NEC Director Larry Kudlow Discusses U.S-China Negotiation Restart…

White House National Economic Council Director Larry Kudlow on the U.S.-China trade talks where recontact has been established and now officially restarted. As noted, President Trump is in no hurry; the status-quo is leverage in our favor.

Additionally Director Kudlow discusses the potential benefits of the USMCA trade deal and whether the Federal Reserve should lower interest rates.

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Regarding “inflation” these pundits just don’t get it.  For over three years CTH has been explaining how President Trump’s maganomic policy would reverse three decades of stagnant Main Street economic growth.  The Bureau of Economic Analysis (BEA) consistently confirms our earlier predictions releasing data where inflation is essentially nonexistent.

Since the mid-to-late 1980’s the U.S. economy split into two divergent economic engines. One traditional engine powered by Main Street, and a second engine powered by Wall Street.  For thirty-plus years the distance between those engines was growing as federal monetary policy provided low interest rate support for investment, but the end destination for the investment was NOT in the U.S. [Hence, globalism]

For more than 30 years monetary policy has been driven by Wall Street influence.  FED interest rates made borrowing cheap, but the money -the actual investment itself- flowed out of the United States.  The end product from the investment, steered by multinationals, created products overseas.  Within this flow of capital there was no benefit to Main Street.

President Trump’s America-First policy has reversed the dynamic.   As a result of his focus and demand, the end product(s) from capital investment are now here in the U.S.A.

The MOUSE is money or investment. The CHEESE is end products, manufactured stuff.

Rather than beg the Wall Street investment mouse to change direction in the manufacturing maze, president Trump has simply moved the cheese to Main Street.  The mouse’s travel changed accordingly.

(BEA Table 4 – pdf)

The price index for gross domestic purchases increased 0.7 percent in the first quarter, compared with an increase of 1.7 percent in the fourth quarter (table 4). The PCE price index increased 0.4 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.0 percent, compared with an increase of 1.8 percent. (link)

As companies reevaluate the best place for investment (highest return), and they see that Trump’s policies (corp taxes, tariffs, material and labor costs) focus on greatest benefit being inside the U.S, then companies return to Main Street.  This is what has been happening since Trump took office; and it continues through today.

The prices of highly consumable goods (food, fuel, energy) is kept low by Trump policies  that increase energy production and return a genuine supply-side dynamic to domestic production prices. [The battle with Big AG]

Meanwhile multinationals, and some foreign governments, fight to keep their footing abroad (original investment) by keeping down the price of durable goods manufactured overseas.  This is done by: currency devaluation, increasing productivity, adjusted supply chains and retention incentives afforded by the benefiting nation.  This is done to offset Trump tariffs which are designed to influence a shift in the manufacturing process.

The end result of both production dynamics, domestic and abroad, is low inflation.

This price dynamic is happening at the location of output, internal to the operations that are determining the output price, based on their determination of what U.S. market prices will absorb and a need to retain export position.

Key Point – The pricing is NOT a result of decision-making on new investment; and therefore the pricing dynamic is not able to be impacted or influenced by FED monetary policy.

Only when the majority of manufacturing investment fully returns to the U.S. will FED policy have any significant bearing on manufacturing prices.  This is the parity point where Main Street’s economic engine is recoupled to inflation.

There was 30 years of distance in the FED disconnect, and it will take more than a few years for the recoupling of Main Street to FED monetary policy.

This dynamic is the basic thesis behind THE THEORY HERE.

DECEMBER 2016 – […] 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 because inflation on fast-turn consumable goods become re-coupled to the ability of wage rates to afford them.

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

Within the aforementioned distance between “X” and “Y”, a result of three decades traveled by two divergent economic engines, is our new economic dimension….

 

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This entry was posted in Big Government, Big Stupid Government, Canada, China, Dem Hypocrisy, Donald Trump, Economy, Legislation, Mexico, NAFTA, Nancy Pelosi, President Trump, propaganda, Trade Deal, Uncategorized, US dept of agriculture, US Treasury, USA, USMCA. Bookmark the permalink.

42 Responses to NEC Director Larry Kudlow Discusses U.S-China Negotiation Restart…

  1. Perot Conservative says:

    President Trump hasn’t tweeted about USMCA in about 2 weeks? Distracted? Waiting until after the summer recess?

    It is such a lynchpin to the other deals, and Pelosi working to stall it.

    I read another article on trade; our deficit with China dropping modestly, but it has increased with some other countries.

