SWAG Observations
The other day my compatriot, the esteemed Dr. Alan Harrop, provided an excellent analysis of the purpose and effect of the POTUS tariff strategy. As I have mentioned, Alan covers facts very concisely, rarely delving into conjecture.
I have no such compunction. There is another facet to the tariff strategy that is a bit of a SWAG (Scientific Wild Ass Guess), but I offer it with researched background.
Right now, the Federal Reserve is holding interest rates high to defeat inflation, which is a normally accepted practice during normal times. Times are not now normal. Inflation is coming down, but haven’t hit the goal yet. Meantime, the real estate market is stagnant. While 7% mortgage rates are not historically high (my first was a bargain at 9.5%), if anyone has a 2-3% mortgage, they aren’t budging from it. Who can blame them? But there are a lot of those mortgages out there. So those folks are sitting tight. And 7-7.5% can still be a stretch considering the beating that inflation has had on earning power and savings. And the housing demand is bursting.
Other credit demands are out there too. Businesses want to build, to expand, to hire. But money is tight.
Enter the tariffs. By using the tariffs, POTUS can bypass the Fed by using the tariffs to drop the bond market so that capital will then seek other sources of earnings.
POTUS nominated Powell during his first term, along with a number of other nominating mistakes. (Comey? Sessions?) The Fed is an independent agency, beholden to neither the President nor the Congress. But it is hardly non-political. Fed Chair Powell is a denizen of the swamp as much as any of them. So, Powell has done things his way, regardless of what the POTUS wants. And POTUS does what he needs, regardless of what Powell wants. POTUS wants the dollar to remain the dominant trade currency, for the value of that dollar to slip compared to other countries, and to draw manufacturing resources – money, research, and talent – to the US.
The US is the 800-pound gorilla of the world’s economies. Without us, the rest of the world will grind to a trickle, especially China. Chairman Xi may try to save face, but 30 days of the new tariffs and he will be sweating. 60 Days and he’ll be sweating blood. But he can’t allow US products, especially durable goods like cars, to be imported. The quality differences are just too large. He’s caught between a rock and a hard spot. By squeezing the energy market, PDJT impacts Russia as well.
POTUS has signed the death certificate for globalization. The Swamp, especially the “elites” (I can’t describe Pelosi, Scheemer and company as “elite” with a straight face), are seeing their money train careen off the tracks. And the BullDOGER just keeps uncovering more of their theft.
Remember when President Barack O’Bozo was stumping for Her Majesty Hilarious Clinton, Queen of Chappaqua, and asked just how in the world that then candidate DJT was going to return all those manufacturing jobs? What was he going to do, “wave a magic wand”? It looks like 6-7 trillion dollars is already lined up to build new business in this country, plus many of the formerly domestic companies that fed offshore are coming back. POTUS didn’t need a magic wand. He needed a seriously large cudgel to persuade competing countries to play fair.
And the tariffs are that cudgel.
ciao,
The Snark