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Strange Bedfellows Indeed: Trump And AOC Converge On Monetary Policy

President Trump and Congresswoman Alexandria Ocasio-Cortez don’t agree on much – and would be loath to admit it if they did. But their ideas on monetary policy are converging on the same goal: easy money forever.

Trump is now trying to force the deep state to devalue the dollar:

Trump has reportedly asked aides to find a way to weaken the US dollar

(CNBC) – The U.S. president has reportedly asked aides to find a way to weaken the dollar in an effort to boost the economy ahead of the 2020 election.

The strength of the greenback has proven a headache for Trump, who’s made reducing the U.S. trade deficit a priority.

Last week, the president said in a tweet that the U.S. should match China and Europe’s “currency manipulation game.”

“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA,” Trump said on Twitter. “We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!”

The president also asked about the greenback while interviewing Federal Reserve Board nominees Judy Shelton and Christopher Waller, people familiar with the matter told Bloomberg News.

A strong dollar tends to give American consumers an advantage when purchasing foreign goods but can hurt domestic exporters as other nations are forced to shell out larger sums for goods produced in the U.S. That’s proven a headache for Trump, who’s made reducing the U.S. trade deficit a priority.

His questioning of Shelton and Waller come after months of White House attacks on the Fed and its hesitation to cut borrowing costs, a move that would reduce the value of the dollar as investors look for higher interest rates elsewhere.

AOC, meanwhile, is doing basically the same thing:

AOC Is Making Monetary Policy Cool (and Political) Again

(New York Magazine) – There’s a strong case that the most important economic policy decisions of the past decade have been at the Federal Reserve. In the wake of the 2008 financial crisis, America’s central bank decided which troubled financial institutions would live and which would die, created a public option for short-term corporate financing, manipulated asset prices by creating artificial demand for various securities, provided an unlimited supply of dollars to some cash-strapped European nations (but not to others), and began deliberately suppressing economic growth in 2015, on the grounds that the U.S. could not sustain an official unemployment rate of below 5 percent without triggering runaway inflation.

All these decisions had profound consequences for the global economy; and that last one might very well have cost the Democratic Party the last presidential election by slowing economic growth in 2016.

And yet, the Fed’s policies attracted scant attention from the mainstream media or elected Democrats. An unthinking reverence for the central bank’s political independence kept the American public ignorant of — and unelected bureaucrats, unaccountable for — exercises of discretion that helped determine the availability of jobs, cost of credit, and distribution of wealth in the United States. Conservative Republicans may have been willing to threaten Fed governors with violence if they didn’t start fighting non-existent inflation — but liberal Democrats barely made a peep as Janet Yellen’s rate hikes needlessly jeopardized the job prospects of low-income workers (and Hillary Clinton).

Fortunately, the 2018 midterms brought some new Democrats to town. And the new generation is woke on monetary policy.

In recent Congressional hearings with Fed chair Gerome Powell, Alexandria Ocasio-Cortez noted that over the past five years, the central bank had repeatedly suggested that unemployment could not fall much lower without triggering high inflation — only to see unemployment fall much lower without triggering high inflation.

Ocasio-Cortez: In early 2014, the Federal Reserve believed that the long run unemployment rate was around 5.4 percent. In early 2018, it as estimated that this was now lower, around 4.5 percent. Now, the estimate is around 4.2 percent. What is the current unemployment rate today?

Powell: 3.7 percent.

Ocasio: 3.7 percent…Unemployment has fallen about three full points since 2014 but inflation is no higher today than it was five years ago. Given these facts, do you think it’s possible that the Fed’s estimates of the lowest sustainable unemployment rate may have been too high?

Powell: Absolutely.

This exchange may sound dull and technical. But the congresswoman’s point has real human stakes. America’s central bank has a dual mandate: to promote full employment and price stability. How the Fed chooses to balance those two objectives has redistributive implications. The wealthy have far more to lose from inflation than they do from modest levels of unemployment. In fact, many business owners may actually prefer for the U.S. economy not to achieve full employment, since workers tend to be less demanding when jobs are scarce. By contrast, the most vulnerable workers in the U.S. — such as those with criminal records or little experience — will struggle to get a foothold in the labor market unless policymakers err on the side of letting unemployment fall “too low.”

