Trump’s Recipe For...
Transcript of Trump’s Recipe For...
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Trump’sRecipeForDisaster
RichardDuncan
h5p://www.richardduncaneconomics.com
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MACROWATCHAvideo-newsle-eranalyzingtrendsinCreditGrowth,LiquidityandGovernmentPolicytoan>cipatetheirimpactoneconomic
growthandassetprices
h-p://www.richardduncaneconomics.com
ToSubscribetoMacroWatchata50%discount,visittheMacroWatchwebsite,clicktheSubscribetaband,when
prompted,usethediscountcouponcode:financial
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It’sTooSoonToKnow,But…
• Wesimplydon’tyetknowwhateconomicpoliciesPresidentTrumpwillputinplace.
• However,basedonhiscampaignpromisesandwhatwe’velearnedsincetheelec>on,there’srealcauseforconcern.
• Acombina>onoftaxcuts,increasedgovernmentspendingandpoliciesthatcurtailtradewouldbearecipefordisasterbecauseitwouldpushupinterestratesandcrushthehighlyleveragedUSeconomy.
• Fivethingswilldeterminewhichwayinterestrateswillmove–and,therefore,thedirec>onofallassetpricesandtheeconomyoverall.
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Here’sWhyInterestRatesAreSoImportant
• TheglobaleconomicbubblecameveryclosetocollapsingintoanewGreatDepressionin2008.
• ThatdisasterwaspreventedbyultralooseMonetaryPolicy.
• Centralbanksslashedshortterminterestratesto0%andthen“printed”trillionsofdollarsworthofnewmoneyandusedittobuyfinancialassets.
• Thatstrategyallowedcredittoexpandandcausedassetpricestosoar,therebyrefla>ngtheglobaleconomicbubbleandstavingoffeconomiccollapse.
• Whathappensnextwilldependoninterestrates.
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0%
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400%
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14.00%
16.00%
1980Q1
1982Q1
1984Q1
1986Q1
1988Q1
1990Q1
1992Q1
1994Q1
1996Q1
1998Q1
2000Q1
2002Q1
2004Q1
2006Q1
2008Q1
2010Q1
2012Q1
2014Q1
2016Q1
10-YearUSGovernmentBondYieldvs.CredittoGDPRa\o
1980topresent
10-YearUSGovernmentBondYield(le^axis) DebttoGDP(rightaxis)
Source:TheFed
Asinterestratesfell,creditbecamemoreaffordable.CreditexpandedandCreditGrowthdroveEconomicGrowth.
But,now,ifinterestratesrise,creditwillcontractandtheeconomywillcrash.
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0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
19521954195619581960196219641966196819701972197419761978198019821984198619881990199219941996199820002002200420062008201020122014Q22016
USTotalDebt=TotalCreditUS$millions,1952to2016
$65Trillion$10trillionhigherthanthepre-crisispeak.
CreditGrowthDrivesEconomicGrowth.1964=$1trillion2016=$65trillion
Source:TheFed
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0
10,000
20,000
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60,000
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195519561958196019621963196519671969197019721974197619771979198119831984198619881990199119931995199719982000200220042005200720092011201220142016
HouseholdNetWorthUS$Billions,1980toQ32016
And,asInterestRatesfell,AssetPricesrose.A^er2008,QEpushedupNetWorthby$35trillion(+60%).RisingassetpricecreatedaWealthEffectthatboostedconsump\onandeconomicgrowthintheUS.
Source:Fed
$90Trillion
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350
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1951-10-01
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1965-10-01
1967-10-01
1969-10-01
1971-10-01
1973-10-01
1975-10-01
1977-10-01
1979-10-01
1981-10-01
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1985-10-01
1987-10-01
1989-10-01
1991-10-01
1993-10-01
1995-10-01
1997-10-01
1999-10-01
2001-10-01
2003-10-01
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2007-10-01
2009-10-01
2011-10-01
2013-10-01
2015-10-01
HouseholdNetWorthasa%ofDisposablePersonalIncome
%,1951to2016
Source:Fed
Thisra\oofWealthtoIncomeisnearrecordhighlevelsbecauseverylowinterestratesandQEhavepushedupassetprices.
Ifinterestratesnowrise,assetpriceswillspiralbackdown,crea\nganega\veWealthEffectthatwillpushtheeconomyintocrisis.
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TheFiveFactorsThatWillDetermineInterestRates
1. TheGovernment’sBudgetDeficit.2. TheUSCurrentAccountDeficit3. Quan>ta>veEasingbycentralbanksoutsidetheUS.4. TheInfla>onRate5. TheChineseRMBExchangeRatevs.theUSDollar.
