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More Fake News: "Trump says US should start manipulating the dollar"
Posted on 7/4/19 at 9:47 am
Posted on 7/4/19 at 9:47 am
The EU and China actively and unilaterally devalued their currency. The EU lending rate (currently 0%) is 2.5% lower than ours. The EU is considering lowering further, and instituting negative rates.
What is the implication?
The implication is either US credit is far worse than the EU, necessitating the US to pay much higher rates on its debt, or the Fed is manipulating rates to strengthen the dollar.
But not according to an AP hack author.
What is the implication?
The implication is either US credit is far worse than the EU, necessitating the US to pay much higher rates on its debt, or the Fed is manipulating rates to strengthen the dollar.
But not according to an AP hack author.
quote:
Trump says US should start manipulating the dollar
By Martin Crutsinger
July 3, 2019
WASHINGTON (AP) — President Donald Trump on Wednesday accused China and Europe of playing a “big currency manipulation game.” He said the United States should match that effort, a move that directly contradicts official U.S. policy not to manipulate the dollar’s value to gain trade advantages.
In a tweet, the president said if America doesn’t act, the country will continue “being the dummies who sit back and politely watch as other countries continue to play their games — as they have for so many years.”
Trump’s own Treasury Department in May found that no country meets the criteria of being labeled a currency manipulator, although the report did put China and eight other countries on a watch list.
A country manipulates its currency when it drives down the value to make its exports cheaper and foreign imports more expensive.
As a candidate in 2016, Trump repeatedly charged that China was manipulating its currency and as president he would immediately label China as a currency manipulator.
However, after taking office, Trump’s Treasury Department has issued five reports on the subject, required by law every six months. In each report it said no country met the criteria to be labeled a currency manipulator.
LINK
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Posted on 7/4/19 at 9:58 am to NC_Tigah
quote:Wow. Just, wow.
The implication is either US credit is far worse than the EU, necessitating the US to pay much higher rates on its debt, or the Fed is manipulating rates to strengthen the dollar.
Those are the only 2 explanations you can come up with for different interest rates across regions? Seriously? Come on dude, read even a single Econ book before spouting off on a subject you clearly aren’t familiar with.
Posted on 7/4/19 at 10:07 am to funnystuff
quote:No. There are a litany of reasons to alter rates, up or down. That is the point. Relative to the author's proclamation that "Trump says US should start manipulating the dollar," can you come up with another reason to maintain a 2.5% EU-US differential that does ultimately imply disproportionate USD strengthening c/w the international environment?
Those are the only 2 explanations you can come up with for different interest rates across regions?
Posted on 7/4/19 at 10:20 am to NC_Tigah
The EU has been raising tax rates (on aggregate of course) at the same time as the US has been lowering ours. Lower taxes push interest rates up which strengthens a currency, while higher tax rates pushes interest rates down which weakens the currency.
But again, that’s just 1 of several dozen factors simultaneously impacting interest rates through market equilibreums. We absolutely should not intentionally distort those markets for the sake of manipulating our currency. That defeats the entire purpose of floating exchange rates.
But again, that’s just 1 of several dozen factors simultaneously impacting interest rates through market equilibreums. We absolutely should not intentionally distort those markets for the sake of manipulating our currency. That defeats the entire purpose of floating exchange rates.
Posted on 7/4/19 at 11:02 am to funnystuff
quote:That is new to me. I was under the impression the Fed's goals were maximum sustainable employment, stable prices, and moderate (2%) inflation. Are taxes included in the Fed mandate in some fashion?
Lower taxes push interest rates up
Insofar as higher taxes potentially slow growth, increase unemployment, and increase inflation, an indirect impact might be to affect economics in a way that could lead to rate cuts. We saw that in play during Obama's second term.
But higher taxes don't directly affect Fed rates as far as I'm aware.
In fact in terms of obamanomics' tenets, higher taxes increase growth and employment. That was the premise.
Re: EU taxes, they have been high and at fairly consistent rates for quite a while.
