Does Trump really want rate cuts? or is he manipulating the fed?

[Swordsmyth]

As we await the FOMC’s decision, it’s well worth the time to reread the comments of the last few days from Fed ex-Vice Chairman Stanley Fischer. He thoroughly rejected the notion that central bank bashing is just noise. If you want to handicap what to expect, you must consider this line:

“Fischer also said there was a good chance the Fed wouldn’t have raised borrowing costs in December if Trump had been less vocal.”
That’s an astounding notion. Especially coming from a Fed defender.
It actually opens up the possibility that if they tilt, in either direction, it could be portrayed as politically motivated.

More at: https://www.zerohedge.com/news/2019-06-19/forget-draghi-focus-fischer-politically-motivated-powell-exposed

[oyarde]

The criteria for the fed board is they represent America . If that is not the case they should be terminated immediately . By law appointments must meet this criteria , if not they are not valid . The guidelines are " a fair representation of the financial , agricultural , industrial , commercial interests and geographical divisions of the country . I would just lock them all out after the election and it could be revisited a few years . Americans wont care because it will not effect them just like they never cared about Harry Reid never passing a budget for years on end .

[Swordsmyth]

The criteria for the fed board is they represent America . If that is not the case they should be terminated immediately . By law appointments must meet this criteria , if not they are not valid . The guidelines are " a fair representation of the financial , agricultural , industrial , commercial interests and geographical divisions of the country . I would just lock them all out after the election and it could be revisited a few years . Americans wont care because it will not effect them just like they never cared about Harry Reid never passing a budget for years on end .
Oyarde for POTUS.

That way 100 years from now we can have an Injun and a dead president on our gold certificates.

[Zippyjuan]

Trump has been pushing for looser money supply for a while- he was disappointed when his own nominees to the Fed raised rates (they just voted yesterday to keep them where they are). He claims the stock market would be 10,000 points (40%) higher if the Fed just played along with him. He sees the economy as proof he is doing a good job and is frustrated that it has been slowing down- as the tax cut effect wears off and the tariff impacts grow.

[Swordsmyth]

Trump has been pushing for looser money supply for a while- he was disappointed when his own nominees to the Fed raised rates (they just voted yesterday to keep them where they are). He claims the stock market would be 10,000 points (40%) higher if the Fed just played along with him. He sees the economy as proof he is doing a good job and is frustrated that it has been slowing down- as the tax cut effect wears off and the tariff impacts grow.
He picked Powell and they may be manipulating the other Fed members together.
China is the biggest threat to America and the world and the rate hikes are helping to pull the rug out from under their house of cards.

[Zippyjuan]

He picked Powell and they may be manipulating the other Fed members together.
China is the biggest threat to America and the world and the rate hikes are helping to pull the rug out from under their house of cards.

Wrong. It actual aids them. If the US raises interest rates, investors abroad see they can get a better return here so they buy dollars and invest. That causes the value of the dollar to go up. A strong dollar means that US exports cost more and imports from China and other countries are cheaper. That is why Trump wants lower interest rates. (he also wants to inflate the money supply so stocks go higher and make him look awesome).

[Swordsmyth]

Wrong. It actual aids them. If the US raises interest rates, investors abroad see they can get a better return here so they buy dollars and invest. That causes the value of the dollar to go up. A strong dollar means that US exports cost more and imports from China and other countries are cheaper. That is why Trump wants lower interest rates. (he also wants to inflate the money supply so stocks go higher and make him look awesome).
No, it hurts them because they have tremendous dollar denominated debts that their companies are collapsing under due to the rising cost of dollars.
That is much bigger than the small trade advantage a strong dollar gives them, especially after Trump's tariffs are factored in.

[Zippyjuan]

No, it hurts them because they have tremendous dollar denominated debts that their companies are collapsing under due to the rising cost of dollars.
That is much bigger than the small trade advantage a strong dollar gives them, especially after Trump's tariffs are factored in.

How much dollar denominated debt does China have?