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1.TheBudgetDeficit
• PresidentTrump’splanstocuttaxesandincreasegovernmentspendingonthemilitaryandinfrastructurearequitelikelytocausethegovernment’sbudgetdeficittoincreaseverysignificantly.
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-1,600,000
-1,400,000
-1,200,000
-1,000,000
-800,000
-600,000
-400,000
-200,000
0
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1960
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2018est
2020est
USGovernmentBudgetSurplusorDeficit(–)US$Millions,1960to2021es\mates,(FiscalYearsendingSept30)
Thebudgetdeficitsarecurrentlyprojectedtoaverage$519billionayearfrom2017to2021.Thoseprojec>onsdon’tincludethelargeincreaseintheannualdeficitsthatislikelytoresultfromPresidentTrump’sproposedtaxcutsandincreasedgovt.spending.
Es\mates
Source:OfficeOfManagement&Budget
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2.CapitalInflows
• BeforeBre-onWoodsbrokedown,tradeimbalancesandcapitalflowsbetweenna>onswereverylimited.
• Butnowtheyhavebecomeverylarge.• CapitalinflowsintotheUnitedStateshavebecomeanenormouslyimportantsourceoffundingfortheUSBudgetdeficit.
• Thelargerthecapitalinflowsare,theeasieritistofinancethegovernment’sbudgetdeficitatlowinterestrates.
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-100,000
0
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TheUSFinancial&CapitalAccountUS$millions,1960to2015
Source:BureauofEconomicAnalysis
CapitalInflowsintotheUnitedStates.
$807bn
$463bn
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MirrorImage
• TheCapitalInflowsarethemirrorimageoftheCurrentAccountdeficit.
• WhentheCurrentAccountDeficitgrowslarger,theCapitalInflowsalsogrowlarger,makingiteasiertofinancethebudgetdeficit.
• But,whentheCurrentAccountDeficitshrinks,CapitalInflowsalsoshrink,makingitmoredifficulttofinancethebudgetdeficitatlowinterestrates.
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-1,000,000
-800,000
-600,000
-400,000
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0
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TheCurrentAccount=TheFinancialandCapitalAccountUS$millions,1960to2015
Financial&CapitalAccount CurrentAccount
MirrorImage
Source:BureauofEconomicAnalysis
1987StockMarketCrash
CapitalInflowshaveapowerfuleffectonUSassetprices.
PropertyBubble
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CapitalInflowsMayShrink
• Trump’splanstoforceUScompaniestobringtheirfactoriesbacktotheUS,torenego>atetradedealsand/ortoimposetradetariffsonChinaandMexicowouldallcausetheUSCurrentAccountdeficittoshrink.
• AsmallerCurrentAccountdeficitwouldcausethecapitalinflowsintotheUnitedStatestoshrink,too.
• LesscapitalinflowswouldmeanlessdemandforUSgovernmentbonds.
• Thatwouldpushupinterestratesandpoptheassetpricebubble.
• So,wemustkeepacloseeyeontheUSCurrentAccountDeficitbecauseitwilldeterminethesizeofthecapitalinflows.
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3.Quan\ta\veEasing
• Quan>ta>veEasingisthethirdfactorwemustwatch.
• Clearly,whentheFedprintsmoneyandbuysgovernmentbonds,thatpushesupthepriceofthebondsandpushesdowntheiryields.
• Addi>onalQEfromtheFednowlooksunlikely,atleastinthenearterm.(We’regoingtohavefiscals>mulusinsteadofmonetarys>mulus.)
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OtherCentralBanks
• However,wemustalsomonitortheQuan>ta>veEasingbeingcarriedoutbyothercentralbanksaroundtheworldbecauseQEoverseasimpactsUSinterestrates,too.
• Currently,theECB,BOJandBOE(combined)areprin>ngtheequivalentofroughly$500billioneverythreemonths.
• Theyusethatnewmoneytobuytheirgovernments’bonds.Thatpushesupthepriceoftheirbondsandpushesdowntheiryields.
• LoweryieldsinEurope,JapanandtheUKarenowpunngdownwardpressureonUSgovernmentbondyields.
• However,ifthosecentralbanksprintlessmoneyinthefuture,USinterestrateswouldprobablyrise.
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Global QE
Per Month
US$ Exchange Rate
US$ billion per Month
US$ billion per Quarter
BOE £70 billion over 8 months £8.75 billion 1.3 11.4 34.1
BOJ Yen 80 trillion per year Yen 6.67 trillion 100 66.7 200.1
ECB Euro 80 billion per month Euro 80 billion 1.13 90.4 271.2
Total 168.5 505.4
HalfATrillionDollarsPerQuarterTheBOJandtheECBarenowcarryingoutQuan\ta\veEasingonaverylargescale.
