Monday, June 24, 2019

We Don' Need No Steenkin' Badges!

Nice world economy ya got there.  Be a shame if something was to happen to it!
Ignore the typos; they'll be corrected eventually.  Ignore the errors; China, for one, gets 2/3rds of its oil from Russia.  Pay attention to the argument:  those assaults on tankers in the Strait?  Who cares?!  Not our problem!  We don't need no steenkin' foreign oil (we do, of course; oil is a global market/commodity, when supplies out of the Middle East are affected, oil prices in America rise)!

You'd think the U.S. wasn't a part of the global economy.  This is isolationism on a lunatic scale.  And why?  Because Trump's climbdown from "obliteration like you've never seen before" only works if those assaults on those tankers aren't the U.S.'s problem anyway.  Trump isn't trampling alliances; Trump is once again finding a way to deny responsibility.  He's President of the United States, not the world!  He's not responsible for saving China's oil!  (If you can identify China's oil in any specific tanker.  Again, that's not the way oil markets work at all, but Trump doesn't want to understand that.)

As further proof of his economic genius:

Tariffs and cavalier stupidity about world markets is not the problem, interest rates are!  Again, nothing is Trump's fault; it's always somebody else what done to him (or the country; l'etat, c'est moi, is Trump's principal of government).  Let's look at the analysis of notoriously left-wing and anti-Trump Forbes:

However, despite the concerns, one cannot ignore that much current data is robust. The Fed's primary goals are low and stable inflation and full employment. The U.S. economy looks good on both counts right now. Unemployment is at extremely low levels. Inflation is moderate. It's almost the perfect outcome for the Fed, so why cut rates? In fact, should you even raise them at the economy appears closer to the top of the economic cycle than the bottom?

As much as current data is sound, the Fed must look ahead. Interest rate policies are estimated to take around a year to have a real impact on the economy. Looking ahead, the picture may be less rosy. Indeed, the yield curve is inverted, a bad sign. Though the outcome of tariffs is uncertain, estimates suggest they could be a drag on the economy as prices rise. Tariffs are perhaps not enough to prompt a rate cut in isolation, but still a negative should they persist. Furthermore, manufacturing data appears soft. Weak manufacturing is a problem, because manufacturing output can be a big swing factor for the economy. Even in a weak economy, consumers will still spend money. However, manufacturing in certain sectors at rocky times for the economy can all but grind to a halt. Production stops, materials aren't purchased and workers are fired or see their hours cut. Companies sell-through ready-made inventory to preserve cash. That's the kind of sharp move that can cause a recession. Nonetheless, we should not ignore that even though a lot of signals suggest economic risk, equity markets remain quite optimistic, in contrast to the bond market's concerned take on the future.
Trump doesn't treat the presidency like a bully pulpit; he's much more like a bull in a china shop.  Except nobody buys china anymore.  Can't imagine who's buying Trump's schtick, either.

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