your friendly neighborhood IC

Lil' trade economics & macro lesson this fine Wednesday:

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Demand for USD as international trade currency makes USD too strong. But enables US to borrow long-term very cheap. Enables cheap international goods due to strong USD.  Drives trade deficit. Hollows out US manufacturing sector.

Result: need to onshore jobs again in blue manufacturing states that flipped red. This makes goods more expensive. Drives USD higher (?)

Need Plaza Accord 2.0 to weaken USD. Restores competitive strength of US to become export economy. Negotiate to get foreign countries to buy long-dated US bonds -> drive yields lower -> weaker USD.

The Fed has lost control of long end of yield curve. When they cut, market called bluff and sent long-term rates up -> strong USD. Fed won’t be able to weaken USD, President must via other means (fiscal policy).

End game = lower 10-year rates. Drives liquidity searching risk assets.

Tax cuts would be fuel to fire. More liquidity.

Then, China can stimulate. More liquidity.