Herearethedetails:
Source:CentralBanks
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Central Bank Holdings Of Government Debt Converted into US Dollars, billions
US$ Exchange Rate US$ billions BOE £375 billion 1.3 488 BOJ Yen 368 trillion 100 3,700 ECB Euro 1,326 billion 1.13 1,500 Fed $2,462 billion 2,462
Total 8,150
US$8.15trillionGovernmentDebtCancelledThusFar
ThistotalisscheduledtoincreasebyUS$1trillionoverthenext6months.
Source:TheBOE,BOJ,ECB,Fed
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BOE 25% BOJ 35% ECB 12% Fed 13%
TheAmountOfGovernmentDebtCancelled*SoFarCentralBankHoldingsOfGovernmentDebt
Asa%ofTotalGovernmentDebt:
Note:ThenumbersfortheBOJandECBareslightlyoverstatedbecausesomeoftheassetstheyhaveacquiredarecorporatebonds(butonlyasmallpart).TheimportanceoftheFed’sQEisunderstatedbecauseinaddi>ontoowningUS$2.5trillionofgovernmentbonds,theFedalsoowns$1.7trillionofasset-backedmortgagedebt.
Source:RDes>mates*Effec>velyCancelled
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4.Infla\on
• Infla>onalsoaffectsinterestrates.• Iftheinfla>onrategoesup,thedemandforbondswillgodown–unlesstheyieldofferedonthosebondsincreases.
• Noonewilllendmoneyfor3%iftheinfla>onrateis5%.
• InrecentyearstheInfla>onRatehasbeenexcep>onallylow–despiteallthemoneythatthecentralbankshavebeenprin>ng.
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1.6%inOct.2016
Source:StLouisFed
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WhatCouldCauseInfla\onToRise?
• Infla>onhasfallensincetheearly1980sbecauseincreasingtradewithlowwagecountrieshaspusheddownUSwagesandthepriceofconsumergoods.
• Now,however,iftheUSimportslessfromlowwagecountries,thepriceofmanufacturedgoodswillrise,USwageswillrise,andinfla>onwillrise.
• ForcingcompaniestobringtheirfactoriesbacktotheUnitedStatesorimposingtradetariffsonimportedgoodswouldcauseinfla>ontoincrease.
• Increasedgovernmentspendingcouldalsocauseinfla>ontopickup.
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5.TheChineseRMB
• Finally,thevalueoftheRMBcouldalsoimpactUSinterestrates.• TheUnitedStateswillimportnearlyHalfATrillionDollarsworthof
goodsfromChinathisyear.• IftheRMBcon>nuestoweakenagainsttheDollar,thoseimports
willbecomecheaperandputdownwardpressureonUSinfla>onrates.
• IftheRMBweretostrengthen(whichisunlikely),thenthatwouldputupwardpressureonUSinfla>on.
• Ofcourse,iftheUSputstradetariffsonChinesegoods,thatwouldcauseaspikeintheUSinfla>onrate,whichwouldpushupUSinterestrates.
• Bytheway,in2015theUSimported$483billionofgoodsfromChinaandexported$116billionofgoodstoChina,resul>nginaUStradedeficitwithChinaof$367billion-orroughly$1billionaday.
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0.0
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ChineseRMBperDollar1980toDecember2016 From2006to2013,
theRMBappreciated.But,now,itisfallingagain.TheGreatChinaBoom
wasfuelledbyaveryweakcurrency.Itfellfordecadesun\l1994.
Source:CEIC
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TheUSTradeDeficitIsToBlame
• PresidentTrumpbelievestheUStradedeficithasbeenresponsibleforthelossofmanufacturingjobsintheUnitedStatesandthedownwardpressureonUSwagesthathasoccurredoverthelastseveraldecades.
• Iagree.• I’vewri-enabouttheharmtheUStradedeficithasdonetotheUnitedStatesandaboutthedestabilizingimpactit’shadontheglobaleconomyinallthreeofmybooks.
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TheDollarCrisis
Herearetheopeninglinesfrommyfirstbook,TheDollarCrisis:
“Theprincipleflawinthepost-Bre-onWoodsinterna>onalmonetarysystemisitsinabilitytopreventlarge-scaletradeimbalances.ThethemeofTheDollarCrisisisthatthoseimbalanceshavedestabilizedtheglobaleconomybycrea>ngaworld-widecreditbubble.”
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NotEasy
• However,unwindingtheUStradedeficitisgoingtobeverydifficult.
