"No Concessions" - Mon. PM KTFA Thoughts/News 9/3/18

by **Ssmith** Tue Sep 04, 2018 9:25 am

KTFA

GodsServant » September 3rd, 2018

I believe Abadi said NO Concessions, but does he need the Kurds to accomplish his Agenda for the People Thank you

Walkingstick » September 3rd, 2018

imo..doubtful

Samson » September 3rd, 2018

5 scenarios in front of Trump to get rid of the strong dollar

3rd September, 2018

The White House needs a weak performance for the US dollar to achieve its trade policy, because reconciling the White House's desire to narrow the trade deficit to increase competitiveness and the strength of the dollar seems difficult

However, the US dollar has recorded strong gains since April, despite US tariffs on trading partners since the beginning of the year

Certainly, the strength of the green card against the yuan has caught the attention of the US administration, it does not correspond to their current business agenda, and with President Donald Trump's recent and repeated comments on the rejection of the current dollar, it shows that the performance of the US currency has reached the maximum level in the White House's ability to withstand

The report lists five ways in which the White House could use the next period to reduce the performance of the world's first reserve currency

Treasury intervention in the currency market (low probability - limited impact)

The first and most direct way that Trump could be used to weaken the dollar is to give orders to the US Treasury through the Federal Reserve in New York State to manage interventions in foreign exchange trading

This will cause the sale of the dollar and the purchase of foreign currencies to be the responsibility of the Settlement Guarantee Fund, which allows the Treasury to purchase gold and foreign exchange after the approval of the President of the Republic

Thus, the Fund grants the Trump Administration the authority to purchase and sell foreign exchange without the need for any prior approval by Congress

But more importantly, can Trump implement this proposal

Unilateral foreign exchange interventions - the US authorities - will be problematic not only within Washington but externally, as the last time US authorities intervened to weaken the dollar in the early 1990s

The main obstacle to this strategy of intervention is the channels and mechanisms of the plan. For the intervention of the Settlement Guarantee Fund, which includes the purchase of foreign exchange assets, which were historically large in euros and yuan, the assets of the US dollar must be sold in the Fund's budget

By 31 July 2018, only about $ 22.27 billion of assets were held by the Fund's budget, all of which were US government debt

Even if the US Treasury wants to direct all of these assets to buy foreign currency assets, the direct impact on the US currency market, with a daily turnover of $ 4 trillion, will be somewhat dim

For technical encroachments beyond the Settlement Guarantee Fund, this may be done by considering foreign exchange intervention a national duty. The second is the US administration's adoption of a policy that seeks to increase US holdings of foreign exchange reserves

No unilateral intervention by the US authorities will have a lasting impact on the weakening of the dollar in the long run. The fundamentals of the economy will prevail and the administration will find it difficult to overcome this fact

Change of US Federal Reserve (low probability - strong impact)

The US administration may be more successful in fighting one of the strong reasons for the dollar's rise, which is the high interest rate. The most effective way to weaken the dollar at the moment is to change the rules of the game for the Fed in a way that forces it to adopt a more quiet path towards higher interest rates

At the same time, this scenario seems elusive; it is difficult to pass Congress any change in the Fed's tutelage, which changes the Bank's inflation target

However, any additional criticism the White House may have to the current Fed policy could create two indirect results

First, in the short term, the Fed is exercising more caution as the rate hike approaches, and the second is making the FOMC rethink its long-term monetary policy framework

In the absence of the power factor to change the rules of the game to the Federal Reserve, the difference between US interest rates on the one hand and advanced economies on the other will remain one of the main drivers of the dollar's rise

White House attempts to weaken the dollar (strong odds - mixed effect)

Given the legislative difficulties that guarantee an active policy that weakens the performance of the dollar, the most likely scenario for the US president to see him is his continuing comments on the dollar and interest rate

In a risky market, Trump's negative comments on the US dollar will have little impact and may not exist in the short term

However, this option may succeed if these comments coincide with key economic factors that also point to the weakness of the dollar, as has recently been seen in some indicators of economic activity in the United States

The White House may be more effective and stronger in the short term if Trump, in cooperation with his cabinet secretary, formally terminates the strong dollar policy, although the chance of doing so is slim before the midterm elections, which could trigger reactions within Congress and the Republican Party

However, the official end of the White House's strong dollar policy may represent a clear shift in the dynamics of the dollar, as it has reduced the incentive for real money investors to maintain excessive US dollar reserves

Pressure on trading partners to strengthen their currencies (high probability - average impact)

This is an easy and effective way, as the dollar can be weakened by pushing other countries to boost their domestic currencies

The strategy was already launched when the currency was linked to the US-South Korean trade agreement

The method is expected to be used more widely in the coming period, with Washington putting the yuan under its terms for negotiations with Beijing in the coming period

US sovereign wealth fund (very low probability - average effect)

One easy idea to support the idea of weakening the dollar is to set up a US wealth fund, which helps to buy a regular foreign exchange

These funds are usually created within countries that manage huge current account surpluses, which is contrary to the fact that the United States is recording a huge trade deficit

A move by the US president to build foreign exchange reserves in order to capitalize a sovereign wealth fund in the future would reduce the bullish trend of the dollar LINK