It is hard to believe but it’s been three years since we first outlined what would happen if candidate Donald Trump’s “America First” policy was implemented.  Specifically how the Federal Reserve would essentially become disconnected and functionally obsolescent for a few years.  As a result of the evidence visible, we are in a unique position to explain.

Staying in the big picture, a disconnected Fed was very predictable.  In the past 35 years the Wall Street multinationals gained as cheap money flowed overseas to start global manufacturing operations; Main Street USA suffered.  When you reverse this process by punishing the multinationals (tariffs), shifting the global supply chain, and changing the best location for investment dollars, Main Street USA benefits.  President Trump August 7th tweets statement:

Notice the “we are competing against other countries” part of the statement.  This is key to understanding what is in the future.  The Wall Street ‘multinationals’, corporations making and selling goods, are invested in production within other countries.

On one hand, Wall Street loves cheap money (low fed rates). However, on the other hand Wall Street multinationals are invested in overseas manufacturing; and those corporations don’t want to see the retention efforts of China and the EU undermined with a lower dollar value (lower fed rate).  So Wall Street is schizophrenic (check the stock market).

U.S. tariffs hurt the Wall Street multinationals because they want to keep making cheap goods overseas and they have invested in this process.  To retain the multinationals, the EU and China are devaluing their currency in an attempt to lower the price of goods they produce.

Lowered currency means their stuff costs less when exported to the U.S. market.  They need the U.S. market for their products; AND they don’t want to move their supply chain, or manufacturing into the United States.

Devaluing currency is what competing countries are doing to offset tariffs and try to block Trump’s America-First policies.  China also directly subsidizes their industries with free electricity, free domestic raw materials, and zero cost loans from their central bank.

As the EU and China devalue their currency, the value of the dollar increases.  President Trump responds to this in a Twitter thread today:

One way for the U.S. to respond is for the federal reserve to cut interest rates, which should lower our dollar value and make it easier to export products; but can also raise the price of things we import.  That is why President Trump notes “(there is no inflation)”.

[However, I doubt any action from the Fed will change anything.  All the data looks to me like the Fed is disconnected in this process.]

We are currently importing deflation as the devalued cost of goods from China and the EU is lower than the tariff rate upon them.   The goal is to move those manufacturing jobs out of China.  Thus the incentive is for President Trump to raise the tariff rate on China even higher.  This looks like the most predictable outcome.

Three variables:

(1) The USMCA ratification.  If/when the USMCA is ratified, this will give multinational manufacturers an established and cemented option to evaluate for supply chain moves.  (Watch Canada election; Trudeau loses and the U.S. stock market will bump.)

(2) The Fed’s rate cut.   If/when the Fed cuts the lending rate again; it will only modestly benefit domestic investment.  The rate cut is against the interest of multinational corporations because it undercuts the defensive efforts of China and the EU; though the cheaper money could help offset relocation costs.  [I strongly doubt much impact.]

(3) Timing.  The Chinese delegation is scheduled to visit in September.  There is almost zero possibility for a deal, unless the Chinese economy is in collapse.

President Trump has a quiver filled with deadly arrows; and after labeling China a currency manipulator, he’s now more likely to raise the tariff rate, perhaps as high as 25% across all sectors.  When this happens U.S. multinational corporations with heavy investment in China will see their supply chain and business model completely changed.

After visiting with victims, families and first responders in Dayton, OH, President Trump traveled to El Paso to visit with victims and first responders from Texas. President Trump delivered remarks from the El Paso Regional Emergency Communications Center. [Video and Transcript Below]

.

[Transcript – @2:30 of video] – Q Mr. President, can you tell us about today and what you’ve seen?

THE PRESIDENT: We had an amazing day. As you know, we left Ohio. And the love and the respect for the office of the presidency, it was — I wish you could have been in there to see it. I wish you could have been in there.