So we have a situation in which the US economy is not accelerating. We are at subtarget rate inflation. Yet, we have an author's proclamation that decreased rates would represent "currency manipulation". Given the indicators and environment, outside of the known effect of dollar strengthening, what is the rational of a 2.5% US gift to lenders at an ultimate cost to taxpayers of ~$25 billion/year?
This post was edited on 7/6/19 at 9:39 am
Posted on 7/4/19 at 11:22 am to NC_Tigah
Lower taxes flood an economy with borrowers. The influx of borrowers means means the demand for cross bank overnight loans increases, which pushes the FFR up. Lower taxes push virtually all interest rates up really, and the fed funds rate is certainly included.
quote:Yea, that was my entire point. You really don’t seem to understand the most basic foundations of monetary policy. This is literally taught in Econ 101.
But higher taxes don't directly affect Fed rates as far as I'm aware.
Posted on 7/4/19 at 11:48 am to NC_Tigah
Why didn't you post Trump's tweet while you were putting your own interpretation on it.
Here's what Trump tweeted:
That appears to be more in line with what the AP article said that what you implied.
Here's what Trump tweeted:
quote:
“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA,” Trump said on Twitter. “We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games - as they have for many years!”
That appears to be more in line with what the AP article said that what you implied.
Posted on 7/4/19 at 11:50 am to funnystuff
quote:Well, let's see. I clarified your "entire point" with regard to direct Fed rate alteration. Then I illustrated to you (I hope) how tax rates had nothing whatsoever to do with the Fed mandate, therefore no impact on lending rates, therefore nothing to do with a premise of "currency manipulation."
Yea, that was my entire point. You really don’t seem to understand the most basic foundations of monetary policy.
You really don’t seem to understand the most basic foundations of monetary policy. This is literally taught in Econ 101.
Posted on 7/4/19 at 11:53 am to texridder
quote:The AP article denies China or the EU are manipulating.
That appears to be more in line with what the AP article said that what you implied.
Posted on 7/4/19 at 12:22 pm to NC_Tigah
You do know that the fed doesn’t just pick the federal funds rate, right? The FFR is the interest rate on overnight loans made between banks, and it is a market equilibrium rate. The fed can set a target for that market and influence it through open market operations and other tools, but it is still a market outcome. And that market is influenced by many more players than just the Fed.
I was probably more harsh in my reply than I needed to be, so if I offended you I apologize. But this...
I was probably more harsh in my reply than I needed to be, so if I offended you I apologize. But this...
quote:...is simply dead-arse wrong. Tax rates have a huge impact on interest and exchange rates. As does consumer and producer confidence. As does government expenditures. As does risk. As does liquidity. As do tariffs. As does several dozen other factors. You really need to spend time learning about this subject in more detail before continuing this argument. You’ve got yourself firmly planted on the peak of the Dunning Krueger curve here and it’s got you arguing a losing position.
Then I illustrated to you (I hope) how tax rates had nothing whatsoever to do with the Fed mandate, therefore no impact on lending rates
Posted on 7/4/19 at 12:32 pm to NC_Tigah
The AP article clearly says Trump’s treasury department denied China or the EU being a currency manipulator. That wasn’t an evaluation the AP came to on their own.
Posted on 7/4/19 at 12:33 pm to NC_Tigah
quote:They kinda imply that but not expressly.
The AP article denies China or the EU are manipulating.
quote:
Trump’s own Treasury Department in May found that no country meets the criteria of being labeled a currency manipulator,
Posted on 7/4/19 at 1:24 pm to texridder
quote:Yet they kinda imply if the Fed reduced rates, it would constitute manipulation.
They kinda imply that but not expressly.
Posted on 7/4/19 at 2:23 pm to funnystuff
quote:Cite it in the Fed mandate, Aristotle.
Tax rates have a huge impact on interest and exchange rates.
Third time you've made the claim.
Third time I've asked you to cite "response to taxes" as a mandate within the FRA.
