Updated MAGAnomics and Global Dynamics – A Discussion With Mohamed El-Erian….

Whenever we discover a financial analyst who understands the new dimension in U.S. economics (rare) it is worth revisiting them from time-to-time. Allianz chief economic adviser Mohamed El-Erian was one of the first MSM pundits to: (a) accept the disconnect between Wall Street and Main Street via de-globalization; and (b) begin to explain why that matters in the era of Trump.

El-Erian appeared this morning on Fox Business News to discuss President Trump’s re-imposition of steel and aluminum tariffs on Brazil and Argentina. Additionally El-Erian discusses trade tensions, market outlooks, consumer strength, recession fears, and the drag the rest of the world is placing in the U.S. economy.

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The U.S. economy is strong; all the fundamentals are solid. However, the multinationals on Wall Street -invested overseas- are more exposed. There is nothing that China and the EU can do to stop the de-globalization process; and efforts to stimulate their economy, more quantitative easing (pumping money) while the global supply chains are being shifted, are futile… they need “structural reform.”  The multinationals are holding cash, waiting to see how it plays out.

The more a nations’ economy is dependent on exports, the more exposure they have to the inherent downsides of de-globalization. U.S. companies that are invested in these nations will naturally see diminishing returns on investment over time; some rapidly. President Trump’s trade policy is controlling the speed of that investment contraction.

The exposure of the multinationals keeps the stock market twitchy, yet the Main Street USA economy is thriving.

China’s economy is dependent on selling products to the U.S. in order to receive dollars. China takes those dollars and then purchases industrial goods from Europe. If China gets less dollars they purchase less from Europe. In essence both China and the EU are dependent on receiving dollars from a maintained trade imbalance. President Trump has begun resetting that imbalance… that is the current status of the global economic flux.

So what is the “structural reform” El-Erian is discussing?  This is where the EU needs to accept their economic model will no longer work if the global economy is changed.

Specifically:

♦The EU has benefited from their one-way tariff system against U.S. industrial goods.  They have also used non-tariff barriers to keep their position.  Now they need to change their perspective and embrace reciprocity in new trade agreements; or else Trump will use the strength of the U.S. market to pummel them with tariffs.

♦The EU has used their one-sided tariff and trade system as a key part of their overly generous social and worker benefits.  If they don’t change the level of social payments and begin to ‘structurally’ change their social benefits, again they will suffer when the one-sided financial benefits are removed.  They won’t be able to afford their social system without the one-sided trade benefit.

♦The EU has over-regulated their industrial base and attached themselves to burdensome regulatory standards; specifically worsened by their Paris climate treaty and changes within their energy programs.  The compliance standards in combination with the increased costs and less global income is a perfect storm for contracting economic growth.

These are the types of EU reforms that are needed in an era where President Trump has purposefully stalled the process of globalization and is resetting global supply chains.  The Trump policies that bring massive amounts of wealth back into the United States has created the dynamic where the EU must adapt or contract.

In essence Titan Trump is engaged in a process of: (a) repatriating wealth (trade policy); (b) blocking exfiltration (main street policy); (c) creating new and modern economic alliances based on reciprocity (bilateral deals); and (d) dismantling the post WWII Marshal plan of global trade and one-way tariffs (de-globalization).

Remember a few paragraphs above when we noted: “President Trump’s trade policy is controlling the speed of that global investment contraction”…. well, here’s an example:

This entry was posted in Auto Sector, Big Government, Big Stupid Government, Decepticons, Deep State, Dem Hypocrisy, Economy, Election 2020, Environmentalism, European Union, media bias, President Trump, Trade Deal, Uncategorized, US dept of agriculture, US Treasury, USA. Bookmark the permalink.

62 Responses to Updated MAGAnomics and Global Dynamics – A Discussion With Mohamed El-Erian….

  1. littlequilterkitty says:

    Bravo, President Trump!

    Liked by 9 people

  2. Rafael says:

    Didn’t explain at all what evidence they have of Brazil manipulating currency rates… I was wishing they could give some.

    Yes, the Real is weak in relation to the US Dollar. But that’s not Brazil’s doing. All the Dollars around the world are going back to the United States because of the strong economy.

    Y’all talk about Brazil like it’s China. The US has a surplus in trade with Brazil. Do you just want the jobs to go away?