And it was no different here. We went to the hospital — just came from the hospital. We were there a lot longer than we were anticipated to be. It was supposed to be just a fairly quick — we met with numerous people. We met with also the doctors, the nurses, the medical staff. They have done an incredible job — both places. Just incredible.

And the enthusiasm, the love, the respect, and also the — telling me, “Let’s see if we can get something done.” And Republicans want to do it and Democrats want to do it.

And, by the way, here is a great hero. This man — the job he did. You all know who it is. Everybody — the whole world knows who you are now, right?

PRIVATE FIRST CLASS OAKLEY: Yes, Mr. President.

THE PRESIDENT: So you’ll be a movie star, the way you look. That’ll be — hey, that’ll be next. Who knows, right?

PRIVATE FIRST CLASS OAKLEY: Yes, sir.

THE PRESIDENT: But what a job. What a job you did.

PRIVATE FIRST CLASS OAKLEY: Thank you, sir.

THE PRESIDENT: There are a lot of heroes. There are a lot of heroes. A lot of people did just incredible work. Now we’re going in, I believe, Chief, and say hello to some of your folks.

POLICE CHIEF ALLEN: Yes, sir.

THE PRESIDENT: This is one of the most respected men in law enforcement, and I want to thank you very much.

POLICE CHIEF ALLEN: Thank you, Mr. President.

THE PRESIDENT: Thank you very much.

Q President Trump, you said today was about healing and unity, and you’ve attacked a number of your critics — Vice President Biden, Senator Brown, Mayor Whaley, as well as various members of the media. Can you explain why you chose to take that tone?

THE PRESIDENT: Well, they shouldn’t be politicking. Yeah, they shouldn’t be politicking today. I had it with Sherrod Brown. He and the mayor, Nan Whaley, they asked to go in — “Could we possibly go in and make the tour with you?” I said, “Yeah, let’s do it.”

They couldn’t believe what they saw, and they said it to people. They’ve never seen anything like it. The entire hospital — no different than what we had in El Paso — the entire hospital was — I mean, everybody was so proud of the job they did because they did a great job. They did a great job here.

And then I said goodbye. I took them in, at their request. We made the tour. They couldn’t believe it. She said it to people. He said it to people.

I get on Air Force One, where they do have a lot of televisions. I turn on the television, and there they are, saying, “Well, I don’t know if it was appropriate for the President to be in…” You know, et cetera, et cetera. You know, the same old line. And they’re very dishonest people and that’s probably why he got, I think, about zero percent and he failed as a presidential candidate.

We’re going to go in and see some very brave people. And I wanted to meet this hero before I did anything. And we appreciate it.

END 4:57 P.M. MDT

Conveying a message of support for those suffering and appreciation for the first responders, President Trump and First Lady Melania Trump traveled to Dayton Ohio to visit victims from last weekend’s horrific mass shooting.

President Donald Trump and Melania met with patients at Miami Valley Hospital in Dayton; and stopped between rooms to thank the hardworking medical staff.

Unfortunately two Ohio politicians decided to make a political argument about the visit itself, instead of focusing on the positive message of healing and appreciation.

Ohio Senator Sherrod Brown and Dayton Mayor Nan Whaley chose to politicize the event for their own purposes and held a press conference while President Trump was visiting Miami Valley Hospital.

Both Democrat Senator Brown and Democrat Mayor Whaley flat-out lied about their encounter with President Trump and instead delivered a false message to the media about their demand for gun control.

If you listen to the first moments of their presser, it’s easy to identify how they planned to lie to their constituents and the media about their tarmac meeting with President Trump.

Their malicious lies are evident with a quick review of the tarmac meeting.  Additionally, it is clear from their body language and conduct with each-other, both politicians had a pre-planned intent to use the meeting to generate fake news and a false narrative.  Their tarmac meeting lasted a few seconds. {Prompted}  Watch their body language, after President Trump and Melania pass them on the reception line.