first, Trump & Dems (aka Kamala as in Dems manifesto in last election) & JP (Fed chief in the middle) are all wrong .. what a start ..!
although, each one of them is partly right & there is a missing point, which i will add ..!
each one of them is looking the situation from there own lens / ideology - also known as political economy, although there is no such thing, its a subject created by crooked politicians in their own interest, rather its economy, stupid .. which is consumer behavior ..!
Trump may bully with 100% tariff or some non-sense number ... & you know how markets reacted in Apr - esp the Bonds market- so he learned his lesson; but tariffs are based on product sales price aka revenue .. IF US govt. start making 100% of all the goods imported in US then it would be the largest revenue generating organization in the World with no tax liability .. which is theoretically impossible as it will collapse by its own weight .. typically an S&P500 company makes 10% net inc. & here we are talking 100% of revenue & that too on all the products consumed .. so total non-sense .. & calm minds prevail as he is settling around 10-15%
Dems are also wrong as the tariffs will cause serious inflation, which hasn't occurred ..YET ..! this is partly because folks pre-ordered things; & second, the volume of good transported has come down. especially big & non-essential items; which means no. of ships going between china and US have come down, which means crude prices are under control; hence shipping costs have come down, which is compensating for the tariffs charged.
JP is simply confused If he should align w/ Dems (expected inflation) or Republicans (lower rates will help Trump) as he could be sacked big time .. so he has no idea .. IF i were him, i would resign now and not wait for my term to end as Trump is looking for a cause and JP could be his first victim .. so get out of his line-of-sight, aka legal troubles .. let me correct here that the first victim is BLM chief ... just fired.
JP, as advised by so called smartest & brightest, but overpaid minds working at Fed, is right that if there are tariffs someone must pay, & there is no mention of such in text books so h/Feds have no use case to refer to in recent history - so he is still looking everywhere, but no where to find inflation; moreover since economy is doing well NOW (4.2% UnEmpl), he can't lower the rates .. but the revised NFP numbers changed the perspective on this Friday (Aug 1st)
as what all of them are missing is the change in consumer Behavior and here is how it will play out ..!
That the US consumer consumption will go down and it will bring down the world-wide economy .. which in today's context is not a bad thing in my opinion .. as due to extreme low interest rates in last twenty years the world-wide economy has grown so much. ..!
so, instead of buying two shirts, you will by one .. or instead of buying a pair of Nike shoes each year, you will buy one pair every couple of years ... & what difference does it make .. given i know the US consumer ... probably nothing .. except that there will be more room in your garage and closet ..!
how does this scenario satisfies everyone .. who are partiality right ..?
1. Dems are right that price will go up, but slightly; however, given that you are buying one shirt instead of two; your net expense will come down, so you can afford it & it's better for you, environmentally ..!
2. Trump is happy that he got his tariffs; generates revenue for US .. trade deficit comes down first - but will also bring down US exports, as the other countries are now making less .. aha .. so they will look for cheaper options like India buying crude from Russia and Iran or buy less US goods.
3. JP has to go .. he has lost his own identity, as on one hand he is a Trump appointee, but as the political climate changed .. he switched to Dems - not a good character .. because once the Consumer Behavior changes .. it will bring down the economy and Trump will be right saying " I told you so" & will have a perfect escape goat to blame JP .. even though it's caused by Trump!
now in this equation - someone has to give; it's the world-wide economy, esp the US consumption - US consumer can buy lots of stuff today because it's cheap & it's cheap because of strong dollar & low tariffs, but when the tariff rise, it will change consumer behavior ... less number of shoes purchased in US means Nike earnings will go down .. worldwide transportation will come down ... less crude will be consumed .. Chinese and Vietnamese companies will make less shoes & hence less money but low demand of crude will bring crude prices down and hence lower the prices of local goods ... so it will affect the world-wide consumer behavior ... iti siddham ..!
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