How Destructive Is Trump'S Policy Proposition?

The US dollar index has dropped sharply from 99 to 97.

The starting point of its collapse is the October 28th FBI restart of Hilary's "mail door" survey.

On the part of the support rate of "traditional media" announced, Trump, who had long hair fluttering, once floated on Hilary's head. The mainstream public opinion regarded this as the main reason for the reversal of US dollar trend.

Trump really has such a magic power? Can you control the trend of the dollar with her own strength? If it can really, it can only be said that Trump's policy proposition is generally not optimistic about the market, and that Trump's policy will lead to the decline of the US economy and the deterioration of the investment environment.

Let us take a brief look at Trump's policies which are so disregarded by the market.

First of all, we can not escape the idea of the US interest rate policy. After all, this is the focus of attention.

Trump has made it clear that he wants to replace Yellen and is aggressive in raising interest rates.

But soon Trump changed her mind. As early as May this year, Trump's remarks changed to "Yellen should leave, but her low interest rate policy should stay".

The reason is clear that asset prices in the US are all at a higher level. The aggressive interest rate policy is likely to be the pin to break the asset bubble.

The Dow Jones index has been sideways for nearly 2 years at around 18000.

After a sharp rise, such a long-term market is often a harbinger of major adjustment, and continuous interest rate increases can easily become the fuse of asset price collapse. I am afraid no matter who is president, he will not take the initiative to step on this big mine.

Radical rate hike is almost impossible. There is little room for cutting interest rates.

The current federal funds target rate in the 0.25-0.50% interval, as long as a rate cut will return to 0-0.25% state, and then drop is negative interest rates.

But the US economy is still in positive growth and inflation is above 1%.

Or negative interest rates are not necessary at all.

The interest rate of the United States is in this dilemma. No matter who is elected president, the Fed can only continue to maintain the current rhythm of "raising interest at most once a year". There is no substantial difference between Trump and Hilary in interest rate policy, so the interest rate issue should not be the main cause of the US dollar's setback.

How destructive is Trump's policy proposition?

If the Fed's policy is not related to the presidential candidate, the only reason why Trump can snipe the US dollar is that the market thinks Trump's other policy proposals may greatly drag down the growth of the US economy and lead to a sharp decline in the attractiveness of the us to international capital.

But is this really the case?

Indeed, Trump has made many startling policy commitments, such as large-scale expulsion of illegal immigrants, trade protectionism (especially for tariffs on Chinese goods up to 45%), and strict restrictions on Muslims.

If these policies can be implemented resolutely, they may even lead to large-scale social unrest in the United States.

We must put aside the threat of violence that may be caused by the harsh attitude of Muslims. It is almost impossible to just expel illegal immigrants on a large scale.

The current number of illegal immigrants in the United States is more than 11 million. Considering the large scale, wide distribution and complicated membership, the cost of screening, registering and ultimately expelling the government is absolutely unacceptable to the federal government.

In fact, the reason is not complicated. Let us think about the difficulty of managing the pancake stand in China.

In addition, illegal immigrants are responsible for the dirty work and heavy work of a large number of legal residents in the United States, and low wage requirements.

To a large extent, the contribution of illegal immigrants to American society is greater than that of some legitimate residents who live on government relief.

Therefore, it is possible to radically expel illegal immigrants.

And social stability.

As for the big trade war, we need not say much.

In the history of the United States, there seems to be no experience of successfully stimulating economic growth through big trade wars.

In fact, it is easy to think clearly about this logic. If tariff increases can stimulate domestic economic growth, such a policy that is simple, crude and lacking technical content has long been the basic national policy of the United States.

The reason why trade protectionism has not become the main policy platform of every government is also because it is not worth the candle in practice.

Friends who have studied economics of undergraduate course should not be hard to understand.

But it is precisely because many of the policy commitments made by Trump are not very reliable in practice. Therefore, once Trump is elected president, the promise of these policy commitments is very low.

Because after the election, as president Trump will inevitably change roles, from a policy critic to the head of policy implementation.

Faced with the practical difficulties in the process of policy promotion, the business tycoon who is well versed in the cold world is unlikely to act recklessly for decades.

This is what I have repeatedly stressed, and the ideal beauty will inevitably give way to the cruelty of reality.

The split of American politics and society is the potential threat of a strong dollar.

If Trump and the US dollar fall together, the board should not play a part in Trump's policy proposition. Maybe Trump's tension with the traditional American political power and financial conglomerates is a more important reason.

The reason is clear, even within the Republican Party, Trump has received little support, which can be seen from the traditional political forces represented by the Bush family and Trump's demarcation line.

Trump has almost become a rat in the eyes of the American elite, and this is precisely why Trump has won the support of the vast majority of the middle and lower strata.

As soon as Trump is elected, American politics is likely to evolve from "tearing each other" between Trump and Hilary into a protracted "mutual assault" between the president and the United States Congress.

And Trump is likely to interpret his challenge in Congress as a deliberate sabotage by the elite to protect vested interests and "Trump style reform".

Because only in this way can the president elected by the lower middle class win the political capital that is counterbalanced with the powerful American elite, which can also provide the best excuse for Trump's policies that are whimsical but difficult to implement.

Once this happens, on the one hand, the operation of the US government may be in great difficulty. On the other hand, the cracks in the elite and lower middle class of Trump and Hilary in the election process may deteriorate and become dominant.

But then again, even if Trump could be elected, there would be more than 2 months from his inauguration. There was also a great deal of uncertainty when he took office, so it was still far fetched to tie Trump's short-term fluctuations with the US dollar.

From the point of view of market speculation, the more reasonable explanation should be: after the US dollar index approached 100 in the early stage, the speculative capital of many US dollars doubted the momentum of the US dollar going up in the short term, and the US dollar index had a larger decline under the action of bag for peace. Trump's support rate may only be a secondary reason for the speculative capital adjustment position, which is at last the last straw to overtake the camel.