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 fiscal 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 Street over Wall Street. One aspect we presented was how Federal Reserve monetary policy would be oddly disconnected from its ability to influence inflation.
While the issues inherent within economic influences can be riddled with complexity, we remain optimistic that MAGAnomics will be very very successful.
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 (fiscal 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 fiscal 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)
♦The Modern Third Dimension in American Economics – HERE
♦The “Fed” Can’t Figure out the New Economics – HERE
♦Proof “America-First” has disconnected Main Street from Wall Street – HERE
♦Treasury Secretary Mnuchin begins creating a Parallel Banking System – HERE
♦How Trump Economic Policy is Interacting With The Stock Market – HERE
♦How Multinationals have Exported U.S. Wealth – HERE