Here’s my take on the Jerome Powell speech/comments in Chicago yesterday:
Thus we must reset, restructure our trade agreements and reduce dependency on China and find sources of revenue. A 10% surcharge on rest of world exports to access US Consumer Market seems reasonable and fair.
- his take on the tariffs: nobody knows, including the Fed, how the dust will settle. There are multiple objectives that will have lots of compromises and trade-offs country by country. Nobody knows how it will shake out. Impossible to predict right now. So JP was speaking out of his ass.
- Nobody is talking about the most important comment he made about the debt/deficits. Quote: “Our debt and deficits are on an unsustainable path”. 🚨 ‼️ 🔔
- He then went on and confirmed that the deficit can’t be fixed by cutting discretionary spending (DOGE) by itself. Duh. The interviewer did not follow up with an obvious question! The 3 biggest line items in the budget: Entitlements (Soc Sec, Medicare, Medicaid), Defense, and Interest expense on the debt. These are the big 3. Note that JP/Fed has a direct impact on Interest Expense. WTF is he going to do about that?! The remaining 2 are up to Congress to deal with! Who believes Congress will address entitlement reform OR cut back on USA defense as the security umbrella for the free world?! NOT. GONNA. HAPPEN.
- Codependency on communist China
- $2T structural deficit and $1T+ annual interest expense. Must borrow money to pay interest expense! $36T debt with $9T that must be refinanced over the next 12 months! 😬
- Massive trade deficits (unfair trade). Consumer/services economy (not a mfg economy). Huge drag on growth.
Thus we must reset, restructure our trade agreements and reduce dependency on China and find sources of revenue. A 10% surcharge on rest of world exports to access US Consumer Market seems reasonable and fair.
