I read headlines such as this with an ear to ear grin. The dollar will devaluate. The Forex market will anticipate with dollar selling vis a' vis other currencies. But I am curious what mechanism the U.S. Treasury and Fed will use to affect only the Renminbi dollar relationship without affecting the dollars relationship to other currencies??? Thus my Big Grin. The huge Trump deficits coming put more dollars in circulation, but the rate they go into circulation depends on the rate the government steps up its purchases of goods and services, and how the excess dollars are distributed among savings, investments, bonds and reserve accounts versus how many high velocity dollars are circulating and being used to purchase goods and services, and pay the government subsidized employees at Walmart . Inflation is kicking in; one can't blame full employment entirely, so lets try China. It is true that employment and inflation are linked but the driving force behind the inflation, as Uncle Milty would only be too happy to point out, were he still with us, is the intentionally stepped up government spending that greatly exceeds government receipts. So bottom line; "Are we, Mr. Trump, doing the ground work needed get away with blaming China for the inflation your idiotic Republican Administration is going to cause. Huh?" But I thought the plan was to bask in the glory of a Go-Go economy now, and then blame the subsequent Democrat Administration for the inflation that inevitably will follow three years from now. Is the plan off schedule, Mr. Trump? Oh, why am i bothering to ask you? Of course you wouldn't know. You're on the 9th hole at Mar-a-Lago. I must Ask Mr. Kelly and Mr. Mnuchin.
It would certainly be a play call straight out of the Chinese State Administration of Foreign Exchange (SAFE) and the People's Bank of China playbook. It's what they do. Repeatedly. For like the past 26 years or so. The United States has just historically been too pussified to call it what it is; currency manipulation.
you are indirectly calling every President of the US for the last 26 years a pussy. maybe you have a point.
Savings has been already revised with a jump to 7 percent in 2018. This should dampen yields actually due to increased supply on savings-investment chart
I agree, i think. The Fed must work their magic against a rising tide -- is is a tsunami ?-- of money. They will sell inventory, draining excess reserves, pushing bond prices down, yields up a little. What ever will we do with all that extra money Mr. Trump will spend into the economy. I suppose we'll buy the Feds inventory. We already have the lakehouse and a Learjet. what else shall we do with it other than to stash it in bonds. Though the nominal yield will rise, the real yield will stay more or less steady at 2 % or so. (maybe ) What really pisses me off is that nice French Comte cheese I buy at that little corner shop on Rue le Goff across from Jardin du Luxembourg is going to double in price for me and my pathetic U.S. dollars once converted to Euros. Oh well, no price is too much to pay for a "Space Force." Yah, right! But hey, Mr. Trump, is a man that loves debt. Inflation is a goldmine for him.
There’s actually several major tools the Fed has at its’ disposal if they had the cajones to use them. Possibly more effective and less controversial than tariffs.
Tariffs??? the Fed??? Neither the Fed, nor its chained at the hip partner, the Treasury, has access to the most effective tools for controlling the money supply, i.e., Taxes and Spending. They have to use what they can. But they do have many arrows in their quiver. Tariffs of course are not in the quiver. Why would they be?
Fed can only respond to tariffs by hiking rates, risking to hurt the economy. I think Trump will act till first signs of a slowdown
The Fed and the Treasury have nothing to do with imposing tariffs - that’s a political calculus. I was not implying that at all.