Tariffs on goods may be a prelude to tariffs on money

[ochotona]

Tariffs on goods may be a prelude to tariffs on money
Capital inflows could be the Trump administration’s next target

This FT article is paywalled... but I saw just the title and it instantly clicked. That's the only way Trump can make the Policy Trilemma work.

According to the Trilemma, you can have TWO of the following at one time, but never all three at the same time:

1. A fixed currency exchange rate
2. Allowing capital to flow freely with no fixed currency exchange rate agreement
3. Autonomous monetary policy

#3 will never be abandoned by the US.

As to #1, I think if Trump wants to make the US a manufacturing, exporting nation again then the exchange rate will have to be managed downward so that the Dollar is weak and our exports are attractively priced... but then Trump says he wants a strong Dollar. I'm actually pretty sure he's an idiot and he doesn't know what he wants, but let's just assume that whatever it is, high OR low, he wants it, which means it has to be managed high or low. So we want #1, we just don't know how.

That leaves #2. That means capital flows will be restricted, which would be very bad given how badly we need foreign capital to fund our government AND to reshore industry to the US (a foreign company wanting to relocate operations here must be able to convert to Dollars... it can't pay US people or companies in Euros or Yen or Renminbi).

[yankees60]

I've been listening now for at least 15 minutes of non-stop Trump "wisdom".

I'm convinced with for how much I have C-Span on that I've been exposed to more of his words than 98% of his supporters.

ALWAYS entertaining but scary that I'm not listening to a TV show but to real life!