Trump Gets Exactly What He Wants

https://finance.yahoo.com/news/what-a-weaker-dollar-means-for-stocks-morning-brief-113708681.html?.tsrc=fin-notif

In short, the dollar is now trading at its lowest level in two years.  That's exactly what Trump has been trying to do and it's bad for Americans.  It's so hilarious that the average person loves Trump despite his fiscal policies that hurt Americans in the short term and long term.  I will repeat for the dummies.  We're an importing country.  Trump can't just bark nonsense to change that.  Exporting is around 13% of our GDP, which clearly indicates we do not benefit from weakening the currency.  This ends up reducing your purchasing power.  Your money is going to get you less than it would have when you convert it in other countries.  Yes, that is relative to how the other currency is doing but broadly speaking, it's not going to be a positive thing for Americans.  There's more to this, though.  Companies are forced to spend more overall to import these goods to America.  Obviously that's going to hurt the bottom line.  These companies pass that expense to consumers so that they don't take a hit.  That's the long-term damage, except I'm not sure how many people realize it gives companies an excuse to artificially keep prices higher.  So while I do think the voting numbers are against Trump, if this moron gets elected again, he's going to absolutely destroy the solvency of the country.  It's astounding that Americans think they're so damn smart when I estimate under 10% of them even understand anything about economics and what's good for the country.  Sigh.

Dollar and stock relationship is not that important.  The correlation coefficient is in the .35 range or so.

China 20%, USA 13%, Germany 46%, etc.  But look at the dynamics.  Look at California's exports -- but a lot of it is to other states.  We have such a varied geography, etc. -- we can trade with ourselves.  Still the largest economy and even our 13% is larger than Germany's 46%, etc.

Trump is also correct about it being an issue of currencies.  Because of our status it is harder to manipulate and is even artificially inflated and this makes exporting trickier.

Some considerations:

The US dollar is stable and strong because it is the world’s reserve currency, and is therefore stockpiled by foreign governments and businesses like gold is.

This increase in non-commerce related demand makes the currency artificially stronger, which means that US goods are relatively more expensive to buy for people in foreign countries, suppressing US exports.

It also inflates the value of US currency abroad, making it cheap for Americans to import things from abroad.

The short answer is: Geography.

Germany is part of the EU. California is part of the United States. Look at the interstate commerce if you want comparables for export and trade. Also with the size and diversity of the economy in the US there is less need to import and export than in Germany where the population and geographic diversity is not as varied as the US, again a better comparison might be the EU and what is imported or exported in and out of the EU or alternatively again look at California compared to Germany.

Okay you threw a lot of material out there but let me give a quick take.  Yes, America is a different size than Germany and so the overall number for exporting isn't directly indicative of how much we need exporting, especially based on the service economy we have.  My point is that you typically weaken a currency so that you're getting more out of exporting.  Otherwise, you just benefit from tourism and that's actually down since Trump has been in office.  I do agree that the dollar is the most stable currency, even if Trump weakens it by 10% or 15%.  It's just not really helpful to Americans and Trump wants it so he can advertise to countries that it's cheaper to do business with him.  He may spend more per deal but he presumes the volume makes it worthwhile.  I figured out his scheme after giving it a bit of thought.  China can't replace the U.S. so easily because of the currency manipulation you referenced.  Nobody is going to trust China enough to change the reserve.  Mnuchin provided the answer back in 2017 that mirrors what I'm discussing.  He tried to assert a weaker dollar was good for exporting and tourism.  That's because investors found out that the dollar went down by 12% over the course of a year.   They didn't think that was normal and asked questions.  It's no coincidence that Mnuchin is one of the few people Trump hasn't dismissed.  He's making money from Mnuchin's moves behind the scenes.  Trump's sons just update him and do everything so he's technically not involved.  Just tell me why you think a weaker dollar is so great for Americans.  If you can't do it in a few sentences, you likely are giving me BS that is never going to change my mind.

It is devaluing every single domestic asset to foreign consumers, investors and governments. Of course Trump wants this because he wants consumption at any cost and a higher stock market...a cheap currency does both of those things at the expense of the very heart of the country. Our relative purchase power is at lows vs other large countries/blocs because of our massive issuance of debt and the FED's actions to prop up multi nationals and the stock market.

There is little positive about trying to force consumption and inflation at the expense of assets and currency devaluation is a useless tool that does a great deal of harm.

Do we want China or Russia or even Europe to come and purchase our assets at a discount? Do we want to sell our resources on the cheap so we can front load our GDP and look good for a few quarters?

A weak currency is precisely due to our interest rates...the 30 and 10 are at historic lows it is shocking that we are under 1.30 EU, .95 Yen, .90 Swiss 1.50 GBP....this shows that all governments and reserve banks are pulling the same con, ours is just on full tilt right now but believe me the EU isnt going to let the Euro run over 1.25 without taking action, it makes their goods and services too expensive for export.

This is a sickening path but the FED has been coddling the market for almost twenty years and Trump is an economic idiot so that makes perfect sense. Poor Trump sucking his thumb wishing his Atlantic City casino debt could be floated now and that he would still be a big fish in the casino market.

The reason there is a lot to say is because there is a lot to it.  But to simply as much as possible:

A strong dollar is better for folks that live and work overseas or travel overseas.  Companies overseas that deal in USA and the folks that invest in these things do better.  Obviously, it keeps our status of world currency and even increases that.  Imported goods are cheaper for the USA.

A weaker dollar is better, as we talked about, for exports, obviously -- that is a big reason, economically, for policies catering to this.  It is cheaper for folks to visit the USA, so tourism increases.  Companies are helped more that do a large portion of business overseas.  Another consideration is that emerging markets can benefit.

So, if you consider trade deficits, corporate profitability, and USA purchasing leverage overseas you can see some of the concerns on both sides of this issue.

That is very, very basic. 

There is a lot of economic theory behind this.  So, maybe that is concise enough to give you some insight.  If you want more esoteric information I can post more or post some links.

I am not really a proponent for either side.  But I can see with say, Japan and China, doing what they do -- maybe we should consider it.

Again, I think the correlation coefficient to the stock market is not a good enough consideration -- .35 or so -- and I am sure Trump's guys know that.  But the export thing is a valid consideration.