    Like

    • Perot Conservative says:

      And I guess the ag purchases I read about were one offs.

      Chinese bureaucracy, or is Xi welching on his word?

      So we are at the mercy of Nancy Pelosi for USMCA vote and debate?

      Like

    • Dutchman says:

      Perot Conservative,
      (Obviously, IMHO) Firstly, any lobbying by PDJT FOR USMCA will stir up the AOC brigade, that are insisting ANY deal “giving Trump what he wants” is a capitulation, and betrayal, and they will oppose.”

      Kudlow says Nancy has been cooperative, and SHE may have told Kudlow “If you want this to pass, tell Trump to shut up about it! That little biotch AOC and her sandbox friends are giving me headaches!”

      Secondly,,I am not convinced PDJT actually WANTS USMCA to pass, going back to PRE-NAFTA would be good for a variety of reasons. And, any political fall out for USMCA ‘failing’to pass is OWNED by Congress. PDJT’s hands are ‘clean’.

      Liked by 4 people

      • SwampRatTerrier says:

        It’s Summer Time.

        Everyone should be Chillin’……….

        Philippians 4:6 Be anxious for nothing….

        Liked by 2 people

      • Perot Conservative says:

        Yes, I’m hoping there is dome 2D logic to these occurrences … USTR RL says he has had talks with Pelosi.

        I thought we had s 90-day window to pass it.

        No idea what wimpy Trudeau and Pelosi will seek in return. NO TO AMNESTY.

        Like

        • Dutchman says:

          Thats the beauty; WHY ‘give’ them ANYTHING in order to entice them to pass.
          ALL lobbyists are pushing them to pass, can’t think of any not.
          The CoC is DIEING for it to pass. Only reason NOT to, is base p.o.’d at ‘giving Trump a win’, and Dems have been ignoring base for a long time.

          If they don’t pass it, Dems and Pelosi OWN it, and PDJT says “fine, we go back to PRE-nafta”, which is VERY good for U.S., Canada and Mexico (and CoC), not so much.

          Give them NOTHING, they have NO leverage.

          Like

        • Dutchman says:

          People are all caught up in pre-DJT era thinking; in which a POTUS’s ego, image and legacy was SO caught up in making a deal, ANY deal, because to try and not make a deal was viewed as a failure.
          So, we had the “a BAD deal is better than NO deal”, which is, of coarse ludicrous.
          PDJT doesn’t PLAY this way, and people JUST don’t get that.
          A2 posted a link to an article that says CCP thinking is that PDJT is going to be desperate to get a deal, as we get close to 2020 election (paraphrasing).
          What is WITH these people, that they won’t invest $20 or so, and a couple of hours to READ what the man has written (Art of the deal)?

          NEVER enter into a deal you aren’t prepared to walk away from. Its basic “common sense”.

          Liked by 1 person

  2. GB Bari says:

    I’m ready to declare that many of the MSM and their alleged economic experts are fully aware of the MAGA Main Street vs. Wall Street dynamic, but are either (a) under orders by their globalist corporate masters to continue to press the set of narratives that they’ve been selling for the past 30 years, or (b) of a belief that the previous set of rules is more accurate, or (c) a bit of both.
    The hosts don’t accept MAGAnomics while they continue to ask questions in their determined attempt to frame the President’s efforts as negatively as possible.

    The smiling friendly faces of those network hosts who conduct friendly banter with Kudlow based on amicable past relationships are simply using their own “panda masks” but in reality their objectives are to try to poke holes in the Administration’s stated policies and trip up Larry or any of the President’s economic advisers.

    Liked by 3 people

    • Dutchman says:

      GB,
      The relevant quote, I believe is ;
      “There are NONE so blind as those who WILL NOT see.” Not “CAN not”, but “WILL not”. And agree its a bit of both.

      Maganomics goes against everything they were taught in school, and what their life experience has ‘taught’them.

      Maganomics destroys their value, by destroying, or refuting everything they think they know. If accepted, they are irrelevant.

      They are ‘experts’in ‘opening a vein, to bleed the patient, in order to let out the bad humors, transported to 20th century.

      Hard to take, having your whole world turned upside down. So, you either throw out your old textbooks and go BACK to school, to learn all over again,..

      Or, you engage in denial, including denying reality, or constantly looking for this magic wand stuff DJT is doing to collapse, so you can go back to what you know. Human nature says MOST will do the latter.

      Liked by 5 people

      • SwampRatTerrier says:

        Touche!!!

