Cool Video: TD Ameritrade with Ben Lichtenstein

With the dollar continuing to trend lower, it was time to check again with Ben Lichtenstein at TD Ameritrade.  It was a privilege to join him today to discuss the drivers. I sketched out my views that the greenback’s two legs, growth and interest rate differentials have been knocked from under it. 

There is a glimmer of hope in some quarters that a path through the fiscal impasse might be at hand.  I am not so optimistic and suspect that the impact of the loss of some support will be evident in the August number, as we saw with the Empire State survey, and may see in the preliminary PMI at the end of the week.  

We touched on the aborted review of the Phase 1 trade deal. President Trump said the scuppering of the review was his doing, even as his top advisers like Navarro, Ross, and Kudlow assure that China is fulfilling its obligations and recently stepped up its purchases of agriculture and energy from the US.  Just like looking at a thermometer does not make it hot, or testing for Covid causes the virus, so too reviewing the progress on the trade deal does not have a material impact.  Given that it is clear that outside of agriculture, China appears unlikely to meet its first-year targets, we have argued that if the US were to formally recognize that it would have to do something about it, and this, in turn, could cause economic hardship in the US.  

We talked a bit about inflation.  The UK’s CPI data today, like the recent US inflation data, were stronger than expected.   However, part of this is a rebound in prices from earlier this year and some seasonal adjustment distortions.  With still double-digit unemployment in the US and a vast swathe of unused capacity in industry,  it is difficult to envision intense price pressures.  That said, there are some bottlenecks, like in lumber, or so relative price changes (coffee, cocoa, and sugar), but inflation is a general increase in prices.  The FOMC minutes due out later today will likely echo the recent official comments highlighting that strengthening the recovery has a higher priority than trying to curb price pressures.   

Click here for the roughly 8.5-minute clip.   

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