Thursday, August 16, 2018

What did Donald Trump do today?

He didn't let knowing nothing about currency markets stop him from tweeting about them.

It was an emotionally turbulent day on Twitter for the vacationing Trump, who was triggered by mass editorial protests in the nation's newspapers and the growing scandal around his threats to revoke security clearances from people who criticize him. But the first tweet at least had a positive tone, in which Trump backed up his bragging about how he thinks the economy is doing by pointing out that "Money is pouring into our cherished DOLLAR like rarely before."

This is correct: the dollar has indeed risen in value against many other currencies in recent months, due in large part to the economic instability created by Trump's seemingly random tariffs and the retaliation they provoke. But there are three problems with Trump saying so.

The first, of course, is that there's a reason presidents don't talk about active markets: the chaotic effects that their words can have. Trump has sent the value of the dollar careening before with loose talk.

The second is that to the extent Trump has expressed opinions on the dollar before, he's taken the opposite stance, favoring a weak dollar. To be clear, it's doubtful that Trump really understands what either means: he once called his now-disgraced national security advisor Michael Flynn in the middle of the night to ask whether a weak or strong dollar was "the good one." (Flynn is not an economist.) 

The third is that, as far as Trump's obsession with trade deficits are concerned, a strong dollar is a bad thing. It raises prices for any American-made goods not already burdened by retaliatory tariffs, and gives a price advantage on U.S. shelves to foreign-made goods. 

So what?

  • Presidents don't need to be economists, but they do have to know the very most basic concepts about how economies work in order to do their jobs.