A good day for a MAGAnomic pause and reminder…

In 2015 we discussed candidate Trump’s economic positions and how they would impact the economy.  CTH anticipated that MAGAnomics would be reversing three decades of federal reserve monetary policy. After about a year of analysis and discussion, in 2016 CTH presented a theory: “A new Dimension in Modern Economics“.

CTH shared a possibility of what could happen if Trump Economic Policy was shifted to favor Main St. over Wall St.  One aspect we presented was how Federal Reserve monetary policy would be oddly disconnected from its ability to influence inflation… Today:

SAN DIEGO (Reuters) – The Federal Reserve could find itself fighting too-low inflation for years to come, San Francisco Federal Reserve President Mary Daly said on Friday, and may need a new policy framework to lift inflation back up to the Fed’s 2% goal.

“We don’t have a really good understanding of why it’s been so difficult to get inflation back up,” Daly said at the annual American Economics Association meeting in San Diego.

But with global growth slowing and the populations of most advanced economies aging, Daly said, “this new ‘fighting inflation from below’ is going to be with us, I would argue, for a longer period of time than just a few years.” (read more)

While the Federal Reserve is perplexed, the underlying reason for monetary policy to be incapable of impacting the rate of inflation is not too complex when you think about the focus of federal economic policy reversing in the era of Trump.

For 30-years +/- U.S. economic policy was geared toward Wall Street.  Corporations looked to maximize profits, manufacturing was shipped overseas, jobs were lost and Main Street suffered.  The Fed monetary policy followed the economic influences of a Wall Street created outcome. U.S. multinationals benefited; U.S. main street companies did not.

A Wall St. economic engine was created. The FED policy followed the new engine. The two entirely different economic engines then detached:

• The Wall Street economy, an engine of sorts, is a “service driven” economy, with manufacturing of cheap imported goods done overseas.
• The Main Street economy, again another engine, is a more balanced “manufacturing” economy; with a balance of imports and finished goods produced in the USA.

Bush, Clinton-Clinton, Bush-Bush and Obama-Obama terms focused on the Wall Street economy.  However, Donald Trump focuses on the Main Street economy.  In 2016, immediately after the election, we wrote about what we might expect to see happen:

2016 […]  Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.

Think about these engines doing a turn about and beginning a rapid reverse.  GDP can, and in my opinion, will, expand quickly.  However, any interest rate hikes (monetary policy) intended to cool down that expansion -fearful of inflation- will take a long time to traverse the divide.

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 influence because inflation on fast-turn consumable goods becomes re-coupled to the ability of wage rates to afford them.

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

What we are seeing in 2019 is precisely this outcome.

Reports of new late-night U.S. airstrikes north of Baghdad are starting to be confirmed.  According to developing reports a convoy of two or three vehicles carrying Iran-back Shia Militia leaders was targeted near Taji in Northern Baghdad. [Convoy pic below]

The strike is reported to have killed Qais Khazali, one of the people the US named as responsible for storming of US Embassy in Baghdad.  Also Shibl al-Zaydi is now confirmed to have been killed. Shibl was the leader of Kata’ib al-Imam Ali or the Imam Ali Battalions.

BAGHDAD (Reuters) – Air strikes targeting Iraq’s Popular Mobilization Forces umbrella grouping of Iran-backed Shi’ite militias near camp Taji north of Baghdad have killed six people and critically wounded three, an Iraqi army source said late on Friday.

Two of the three vehicles making up a militia convoy were found burned, the source said, as well as six burned corpses. The strikes took place at 1:12 am local time, he said. (link)

It would appear the U.S. has ongoing excellent intelligence on the movements of key Iranian militia leadership operating in Iraq, and are now working through a list of those targets as they attempt to move around.

Today President Trump is speaking at an “Evangelicals for Trump” coalition kick-off event in Miami, Florida.  Anticipated start time 5:00pm ET

Fox News Livestream – Fox Business Livestream – Alternate Livestream

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This afternoon President Trump delivered a statement on Iran outlining the successful preemptive strike against Iranian terrorist leader Qasem Soleimani.

…“We took action last night to stop a war. We did not take action to start a war.”…

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[Rough Transcript] Thank you very much, and good afternoon.

As president my highest and most solemn duty is the defense of our nation and its citizens. Last night, at my direction, the United States military successfully executed a flawless precision strike that killed the number one terrorist anywhere in the world, Qassem Soleimani.

Soleimani was plotting imminent and sinister attacks on American diplomats and military personnel, but we caught him in the act and terminated him.

Under my leadership America’s policy is unambiguous to terrorists who harm or intend to harm any American. We will find you. We will eliminate you. We will always protect our diplomats, service members, all Americans and our allies.

For years the Islamic Revolutionary Guard Corps and its ruthless Quds Force under Soleimani’s leadership has targeted, injured and murdered hundreds of American civilians and servicemen.

