White House National Economic Council Director Larry Kudlow on the U.S.-China trade talks where recontact has been established and now officially restarted. As noted, President Trump is in no hurry; the status-quo is leverage in our favor.

Additionally Director Kudlow discusses the potential benefits of the USMCA trade deal and whether the Federal Reserve should lower interest rates.

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Regarding “inflation” these pundits just don’t get it.  For over three years CTH has been explaining how President Trump’s maganomic policy would reverse three decades of stagnant Main Street economic growth.  The Bureau of Economic Analysis (BEA) consistently confirms our earlier predictions releasing data where inflation is essentially nonexistent.

Since the mid-to-late 1980’s the U.S. economy split into two divergent economic engines. One traditional engine powered by Main Street, and a second engine powered by Wall Street.  For thirty-plus years the distance between those engines was growing as federal monetary policy provided low interest rate support for investment, but the end destination for the investment was NOT in the U.S. [Hence, globalism]

For more than 30 years monetary policy has been driven by Wall Street influence.  FED interest rates made borrowing cheap, but the money -the actual investment itself- flowed out of the United States.  The end product from the investment, steered by multinationals, created products overseas.  Within this flow of capital there was no benefit to Main Street.

President Trump’s America-First policy has reversed the dynamic.   As a result of his focus and demand, the end product(s) from capital investment are now here in the U.S.A.

The MOUSE is money or investment. The CHEESE is end products, manufactured stuff.

Rather than beg the Wall Street investment mouse to change direction in the manufacturing maze, president Trump has simply moved the cheese to Main Street.  The mouse’s travel changed accordingly.

(BEA Table 4 – pdf)

The price index for gross domestic purchases increased 0.7 percent in the first quarter, compared with an increase of 1.7 percent in the fourth quarter (table 4). The PCE price index increased 0.4 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.0 percent, compared with an increase of 1.8 percent. (link)

As companies reevaluate the best place for investment (highest return), and they see that Trump’s policies (corp taxes, tariffs, material and labor costs) focus on greatest benefit being inside the U.S, then companies return to Main Street.  This is what has been happening since Trump took office; and it continues through today.

The prices of highly consumable goods (food, fuel, energy) is kept low by Trump policies  that increase energy production and return a genuine supply-side dynamic to domestic production prices. [The battle with Big AG]

Meanwhile multinationals, and some foreign governments, fight to keep their footing abroad (original investment) by keeping down the price of durable goods manufactured overseas.  This is done by: currency devaluation, increasing productivity, adjusted supply chains and retention incentives afforded by the benefiting nation.  This is done to offset Trump tariffs which are designed to influence a shift in the manufacturing process.

The end result of both production dynamics, domestic and abroad, is low inflation.

This price dynamic is happening at the location of output, internal to the operations that are determining the output price, based on their determination of what U.S. market prices will absorb and a need to retain export position.

Key Point – The pricing is NOT a result of decision-making on new investment; and therefore the pricing dynamic is not able to be impacted or influenced by FED monetary policy.

Only when the majority of manufacturing investment fully returns to the U.S. will FED policy have any significant bearing on manufacturing prices.  This is the parity point where Main Street’s economic engine is recoupled to inflation.

There was 30 years of distance in the FED disconnect, and it will take more than a few years for the recoupling of Main Street to FED monetary policy.

This dynamic is the basic thesis behind THE THEORY HERE.

DECEMBER 2016 – […] Additionally, inflation on durable goods will be insignificant – even as international trade agreements are renegotiated.  Why?  Simply because the originating nations of those products are going to go through the same type of economic detachment described above.

Those global manufacturing economies will first respond to any increases in export costs (tariffs etc.), by driving their own productivity higher as an initial offset, in the same manner American workers went through in the past two decades.  The manufacturing enterprise and the financial sector remain focused on the pricing.

♦ Inflation on imported durable goods sold in America, while necessary, will ultimately be minimal during this initial period; and expand more significantly as time progresses and off-shored manufacturing finds less and less ways to be productive.   Over time, durable good prices will increase – but it will come much later.

♦ Inflation on domestic consumable goods ‘may‘ indeed rise at a faster pace. However, it can be expected that U.S. wage rates will respond faster, naturally faster, than any monetary policy because inflation on fast-turn consumable goods become re-coupled to the ability of wage rates to afford them.

The fiscal policy impact lag, caused by the distance between federal monetary action and the domestic Main Street economy, will now work in our favor.  That is, in favor of the middle-class.

Within the aforementioned distance between “X” and “Y”, a result of three decades traveled by two divergent economic engines, is our new economic dimension….

Earlier today President Donald Trump welcomed Amir Tamim Bin Hamad Al Thani from Qatar to the White House. Qatar came under considerable scrutiny from President Trump as part of the 2017 mid-east alliance due to their connections to the Muslim Brotherhood, terrorist financing, and regional issues in conflict with Saudi and Egyptian allies.

When President Trump formed the mid-east coalition, & referencing extremist elements, said: “drive them out”, the target audience was Qatar. [Video and Transcript below]

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[Transcript] PRESIDENT TRUMP: Thank you very much. It’s a great honor to be with the Amir of Qatar — a highly respected man, a real leader in a large part of the world and a very important part of the world. And we’ve known each other a long time. We’ve been friends for a long time.

And we’re doing a lot of work now. They’re investing very heavily in our country. They’re creating a lot of jobs. They’re buying tremendous amounts of military equipment, including planes. And they’re buying commercial planes, as you know — very large numbers of commercial planes from Boeing. And we very much appreciate it.