I assumed you knew what I was asking. Now I'm not so sure.
Do you not know what the Fed's dual mandate is?
Hint: 3 tenets ––> Direct response to taxes ain't one of them.
So one more time . . . economists disagree on economic effects of taxation.
Do you understand?
The Fed would respond to those effects, not to the taxes themselves.
Got it?
As varying experts (e.g., members on a diverse Federal Reserve Board) would initially disagree as to the anticipated economic effects subsequent to change in tax policy, and the Fed only has directives to respond to said economics, taxes might or might not impact the Fed.
Do you understand?
Likewise, in terms of issues which do drive the Fed, a disproportionately strong dollar in the face of weakened international currencies +/- weakening international economies, is likely to stifle domestic economic growth.
Clear?
Stifled domestic economic growth would be 1 reason the Fed could consider dropping rates. Low US inflation rates comprise a second justification for a rate cut. IOW, a rate cut in those circumstances would (1) Be related to international monetary policy, and (2) Be easily supportable given the current environment ––– without any "manipulation".
Posted on 7/4/19 at 4:14 pm to NC_Tigah
quote:
Cite it in the Fed mandate, Aristotle. Third time you've made the claim. Third time I've asked you to cite "response to taxes" as a mandate within the FRA
Funnystuff is right on this. You’re way off-base.
Posted on 7/4/19 at 5:16 pm to Athanatos
quote:You're back on line?
Athanatos
Do tell.
Posted on 7/4/19 at 7:52 pm to NC_Tigah
Dude, I can’t possibly explain this any mode clearly. I’ll try one more time, because this is sufficiently important to understand if you want to be involved in economic discussion. But this is the 4th and I’ve got family stuff and this is the last bit of time I’m wasting on you.
Just try to step back for one second from this mistaken position that the federal funds rate is determined solely in conjunction with the fed’s dual mandate. It’s just simply not.
For example, when a tax cut floods the market with increased demand to borrow, it will put upward pressure on the federal funds rate as banks have a higher need to make short term loans to one another (the interest rate on those loans is what we call the federal funds rate). If the fed were to hypothetically want to keep the fed funds rate low, they would have to actively do something like buying a bunch of government bonds from the public. That would flood the market with dollars, putting downward pressure on the interest rate to keep it stable. But if the fed were to do nothing at all, the federal funds rate would still rise.
That’s the simplest I can make it. The reason I hadn’t answered your fed mandate question is because it is a question that fundamentally missed the point. THE FED DOES NOT SIMPLY SET THE FEDERAL FUNDS RATE. It is a market interest rate where the Fed is just a single actor in a large, complex lending market.
Yes economists disagree on the full impact of taxes. But no, not a single economist disagrees with the assertion that a decrease in taxes puts upwards pressure on the federal funds rate. Source: I’m an economist.
Have a great 4th!
Just try to step back for one second from this mistaken position that the federal funds rate is determined solely in conjunction with the fed’s dual mandate. It’s just simply not.
For example, when a tax cut floods the market with increased demand to borrow, it will put upward pressure on the federal funds rate as banks have a higher need to make short term loans to one another (the interest rate on those loans is what we call the federal funds rate). If the fed were to hypothetically want to keep the fed funds rate low, they would have to actively do something like buying a bunch of government bonds from the public. That would flood the market with dollars, putting downward pressure on the interest rate to keep it stable. But if the fed were to do nothing at all, the federal funds rate would still rise.
That’s the simplest I can make it. The reason I hadn’t answered your fed mandate question is because it is a question that fundamentally missed the point. THE FED DOES NOT SIMPLY SET THE FEDERAL FUNDS RATE. It is a market interest rate where the Fed is just a single actor in a large, complex lending market.
Yes economists disagree on the full impact of taxes. But no, not a single economist disagrees with the assertion that a decrease in taxes puts upwards pressure on the federal funds rate. Source: I’m an economist.
Have a great 4th!
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