8 April follow-up

In yesterday's post I said maybe Trump's tariff policies will somehow "be enough to prevent a slowdown of the US economy," and maybe

the shift toward more domestic purchasing will be enough to boost the growth of our economy -- which to me seems a central part of Trumpian economics. (But then, I always focus on growth. And really, I have no idea what Trump is thinking.) 

I mistakenly attributed my focus on growth to Trump. An easy mistake, as I have no clue what his objective actually is. No clue at all: You even saw me the other day asking if Trump is trying to create a global depression.

But at MarketWatch just now I found "Here’s the real reason Trump wants to create economic chaos — and why investors should be more afraid" (by Brett Arends, 26 March 2025) along with this subtitle text:

Trump administration wants a weaker dollar and lower Treasury yields to pay for U.S. tax cuts. A recession could be a part of the deal.

So maybe I'm not too far off, wondering if he's trying to create a depression.

 

The MarketWatch article, an opinion piece, was interesting. The opinion starts with an observation -- "The US Dollar is particularly strong" -- and a corrolary: The strong dollar makes US exports expensive and US imports cheap. That, they say, is

the absolutely essential context for understanding the Trump administration’s economic, financial and trade policies... Donald Trump wants to slash the value of the U.S. dollar against other international currencies, to make U.S.-manufactured products cheaper both at home and overseas while making other countries’ manufactured products more expensive.

That is gimmicky shit. Gimmicky economics. Maybe Trump will end up making the dollar weak and China's currency strong. What, China's not doing well enough without our help?

Hey, I don't like the US trade deficit either. But I'm not convinced the US trade deficit is Trump's focus. And I  don't think the trade deficit is the problem. FRED's Table 1.5.5 shows GDP as C + I + NX + G. NX is Net Exports. The Table links to this Net Exports graph. The graph shows that we have had a trade deficit since 1976. The article says "The US dollar is currently going through a phase of broad over-valuation." What, a phase that began in 1976?

Maybe Trump does want to weaken the dollar. But surely this would not be a long-term strategy. Nations with weak or declining currencies are not well respected, if I rightly grasp human nature. But Trump demands respect. And I don't even trust the idea that creating a recession would help weaken the dollar. It would have to be a US-only recession. That is not likely, in our globalized world.

Besides, it was less than 20 years ago that economists were panicked about the financial crisis creating a full-fledged depression. People say things like "the fundamentals are sound." But they said that during the financial crisis, too. They just say it to build consumer confidence. They don't know. They only hope the fundamentals are sound. As do we all.

But "All Sectors" debt (relative to GDP) was just as high in 2020 as it was in 2009. The peaks look similar on the graph, and the two declines from peak look identical. One more recession now, and we get a third identical peak. With a depression, we get a much higher peak. The fundamentals are sound, my ass.

And yes, I know, during the campaign Trump said

I don’t want to be Herbert Hoover. The one president – I just don’t want to be Herbert Hoover

He doesn't want to be the guy that starts the Depression. At least, that's what he said.