We’re going to be signing a document today — a very large transaction. You’re going to be invited to the signing. It’s a transaction that will be purchasing a lot of Boeing jets and a lot of money spent in our country, and that means a lot of jobs.

So, we just appreciate everything. We have a great operation — military operation — right now in Qatar. They built one of the great military bases, I would say, anywhere in the world. And it’s just been expanded, with runways and everything else. It’s been really a great honor to work with my friend. Thank you very much for being here.

AMIR AL THANI: Thank you, sir.

PRESIDENT TRUMP: Thank you.

AMIR AL THANI: Thank you. Mr. President, I am very happy and honored to be here. And thank you very much for your hospitality. As you mentioned, we enjoy a very great relationship between Qatar and the United States of America.

We’re doing a lot together. As you mentioned, President, we’re signing a few documents today. And our economic partnership has been more than $185 billion, and we’re planning to double this number. We have a lot of investments in the U.S. We trust the economy here. We do a lot in the infrastructure, and we’re planning to do more investments.

Yes, we host at Al Udeid Base, and it’s — we’re working very closely together. You’re invited to come and see Qatar and also to visit the base at any time, Mr. President.

And I really enjoy the personal friendship with you. Thank you very much.

PRESIDENT TRUMP: Thank you very much.

And I will say the base is incredible. It’s — what they’ve done there is absolutely — and a great place to have it, right in the middle of the Middle East. And so it’s — obviously, it’s a very important location.

So thank you all very much. Yes.

Q Mr. President, do you have any reaction to the subpoenas — the new subpoenas of Jared Kushner and other members of your administration?

PRESIDENT TRUMP: I don’t know anything about it.

Q Mr. President, can I ask you about Iran? How long are you going to wait before you see the Iranian enrich — before you take that action?

PRESIDENT TRUMP: Well, we’re going to see what happens with Iran. Iran is doing a lot of bad things right now and they better be very careful.

Q Mr. President, do you have full confidence in Secretary Acosta right now and in the future?

PRESIDENT TRUMP: Well, you know, I met Secretary Acosta — the first time, I know — when I made the deal to bring him on into the administration. I can tell you that for two and a half years he’s been just an excellent Secretary of Labor. He’s done a fantastic job.

Now, part of it is our economy is so good; our unemployment numbers are at record lows. You know, so many good things are happening.

But the fact is he’s been a very good Secretary of Labor. What happened 12 or 15 years ago with respect to when he was a U.S. Attorney, I think in Miami — is it Miami?

Q Yeah. Southern District of Florida.

PRESIDENT TRUMP: You know, if you go back and look at everybody else’s decisions, whether it’s a U.S. Attorney or an Assistant U.S. Attorney or a judge — you go back 12 or 15 years ago or 20 years ago, and look at their past decisions, I would think you’d probably find that they would wish they’d maybe did it a different way.

I do hear that there were a lot of people involved in that decision, not just him.

I can only say this: From what I know — and what I do know is that he’s been a great — really great Secretary of Labor. The rest of it we’ll have to look at. We’ll have to look at it very carefully. But you’re talking about a long time ago. And again, it was a decision made, I think, not by him but by a lot of people.

So we’re going to look at it very carefully. We’ll be looking at that very carefully. Okay?

Okay. Anything else?

Q Do you still think Jeffrey Epstein is a “terrific guy”?

PRESIDENT TRUMP: Well, I knew him like everybody in Palm Beach knew him. I mean, people in Palm Beach knew him. He was a fixture in Palm Beach. I had a falling out with him a long time ago. I don’t think I’ve spoken to him for 15 years. I wasn’t a fan.

Q What was all that about?

PRESIDENT TRUMP: I was not — yeah, a long time ago. I’d say maybe 15 years. I was not a fan of his, that I can tell you. I was not a fan of his.

So I feel very badly, actually, for Secretary Acosta because I’ve known him as being somebody that works so hard and has done such a good job. I feel very badly about that whole situation.

But we’re going to be looking at that and looking at it very closely.

We’re also going to be signing a big contract in a little while, so we’re going to see you in a little while in a different room, in a different part of the White House where we’re going to be signing up a big deal with Boeing. Thank you very much. We’ll see you in a couple of minutes.

END 12:18 P.M. EDT

Yesterday AG Bill Barr affirmed he was recused from the DOJ prosecution of Jeffrey Epstein. However, according to new media reporting, based on information from the office of U.S. Attorney General Bill Barr, the Attorney General has consulted with DOJ officials and modified his recusal position:

(Tweet Link)

It would appear Bill Barr is recused from aspects surrounding Epstein that connect to the earlier Florida prosecution; and prosecutorial position of the DOJ at the time-frame of the Florida plea agreement (via U.S. Attorney Alex Acosta); however, Bill Barr is not recused from the current SDNY prosecution in 2019 (via U.S. Attorney Geoffrey Berman).

For the Florida case Barr is recused. For the SDNY case, Barr is not recused.  So AG Barr will have oversight during the SDNY case against Jeffrey Epstein.

This position would reconcile the statement made by AG Barr yesterday:

Billionaire businessman and two-time independent presidential candidate, Ross Perot, has died at 89. He was battling leukemia and died Tuesday morning at his home near Dallas.

Ross Perot was the first modern presidential candidate to cut through both sets of party lines and reach out to the monster vote. Perot’s ferocious opposition to the NAFTA trade deal, and all economic policies against U.S. interests, was the center of his campaign.

There are striking similarities between President Trump and Ross Perot particularly around America-First trade deals and prioritizing policy for the American worker.