The recent attacks on U.S. targets in Iraq, including rocket strikes that killed an American and injured four American servicemen very badly, as well as a violent assault on our embassy in Baghdad, were carried out at the direction of Soleimani.

Soleimani made the death of innocent people his sick passion, contributing to terrorist plots as far away as New Delhi and London. Today we remember and honor the victims of Soleimani’s many atrocities and we take comfort in knowing that his reign of terror is over. Soleimani has been perpetrating acts of terror to destabilize the Middle East for the last 20 years.

What the United States did yesterday should have been done long ago. A lot of lives would have been saved. Just recently Soleimani led the brutal repression of protesters in Iran, where more than 1,000 innocent civilians were tortured and killed by their own government.

We took action last night to stop a war. We did not take action to start a war. I have deep respect for the Iranian people. They are a remarkable people with an incredible heritage and unlimited potential.

We do not seek regime change. However, the Iranian regime’s aggression in the region, including the use of proxy fighters to destabilize its neighbors, must end and it must end now. The future belongs to the people of Iran, those who seek peaceful co-existence and cooperation, not the terrorist warlords who plunder their nation to finance bloodshed abroad.

The United States has the best military by far anywhere in the world. We have the best intelligence in the world. If Americans anywhere are threatened, we have all of those targets already fully identified, and I am ready and prepared to take whatever action is necessary. And that in particular refers to Iran.

Under my leadership we have destroyed the ISIS territorial caliphate, and recently American special operations forces killed the terrorist leader known as al-Baghdadi. The world is a safer place without these monsters.

America will always pursue the interests of good people, great people, great souls, while seeking peace, harmony and friendship with all of the nations of the world.

Thank you, God bless you. God bless our great military, and God bless the United States of America.

Thank you very much. Thank you.

Details are starting to emerge about the killing of Qassem Soleimani, the head of Iran’s elite Quds Force.  As with all early reports a modicum of skepticism toward the details should be applied. However, here’s the expanded reporting from the Associated Press.

BAGHDAD (AP) — The Pentagon said Thursday that the U.S. military has killed Gen. Qassem Soleimani, the head of Iran’s elite Quds Force, at the direction of President Donald Trump.

An airstrike killed Soleimani, architect of Iran’s regional security apparatus, at Baghdad’s international airport Friday, Iranian state television and three Iraqi officials said, an attack that’s expected to draw severe Iranian retaliation against Israel and American interests.

The Defense Department said Soleimani “was actively developing plans to attack American diplomats and service members in Iraq and throughout the region.” It also accused Soleimani of approving the attacks on the U.S. Embassy in Baghdad earlier this week.

A statement released late Thursday by the Pentagon said the strike on Soleimani “was aimed at deterring future Iranian attack plans.”

The strike also killed Abu Mahdi al-Muhandis, deputy commander of Iran-backed militias in Iraq known as the Popular Mobilization Forces, or PMF, Iraqi officials said. The PMF media arm said the two were killed in an American airstrike that targeted their vehicle on the road to the airport.

Citing a Revolutionary Guard statement, Iranian state television said Soleimani was “martyred” in an attack by U.S. helicopters near the airport, without elaborating.

[…] A senior Iraqi politician and a high-level security official confirmed to The Associated Press that Soleimani and al-Muhandis were among those killed in the attack shortly after midnight.

Two militia leaders loyal to Iran also confirmed the deaths, including an official with the Kataeb Hezbollah faction, which was involved in the New Year’s Eve attack by Iran-backed militias on the U.S. Embassy in Baghdad.

[…] A senior Iraqi politician and a high-level security official confirmed to The Associated Press that Soleimani and al-Muhandis were among those killed in the attack shortly after midnight. Two militia leaders loyal to Iran also confirmed the deaths, including an official with the Kataeb Hezbollah faction, which was involved in the New Year’s Eve attack by Iran-backed militias on the U.S. Embassy in Baghdad.

[…]  The security official, speaking on condition of anonymity, said al-Muhandis had arrived to the airport in a convoy along with others to receive Soleimani, whose plane had arrived from either Lebanon or Syria. The airstrike took place near the cargo area after he left the plane to be greeted by al-Muhandis and others.

Two officials from the Iraqi Popular Mobilization Forces said Suleimani’s body was torn to pieces in the attack while they did not find the body of al-Muhandis. A senior politician said Soleimani’s body was identified by the ring he wore.

[…]  The official with the group known as the Popular Mobilization Forces said the dead included its airport protocol officer, identifying him as Mohammed Reda.

