INFLATION--FED Rebuffs Trump--refuses to lower rates; Tariffs=new Inflation Wildcard

Chop said:
Don’t worry folks……..

The economics textbooks say a little inflation is a good thing.
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Yep, all the ones selling Keynesianism, straight out of his book "The General Theory of Employment, Interest, and Money." It was full of false statements but the British government and many others loved it and pushed it on all the schools.
 
Monahorns said:
No one said we didn't. But you said "money is just illusory." That is a false statement.
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Here, where we live, in the USA, money is fiat. Same with UK, Japan, Germany, Australia, pretty much anywhere--money is illusory. Maybe in some make believe country, money represents a voucher for a certain amount of some tangible thing that you can trade in your currency for. That's not what we have in the real world today.
 
Chop said:
Here, where we live, in the USA, money is fiat. Same with UK, Japan, Germany, Australia, pretty much anywhere--money is illusory. Maybe in some make believe country, money represents a voucher for a certain amount of some tangible thing that you can trade in your currency for. That's not what we have in the real world today.
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This better explains your point. It wasn't clear before.
 
this is interesting.

I heard a talk given by a Chinese young man who is in tune with the people. He claims Chinese Nationals are hoarding an estimated 2.6 trillion dollars worth of physical cash. Think of our great grandparents—they don’t trust banks and they keep lots of cash hidden around the house.

A. If they spend this, it could drive the world out of a recession.

B. If they spend this, it could drive world inflation up quite a bit.
 
Chop said:
this is interesting.

I heard a talk given by a Chinese young man who is in tune with the people. He claims Chinese Nationals are hoarding an estimated 2.6 trillion dollars worth of physical cash. Think of our great grandparents—they don’t trust banks and they keep lots of cash hidden around the house.

A. If they spend this, it could drive the world out of a recession.

B. If they spend this, it could drive world inflation up quite a bit.
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Oversupply of mfg. capacity in China currently, so not excessively inflationary.
 
Chop said:
this is interesting.

I heard a talk given by a Chinese young man who is in tune with the people. He claims Chinese Nationals are hoarding an estimated 2.6 trillion dollars worth of physical cash. Think of our great grandparents—they don’t trust banks and they keep lots of cash hidden around the house.

A. If they spend this, it could drive the world out of a recession.
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A. Is a Keynesian fallacy. It contradicts actual economics. Keynes was a socialist trying to ruin England's economy and give cover for government control.
 
apnews.com

Trump says he will 'demand' that interest rates come down, but it won't be that simple

President Donald Trump has pledged cheaper prices and lower interest rates, but an economy transformed by the pandemic will make those promises difficult to keep.
apnews.com apnews.com

"If Trump follows through on his promises to impose widespread tariffs on imports and deport millions of immigrants, economists expect inflation could worsen -- making it less likely the Federal Reserve will cut its key interest rate much this year.

All of these trends will likely keep borrowing costs higher, including for homes and cars.

Yet on Thursday during the World Economic Forum’s annual event in Davos, Switzerland, Trump said he would reduce oil prices, and then “I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world.”"
 
Reconciling the tariffs with inflation is a balancing act.

Long term, we need to be making what we produce in all critical industries. But getting there needs to be stepped. He needs to phase in the tariffs bit by bit, not go from nothing to 50% overnight.
 
Chop said:
Reconciling the tariffs with inflation is a balancing act.

Long term, we need to be making what we produce in all critical industries. But getting there needs to be stepped. He needs to phase in the tariffs bit by bit, not go from nothing to 50% overnight.
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I hope that DJT is able to see this. I hope that his very aggressive initial salvo was just to let the world know that he means business. I also hope that world realizes that America is tired of carrying the water for so many of them and getting so little in return. Columbia got the message pretty fast. I hope the others do as well.
 
The purpose of the tariff matter more than the amount. Tariffs shouldn't be used as a form of economic protectionism. They should be used when the United States is willing to pay an economic price to leverage a bad foreign actor to stop its bad acts.

For example, tariffs (even very high tariffs) on a country refusing to accept deported illegal aliens who are lawful citizens of that country are a good use of tariffs. However, imposing a tariff on Japanese or South Korean steel to protect steel production in Pennsylvania isn't a good use of them.
 
As for Korean steel, I remember going to the seedy port city formerly known as Masan (now part of Changwon). By car/van, you come down from a ridge over the town and there's 100s upon 100s of acres of steel plants and mills spread out before you. They go on and on and on. They've really built up A LOT of heavy industry over there.

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1738173791725.png
 
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Chop said:
As for Korean steel, I remember going to the seedy port city formerly known as Masan (now part of Changwon). By car/van, you come down from a ridge over the town and there's 100s upon 100s of acres of steel plants and mills spread out before you. They go on and on and on. They've really built up A LOT of heavy industry over there.

1738173776020.png

1738173791725.png
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That notorious den of villainy and sin (which happens to double as a big steel town) formerly known as Masan has since been merged into the much more respectable metropolis of Changwon. I suppose Masan's reputation got so bad, the government decided to erase it through merger with a more normal city.

But..........................they apparently still produce an enormous amount of steel. And S. Korea is an ally. And they do import steel to us.
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The Fed rebuffs Trump and leave the rates unchanged.

www.rttnews.com

Fed Leaves Interest Rates Unchanged After Three Straight Cuts

After cutting interest rates for three straight meetings, the Federal Reserve on Wednesday announced its widely expected decision to leave interest rates unchanged following its first monetary policy meeting of 2025.
www.rttnews.com

www.nbcnews.com

Fed holds interest rates steady despite Trump's calls for a cut

Policymakers left rates unchanged amid signs that the economy is humming along, defying the president’s tradition-bucking pressure on the central bank.
www.nbcnews.com www.nbcnews.com
 
Chop said:
The Fed rebuffs Trump and leave the rates unchanged.

www.rttnews.com

Fed Leaves Interest Rates Unchanged After Three Straight Cuts

After cutting interest rates for three straight meetings, the Federal Reserve on Wednesday announced its widely expected decision to leave interest rates unchanged following its first monetary policy meeting of 2025.
www.rttnews.com

www.nbcnews.com

Fed holds interest rates steady despite Trump's calls for a cut

Policymakers left rates unchanged amid signs that the economy is humming along, defying the president’s tradition-bucking pressure on the central bank.
www.nbcnews.com www.nbcnews.com
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This could turn into a good dynamic.
 
And Trump is strongly on the side of fighting the dumping of steel (and other products) at prices below the cost of production. Watch for plenty more anti-dumping actions by the Dept of Commerce, etc.
 
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