re: Peter Schiff says President Trump surrendered in shortest global trade war in history

Schiff has definitely been pushing economic doom porn for a long time. That said, it was inevitable that 90% of this board would conclude Trump got his intended result, no matter how it ended up.

That's all these stupid fricks are going to do is play a retarded game of heads I win tails you lose. If he holds on to the tariffs they will say it's because he's losing and other countries are fighting back and if he gives up tariffs they will say it's because he folded. The truth is irrelevant. It's almost certainly pretty much got all the stories already written they just have to decide which one to pick

quote:

---

.
Y'all think he sits in a room and just writes ideas on pieces of paper, then balls em up and puts in a shaker, rolls it around and picks one

---

I mean it's plausible. I was thinking more of throwing darts at a board though.

Fair point

quote:

---

So Japan started selling US bonds last night, and Trump folded on the tariffs.



This comment makes no sense.

---

Did you forget who you were replying to?

quote:

---

Schiff has definitely been pushing economic doom porn for a long time. That said, it was inevitable that 90% of this board would conclude Trump got his intended result, no matter how it ended up.

---

Since you were crying about the stock market, you too got the result you wanted.


S&P gains the most since WWII.

quote:

---

There were reports about them teaming up.

---

The X post you linked says nothing about Japan and China "teaming up" to sell bonds.

It's much more likely the "united front" they were seeking with each other and then Europe was to coordinate their tariff levels against the U.S.

quote:

---

a united front in the face of US tariffs

---

Your simple-minded level of understanding of capital markets is humorous.

quote:

---

I mean the Fed has intervened before with QE and QT, but that is relatively rare historically speaking, and not a policy that is being used right now in the longer term bond market.

---

You said earlier: "Your previous posts seem to be conflating the federal funds rate and the 10y treasury rate. The Fed sets the former through policy and open market activity, but the market sets the latter." There are several different but related ways to look at the relationship between short rates and longer term rates, but Fed policy on the short end (without QE/bond purchases) does affect longer rates including treasuries. Here's one way that happens.

Even before QE, short term rates as set by the Fed affected long term interest rates. Short rates affect the cost of funds for banks and other financial institutions. If short rates rise, their cost of funds (deposits, interbank lending, etc.) rises, so they maintain their profit margin by hiking the interest they charge to borrowers. Long term rates don't necessarily rise in lockstep with short rates but they normally move in the same direction. So as the fed hikes, market forces cause long rates, including US Treasury yields, to rise, but that rise is precipitated or strongly influenced by the Fed policy on the short end.

So why do long term rates sometimes fall while short rates are rising? Several reasons, one being investors anticipating that the economy is headed for a downturn and eventually the Fed will juice the money supply and reduce short rates by buying short term debt (old method, these days they lower IOER). Falling short rates will lower lenders' cost of funds, which in turn allows them to profitably lend at lower long term rates, which stimulates consumption/production and thus the economy. So investors front run that Fed effect and buy long term treasury debt to lock in current high rates and earn capital appreciation as future bond prices rise. That's a second way the fed affects long term rates via their policy on the short end; anticipation of future fed policy based on history and signalling. You may say this is a "market driven" function, but it is actually strongly influenced by the Fed. Without the Fed's influence, long rates would remain higher for much longer during a downturn, as default risk offset the impact of lower demand for borrowing.

Why would long rates rise when short rates are declining and recession risk is rising? This could be a sign of true market forces, i.e., investors are losing faith in the Fed's ability to protect both the dollar and the level economic activity. If QE is off the table, they may fear multiple risks on the long end, mainly inflation and default, which could both come into play simultaneously if foreigners are dumping dollars and US treasuries/corporates in an attempt to force US capitulation. Maybe they've decided inflation is baked into the case no matter what and this seems like a good time to unload risk and wait. Maybe the Federal Reserve is selling long term treasuries to raise cash for IOER to defend the dollar (not likely). Or maybe somebody just knew that either the ROW or Trump admin or both were about to kiss and make up. Recession risk off and yields go back up to where they were a few months ago.


Here's another way to think of how short rates affect long. Debt instrument risk increases with duration, so lenders generally demand higher interest rates as loan duration increases, to compensate for that higher risk. If the positive yield spread between long and short maturities declines (due to fed raising short rates), lenders' either raise rates on long term loans to maintain their margin, or their preference shifts toward shorter duration assets with a better risk/reward profile, which in turn puts upwards pressure on long term interest rates.

There are other, mathematical reasons that short and long term interest rates are connected, but no matter how you look at it, Fed policy at the short end plays a role in setting rates across the entire curve.

Trump is winning this in so many ways. Similar to why restaurants don't mind giving out their recipes is because there is always some secret they leave out. This is how Trump works as well. He wrote his strategy in his book but that strategy does not work unless you also employ what Trump kept secret.

Trump never goes into a negotiation, or a fight without multiple ways to win and multiple exit strategies. On the tariffs Trump did not intend it to be a long battle. No doubt he knew the market implications and the fickle people were going to start crying when they lost $1. Trump stays fluid and adapts to the current environment.

His BIG win? China and Xi got really F,Ed. China was trying to put wedges in US relations and trade with other countries, they were trying to tank the US markets, they were trying to maximize the tariffs to their benefit. All that got pulled out from under them and all those countries they were working, just left the sitting on the outside all by themselves. Trump's US just got stronger and China just got weaker exponentially. Does that sound like losing for Trump?

Trump also got to see where people are on his policy. How many were offering vocal support but we're working behind him to sabotage his efforts? Those are now outed as people he does not want involved in economic sessions.

Trump also built a longer runway for future negotiation tactics. All those who panicked on day two, may now wait until day 7 because what they thought was going to happen did not happen and they look stupid now.

quote:

---

this board would conclude Trump got his intended result

---

That’s to be determined. He very well could have folded or he could very well have done what was needed to achieve his desired result.