        RE: “Maganomics goes against everything they were taught in school, and what their life experience has ‘taught’them.”

        Which is why Young Black Men (who are also opinion makers) are saying Trump will probably get more Black votes in 2020.

        Liked by 1 person

  3. Art Laffer is “The Art of the Deal” and the Koala is a national treasure. In my humble opinion, the true brilliance of President Trump is that he could see the unlimited potential of using assets such as Ross The Boss, Nuch, Varo and Light as the most dynamic economic team ever assembled and he did it!
    I am an old fart and our current POTUS is the only leader in my lifetime the Walks the Walk then leaves the talking to the babble heads. Results speak louder the rhetoric.

    Liked by 5 people

    • Perot Conservative says:

      Well, the USMCA appears to me as the cork in the bottle, preventing other major negotiations / leverage. Likely not wise to tariff the whole world simultaneously. Japan in limbo.

      POTUS wants to tariff India, Vietnam, and likely the EU, but we go back to Pelosi holding up USMCA.

      Some ag groups are pushing, a couple of senators, and ads are going up in swing states, and the President seems silent on the issue while Pelosi stalls. Odd.

      Thinking like evil Pelosi, I can see her holding it hostage for DACA Amnesty or such. Especially if Kudlow is correct that it will add 200,000 jobs a year and .5 to GDP.

      Like

  4. Mark says:

    We’ve already had the inflation during Obama’s 8 years. Prices kept going up, portions became smaller, etc. The MSM and gov’t just did everything they could to hide it.

    Liked by 2 people

  5. snellvillebob says:

    My thought on this is:
    The goods coming into the USA are already being sold at a price set by what the market will bear, so when we put a tariff on it, they will lose sales if they pass that price change on to the consumer. This is why China is absorbing the cost of the tariffs and not passing it on to us.

    Like

    • Perot Conservative says:

      The Dollar Store can’t become the $1.30 Store overnight!

      Liked by 1 person

    • Dutchman says:

      snellville,
      In the SHORT term, yes. In the longer term, AS we collect BILLIONS in tarifs, multinationals realise its just too unstable to gamble on tarifs, when trying to sell into THE market EVERYBODY wants to sell into.

      And, less environmental regs and cheap labor isn’t worth it. So, the manufacture HERE, to sell HERE, and even for export. Its the safest bet, and $ moves to safety.

      Even moving from China to Mexico. Say USMCA DOES pass, but then Mexico is unable to satisfy PDJT with regard to stopping the transhipment of drugs thru Mexico and into U.S.?

      BAM, he tarifs their auto sector 25%, and now the manufacturing you JUST moved from China to Mexico, has to be moved, again.

      Do you bet that Mexican govt. can actually shut down the cartels? I sure wouldn’t call that a ‘safe bet’.

      Do you bet the farm that PDJT won’t win reelection in 2020? Ditto.

      Do you bet that with what he has done, demonstrating clearly how MAGANOMICS works, that no POTUS,in the future will follow the same pattern?

      And of coarse for those,who have taken MAGAnomics 101 by SD, if these widgets or lemons are produced IN the U.S., its going to be a impossible to manipulate supply and demand, to exfiltrate wealth out of the U.S.

      Because, you know,..”Trillions at stake”

      Liked by 2 people

      • Donald says:

        @Dutchman-
        “In the longer term, AS we collect BILLIONS in tariffs,”
        This is where the Twenty-Second Amendment (limiting the president to two terms) completely undermines the foundation of the Constitution.
        The economic dilemma you accurately describe has a very practical and attractive solution: to wait out the President. He’s term-limited!
        Can anybody really wait out Nancy Pelosi? Mitch McConnell? John Roberts?
        In my opinion, ‘this improvement’ on the original structure of the Constitution has been
        a disaster, creating two ‘permanent’ Washington classes (Deep State, anyone?), and one ‘newcomer’ (who’s also a ‘short-timer!’) that the ‘permanent political class hopes to strangle in the crib!
        As people begin making long-term financial decisions in their respective industries, ‘waiting out the president may seem very attractive. To them, Nancy, Mitch and John will still be there. Donald? Not so much.

        Like

        • Dutchman says:

          Yup. Judges for life, Congress leadership, virtually for life, with hand picked successor to carry on, but ONLY in the Executive are there term limits.
          And what about the argument against term limits for Congress?
          i.e. “We HAVE term limits, they’re called ELECTIONS.”
          If the Founding Fathers had wanted POTUS to be term limited, they would have made it that way at the outset. They certainly discussed NOT making George Washington into another King, so were aware of the potential downside.

