E It's A Good Thing That Trump Is Asking About Strong Or Weak Dollar

Despite press coverage to the contrary, it is actually a good thing that Donald Trump asked national security adviser Mike Flynn about the benefits of a weak dollar versus a strong dollar for the US economy. He asked the wrong guy, but at least his question is extremely relevant because of economic stands he has taken or may take in the future.

Trump wants the American worker to rebound, economically. So the question is an important one. I believe there is a specific reason Donald Trump asked the question and I share it at the end of this article.

The question is important is because Trump wants our exports to succeed. That would require a somewhat weak dollar compared to other currencies. But he wants a strong dollar to strengthen the buying power of the American worker. This of course is an economic conundrum, like wanting high and low interest rates at the same time.

Key adviser Steve Mnuchin is on record saying in January that he favors a weak dollar, at least until currency manipulation by everyone else is somehow stopped, assuming China and Germany acknowledge the practice, which they don't.

Donald Trump, by asking the question, is wrestling with pragmatic solutions to the ills of our nation. Of course a weak dollar is crucial to exports, but it erodes the buying power of Americans. If they don't spend, who buys all the extra goods produced? And now we hear that gasoline demand plunged by a recessionary amount.

Consider that we have gasoline demand declining, we have a fairly unhealthy capital formation and we have labor's share of capacity utilization below historic norms. The charts show this:

Organization for Economic Co-operation and Development, Gross Fixed Capital Formation in United States© [USAGFCFQDSNAQ], retrieved from FRED, Federal Reserve Bank of St. Louis;

Labor's Share of Capacity Utilization Up Trend Shows Decline -h/t  Edward Lambert

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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