AOC was effectively pressuring Powell to pursue an accommodative monetary policy that would improve Donald Trump’s chances of reelection (or so, Trump himself seems to think).

It would be epically ironic if Congress’ most outspoken socialist turned out to be instrumental in re-electing Trump by making easy money acceptable just in time for 2020.

But – as strange as this new alignment of the political stars looks at first glance – it’s also inevitable. Once a society takes on more debt than it can ever hope to pay off, the only way to avoid another Great Depression is to inflate away the currency. So it should come as no surprise that both ends of the ideological spectrum are rationalizing lower (and soon negative) interest rates and next-gen QE.

And it won’t be a surprise when these policies create exactly the kind of chaos that always results when governments try this kind of thing.

Now for the obligatory gold plug: Each and every time something similar has happened in the past, gold and silver preserved purchasing power – which is to say they soared in local currency terms. This time will be no different.

 

Emigrate While You Still Can – To Finca Bayano

15 thoughts on "Strange Bedfellows Indeed: Trump And AOC Converge On Monetary Policy"

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    2. Look at it another way. Gold prices have NEVER changed. Its the dollar’s losing value that only makes it seem as if gold is getting more expensive. But however you want to look at it, my guess (and I am no expert by any means) is yes it will ‘rise’ in value.

      1. Too many Black Swans involved effecting the situation back & forth.
        All the economic variables pushing up & down & against each other can create a huge headaches

        1. Well yea very true. Obviously more complex than what I wrote. I just feel that it is better to look at it from the perspective of a worthless dollar instead of rising gold. More realistic picture of what is going on. And I feel it is presented as ‘rising’ gold instead of 97% since 1913 devaluation of the dollar to keep most blind to the reality of the Money Changers’ treachery. But regardless, its all manipulated one way or another, so yay for us. Can’t wait for all the ‘fun’ to come

          1. Strictly speaking It isn’t even a US Dollar,
            It’s a Federal Reserve I.O.U.,The Central Bank’s promise to pay on demand sometime in the future.When it is worth even less.

          2. Right you are again. And all according to The Plan IMHO. Just glad I don’t have much (or any really) family I need to worry about when all goes completely off the rails.

          3. Joel,…
            As far as I can tell,…there is no plan,… the bankers just hang in & keep doing more of what has been done.
            The only thing worth paying attention to, is the last couple of years the bankers,financiers & the sovereign funds have been buying huge amounts of gold.

            Gold,the barbaric antiquated measure of wealth the central reserve bankers have supposedly replaced.
            Now they have all turned 180 degrees around & can’t get enough of physical gold!
            As far as I can tell,the Central Reserve Banking,the Fed, is just a gigantic Pyramid swindle,like Bernie Madoff had but trillions of times bigger.
            And like all financial pyramids they expire & collapse at their expiation point.
            The Expiation date is when the scam runs out of the national wealth to feed in at the bottom & be harvested by the insiders at the top.
            At this point,the whole mess defaults & those who are highly leveraged
            can find themselves broke,

            I believe that the whole financial system,world wide,is tanking,
            call it a gigantic reset back to reality & price discovery.

            This may be why the financial Powers That Be have suddenly become so enthusiastic about gold,they are trying a new/old direction to survive.
            They are looking for tangible assets in a new era of collapsing paper assets!

          4. I’m with ya on that except the ‘no plan’ part. I feel they are losing grip of the plan, but there is one nonetheless IMO. Also I feel more telling than the mass gold purchases is the mass silver purchases by certain entities. Seems to me that those entities are seeing something most aren’t. A major ‘correction’ in all the manipulation. The way I see it and again I could be wrong but it seems silver price is purposely deflated while gold is purposely inflated and when the ‘correction’ occurs we may see one spike and the other drop like a brick. But whatever the case, They will be fine and we get it the hard way. Rare case of my really really hoping I am wrong. Only time will tell, and that time is running out and will most likely happen within the next decade, if not sooner. Good time to stock up on silver, gold, lead (ammo) and water. Sh*t gonna get real ugly whenever it goes down.

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