    We don’t mind fair deals. We don’t mind deficits. From our point of view, right now it just looks like Trump can’t be trusted because the explanation for his actions don’t make any sense. I hope there’s an explanation behind this.

    Like

    • Sharon says:

      “From our point of view,…”

      Can you please clarify who you are speaking for.

      Who is referenced by “our”? Who is “we” in the last paragraph?

      Liked by 2 people

    • WRB says:

      Yes, the Real is weak in relation to the US Dollar. But that’s not Brazil’s doing

      It is nothing personal. But the US has only a few aluminum and steel plants, and if they go belly up the US can not really be a “superpower” when it is at the mercy of other countries for the supply of such critical metals. With low exchange rates, those US plants can not compete, so the US raises the cost of imported steel and aluminum and this enables the plants to stay in business.

      People argue if it’s fair, or if it’s economical or if it costs jobs (in the US or abroad). But all of that misses the point: the US wants a domestic industry in aluminum and steel and will fight to keep it. Well, until the dems regain control of the gov’t and then it goes to the highest bidder.

      Liked by 7 people

      • Rafael says:

        Brazilian mills don’t compete directly with the US ones. Their products are complementary. Brazil produces cheap steel mostly and doesn’t export aluminum. US mills don’t even bother producing the crap we produce, they have a much refined product.

        If steel tariffs are lowered, both countries would buy more of each other’s production.

        Liked by 1 person

    • IGiveUp says:

      Yeah, I didn’t get that either. Argentina is a basket case so its currency continually devalues naturally. And the US does have a trade surplus with Argentina. And like you said, Brazil has a substantial trade deficit with the US and Bolsonaro has been very helpful to Trump. Confused about this move.

      Liked by 1 person

      • Rafael says:

        Argentina did announce measures that could be constructed to be currency manipulation recently. But I don’t see the need to punish them for it because the measures will destroy their economy on their own.

        These tariffs are so confusing markets didn’t even react to it. They will wait and see what high-levels talk produce.

        Liked by 1 person

        • IGiveUp says:

          Maybe it’s because Trump wants a bilateral deal with Brazil but Bolsonaro has been saying that it must include all Mercosur countries. So like you say, probably is a negotiating tactic that will get resolved by the heads of state. We know Trump loves to make a deal when possible. My guess is that for a variety of reason, a deal with Brazil will be made.

          Like

          • IGiveUp says:

            This might help explain it. It seems Mercosur is negotiating with the EU. Since that would include Brazil, it prohibits Trump from getting a bilateral deal with Brazil, and the Mercosur-EU deal could hurt US interests:

            FTA: Ross said a trade deal between Mercosur and the European Union, reached in principle last month, should avoid “poison pills” that would obstruct a possible U.S. accord.

            “It’s important not to put roadblocks in the way of a U.S.-Brazil free trade agreement that inadvertently might be brought up in the transaction between Mercosur and the EU,” Ross told journalists in Sao Paulo. “We have issues about standards in autos, pharmaceuticals, chemical, food and a whole bunch of areas.”

            https://en.mercopress.com/2019/07/31/trump-after-a-trade-deal-with-brazil-but-brasilia-says-any-tariffs-agreements-must-include-mercosur-members

            Liked by 1 person

            • Rafael says:

              The Brazilian government says Ross concerns are valid and that they took measures to address them during negotiations. Journalists were asking him about the deal and he told the US perspective, which is a good perspective. But he didn’t have information at the time to actually know if his concerns were justified.

              What he wants is for Brazil to only enforce European standards on products meant to be exported to Europe. If Brazil adopted their standards to be applied locally, this would make it so the US couldn’t export to Brazil, since European Standards are meant to be unfair against the United States.

              Like

          • Rafael says:

            Brazil cannot under law sign bilateral deals that include tariffs. (for now)

            Brazil does want a trade deal with the United States, but must not discuss tariffs until things go completely to shit in Mercosur and we leave.

            It would be a non-tariff agreement.

            It’s not that Bolsonaro doesn’t want one that doesn’t include Mercosur, it’s that that’s the law. We have to leave Mercosur before we can sign a deal that includes tariffs. And for that we have to show Argentina is being unreasonable, it’s always bad for a country to go back on it’s words.

