the strong usd

[touchring]

Re: the strong usd

the rates themselves will not generate inflation. they are a symptom of the need for inflation, and a harbinger of the essentially unfundable enormous fiscal spending to come. that is what will generate inflation.

Let's try to think out of the box. Maybe monetary policy (lower rates) cannot generate inflation since China exports deflation.

Perhaps Trump's tariffs will generate the inflation you need? Think about it, US raises tariffs, China devalues yuan, but while Trump can raise tariffs 100%, China can't devalue the Yuan by 50% without jeopardizing domestic consumption.

Trump has levied 25% tariff on half of Chinese goods. Has inflation increased? Barely I believe. So it can go much higher before it has an impact. In the meantime, it's free money for the Federal government.

[dcarrigg]

Re: the strong usd

If anything, I'd suspect that Chinese imports are the last things that would push inflation. Rich people don't buy them, at least not in any significant portion of income. And everyone else when pennies get tight cuts back on Chinese imports way before food, healthcare, Ed, insurance, debt service, energy, rent or mortgage etc.

Seems to me really cranking up tariffs even on the entirety of Asia might pass some cost increase (not all) onto consumers. But that will just lead to crap revenues for companies selling that stuff as people cut back and sales drop. If it goes on long enough, maybe it puts downward pressure on rents etc. as disposable income is reduced.

But I guess that's my working theory now. It's like a seesaw. FIRE and Healthcare on one side, consumer products on the other. One goes up, the other goes down. As a society we've swapped constants and variables too. Used to be labor's share of national income was constant and wages were variable with national product. Now wages are constant and labor's share of national income floats, decreasing as national product rises. How did the constants switch? Laws, norms, and other practices that came about probably around the rise of human resources departments. Either way, that's the bones of my going theory. It ain't complicated. But when I look at the numbers and I see labor's share dropping all over the west and wages stagnant all over the west and fire exploding all over the west with rents going nuts and Chinese imports going nuts and all the rest while inflation stays slow despite zirp, I can't think of another way to get my head around it. The seesaw and the variable switch. That's the story I think.