President Smoot (AKA Trump), tweeted this morning that the problem is not the trade war with China and others. His contention is that the FED is keeping interest rates too high. They need to lower them immediately and aggressively is his advice.
This is absurd. The ten-year U.S. Treasury is 1.70%. The cost of money is NOT keeping people from buying cars and homes. The ability to borrow money at all time low interest rates is NOT keeping corporations from borrowing to expand plant and equipment. For both business and consumers, loans are readily available at historical low interest rates. Does the President believe if the cost of loans was just lower, it would create a major spending boom by business and consumers?
The problem is indeed tariffs. This is a major cost increase that discourages both Chinese citizens from buying and U.S. citizens from buying. It destroys business confidence on both sides. It stops business activity. The U.S. and China represent approximately 45% of the world economy. The other 55% are beginning to see sales to both China and the U.S. slow.
Hopefully the President’s comments are just political posturing. It worries us that he may actually believe what he tweeted this morning.