            > probably is a negotiating tactic

            Perhaps he is punishing Mercosur as a block for what’s Argentina is doing, to help Brazil get out quicker? This way Bolsonaro can argue Argentina’s policies have very bad consequences for Brazil itself.

            Liked by 2 people

    • bertdilbert says:

      Rafael, Trump is going to act on what is the interest of the US. Trump policies have created a strong dollar. That strength will likely continue for some time. As the dollar goes up, the US is less competitive. This does not help balance of trade.

      Trump is going to stand with US farmers and steel workers. Both Brazil and Argentina are large exporters of soybeans. As world economies falter, it would be expected that protein consumption would decline and soybean animal feed would decline also.

      Trump is jawboning the Fed to lower rates to lessen the dollars strength, which he has been doing for some time. Perhaps he is more interested in moving the Fed to lower interest rates. There is an election coming up and lower rates into the election will boost the US economy.

      Liked by 2 people

      • Rafael says:

        I’m not complaining about Trump doing what’s best for the United States at all. All the power to you guys, godspeed.

        I’m complaining about two things:

        1. The justification for the tariffs is false. Brazil does not in any way manipulate it’s currency. How are we supposed to build trust this way?

        2. There were no high level talks about it. This is specially troublesome after Brazil gave strong diplomatic help to the US this last year.

        If we look at this as the start of a negotiation, or some other possibilities I saw in this comment section, it might be all good.

        Right this moment it’s not making a lot of sense, that’s all.

        Like

        • bertdilbert says:

          Trumps sets people up and gives them the opportunity to skewer themselves. Look back on Syria. Trump announced a withdrawal. Then amazingly, after everyone acted like the world was coming to an end, there was an unexpected peace deal. The peace deal was probably already a done deal with the political situation needed to be acceptable.

          So while you may be scratching your head trying to figure this one out, there is probably some kind of deal in the works that will come out as a win/win. The win/win solution always looks better after everyone feels like they were staring death in the face.

          Liked by 1 person

          • Rhoda R says:

            One of the really great things about our President is that win-win for both sides is part of his definition of a ‘good deal’. Can you imagine what kind of deal, given the strength of our economy, that the US could ram down other nations’ throats with a total economic and moral loser – like Clinton – in charge.

            Liked by 1 person

        • The Dark Lord says:

          you say you can’t trust Trump because his reasons don’t add up … except, Trump didn’t say manipulation of currency, you did … if you can’t read his words why should anyone trust your concerns ?

          Liked by 1 person

    • So far, Brazil has been all talk and zero action.

      Selling Soybeans to China to undercut USA farmers during our Trade Deal Dispute.

      Buying Huawei 5g to enable China to infiltrate Telecom in the Americas.

      ZERO basis for a Trade Partnership.

      This is Bolsonaro’s idea of RECIPROCITY for President Trump sending help with the Amazon fires.

      Bolsonaro just BURNED his goodwill with the USA.

      Liked by 2 people

    • ATheoK says:

      A couple of articles previous, President trump specifically stated that Brazil “devalued” their currency.

      From a chart, it looks like there are several different episodes of devaluation; especially the end of July and November 8th.
      https://www.xe.com/currencycharts/?from=BRL&to=USD&view=1Y

      That devaluation isn’t just against the trade balance between the nations; but especially affects the cost of materials in international trade. i.e. Brazil’s devalued currency takes legitimate international customers away from the USA solely because the currency is devalued.

      Like

  3. calbear84 says:

    El-Erian is no fool. I’ve followed him for years (pre-Trump) and he is always sober and credible in his analysis of markets. Great MAGA / KAG news!

    Liked by 4 people

  4. TheLastDemocrat says:

    It is good to focus on energy in European countries.
    Because their economies have really been subsidized by the trade imbalance with the U.S., they have been able to tax and regulate energy as part of going green / fighting ( the myth of ) man-made global warming.

    European countries would be changing big time if they knew U.S. was going to be consistent in our change to America-First. But this would be such a big move that it really is worth waiting to see if the political scoundrels in the U.S. can subvert America-First. And, the European countries may be working against America-First.

    Once it looks like the U.S. leveling out this decades-long trade imbalance will be the new normal, Europe will be re-thinking the entire Green Movement – they will be ready to work out trade deals with U.S., including energy – and they are free to go ahead and work out energy deals with Russia or whoever else.