A security official confirmed that seven people were killed in the attack on the airport, describing it as an airstrike. Earlier, Iraq’s Security Media Cell, which releases information regarding Iraqi security, said Katyusha rockets landed near the airport’s cargo hall, killing several people and setting two cars on fire. (more)

Statement from the Pentagon:

Iraqi State TV tonight reporting that Qassim Soleimani, leader of Iran’s Quds Force, the elite unit of the Revolutionary Guards, was killed in US airstrike near Baghdad. For context this would be the equivalent of U.S. General Norman Schwarzkopf being killed during Dessert Storm.  This is a major escalation… buckle up!

Oh man, this is huge. Soleimani was a bad guy, a terrorist, and responsible for many U.S. deaths; but this could also mean we are about to go into a full-blown war with Iran. Also killed was Abu Mahdi al-Muhandis, the deputy commander of Iran-backed militias known as the Popular Mobilization Forces and other members within a convoy.

Qassim Soleimani (left) Abu Mahdi al-Muhandis (right)

Baghdad (AP) — Iraqi TV and three Iraqi officials said Friday that Gen. Qassim Soleimani, the head of Iran’s elite Quds Force, has been killed in an airstrike at Baghdad’s international airport.

The officials said the strike also killed Abu Mahdi al-Muhandis, the deputy commander of Iran-backed militias known as the Popular Mobilization Forces.

Their deaths are a potential turning point in the Middle East and are expected to draw severe retaliation from Iran and the forces it backs in the Middle East against Israel and American interests. The PMF blamed the United States for an attack at Baghdad International Airport Friday.

A security official confirmed that seven people were killed in the attack on the airport, describing it as an airstrike. Earlier, Iraq’s Security Media Cell, which releases information regarding Iraqi security, said Katyusha rockets landed near the airport’s cargo hall, killing several people and setting two cars on fire. (link)

Soleimani likely felt the U.S. would never dare strike him in/around Baghdad, Iraq, despite his provocations near the U.S. embassy.  Reuters files this initial report:

BAGHDAD (Reuters) – Iranian Major-General Qassem Soleimani, head of the elite Quds Force, and Iraqi militia commander Abu Mahdi al-Muhandis were killed late on Thursday in an air strike on their convoy in Baghdad airport, an Iraqi militia spokesman told Reuters.

“The American and Israeli enemy is responsible for killing the mujahideen Abu Mahdi al-Muhandis and Qassem Soleimani,” said Ahmed al-Assadi, a spokesman for Iraq’s Popular Mobilization Forces umbrella grouping of Iran-backed militias.

Earlier today, after the U.S. Embassy attack in Iraq, Defense Secretary Mark Esper appeared on television to say actions by Iran or its proxies will be met with a severe and strong response by U.S. force.

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American voters responded to the fraudulent impeachment effort in a big financial way for President Trump in the fourth quarter.  The campaign announced a massive $46 million influx which doesn’t count the amount raised by the RNC.

WASHINGTON (Reuters) – President Donald Trump’s re-election campaign raised $46 million in the fourth quarter of 2019, a major haul that was boosted by a surge of donations in the wake of the Democrats’ impeachment bid, a senior campaign official said on Thursday.

[…] The Trump campaign begins the 2020 re-election year with cash on hand of $102.7 million, the official told Reuters, an amount that will help his bid to compete in more states beyond those that carried him to his improbable victory in 2016.

Speaking on condition of anonymity, the official said the campaign felt that Trump’s strong fundraising was a direct result of his decision to keep his campaign apparatus alive after taking office in January 2017.

He filed for re-election shortly after assuming office, allowing the campaign to keep functioning, a break from the tradition of winding it down after the election.

The $46 million for the fourth quarter was the amount raised only by the Trump re-election campaign. Trump and Vice President Mike Pence typically headline fundraising events that benefit both the campaign and the Republican National Committee.  (read more)

In the aftermath of National Security Council usurper Lt. Col. Vindman helping to orchestrate a joint DoD, CIA and State Dept soft-coup against President Trump, several pointed questions were asked about why the NSC was allowed to undermine the office they were created to support.

In response to those questions, newly appointed National Security Advisor Robert O’Brien announce the White House was in an ongoing process to reduce the size of the NSC.

A follow-up article within the Washington Times highlights the downsizing so far.

WASHINGTON DC – The White House National Security Council staff is being downsized sharply in a bid to improve efficiency within the policy coordinating body by consolidating positions and cutting staff.

A second, unspoken thrust of the overhaul is a hoped-for end to what many critics see as a string of politically damaging, unauthorized disclosures of sensitive information. Leaks of President Trump’s conversations with foreign leaders and other damaging disclosures likely originated with anti-Trump officials in the White House who stayed over from the Obama administration, according to several current and former White House officials.

White House National Security Adviser Robert C. O’Brien is leading the NSC reform effort. He revealed in a recent interview with The Washington Times that 40 to 45 NSC staff officials were sent back in recent months to the agencies where they originally worked, with more likely to be moved out. (continue reading)