• Overthepast35years,thatdeficithasbecomeTHEdriverofglobaleconomicgrowth.
• Infact,theen>reglobaleconomyhasbeenconstructedaroundunbalancedtrade.
• Atthispoint,thea-empttoeliminatetheUStradedeficitcouldveryeasilycausetheglobaleconomytocollapseintoanewGreatDepression.
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-900,000
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0
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2014
USCurrentAccountBalanceUS$Millions,1960to2015
Fromtheearly1980s,theUSCurrentAccountDeficitbecameTHEdriverofglobaleconomicgrowth.Aslongasthedeficitexpanded,theglobaleconomyprospered.
Source:BureauofEconomicAnalysis
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TheUndesirableConsequencesofElimina\ngTheTradeDeficit
1. IftheUSreducesitsimports,theglobaleconomywillshrink.2. IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepressionthatwouldseverelyimpactallofChina’stradingpartners,andpoten>allyleadtosocialinstabilitywithinChinaandtomilitaryconflictbetweenChina,itsneighborsandtheUS.
3. IftheUSCurrentAccountdeficitreturnstobalance,theglobaleconomywillsufferfrominsufficientDollarliquidity,whichcouldcauseeconomicstagna>onorworse.
4. Areduc>onofimportsfromlowwagecountrieswouldcauseUSinfla>ontorise,whichwouldpushupUSinterestrates.
![Page 32: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/32.jpg)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
USImports&ExportsUS$Millions,1990to2015
Exportsofgoodsandservices Importsofgoodsandservices
IfUSImportsfall,USExportswillfall,too.
WhentheUSbuyslessfromtherestoftheworld,therestoftheworldbuyslessfromtheUS.
Source:BureauofEconomicAnalysis
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TheUndesirableConsequencesofElimina\ngTheTradeDeficit
1. IftheUSreducesitsimports,theglobaleconomywillshrink.2. IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepressionthatwouldseverelyimpactallofChina’stradingpartners,andpoten>allyleadtosocialinstabilitywithinChinaandtomilitaryconflictbetweenChina,itsneighborsandtheUS.
3. IftheUSCurrentAccountdeficitreturnstobalance,theglobaleconomywillsufferfrominsufficientDollarliquidity,whichcouldcauseeconomicstagna>onorworse.
4. Areduc>onofimportsfromlowwagecountrieswouldcauseUSinfla>ontorise,whichwouldpushupUSinterestrates.
![Page 34: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/34.jpg)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
China'sExports&ImportsUS$Millions,1990to2015
Exports
Imports
WhenChinaExportsless,itImportsless.AndwhenChinaimportsless,commoditypricesfall,hur\ngtheeconomiesandcurrenciesofthecommodityproducingcountriesallaroundtheworld.
Source:CEIC
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IfChina’sEconomyImplodes
• China’seconomyisalreadyvergingoncrisis.Ithasmassiveexcesscapacityacrossprac>callyeveryindustry.So,productpricesarefalling,companiesareloss-makingandthebankingsystemisstuffedwithunrecoverableloans.
• IfChina’stradesurpluswereeliminated,thenega>veimpactonChina’seconomywouldbedevasta>ng.
• Inalllikelihood,Chinawouldexperienceaseveredepression,thatcouldthreatentheruleoftheCommunistParty.
• Chinamightrespondmilitarily–justasJapandidatPearlHarborarertheUSimposedanoilembargoonJapanin1941.
• Nooneshouldunderes>matethedamagethatcouldresultfromaneconomiccrisisinChina.
![Page 36: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/36.jpg)
TheUndesirableConsequencesofElimina\ngTheTradeDeficit
1. IftheUSreducesitsimports,theglobaleconomywillshrink.2. IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepressionthatwouldseverelyimpactallofChina’stradingpartners,andpoten>allyleadtosocialinstabilitywithinChinaandtomilitaryconflictbetweenChina,itsneighborsandtheUS.
3. IftheUSCurrentAccountdeficitreturnstobalance,theglobaleconomywillsufferfrominsufficientDollarliquidity,whichcouldcauseeconomicstagna>onorworse.
4. Areduc>onofimportsfromlowwagecountrieswouldcauseUSinfla>ontorise,whichwouldpushupUSinterestrates.
![Page 37: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/37.jpg)
GlobalLiquidityWouldDryUp
• Whentheworldwasonthegoldstandard,“globalliquidity”dependedonthediscoveryofnewgoldmines.Some>mestherewastoomuchgold(16thCenturyEurope,whichcausedinfla>on)andsome>mesnotenough(late19thCenturyAmerica,whichcauseddefla>on).
