Friday, August 3, 2018

The US dollar narrative - a point

The idea recently has been that the USD is appreciating because Trump is going to fight a trade war (hegemonic mercantilism supports a currency) and reduce his trade deficit. More US goods on the world market mean more demand for US dollars to buy those goods, fewer foreign goods in the US market mean fewer foreign currencies demanded to buy those goods, and thus USD goes up versus everyone who's an "enemy of America" (Canada, the EU, the UK, etc.).

I'm wondering how long it's going to take before people realize there's an opposite narrative: tax breaks like Trump's, that generate a trillion-dollar-a-year federal deficit, should make a currency collapse in value.

Which, actually, would make for a better way to eliminate a trade deficit... though I doubt Americans will want to live through that hellscape.

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