The ‘National Emergency Loophole’: How Trump could intervene in the market to crush the dollar
“Here is why [Nomura’s Richard] Koo is confident that it is only a matter of time before Trump directly intervenes in the FX market:
‘A protectionist policy that must be individually tailored to each product category requires large numbers of administrative staff, and a period must be established during which companies can apply for exemptions. Exchange rate-based adjustments, on the other hand, entail no such costs. In that sense, the more problematic administrative delays become and the more industry opposition mounts, the greater the likelihood that President Trump will replace tariffs with exchange rates as his main tool for addressing US trade imbalances.’
The loudest warning to date that Trump could rock the currency world has come from Charles Dallara, the former U.S. Treasury official who was one of the architects of the Plaza Accord, the 1985 agreement between the U.S. and four other countries to jointly depreciate the dollar. ‘The trade debate will increasingly include the currency issues,’ he told Bloomberg ‘It’s inevitable.'”
USAGOLD note: This article tells how the White House could offset the Fed’s interest rate policies in terms of their effect on the trade wars and the strong dollar. An intervention like what is discussed at the link above, in our estimation, would have a major impact on the gold market.
Repost from August 22, 2018
In light of Treas Sec Mnuchin’s comments today (see DMR), it seems former Treasury offical Charles Dallara was prescient in his comments back in late August. Also, a reminder that the president has options on the dollar other than simply lobbying the Fed.