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Why the President wants a weaker dollar and needs the Fed to do it for him

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Why the President wants a weaker dollar and needs the Fed to do it for him

There seems to be a lot of confusion over recent Tweets and calls by the President for the Federal Reserve to take aggressive action on interest rates. He’s been on a tear and judging by responses, many Americans aren’t sure what he’s talking about. Today was his clearest Tweet thread on the issue, yet it’s still a series of three Tweets that are not garnering his average levels of engagements in likes and retweets.

Even the comments seem a bit detached and often confused. Here are the Tweets:

Quantitative tightening? Fed cuts? Strong dollar bad? The economic terms in which the President is and has been Tweeting aren’t difficult concepts, but they do require a bit of basic explanation and Twitter isn’t giving him enough room to do it. It’s time for the White House to put forth a plan, or at least an explanation, on the need to weaken the dollar for a relatively short period of time. Until they do, here is a brief translation of what the President wants.

Weaker dollar means more exports

It may seem counter-intuitive, as the President noted in the beginning of his Tweet thread, for a President of the United States to want the dollar to be weaker. We like strength. We’re America! But in some instances, strength has its drawbacks, and a strong dollar means more buying power and less selling power on the international markets.

The stronger the dollar is relative to other currencies, the higher the other countries’ costs are to import goods from the United States. I’ll illustrate this shortly, but buying power and selling power in the world of trade head in opposite directions based on currency strength.

Here’s a basic example. Let’s say, for the sake of easy math, that the dollar and the yuan are currently equal. $1 = ¥1.

Now, imagine two products, the Widget and the Wodget. In the US, the Widget sells for $500 and the Wodget sells for $600. In China, the Widget sells for ¥600 and the Wodget sells for ¥500. In this balanced scenario, it makes sense for American companies to buy domestic Widgets while importing Chinese Wodgets. The opposite is true for China who will import Widgets and export Wodgets. Make sense so far?

But something happens. China’s yuan is weakened by 20%. Now, ¥1 is only worth $0.80. The stronger dollar is great, right? America loves strength. But there’s a problem. Now, the $500 Widget the Chinese were importing from America when the currencies were balanced used to cost them ¥500. But their weaker currency means it will now take ¥625 to equal the $500 American cost. So it makes sense for them to buy their own Widgets for ¥600.

Conversely, the Widget American companies were buying domestically for $500 now costs more than importing the Widget from China. Even though it’s still the same ¥600, the drop in their currency strength means American companies can buy it with dollars at a rate of $480.

The stronger dollar means we have more buying power for imports. But it also means we have less selling power because it takes more of the other country’s currency to compensate for the dollar’s strength.

In short, a strong dollar is good for keeping costs lower for imports but makes it harder for American companies to export their goods. This is what the President was referring to when he Tweeted the strong dollar is “making it more difficult for our great manufacturers like Caterpillar, Boeing, John Deere, our car companies, & others, to compete on a level playing field.”

China’s devaluing their yuan

In an effort to win the trade war, China has been devaluing the yuan. It finally eased up yesterday after the White House condemned them for currency manipulation, which has been frowned upon by the international community for decades. But China has never shied away from things that are frowned upon.

Their weakened currency means their people have less buying power internationally, but the government hopes they won’t notice. And they’re probably right. Despite being a mass exporter, China has been practically isolationist when it comes to importing goods. They like to keep things Made in China and they don’t mind forcing their people to do the same.

To win the trade war faster, President Trump needs the dollar to drop. Tariffs can only do so much and focus on specific goods, while currency manipulation is a universal shift on all imports and exports. With the lower yuan, China is essentially telling the world now’s the time to buy as much from China as possible, stabilizing their economy temporarily as they struggle to cope with the President’s tariffs.

If the President can lower the dollar, it will counteract the effects of the yuan’s devaluation and make it easier for American companies to export. The trade off, of course, is that it makes it harder for American companies to import goods. This is a very bad thing in the long term; we are a consumer-driven nation. We need imports. But in the short term as we struggle through the trade war, it’s an acceptable trade-off.

