Trump Asks the Fed Start a Currency War With China
|To win his trade war, Trump seeks a currency war. Pump the Money China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal! Lead image from Hedgeye with my anecdote in white. Another Routine Lie For starters, note the routine lie in Trump's Tweet. If China wanted a deal we would have one. More accurately, both sides have to want a deal. But wanting a deal and demanding terms the other side cannot accept is an admission you really don't want a deal. Currency War The important point is not the routine lie which we expect daily from Trump, but rather his proposal for a currency war. Trump explicitly stated he wants the Fed to pump money and cut rates to "match" China. That's a direct call for a currency war to debase the US dollar. Manipulations - Two Means to an End China pegs the yuan, allegedly keeping it undervalued. But interest rate cuts are just another means to the same end. The US dollar is strong because the Fed is the only advanced nation that has been hiking. The ECB is still accumulating assets. Interest rate and QE wars serve the same end as pegs, ceilings, and floors: competitive currency devaluation. Meanwhile, the manipulators (every nation) point the finger at China. Why Now? The key to Today's Tweet stems from today's import/export price report. Agricultural Imports and Exports Synopsis For details, please see Forecasters Miss Inflation Targets By a Mile: Steep Decline in Ag Export Prices. Message Not Heard Things got so serious in April that Iowa Senator Chuck Grassley warned "Trump’s Tariffs End or His Trade Deal Dies". Trump did not heed Grassley's message. Instead, Trump wants a currency war and a weak dollar to boost exports and reduce imports. Soybeans at 2008 Lows Soybean prices have been falling since 2012. Don't blame Trump for that. But his tariff tactics and China's retaliatory agriculture tariffs put the screws to the US. See-Through Bluster That Tweet is so preposterous, everyone admits it, even Trump's own advisers. Note that Kudlow Admits the Obvious: Trump is Wrong. Much like a playground bully coward, Trump's preposterous see-though bluster unmasks his fears. And today's import export report pinpoints the weakness Trump wants to hide: agricultural states in the upcoming election. Stop the Lies On May 10, I asked Dear President Trump: Stop the Damn Trade Lies. But Trump is doubling and tripling down. Where Does It stop? With Trump it hasn't and perhaps won't. Trump's scorecard is a big zero on: USMCA, TPP, China, and the EU. Meanwhile we have threats of escalating trade wars with a new threat of currency wars on top of it. Good luck with that.
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