• Tag Archives Trump
  • The Laws of Economics Cannot Be Wished Away

    In areas such as rent control and minimum wage laws there’s an increasing tendency to ignore the basic laws of economics, and hope they somehow don’t apply to the policy being considered.

    President Trump provided another example in this recent tweet:


    There are multiple errors here. The first sentence is incorrect; the yuan was much lower when I first visited Beijing in 1994. The second sentence is also incorrect, for two different reasons. Currency manipulation is defined as artificially depreciating a currency to create a current account surplus. China’s current account is roughly balanced, and the depreciation reflected market forces. So there is no currency manipulation, no “major violation” of any agreement.

    One irony here is that it is President Trump’s policies that have caused the yuan to depreciate, as is explained in any principles of economics textbook. When country A puts tariffs on the exports of country B, the currency of country A will appreciate and the currency of country B will depreciate. This is ECON 101.

    In a world with more than two countries, there will be additional effects. China’s currency depreciation will push it to sell more goods to third parties, such as Europe. That will cause depreciation of the euro—another issue that Trump has complained about. Because the dollar would be expected to appreciate against almost all currencies, the US will buy more goods from third parties.

    Textbooks also teach us that tariffs will not improve the trade balance, which depends on saving/investment imbalances. Textbooks also tell us that a major fiscal stimulus will cause the trade deficit to get larger. And that’s exactly what has happened, the trade deficit has become even “worse” over the past two years in response to Trump’s enormous fiscal deficits.

    Trump’s reference to the Fed is an allusion to his earlier plea that the Fed manipulate the dollar lower. It’s not clear why he would want the Fed to do that, as in the final sentence he says that currency manipulation will weaken China over time. So why encourage the Fed to manipulate the dollar? Wouldn’t that also weaken America over time?

    Here’s King Canute:

    This article is republished with permission from the Library of Economics and Liberty.

    Scott Sumner

    Scott B. Sumner is the director of the Program on Monetary Policy at the Mercatus Center and a professor at Bentley University. He blogs at the Money Illusion and Econlog.

    This article was originally published on FEE.org. Read the original article.

  • US-Russia Tensions Are Escalating Because of Collusion Fever




    Establishment media and politicians began to sound the alarm on fake news after Donald Trump won the presidency in 2016, blaming deception and ignorance for his victory. But as much as they might worry about the spread of false narratives and disinformation, their thirst for stories about Russia colluding with then-candidate Trump during the 2016 election proved to be a powerful brand of fake news—one that has most certainly put lives at risk.

    In the aftermath of Trump’s victory, the “Russia hacked the election” narrative quickly became the gospel of the mainstream left. It was only a matter of time, they claimed, until the facts revealed the nefarious relationship between Trump and the Kremlin and exposed the flagrant collusion that led to Clinton’s defeat. There was just one problem: the outlets drumming up this narrative lacked evidence to substantiate it.

    In one instance, The Washington Post reported that Russia had penetrated the US electricity grid only to be forced to issue a correction admitting they had their information wrong. In another show of sensational Russiagate journalism, The Post published a story citing an anonymous group called PropOrNot claiming Russia had infiltrated alternative news outlets to spread Russian propaganda.

    After respected journalists like The Intercept’s