US Dollar Index

In my email:

It's all downhill since January, for sure.

Trump's record. Policy Uncertainty: up. Consumer Confidence: down. And the Dollar: down.

I never heard of the "U.S. dollar index" before. I find it at MarketWatch as U.S. Dollar Index (DXY). I grabbed the 10-year graph, and cropped it to show since just before Covid:

The last high point on the right,  above the 105 level, shows October 1, 2024. Find the tick mark for 2025 and from there go straight up to the blue line at the 104.21 level: That point shows January 1, 2025. Looks like that's where the other graph starts, the first graph. From that point both graphs show strong decline.

The second graph shows an October 2024 peak -- before the November election. But the next data point on the 10-year graph is for January 1, 2025. So the graph does not indicate when the peak was, relative to the election. It  looks like the downturn was an immediate response to the Novemper election, but it turns out that it was not.

Yes, I do look for things like that. All the time.

At MarketWatch the 6-month graph begins in October and shows weekday readings. Looks like the Dollar Index peaked on 13 January 2025 at 109.96 whatevers. The decline started in mid-January. Like Consumer Confidence, the Dollar Index waited a couple of months after the election before starting to fall. It did not make a severe change right after the November election, the way Uncertainty did. Sorry to disappoint.

Back to the 10-year graph. Covid created a comparably large drop from the January 1, 2020 high. And something -- oh, inflation, no doubt -- created a comparably large drop from the high point of July 1, 2022, with CPI inflation having reached 8.99930 percent in June. (Call it 9 percent. It couldn't get much closer.)

Kinda funny: the Dollar Index peaked moments after inflation peaked, and both came down together. Well, as I said, I never saw the Dollar Index before. I don't claim to know what it measures.

Yes, the "This Year" performance on the first graph is an eye-opener. But when eyes are open, the decline is not as overwhelming as that graph makes it look. That first graph only tells me I need to keep an eye on the Dollar Index data, too. I know, it would be more fun to say "Trump is crashing the economy" but I can't say that. Not yet. Yes, I still think he's trying to crash the economy. But that's not the same thing.

It's worse.

It has taken almost 50 years, but we're getting there

Paul Samuelson, writing in 1979:

Today’s inflation is chronic. Its roots are deep in the very nature of the welfare state. [Establishment of price stability through monetary policy would require] abolishing the humane society [and would] reimpose inequality and suffering not tolerated under democracy. A fascist political state would be required to impose such a regime and preserve it. Short of a military junta that imprisons trade union activists and terrorizes intellectuals, this solution to inflation is unrealistic—and, to most of us, undesirable.

From "The Evolution of U. S. Monetary Policy" by Robert L. Hetzel (2017). Hetzel's reference to Samuelson is:
Samuelson, Paul A. “Living with Stagflation” (1979) in Kate Crowley, ed., The Collected Scientific Papers of Paul A. Samuelson. vol. 5, no. 379, 1986, 972.

Project 2025 was "Organized by the Heritage Foundation"

Just before 7 o'clock this morning on the Audie Cornish show on CNN, the topic text across the bottom of the screen reads:

TRUMP SUGGESTS HARVARD SHOULD BE TAXED "AS A POLITICAL ENTITY"

Harvard, a political entity.

Meanwhile, as you are no doubt aware, the Heritage Foundation is a tax-exempt charitable organization.

That is unconscionable. 

Do the math

From Congressional Research Service: "Introduction to U.S. Economy: Inflation" dated April 1, 2025

From page 2 of 3:

 

The link turned up as part of the AI Overview in Google Search results. The AI Overview response itself provides a different calculation:

To convert a nominal value to a real value, you need to adjust for inflation using a price index. The formula is: Real Value = Nominal Value / (Price Index / 100).

 

To remove inflation from nominal values, you divide it out of the nominals. The CRS would have us multiply inflation in.

An April Fools gag? New Trump policy?? Pure ignorance??? Hard to say.

Engineering a depression

"The Trump Depression" by Robert Kuttner, 5 March 2025, at The American Prospect. The subtitle says "Donald Trump is on track to be the first president to deliberately engineer a severe depression." That was the first reference I found to Trump creating a depression. The statement is clear and, I think, correct. The goal is depression, and the intent deliberate.

The second reference to depression that I saw was S2E8 of "Have I Got News for You". About 8:50 into the video, Roy Wood Jr asks "What happens of Trump's tariffs don't work and America ends up in a depression?" And again, about 9:14 into the video, Roy Wood Jr asks: "If the depression hurricane is off shore, how close is it to landfall?" It is a comedy show, but Roy Wood Jr was expressing honest concern.

Don't fast-forward to the depression quotes. Watch the show, it's so funny. It's my new favorite show.

The third reference to depression is from "Smerconish" on CNN. Season 2025, the 12 April episode. At the end of the episode he shows a cartoon of Trump wearing a hat that says "Make America 1929 Again". It's perfect.

I'm glad the topic comes up once in a while because if we are going to have a depression, it is best not to be caught by surprise. Anyway, these things take time to develop. And if people believe Trump is creating a depression, and react negatively, there is time to change course. Of course, the reaction to Trump's policy would have to be strong and severe.