Why the Fed has to do it

For the sake of brevity, let’s forgo any discussions of the Bretton Woods agreement, gold standard, and the dollar as the world reserve currency. Let’s just encapsulate it all into one statement: The world would not react well to direct U.S. government action to devalue the dollar.

The President needs the Fed to lower interest rates so dollars will be sold. We don’t have the designated funds available to influence the yuan or we would. So that means the fastest path to devaluing the dollar is through the Fed backing down rates relatively rapidly.

They could do more quantitative easing as they did during the Obama years, but that would be tantamount to unnecessary currency manipulation, so the President is simply calling for an end to quantitative tightening.

It’s still very likely we would win the trade war even with China devaluing their currency, but it’s unlikely we could do so before the 2020 election. The President wants a deal before then. The Chinese want to wait and hope the President loses the election. But they may be in for a shock even if that happens. They seem to forget that Bernie Sanders and other Democrats have been fans of tariffs on China since Donald Trump was on The Apprentice. This may be Trump’s trade war, but it’s conspicuous that few Democratic candidates are focused on that aspect of the President’s policies. China may find they don’t like what they get if the President is replaced.

As for the people, it’s important that we support the trade war even if we’re free traders. I am. But I also recognize that we’re in this trade war now and there’s nothing beneficial about screaming “free trade, free trade!” I’ll do that later. For now, whatever it takes for America to come out on top, I’m all for.

This is one of the few examples where Twitter isn’t enough. The President needs to lay out a written plan because he’s right about how to address this economic issue. Many of his supporters simply don’t understand it.

We are currently forming the American Conservative Movement. If you are interested in learning more, we will be sending out information in a few weeks.

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Economy

What mainstream media knows: Fear of recession causes recessions

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Fear of recession causes recessions and the media is hoping to do it again

President Trump’s concerns over mainstream media outlets painting the economy as being on the verge of recession are legitimate. He’s well aware that perceptions drive large portions of the economy. Fears that the market might tumble cause people to sell, which then makes the market tumble. Businesses concerned about the economy slowing may stop hiring, which helps the economy to slow. The circular reasoning becomes a self-fulfilling prophecy, which is why the President’s concerns are real.

And the media is playing it up like the rest of the fake news they’re peddling in hopes that stoking fears will prove their premise correct.

It doesn’t matter to them how many people get hurt by this dastardly propaganda technique. They have one goal: Make Trump lose in 2020. If they knock off the Senate Majority and keep the House, that’s a plus as well. But the President is their sole target.

The funny part in this whole scenario is they’re blaming the one progressive component in President Trump’s economic plan for the worldwide economic downturn they’re predicting. The trade war with China is modeled after Senate Minority Leader Chuck Schumer’s and presidential candidate Bernie Sanders’s plan. This is, of course, conveniently overlooked as they’ve inverted the stances on tariffs to make them wholly owned by President Trump.

Speaking of inversions, the buzzword of the week is “inverted yield curve.” In layman’s terms, it’s a sentiment indicator that shows when it’s cheaper for the government to borrow for ten years rather than two. It goes against conventional economic wisdom and is claimed to be a precursor to recession. But there’s one factor in the current curve that’s not being taken into consideration. This market-based fear is not a worry about the current or near-future economy as much as it’s an indicator the prospects of Democrat winning the White House in 2020 will erase the progress that has been made in the economy.

In other words, the fearful dollar brokers are so scared of Democratic economic policies, they’re not willing to bet on the economy should a Democrat take over.

There’s a solution: Stop listening to the polls. As we learned in 2016, polls in the days leading up to the election were highly inaccurate. This far from the 2020 election, hypothetical head-to-head polling as completely useless. But it does drive fear, lending itself to the agenda being pushed by progressive media to help tank the economy by telling everybody the economy is about to tank.

Expect more economic lies from fake news media in the coming weeks. They’re pushing hard to destroy the economy regardless of how many Americans suffer from it. It’s a kamikaze mission to take down the President at any price.

