Trump Will Set Rates If Electing. Potential Rally in Equity
I thought we'd see the top. I couldn't see any way to print more money. No knobs or dials left.
Until I saw multiple reports of Trump planning to oust Jpow, and nullify the separation between the US Federal Reserve and the US Government. That would mean that an elected Trump would control the interest rates. He wanted negative interest rates when he was in, and he has a plan to make that happen if elected.
I'm expecting markets to rally next week. This will potentially have two effects: debase currency (embed inflation) and boost economic activity. It has another effect of subduing the bad debt risks from CRE and consumer debt as it makes the debt easy to service again.
But it could devalue currencies globally as a lot of them are correlated to the USD even if they're not directly pegged. A lot of central banks are swapping dollar reserves for gold. And 20% of oil q1 was transacted without the dollar. Dropping rates would compound the downward pressure on the dollar. It makes some sense as an invisible tax that would reduce the US debt's real value as well. If inflation runs hot for a couple years, that would charge an "inflation tax" paid to the deficit. But it risks rattling consumer confidence.
We'll see what happens. That would be wild to see.
Until I saw multiple reports of Trump planning to oust Jpow, and nullify the separation between the US Federal Reserve and the US Government. That would mean that an elected Trump would control the interest rates. He wanted negative interest rates when he was in, and he has a plan to make that happen if elected.
I'm expecting markets to rally next week. This will potentially have two effects: debase currency (embed inflation) and boost economic activity. It has another effect of subduing the bad debt risks from CRE and consumer debt as it makes the debt easy to service again.
But it could devalue currencies globally as a lot of them are correlated to the USD even if they're not directly pegged. A lot of central banks are swapping dollar reserves for gold. And 20% of oil q1 was transacted without the dollar. Dropping rates would compound the downward pressure on the dollar. It makes some sense as an invisible tax that would reduce the US debt's real value as well. If inflation runs hot for a couple years, that would charge an "inflation tax" paid to the deficit. But it risks rattling consumer confidence.
We'll see what happens. That would be wild to see.