          Liked by 1 person

          • Donald says:

            @Dutchman,
            Thx!
            I don’t know if you grew up with siblings or not, but the phenomenon of sibling rivalry is well-known, whereby each envies the other in some manner or way. But there’s always one of the siblings that gives in to the incessant bickering and acrimony for the sake of peace and harmony.
            With all due respect for our first, and probably greatest president, I think he gave in to the sibling rivalry of his day with that comment about not wanting to be king.
            It’s notable, though, that no one was rushing off to amend the Constitution.
            My belief is that with the 22nd amendment, our form of government is dysfunctional as a result.
            Best,
            Donald

            Like

            • Dutchman says:

              5 siblings, me roughly in the middle.
              Never really gave the 22 nd much thought till recently, but now I think it kind of hamstrings us.

              Both in foriegn affairs, and in Congressional leadership, and the deep State, as stated they can just wait out the,POTUS.

              Like

  6. MD says:

    One thing I don’t agree with that Larry said was that China wasn’t waiting for the elections. I think those on the other side of this issue have been filling their heads with ideas that Trump will be impeached, voted out etc. There are many people out there trying to sabotage any deal with China and other countries.

    Like

    • Sentient says:

      If China is obviously stalling in hopes of a more compliant US president, that actually becomes another strong reason for Americans to vote to re-elect President Trump. If China wants Kamala Harris (I think she’ll be the nominee), voting for Trump is a way to thwart China’s plans. So they either agree to a deal that’s fair to the US or they dig their heels in, giving American voters reason to return Trump to office to keep fighting on their behalf. It’s a win/win politically.

      Like

    • Pf1289 says:

      I think they were being advised by Obama Democrats to wait for the elections too…until they saw the first debate and realized they’ll have PTrump to deal with for a second term!

      Like

  7. Fools Gold says:

    I ain’t trying to be a bummer (love Trump policies better than any in my time including Reagan) here but why are diesel prices up? Paid 2.99 per gallon for a load today for 3/4 ton diesel. I’m not a trucker but hell it was 2.29 earlier this year. This ain’t good for prices for stuff hauled in all direction within our continent, just simply asking the question.

    Like

  8. qzy says:

    God, I love that picture SO much. A “younger me” would have been skeptical that an international, billionaire, real estate mogul, would actually care about working men and women.

    Now, I believe.

    Like

  9. Ryan Gordon says:

    Reading the Bloomberg article Sundance retweeted earlier tonight it seems that manufacturing production is at maximum capacity in the “Golden Ticket” winning counties, great news for these countries but a scary time is at hand for the companies looking to flee China. Where are they too go? I’d suggest looking at Mexico or bring it back home to Main Street USA. Nancy better start whipping up votes for USMAC and the Mexican’s better uphold their end of the immigration deal or we will recapture ALL of this production.

    https://www.bloomberg.com/news/articles/2019-07-09/trade-war-threatens-chinese-factories-existence-li-fung-says

    Like

  10. no-nonsense-nancy says:

    Thank you Sundance for this article. I think I understand about 50% of what you ell us about the Maganomics and that is good for me, since I knew zero about the economy before I found CTH a few years ago. I have several MBAs in my immediate family and I wonder how much they are up on all of the President’s economy. I don’t ask them because I don’t have too much clout in my own family. They mostly think I am a little radical and even crazy for my devotion to POTUS.

    Like

  11. Zippy says:

    There will be no agreement until after the 2020 election. China wants Trump gone and won’t give him a political feather in his cap.

    Like

    • They can’t wait that long. China has built a huge industrial machine based on being able to tell its citizens what they must do and where they must live, and by ignoring environmental and worker-protection law. The one thing which they can’t withstand is the re-emergence of domestic production capability within the United States homeland. Companies “just down the street, not oceans away,” who are by-the-way producing better stuff that isn’t subject to tariffs.

      If the United States actually wakes up and remembers who he is … China will have no answer.

      Liked by 1 person

  12. Perot Conservative says:

    Sundance was right- Bloomberg, MUST READ

    Vietnam at capacity

    Bloomberg: Walmart’s Supplier Says Chinese Factories in ‘Desperate’ State

    https://www.bloomberg.com/news/articles/2019-07-09/trade-war-threatens-chinese-factories-existence-li-fung-says

    Like

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