• ButunderTheDollarStandard,globalliquidityisdeterminedbythequan>tyofDollarsintheglobaleconomy;andtheprincipalwayinwhichDollarsareinjectedintotheglobaleconomyisthroughtheUSCurrentAccountdeficit.
• IftheUSCurrentAccountDeficitwereeliminated,thesupplyofDollarliquiditywouldbetoo>ghttosupporteconomicexpansion.
• Thatwouldprobablyresultinglobaleconomicstagna>onorworse.
![Page 38: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/38.jpg)
TheUndesirableConsequencesofElimina\ngTheTradeDeficit
1. IftheUSreducesitsimports,theglobaleconomywillshrink.2. IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepressionthatwouldseverelyimpactallofChina’stradingpartners,andpoten>allyleadtosocialinstabilitywithinChinaandtomilitaryconflictbetweenChina,itsneighborsandtheUS.
3. IftheUSCurrentAccountdeficitreturnstobalance,theglobaleconomywillsufferfrominsufficientDollarliquidity,whichcouldcauseeconomicstagna>onorworse.
4. Areduc>onofimportsfromlowwagecountrieswouldcauseUSinfla>ontorise,whichwouldpushupUSinterestrates.
![Page 39: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/39.jpg)
TheUndesirableConsequencesofElimina\ngTheTradeDeficit
5. Theelimina>onoftheCurrentAccountdeficitwouldcauseasharpreduc>onincapitalinflowsintotheUS,whichwouldalsocauseUSinterestratestorise.
6. HigherinterestrateswouldcausecredittocontractandtheUSeconomytogointorecession.
7. HigherinterestrateswouldalsocauseasharpfallinUSassetprices.That,too,wouldalsocausetheeconomytogointorecession.
8. HigherinterestratescouldcauseawaveofcreditdefaultsintheUSandaroundtheworld,poten>allyleadingtoanewsystemicfinancialsectorcrisis.
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ABe5erWay
• Forallofthesereasons,I’mveryconcernedthatitwillnotbepossibletoeliminatetheUStradedeficitwithoutcausingtheglobaleconomicbubbletoimplodeintoanewgreatdepression.
• Ratherthana-emp>ngtoeliminatethedeficit,itwouldbewiserfortheTrumpAdministra>ontoallowthedeficittopersist,buttopursuepoliciesthatwouldincreaseaggregatedemandinthecountriestheUStradeswithandalsointheUnitedStatesitself.
![Page 41: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/41.jpg)
ABe5erWay
• Forinstance,theUScouldenactpoliciesthatwouldforceChinatoincreasewagesinitsmanufacturingsector.ThatwouldincreaseChina’sdemandforUSgoodswithoutcausingacrisisinChina.
• Athome,theUSgovernmentcouldsharplyincreaseitsinvestmentinnewindustriesandtechnologies.ThatwouldboostUSpurchasingpowerandgrowth–and,thatinvestmentcouldbefinancedatverylowinterestratesthankstothedefla>onarypressuresandthecapitalinflowsresul>ngfortheUStradedeficits.
![Page 42: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/42.jpg)
Conclusions
• TheproposalsoutlinedthusfarbyPresidentTrumpsuggestthat:
1. Thebudgetdeficitwouldgrowlarger(duetotaxcutsandincreasegovernmentspending);
2. Thecurrentaccountdeficitwouldshrink(duetorenego>a>ngtradedeals,bringingUSfactoryjobsbacktotheUSandpossiblytradetariffs);
3. Andinfla>onwouldpickup(duetoincreasedgovernmentspending,higherUSwages,pressureonChinatopushuptheRMBand,possibly,tariffs).
![Page 43: Trump’s Recipe For Disasterstatic.financialsense.com/historical/users/u796/pdfs/2017/Recipe-For-Disaster.pdfTo Subscribe to Macro Watch at a 50% discount, visit the Macro Watch website,](https://reader033.fdocuments.net/reader033/viewer/2022042809/5f8de55dc1f26d6e4a6338a6/html5/thumbnails/43.jpg)
ARecipeForDisaster
• Ifthosepoliciesreallyareadopted,theywouldbearecipefordisasterbecausetheywouldpushUSinterestratessignificantlyhigher–andthatwouldpoptheglobaleconomicbubble.
• Ifitpops,itmaybepossibletoreflateitagainwithevenlargeramountsofQuan>ta>veEasing.
• Ontheotherhand,itmightnotbe,inwhichcasetheworldcouldbeplungedintoanewGreatDepression.
• Inthatscenario,massivewealthdestruc>onwouldonlybethebeginningofourproblems.Ourpoli>calins>tu>onswouldprobablynotsurvivethestrain.
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