Sweet Irony

You will find no harsher critique of Mr. Trump’s indiscriminate use of social media than yours truly. If it were up to me, the president’s phone would have been deactivated a long time ago. Last week’s performance on economics, however, struck at the heart of a story economists and strategists have been circling for a long time. How far will monetary policy divergence be stretched in this cycle? Mr. Trump first suggested that other major economies—Europe and Asia—are unfairly manipulating their interest rates and currencies, before following up with a swing at Fed for making things worse by hiking rates. In short; the White House is suddenly spooked by the risk to the economy from a stronger dollar and higher rates. This is probably a reasonable political worry ahead of the mid-terms, but it is also sweet irony. If Mr. Trump wants to complain to anyone about the vigour of the dollar, he should start with a look in the mirror.  Aggressive tax and short-term inflationary tariffs in an economy with a near record-low unemployment and savings rate could only have one outcome in the end. A more assertive Fed and a stronger dollar always were obvious side-effects of such a policy constellation. 

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Your humble scribe will be on holiday in the next week few weeks. Please do try not to break anything while he is away.