In the American Prospect article, Kuttner asks: "What in the hell does Trump think he is accomplishing?"

It's a good question. I have been waiting, focusing on the news, trying to understand what Trump's plan is, trying to understand how "tariffs" and "Greenland" and "bullying" and all the other pieces of his plan fit together. It finally struck me about two days ago: He's creating a depression. Thank you, Mr. Kuttner, for helping me see it.

Kuttner says: 

A related key question is whether Trump has any master plan for the economy here, or whether he is just batshit crazy. The evidence is that Trump’s effort to destroy the government reflects a certain malign consistency, but that his effort to destroy the economy is based on sheer ignorance and impulsivity.

It's not ignorance or impulsiveness. It can't be. It's a plan. A "deliberate" plan to create a depression. As Kuttner has it, "There are several distinct elements" to Trump's policy, "all cutting in the same direction, all interacting with each other, all needless." Together, they will create a depression.

Depression opens a door to the future that Donald Trump wants.

Trump wants regime change. He doesn't want democracy. He doesn't want to be restrained by the US Constitution. He wants to be a dictator -- "for one day," he said. Dictator for a short time, and then Emperor: Emperor of the Western Hemisphere: For now, Emperor of the US, Canada, Greenland, and Panama. Before long, no doubt, also Mexico and most or all of Central and South America. Willing to trade Gaza.

Why create a Depression? A depression will make it easier to get rid of the US Constitution. A depression will be the last straw, convincing an overwhelming majority of Americans that the existing US government is the cause of our economic problems and must be eliminated. They will torch the US Constitution and line up behind their Emperor.

But the proximate cause of our economic problems is excessive private-sector debt. The cause of that cause is that our economic policies encourage us to use credit, to help our economy grow.  Using credit to grow the economy works best when there is little accumulated debt. It does not work at all when we have been encouraged to use credit for 80 years and our accumulation of debt has become massive.

Required reading

First, read something that will give you a feel for how very good a good economy can be: From Time Magazine, Friday 31 December 1965: "We Are All Keynesians Now" at Brad DeLong's site. Or, if that title turns you off, read the first few paragraphs of Jude Wanniski's "The Way We Were":

... you have to have lived in the 1950s and 1960s to have experienced a good economy.

I want to be sure you know that for a very long time our economy has not been good. Wanniski says it well, but the Time article really makes you feel it.

Second, read page 30 from William E. Leuchtenburg's Franklin D. Roosevelt and the New Deal, 1932-1940. I want to be sure you see that when a bad economy is very bad, people react as if the problem is political. Leuchtenburg tells us that

Henry Hazlitt proposed abandoning Congress for a directorate of twelve men.

He also quotes Barron's from 13 Feb 1933:

"Of course we all realize that dictatorships and even semi-dictatorships in peace time are quite contrary to the spirit of American institutions and all that," remarked Barron's. "And yet — well, a genial and lighthearted dictator might be a relief from the pompous futility of such a Congress as we have recently had. ... So we return repeatedly to the thought that a mild species of dictatorship will help us over the roughest spots in the road ahead."

Yes, you can change things by abandoning Congress. Yes, you can change things by abandoning the US Constitution. But if you want to change the economy, you need to do economic things. And if you want to improve the economy, then you must correctly understand what the problem is, what the economy's problem is, so that when you change economic policy the economy changes in the way that you want.

A different world

The historian M. I. Rostovtzeff (1870-1952) on the fall of Rome:

What happened was a slow and gradual change, a shifting of values in the consciousness of men. What seemed to be all-important to a Greek of the classical or Hellenistic period, or to an educated Roman of the time of the Republic and of the Early Empire, was no longer regarded as vital by the majority of men who lived in the late Roman Empire and the Early Middle Ages. They had their own notion of what was important, and most of what was essential in the classical period among the constituent parts of ancient civilization was discarded by them as futile and often detrimental. Since our point of view is more or less that of the classical peoples, we regard such an attitude of mind as a relapse into "barbarism"....

From "The Decay of the Ancient World and Its Economic Explanations" by M. I. Rostovtzeff. In The Fall of Rome: Can It Be Explained? edited by Mortimer Chambers.

Understanding Trump's economic policy

At The American Prospect: "Donald Trump is on track to be the first president to deliberately engineer a severe depression." 

I see it that way. I expect depression. Depression opens a door to the future that Donald Trump wants.

Trump wants regime change. He doesn't want democracy. He doesn't want to be restrained by the US Constitution. He wants to be a dictator -- "for one day," he said. Dictator for a short time, and then Emperor: Emperor of the Western Hemisphere: For now, Emperor of the US, Canada, Greenland, and Panama. Before long, no doubt, also Mexico and most or all of Central and South America. Willing to trade Gaza.

Why create a Depression? A depression will make it easier to get rid of the US Constitution. A depression will be the last straw, convincing an overwhelming majority of Americans that the existing US government is the cause of our economic problems and must be eliminated. They will torch the US Constitution and line up behind their Emperor.