[Swordsmyth]

How much dollar denominated debt does China have?
This is old data from late last year and things have only gotten worse since:


In its report dated Nov. 7, Nomura estimated that outstanding dollar-denominated Chinese corporate debt stood at about $751 billion in the third quarter. That’s more than double the amount at the end of 2015.

It projected that an average of $33.3 billion of Chinese corporate dollar bonds will mature each quarter from the fourth quarter of 2018 to the end of 2020, sharply higher than the estimated $11 billion that matured in the third quarter of this year.


More at: https://www.cnbc.com/2018/11/19/china-corporate-bonds-experts-warn-of-more-defaults.html



And each company that goes bankrupt puts increased pressure on the rest of their economy.

[Zippyjuan]

This is old data from late last year and things have only gotten worse since:




And each company that goes bankrupt puts increased pressure on the rest of their economy.

For comparison, US corporate debt is $15 trillion. https://www2.deloitte.com/insights/us/en/economy/issues-by-the-numbers/rising-corporate-debt-levels.html

Debt is usually at fixed interest. You face higher costs only if you refinance.


It projected that an average of $33.3 billion of Chinese corporate dollar bonds will mature each quarter from the fourth quarter of 2018 to the end of 2020

So only about $33 billion a quarter may be effected if the US raises interest rates. Out of total corporate debt of $21 trillion.

The US choosing to not raise interest rates had zero impact on them.

[Swordsmyth]

For comparison, US corporate debt is $15 trillion. https://www2.deloitte.com/insights/us/en/economy/issues-by-the-numbers/rising-corporate-debt-levels.html

Debt is usually at fixed interest. You face higher costs only if you refinance.



So only about $33 billion a quarter may be effected if the US raises interest rates.

The US choosing to not raise interest rates had zero impact on them.
US debt is in their native currency, they are not affected if the dollar rises or falls.
Chinese companies with dollar denominated debt see their debt and required payments shoot upwards in their native currency when the dollar rises, they don't have vast reserves of dollars to pay with and are forced to pay ever higher prices in yuan to buy them, that shreds their finances.

[Zippyjuan]

US debt is in their native currency, they are not affected if the dollar rises or falls.
Chinese companies with dollar denominated debt see their debt and required payments shoot upwards in their native currency when the dollar rises, they don't have vast reserves of dollars to pay with and are forced to pay ever higher prices in yuan to buy them, that shreds their finances.

If they are receiving $US for the goods we purchase and use that to pay the interest on their debt, they don't get effected by the exchange rate. Everything is in dollars.

[Swordsmyth]

If they are receiving $US for the goods we purchase and use that to pay the interest on their debt, they don't get effected by the exchange rate. Everything is in dollars.
Many of them are not exporters who receive dollars and the exporters aren't getting so many dollars thanks to Trump fighting back in the trade war, the strong dollar is the second part of a 1-2 punch that is pulling the rug out from under the Chinese house of cards.

[Zippyjuan]

Many of them are not exporters who receive dollars and the exporters aren't getting so many dollars thanks to Trump fighting back in the trade war, the strong dollar is the second part of a 1-2 punch that is pulling the rug out from under the Chinese house of cards.

So we need higher interest rates to destroy China. Strong dollar make it impossible for them to pay their debts. (but lets them sell a ton of more stuff to us since it is a lot cheaper which helps them).

And we need lower interest rates to destroy China. So their products are more expensive and we buy fewer of them.

Win win!

[Swordsmyth]

So we need higher interest rates to destroy China. Strong dollar make it impossible for them to pay their debts. (but lets them sell a ton of more stuff to us since it is a lot cheaper which helps them).

And we need lower interest rates to destroy China. So their products are more expensive and we buy fewer of them.

Win win!
A stronger dollar will destroy China a weaker dollar will destroy the US.

[Zippyjuan]

A stronger dollar will destroy China a weaker dollar will destroy the US.

Strong dollar means more Chinese imports.

[Swordsmyth]

Strong dollar means more Chinese imports.

Not necessarily, aside from the tariffs and the collapse of Chinese companies there is the fact that American manufacturers can import raw materials cheaper.