"Luckily for him, the recently released inflation report suggests core PCE is trending at 2.3% - not bad:"
The core PCE is a joke. Here's the reality:
"The typical American household must spend an additional $11,434 annually just to maintain the same standard of living they enjoyed in January of 2021, right before inflation soared to 40-year highs, according to a recent analysis of government data." (NPR)
"The US also issues bonds in the global reserve currency, so bond vigilantes are unlikely to go after the US."
The bond vigilantes have already gone after the U.S., and they will continue to do so. Foreign "bond vigilantes" have gone from buying 49% of U.S. Treasuries to 29%, and are currently dumping far more T-bonds than they are buying.
"After the GFC, the US economy has deleveraged its private sector – private debt to GDP is down in the US."
Who knew? According to Forbes Magazine, 78% of Americans are living from paycheck to paycheck. Sounds like a lot of public debt to me.
The U.S. GDP is a joke, because over 36% of the GDP is Government spending, financed by exponentially growing Government debt. And that doesn't even include the GSEs. Without the GSEs, the mortgage market and the housing market would collapse. Now just imagine what will happen if Bill Ackman is able to convince Trump to bring Fannie Mae and Freddie Mac private.
Remember, nothing deepened the Great Depression like the Smoot Hawley Tariff Act of 1930. Back then, the U.S. was the world's largest creditor nation. So just imagine what Trump's tariffs could do to today's American economy, now that the U.S. is the world's greatest debtor nation.
I don't think tariffs are economically motivated, it's rather a political move to weaken the 4 countries mentioned. Easier to negotiate someone in a weaker position, this has always been Trump strategy
Does the consumer really have the ability to absorb any increase, however minor, in inflation? Tariffs+ deportation+healthcare cost increases will break the camel's back IMO.
"Luckily for him, the recently released inflation report suggests core PCE is trending at 2.3% - not bad:"
The core PCE is a joke. Here's the reality:
"The typical American household must spend an additional $11,434 annually just to maintain the same standard of living they enjoyed in January of 2021, right before inflation soared to 40-year highs, according to a recent analysis of government data." (NPR)
"The US also issues bonds in the global reserve currency, so bond vigilantes are unlikely to go after the US."
The bond vigilantes have already gone after the U.S., and they will continue to do so. Foreign "bond vigilantes" have gone from buying 49% of U.S. Treasuries to 29%, and are currently dumping far more T-bonds than they are buying.
"After the GFC, the US economy has deleveraged its private sector – private debt to GDP is down in the US."
Who knew? According to Forbes Magazine, 78% of Americans are living from paycheck to paycheck. Sounds like a lot of public debt to me.
The U.S. GDP is a joke, because over 36% of the GDP is Government spending, financed by exponentially growing Government debt. And that doesn't even include the GSEs. Without the GSEs, the mortgage market and the housing market would collapse. Now just imagine what will happen if Bill Ackman is able to convince Trump to bring Fannie Mae and Freddie Mac private.
Remember, nothing deepened the Great Depression like the Smoot Hawley Tariff Act of 1930. Back then, the U.S. was the world's largest creditor nation. So just imagine what Trump's tariffs could do to today's American economy, now that the U.S. is the world's greatest debtor nation.
I don't think tariffs are economically motivated, it's rather a political move to weaken the 4 countries mentioned. Easier to negotiate someone in a weaker position, this has always been Trump strategy
'Its business model of cheap energy imports'
I'd be very interested to learn which economies flourish on expensive energy imports.
The first thing I will watch are the impact on regions that will be targeted by Canada, and Mexico.
The one time tariffs were used in a large way was before the Great Depression. Things can get out of hand and boomerang back.
The targeted countries could end up buying products that are cheaper from non-competitors.
Critical minerals and energy could be cut off from the American consumers.
Alfonso, Congratulations for very good 👍 predictions!
This is going to be an absolute coin flip
Don’t think so, but thanks
Does the consumer really have the ability to absorb any increase, however minor, in inflation? Tariffs+ deportation+healthcare cost increases will break the camel's back IMO.
Good summary thanks. Bonds may be more fun if they take off either direction. How to play in that arena?
Very good analysis
Great article. Thanks Alfonso