Chief economist update: Currency manipulators beware

"China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. 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!"

- 7:21 am - 3 Jul 2019

This is the latest tweet from @realDonaldTrump aka US President Donald J. Trump.

POTUS is really upping up the ante in his war with the rest of the world in his quest to make "America Great Again" and perhaps, secure a second term at the Oval Office.

Reminds me of George W. and the Bushisms that flourished under his watch. For our purposes, I note: "The vast majority of our imports come from outside the country."

"Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we."

These were funny quotes during George W. Bush's days but under Trump, have taken on a more sinister meaning.

Trump puts and/or threatens to put in action Bush's: "They never stop thinking about new ways to harm our country and our people, and neither do we."

Trump's recent call to "MATCH" what he perceives as currency manipulation from America's trading partners is consistent with his view (and criticism) that the US Federal Reserve should have been cutting interest rates instead of raising them when it did.

Certainly, it would put downward pressure on the US dollar and, coupled with his increased tariffs, would reduce the US trade deficit.

Lower US interest rates and a cheaper currency will make America great again! Just think of all the business and consumer spending spent inside the US of A instead of leaking to other countries through purchases of imported products and services.

US GDP growth of 4%-6% here America comes!

Yippee-kay-yay! Trump's promise made, Trump's promise delivered.

This state of "booming" affairs might last well ... until Trump gets re-elected.

This is because the upward pressure on the US dollar gets stronger as the American economy strengthens. Investors will be buying the greenback to participate in the US economic boom. In addition, expectations that the Fed would need to raise interest rates to prevent the boom from sparking above target inflation would further raise upward pressure on the US currency.

Beggar-thy-neighbour policies have never worked in the past. And it would not now, especially in this age of greater globalisation.

Free-floating exchange rates are designed to restore economic equilibrium. The reason the US dollar is fetching a higher exchange rate than its counterparts today is because the US economy's outlook (slowing as it is) is relatively better than its trading partners.

This is the reason why other world central banks are maintaining or easing their respective monetary policies - and in the process cheapening their currencies - in the first place.

Trump's motto appears to be, I win only if everybody else loses.

Nah, Mr. Trump. There's no war to be won. America would be great again, even greater, if your leadership provides the rising tide that would lift all boats on this planet.

"Heal the world
Make it a better place
For you and for me
And the entire human race..."

- Michael Jackson

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