my BRICKS and realestate and anything that made what ever passed for money at the moment. Maybe a few businesses in every country with my gold ans lans like many foreign wealth funds already do.
What if the Fed shows up to the bond auction with unlimited money ? They have interfered in bond auctions before from random accounts in the Caymans.
The gargantuan trade problem and the resulting drastic decline in our industrial base since turning into a debtor nation, is a function of an incompetent FED.
See Greenspan:
“at the February 10, 1988, meeting Greenspan noted “there has been more data mining with the monetary aggregates in the last 2 years than I’ve seen with any other set of data in my whole life. And whenever you get to that, you know that there’s nothing there. We can expand away or we can contract, but I don’t think it matters p. 44).”
See Powell:
#1 “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time.”
#2 “Inflation is not a problem for this time as near as I can figure. Right now, M2 [money supply] does not really have important implications. It is something we have to unlearn.”
#3 “the correlation between different aggregates [like] M2 and inflation is just very, very low”.
Thanks for this good history. But isn’t it really fiscal policy that made us a debtor nation? The Treasury Dept. wants a strong dollar so the U.S. can finance those budget and trade deficits with paper that our creditors will accept. The Fed just executes economic policy to keep inflation low and employment high as best it can. Congress gave the Fed that dual mandate, but it never said, “don’t put good manufacturing jobs in jeopardy and turn us into a nation of bartenders and janitors.” So, Congress and the Fed turned us into a nation of highly educated bean counters for Wall Street, PMC professionals, coders, bartenders, and janitors. Where did all the factories go?
Also:
As Dr. Ravi Batra said in his book Greenspan’s Fraud, pg. 142:
“In Twentieth Century America, output grew strongly in 1900s, 1940s, 1950s, 1960s, and then in the second half of the 1990s, with annual GDP growth exceeding 4 percent-but market bubbles only arose in the 1920s, and from 1982 to early 2000, when growth was mediocre, even below average.”
“The behavior of wages and debt answers this puzzle. When wages grew smartly with productivity, output grew sharply without much rise in debt. Thus, high wage growth alone produced high output growth, but no bubbles, because rising worker salaries precluded the sharp rise in profits.”
No, because of the monetization of time deposits. An increase in bank CDs adds nothing to GDP. All monetary savings originate in the banks. Savings are not synonymous with the money supply.
As the economic syllogism posits:
#1) “Savings require prompt utilization if the circuit flow of funds is to be maintained and deflationary effects avoided”…
#2) ”The growth of commercial bank-held time “savings” deposits shrinks aggregate demand and therefore produces adverse effects on gDp”…
#3) ”The stoppage in the flow of funds, which is an inexorable part of time-deposit banking, would tend to have a longer-term debilitating effect on demands, particularly the demands for capital goods.” Circa 1961
This caused the “Great Inflation”
Princeton Professor Dr. Lester V. Chandler’s, Ph.D., Economics Yale, original argument.
Chandler’s theoretical explanation was:
“that monetary policy has as an objective a certain level of spending for N-gDp and that a growth in interest-bearing deposits in the payment’s system involves a decrease in the demand for money balances, and that this shift will be reflected in an offsetting increase in the velocity of the remaining transaction’s deposits”.
Professor Chandler’s conjecture was correct up until 1981 – most of this “S-Curve” dynamic damage (sigmoid function), was complete by the first half of 1981, up until the saturation of financial innovation for commercial bank deposit accounts (the near end of the “monetization” of time deposits, the virtual end of gate-keeping restrictions, Reg. Q ceilings, and reservable liabilities on time deposits).
Trump the dictator doesnt care about inflation, the economy, unrest or much of anything else. He wants the acceptance and love of his “equals,” and with interest rates at 0% again, as in 2006-2022, America’s rich can continue to buy up America for free. Republic to feudalism. 5000 lords and ladies owning everything, and everyone else rents and makes little money. What WWI destroyed in the UK, Trump will make rise again. Get ready to kneel …
In the summer of 2002, when I visited Canada, the US $ was worth about $1.60C.
The following year, the US started an expensive war against Iraq and cut Federal income taxes. The US $ started a multi year decline. So if Trump wants a weaker US dollar, let him start a new war somewhere.
David Stockman had a great response to Trump’s tariffs on Canada
Stockman: Will Trump Really Make America Free And Prosperous Again? | ZeroHedge
Trump’s beggar thy neighbor policies will undermine the economy, dollar hegemony, and reduce foreign direct investment, as the Great Depression’s protectionist trade polices already proved. It will increase inflation and produce a recession in the short-run.
The volume of dollar-denominated liquid assets held by foreigners is extremely large. Any significant repatriation of these funds, by reducing the supply of loan-funds, will force interest rates up – thus increasing the federal deficit and the burden of all new debt. These events alone could trigger a downswing in the economy resulting in more unemployment, more unemployment compensation, less tax revenues and larger federal deficits — truly a vicious cycle.
Yep. And eventually collapse and a great depression II. I think there will be bigly bad stuff this summer.
Does anyone, including himself, really know what trump wants, other than to be king?
No.
With conflicting goals it’s impossible.
It’s just a question of whether Trump pivots before the recession or after.
Some of us have been saying Trump was deranged for a long time. We kept being told WE had TDS. I think anyone who is a Trump critic is no longer deranged and the truth will be revealed for all to see. The emperor has no clothes on.
I thought your campaign was that he is Hitler, but now you want him to be Mad King George, and also you want him to be low IQ, I mean, which is it… you need to get your character backstory right.