We are currently forming the American Conservative Movement. If you are interested in learning more, we will be sending out information in a few weeks.

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Economy

Hogan Gidley echoes Trump: Media are pushing a recession

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Hogan Gidley echoes Trump Media are pushing a recession

Deputy White House Press Secretary Hogan Gidley joined Fox News host Howard Kurtz to discuss the media’s concerted and coordinated efforts to destroy the economy by stoking fears and making false claims about a recession that can only happen if they convince the people it will.

My colleague noted yesterday that the media isn’t reporting on actual bad news about the economy, but was instead trying to scare people into unwittingly participating in hurting the economy. They know the economy ebbs and flows based on perceptions and with the 2020 elections around the corner, they also know the President’s best case for reelection is the amazing prosperity millions of Americans are enjoying since he took office.

There is no doubt the left in both DC and newsrooms across the country are going to try to dismantle the economy by convincing people it’s getting bad. The only question is whether the people will believe them enough to make it true.

We are currently forming the American Conservative Movement. If you are interested in learning more, we will be sending out information in a few weeks.

American Conservative Movement

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Economy

Media isn’t reporting ‘bad economy’ – they’re hoping for it

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Media isnt reporting on bad economy - theyre hoping for it

The direct narrative legacy media is painting regarding President Trump is blatant and unambiguous. They want you to not only believe he is a racist, but most Republican lawmakers are also racist and anyone supporting them must be a racist as well. That’s their front-facing message as they attempt to push the 2020 election to the Democrats. But there are many associated narratives they’re also trying to drive, and none of them is more despicable than what they’re trying to do to the economy.

As we noted before, perceptions are the most power tool in helping or hurting the economy. When people believe things are good, they buy more and help to make it good. That’s an oversimplification of the complex nature of market and economic trends, but it holds true.

From now until the 2020 election, conservatives can expect an onslaught of negative news reports about the economy. Some will point to signs the economy is about to collapse. Eventually, they’ll shift gears to demonstrate how the economy is in the process of collapsing. Then, they’ll describe ways in which the economy has already collapsed. The more people they can make believe it’s true, the more likely it is that it will become a reality.

My colleague characterized it as a self-fulfilling prophecy, and that’s not inaccurate, but I think the better way to understand it is to realize in the post-truth society radical progressives want to build, they need the economy to collapse. They need capitalism to collapse. This isn’t so much an attempt to create a self-fulfilling prophecy as it is a stepping stone to the end goal of Modern Monetary Theory. That, more than anything else they’re proposing, is the most dangerous because it enables everything else.

But we’re not quite there yet, and MMT deserves a much longer analysis. For now, let’s take a look at a sampling of the narrative progressive legacy media is driving right now. Here’s a snapshot of the Google News “top stories” regarding the economy:

Media Trump Economy

Keep in mind, this isn’t a search for “Trump economy” or “coming economic collapse” or any doom-and-gloom keywords. This is the “full coverage” of our current economic situation, delivered in proper propaganda format by Google News.

The reality is the economy is still humming. Jobs are not hard to find, driving up wages and reducing unemployment. The stock market is strong. The dollar is strong, and while this may be hurting in the trade war with China, it’s giving Americans unprecedented purchasing power.

Getting word of reality out to the masses is the challenge with such an onslaught negative press against the economy. This is one of the reasons it is so important that crowdfunded conservative news outlets like NOQ Report receive as many donations from patriots as possible. Doing so is essentially like giving directly to the Trump reelection campaign because he needs truths like these promoted to voters. People are more inclined to believe what others are saying about issues than politicians, which is why we strongly encourage giving generously to NOQ Report.

The more the left builds the narrative that the economy is bad, the more likely it is the economy will have a downturn before the election. They’re lying now in hopes their lies become reality. We must adhere to the truth that the economy is strong.

We are currently forming the American Conservative Movement. If you are interested in learning more, we will be sending out information in a few weeks.

American Conservative Movement

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