    Liked by 4 people

  5. FL_GUY says:

    The American taxpayer has been being exploited ever since WW2. Not only did our people shed their blood by the hundreds of thousands and had their health damaged by the millions, afterward We the People became enslaved to propping up the countries that caused the world wide mess in the first place.

    The globullists are like leeches and have been sucking the life blood out of the American people while trying to destroy our quality of life, e.g. air conditioning (checked the price of freon lately?), cars (most cost more than my house) etc. because We the People don’t “deserve” it. We the People are “privileged”. Let me tell you, I haven’t had any privilege in my life. Yet every damn one of these so-called elitists live like kings and queens while demeaning and degrading the very people who make their absurd lifestyles possible..

    Thank GOD we have a GENIUS President Trump who truly understands the enemy of We the People and how to fix the problems.

    It’s time We the People tend to ourselves: America First!

    Liked by 26 people

  6. LookUp says:

    What fool, (cough, cough, Obama) said that the world’s best businessman at the helm was going to need a magic wand to undo all the trash the collective globalists pitched at the United States?
    My God, I love this president.

    Liked by 7 people

  7. I second what CalBear84 said

    Like

  8. Fantastic synopsis, Sundance.

    Looking for POTUS to impose SELECTIVE and ESCALATING TARIFFS on the EU
    … creating Tariff Leverage for the EU to change (duplicating Trump’s policy footsteps)
    … just as Tariff Leverage is driving China to change (as trade slowly rebalances)
    … until POTUS has reestablished opportunities for MUTUAL GAIN.

    This will take time.

    Liked by 4 people

  9. bullnuke says:

    It’s amazing to watch President Trump put into motion actions that benefit the American economy. He has discussed being taken advantage for decades and is now in a position to reverse those schemes. What an incredible mind he has to see things this clearly.

    Liked by 6 people

  10. signer1 says:

    The genius of his strategies never fail to fill me with patriotic pride.

    Liked by 5 people

  11. Caius Lowell says:

    I’m going to create a degree program on Economics and MAGA-Dynamics! Who’s with me? Let’s gooooooooo!

    Like

  12. StanH says:

    Well done President Trump. This is what matters.

    Liked by 1 person

  13. A2 says:

    One report that provides some background.

    Trump to hit Brazil and Argentina with steel and aluminium tariffs

    https://www.ft.com/content/1ad2ffbc-14f6-11ea-8d73-6303645ac406

    Like

  14. fangdog says:

    People who bet with their money has skin in the game. The Dow Jones reflects who has most at stake and what their thinking. It is Trumps economic policies what money people pay attention. They care less about what the Liberal Democrat corrupt globalist media pays their attention and see it as nothing but chaff.

    I wish Colleges and Universities taught what really counts, however, they do not know because “they” don’t want them to know. What is produced are dullards when it comes to the real World of what makes the World go around. Sundance understands it and offers a great economic education service for those who follow his website.

    Liked by 4 people

    • Pale rider says:

      By the way they also drive the economy not the mindless who in real-time are powerless until they put skin in the game. They cannot be relevant until and subsequently shouldn’t be. Nobody caters to them in deed only in speech. They are just a temporary vote. A lasting vote is the dollar. That kinda describes the deep state also. Congress is temporary, and our beloved president.
      Trump is making his mark through that fact and it will be lasting. I suspect his next four years I’ll be more law enforcement within our borders.

      Liked by 1 person

  15. GB Bari says:

    If Brexit ever happens, it would put an additional boot in the EU’s rear end to start their structural changes sooner than later. But Brexit seems to be in an indefinite holding pattern. Hopefully PDJT isn’t relying on BJ to get it done, or relying on Brexit as the impetus to get the EU moving despite their China woes.

    Liked by 3 people

  16. David says:

    Rafael , there’s a couple of things driving this. First is that Brazil has just signed some trade deals with China and so has Argentina. The world is splitting into a bipolar system again and all countries are going to forced to pick sides. Argentina just elected another corrupt Peronist so there’s a desire to sink the Argentine economy for turning away from free market reforms. There’s also the need to limit the damage US farmers suffer long term from the trade realignment. Brazil and Argentina rushing to grab the Chinese market is going to generate some political blowback.

