Feb

7

Read His Book, from John Floyd

February 7, 2017 |

 I found one of the keys to understanding Bernanke and how he may act was to read his academic work and books. Once, not a direct quote and I forget the forum, the future Fed chair was asked something like "what will you do if we have a depression like scenario?" and the response was "that is not going to happen on my watch". Many brilliant minds articulated ideas on economic growth, inflation, and other factors that might drive Fed policy under Bernanke, but that one piece of information turned out to be very telling.

In a similar fashion I remember interviewing in the late 1990's with a Nobel laureate type economist who was an advisor to a hedge fund and arguing to him that Japanese yields where not going up anytime soon and the answer to reflating was to just absolve the debt. He disagreed and belittled me and I never got the job, but that is another lesson in my poor salesmanship. But, if you knew Japanese history and social mores you had an edge. I have been "Trumped" a few times by markets the past month or so.

To that end I am reading The Art of the Deal and also suggest reading other books liked by POTUS advisors. The overriding theme being to ask the right questions that are going to define a scenario and possible outcomes and take care to not get caught up in obfuscating noise.

Stefan Jovanovich writes: 

You will also want to read his other book The Art of the Comeback if you can find a copy. It is even more revealing. The basic rule is Never, ever give up! That does not mean go down with the ship but find a way to launch a lifeboat and get your lawyer to see how salvage law can work to your benefit.

Trump has no fear of the United States' debt itself. He believes that, if the government runs at a slight surplus in its basic operating account, it can carry its existing debt indefinitely, including the promises for Social Security. I don't know this for a fact, but my guess is that he thinks sending Medicaid and social welfare back to the states is a fair deal for releasing the states from regulation and lowering overall Federal taxation on individuals and entities. That still leaves Social Security and Medicare; but he thinks _ rightly - that Social Security alone is manageable and that Dr. Price will be able to cut Medicare's actual costs dramatically by ending the gaming of the system by the providers. (Senator Pocahantas' grilling of Price was revealing; she wanted him to pledge that he would never, ever "cut" Medicare spending, and he politely declined, even in the face of her reminding him that the President had made that promise. A "cut" in Trump's mind is a cut in what the customer gets, not what the government spends.)

Trump also has no fear of a rising exchange rate for the U.S. dollar. He actually wants a "strong" dollar because that will allow the U.S. to make any necessary trade "adjustments" through collecting tariffs. Fro him an ever "stronger" dollar means a shrinking deficit. That is why his statements about "currency" manipulation by other countries are to be read as an advocacy of tariffs, not a threat of a "trade war".
 


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