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Mnuchin, Trump Retract Dollar Comments: Hypocrisy Everywhere

Strong dollar, weak dollar, who wants what? It changes day to day. The ECB got into the act, compounding the hypocrisy.

On Wednesday US treasury secretary Steven Mnuchin caused a quite a stir when he stated that a Weak Dollar is Good for Trade.

On Thursday, Mnuchin tried to distance himself from what he had stated.

Now Mnuchin says, "There are benefits and there are costs of where the dollar is, depending on which side of the table you are on."

Let's not beat around the bush. Exporters are on one side of the table, importers the other.

Then and Now

Peter Schiff Summed Up Things Nicely

David Rosenberg

Dr. Arbitration

Which is Better?

ECB president Mario Draghi Not Amused

ECB president Mario Draghi was not amused by this action. The Wall Street Journal reports ECB’s Draghi Criticizes Mnuchin’s Currency Comments.

European Central Bank President Mario Draghi criticized remarks by U.S. Treasury Secretary Steven Mnuchin that a weak dollar benefits U.S. trade, signaling a fresh economic policy rift between European officials and the Trump administration.

Mr. Draghi attributed some of the euro’s recent gains to “the use of language that doesn’t reflect the terms of reference that have been agreed.” He warned at a press conference that such language violated longstanding international agreements designed to prevent currency wars.

The war of words comes amid a surge in the euro currency, which has hit a three-year high against the dollar of $1.25.

Mr. Draghi didn’t identify Mr. Mnuchin by name, but he referenced the Treasury secretary’s remarks in Davos, Switzerland, on Wednesday—that a weak dollar was helpful for trade. Those comments sent the euro higher against the U.S. currency.

“The recent volatility in exchange rates represents a source of uncertainty which requires monitoring with regard to its possible implications for the outlook for price stability,” Mr. Draghi said. A stronger euro makes the ECB’s task of increasing the inflation rate harder because cheaper imported goods weigh on prices. Eurozone inflation has remained below the central bank’s target of just under 2% for five years.

Amazing Hypocrisy Everywhere

Draghi wants a cheap euro, but he blasts Mnuchin for wanting a weak dollar.

Apparently, you can want a weak currency. Actions to achieve a weaker currency, such as competitive QE to infinity, do not matter either.

You just cannot say you want a weak currency.

All in the Definition

US Treasury Secretary John Snow paved the way out of this mess way back in 2003 with his "Newly Defined" Strong Dollar thesis.

Mr. Snow said "strong" refers to such aspects of the dollar as the confidence it inspires in the public and its resistance to counterfeiting.

There you have it. A "Strong" dollar is one that inspires confidence and is hard to counterfeit.

Every county wants that.

The only problem is we need a good definition of "counterfeit".

Does printing money out of thin air coupled with competitive QE constitute counterfeiting?

Mighty Dollar

Recall that The Economist nailed the exact top of the Dollar in December of 2016 with its "Mighty Dollar" cover.

Please click on the link for amusing details and other contrarian covers.

Mike "Mish" Shedlock

It is less than hypocritical to want orderly markets though and but for the inexperience of American officials there would have been over the last few days. Introducing bitcoin-like irrational volatility to foreign exchanges does not help anyone possessing a serious purpose.

Trump wants to be the manufacturing jobs president as opposed to the obama coffee slinger jobs president. A lower dollar is a part of that strategy. Investments and tourism will rise in America. But there is no free lunch. Imports will rise in cost potentially importing inflation. And foreigners will outright buy and own American companies and assets. And as Mish points out - if every currency wants to be weak - all can't win.

Having a strong currency has it benefits too.

Well the worst asset to own seemingly in the last 6 years is the obvious choice when everyone clearly wants a weak currency - its yellow

The dollars recent tumble has moved far past where many of us predicted, of course, much of this has to do with President Trumps rather unorthodox take on "Making America Great Again." It did not help that U.S. Treasury Secretary Steven Mnuchin told reporters at the World Economic Forum in Davos that he endorsed the dollar’s decline as a benefit to the U.S. economy."

We cannot, of course, underestimate the important role currency valuations play in the global economy. The article below cautions about the danger of promoting currencies to play a bigger role in the trade wars.

http://Destroying The Dollar Is Not The Solution To Trade Issues.html

A weak dollar is inevitable. Just like the sun incinerating the earth. The question is when, not if. CBs can prop up the dollar for now, but eventually it will sink to it's true value. Which I suspect is much lower than its current value.

Is the dollar too high? Too low? Compared to what? Compared to other currencies? Compared to gold? Compared to stocks? Compared to real estate? The answer is important, as it tells you what to move your dollars into.

Rumor is trump,wilbur,and mnuchin are proposing a tariff on imported bitcoin! /sarc

listen to Trump and you get what you deserve

Yep, buy NYC real estate was an awful call.

@Wrldtrst
Buying a winning lottery ticket not being a “bad call,” doesn’t somehow make listening to lottery ticket salesmen a particularly clever way to spend ones money.

“the use of language that doesn’t reflect the terms of reference that have been agreed.”

This is what passes for “economics” by the undifferentiated mass of utterly mediocre backmarkers cluttering up Davos, as well as Western capitals. Pure, meaningless drivel. Only sellable to a population so reliably indoctrinated, they still believe that there exists a single one of these dimbulbs who are any better suited to “managing” anything, than the average Cambodian 7 year old with an AK was back in the day.

Im pretty sure the average 7yr old Cambodian couldn't have done my job as well as i did. Maybe an 11 yr old, but definitely not a 7 yr old.

...and equating developing buildings in a city no one wanted to touch with a lottery ticket is a bit of a strech, and then some.

Trump, or any hubris-filled politician, cannot control the trend of the dollar or the DOW. As soon as Mr. Market gets everyone over to the same side of the boat, a little default wave out of Europe will capsize the boat load of dollar shorts. The DOW and gold bugs will also be flushed out this year before they rip higher as the sovereign debt contagion spreads.

If Trump wants a strong dollar, he must want to rip off the band-aide of US debt around the world, so he can get on with the economic reset that's required to force the necessary reforms. One of those reforms will be eliminating any individual country from holding the world's reserve currency.

"Apparently, you can want a weak currency. You just cannot say you want a weak currency."

Imagine the poor pressure on Trump's mouth. He has to keep it shut!

Read as... "Imagine the pressure on poor Trump's mouth. He has to keep it shut!

Mish, any options to edit?

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