    Liked by 3 people

    • Rafael says:

      Brazil is not at all aligning with China.

      We do need to keep entertaining them, though. No choice, our economy cannot do without them. The same power Trump has over the Chinese, they have over Brazil.

      We gave strong signs of diplomatic alignment with the US this last year. And also strong signs of diplomatic rejection of China.

      To have an idea, Bolsonaro said in front o Xi they would work on some deals for China and then went ahead and only worked on it for Taiwan (“True China”).

      Do you have how big of a diplomatic insult to China this is?

      Go look at what Brazil did to show support for the United States this last year, I don’t have time to list it now.

      Liked by 1 person

      • Mike says:

        China cannot feed its people but produces 50% of the world’s steel. They need soybeans, however if they purchase all Brazil produces they’ll still be short. Trump is placing tariffs on steel and aluminum to stop China from exporting metals to the US via Brazilian ports. In effect Trump is preempting China from using Brazil as an export pass through China used the NAFTA loophole Mexico and Canada to circumvent 35% US Tariffs.

        Liked by 1 person

      • willthesuevi says:

        Rafael,
        I personally applaud Brazil electing Bolsanaro. I want to see Brazil continue to roll back their foray into socialism and corruption.

        Showing support for the USA wasn’t out of the goodness of your heart. There is always a goal and reason. Just because someone supports me, does not mean I have to support them back. I only support those who I align with and like. I am sure you do the same. Countries are no different.

        Brazil should do what is best for Brazil and President Trump will continue to do what is best for the USA. I doubt that in President Trump’s world a “Strong Sign” means much. He is more of a “Solid Treaty and Deal” guy.

        Fix your China and regional problems and come back to the table. One thing about POTUS, he has shown to be flexible when needed.

        Liked by 2 people

  17. gerkmonster says:

    If only we could cut our glutinous gov. Ppending

    Liked by 1 person

  18. Buck Turgidson says:

    Dead on the $$ sundance. He is the one economist who grasps the global international economic decoupling on your level. Not bad company! The cnbc crowd usually listens while drooling a little and catching flies, and asking how can this be?

    Like

  19. Dutchman says:

    Both China and EU have developed their systems to be absolutely Dependant on screwing the U.S.

    Their systems cannot compete with the,U.S. on ‘fair’ and equal footing.
    Hence, they cheat.

    The ‘structural reforms’ we are talking about are MASSIVE, and while theoretically ‘do-able’, in reality,…impossible.

    For EU, paying their fair share in NATO, and dropping ALL trade barriers, means they can’t afford to have all their workers, retire at 50, with full pension.

    They can’t afford generous State financed health care. All the “ENTITLEMENTS” there populace has gotten used to.

    They are called “Entitlements” for a reason; once people get used to them, they feel ENTITLED, and will take up pitchforks if the Government tries to take them away.
    Look at what happens whenever someone mentions means testing for Social Security.
    China is, if possible, in even worse shape.
    They steal intellectual property, because all their innovative thinkers are in gulags, waiting to donate organs. Their system ingrains group think, and in the strongrst way possible, discourages innovative thinking, as it is seen as dangerius to the State.

    And, their system simultaneously encourages corruption. If a manager of a State run manufacturing plant, purchases inferior raw materials, thereby improving the bottom line, he is REWARDED.

    So, China and EU can NOT make the structural reforms neccesary, without those in power, losing power, and their heads.

    EU is just Conmunism lite, excessive regulation, decisions by unelected buerocrats, imposing their will on the populace.

    As for China,…FORCED ORGAN DONATIONS from political prisoners!
    Lots of other stuff, as well, but once you aknowledge they are grabbing up their Deplorables, doing tissue typing on them at intake to the gulag, and then the prisoners get to play “Organ roulette”, well all the other suppression, etc. just is a given.

    Good riddance to both. What arises from the demise, will HOPEFULLY be a fairer system for the populace, and it better be, in order to be able to compete in the World PDJT is rapidly creating.

    Liked by 2 people

  20. TradeBait says:

    I knew if PDT became POTUS everything would change for the better economically. He and his team are the best of the best. We need to have their backs at all costs.

    Liked by 2 people

  21. Rynn69 says:

    Nothing like a MAGAnomic update during the holiday season! Thank you, Sundance.

    Like

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