Chairman Powell Moves toward my Recession Prediction and Helps Trump Trade War

Chairman Powell Moves toward my Recession Prediction and Helps Trump Trade War by David Haggith for The Great Recession

The bears that are gathering will soon enough be picking flesh off the sun-bleached bones of this market. Even the Fed Chair, who usually does all he can can to avoid dismal pictures and to sound optimistic, is finally talking downcast about the US economy.

Powell helps Trump Trade War

He didn’t do much, but Powell genuflected in Trump’s direction, giving him a nudge where he needed it in trade. Powell’s congressional comments today helped Trump out a little with his trade-deficit problem by causing the dollar to plunge in value:

Since Trump has been in office, the trade deficit has widened by 25% (as has the US budget deficit). The trade deficit is widening because countries are importing fewer US goods and because they are lowering the value of their currency against the dollar, and we measure trade in dollars. As foreign currency devalues, it takes fewer of those dollars to buy the same amount of goods.

That devaluation of foreign currencies good for US consumers, but bad for US exporters because the price of their goods in foreign currencies goes up because they start out being built and priced in dollars, so they sell fewer goods abroad. It’s also bad for US trade statistics. When other nations lower their currency the lower price of goods in US dollars increases the amount of goods on the foreign side of the ledger that the US imports, widening the trade deficit.

It turns out tariff wars are trickier than Trump said they were, which is partly why Trump is constantly cudgeling Fed Chair Jerome Powell to lower interest (as that correspondingly has the effect of devaluing the dollar on foreign exchanges … as other nation’s are doing). It helps us in a trade war by getting into a currency war. The enemy fights back, as it turns out, and so far the enemy is winning in terms of the trade balance sheet.

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David Haggith

Knave Dave — vigilante against the false profits of The Great Recession Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts. Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?