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Trump’s tariffs – a wee bit of mischief perhaps?

When Trump hit the Swiss with a stunning 39 percent tariff, one official bemoaned that he guessed that is the price the Swiss pay for independence. If they were in the EU their tariff would “only” be 15%. Trump said the 39% was because of a REALLY BIG DEFICIT, which happens to be a paltry $39 billion. I’m sure it is just a coincidence that their tariff equals their deficit. Hey, we know that Trump is not exactly a math whiz. Another Swiss official said that if every Swiss started drinking whiskey every day and bought a Harley, they would still be running a deficit. You just got to stop making Americans from buying Swiss goods Donald. Maybe they can become the 51^st state. Or maybe they could move their watch, precision tool and chocolate companies to the US. Then they can export their products back to Switzerland. But the chocolate won’t taste as good.

Pity poor Lesotho a country with a GDP of only $2.3 billion – not trillion but billion. Mind you there are over 600 American companies with revenues over $2 billion that are doing business with China. Needless to say Lesotho is perhaps the poorest country in the world. Trump’s initial tariff was an astounding 50%. This devastated the country’s textile industry with garment exporters shutting down and laying off workers. The country declared a state of emergency. The country had been benefitting from the 25-year-old American trade program that granted duty-free access to the U.S. market to dozens of African countries. Their textile industry was supplying garments to Reebok, Levis and to Walmart. With the tariffs, the orders went away, factories shut down and workers were laid off. Trump had derisively called Lesotho the “country that nobody had ever heard of.” Trump has announced that Lesotho’s tariffs will now be 15% and it will be interesting to see if business will come back even at that lower rate. Before Lesotho benefited from the African Growth and Opportunity Act, which allows 32 African countries to sell some 1,800 products in the U.S. duty-free. The law expires this year and it is doubtful if Trump’s republican controlled congress will renew it. Lesotho’s textile plants pay about $168 a month and if there is no work there is no pay. One factory produces 90 percent of its output for the US market. It is shut down and may not reopen even with the lower tariff. But Trump doesn’t seem to care that his tariffs will increase the misery of some of the poorest people in the poorest countries of the world. By the way, Lesotho’s trade deficit with the US was only $234 million not exactly a REALLY BIG DEFICIT. Trump should be ashamed.

There are plenty of problems with the tariffs not the least being the seemingly randomness of it all. Trump once threatened a universal tariff of 10% and then it changed to 15 percent. Yet every one of the 193 countries could negotiate for a different tariff. This opens the door to all sorts of mischief. It seems that these numbers change almost daily, the tariffs range from 10% (UK) to 50% (Brazil). Countries like Laos, Myramar, and Syria are at 40%. India was at 25% but Trump has threatened to double it if they don’t stop buying Russian oil. Of course, within the tariffs are higher ones like those on aluminum and steel.

If there is one positive thing, and maybe the only positive thing, about the tariffs is that it will greatly simplify the accounting. Currently it is a nightmare. Go to the Harmonized Tariff book at where you will see a specific tariff dor each product imported from a specific country for every country in the world. Last year we imported over $4 trillion in goods from abroad.

 https://hts.usitc.gov.

The schedule comprises about 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure, and supported by well-defined rules to achieve uniform classification. The system is used by more than 200 countries and economies as a basis for their customs tariffs and for the collection of international trade statistics. More than 98 percent of the merchandise in international trade is classified in terms of the HS.  The HS nomenclature is updated every five years, with the most recent update in 2017. Whew!

But negotiating with every country with differential tariffs has got to lead to all sorts of mischief and even briberies, wouldn’t you think? Right now there are already dozens of carve outs. I wonder why? I want to know the logic – if any. I also wonder if Don Jr. and other members of the family are doing a Hunter Biden and doing some negotiations with side deals getting kickbacks for themselves and the Big Guy. Just saying. If Trump wanted to keep things simple then he would have simply imposed a flat tariff on all imports from all countries with which we run a deficit – say 10 percent – and none on those with a surplus. Now 10 percent of $4 trillion is $400 billion, a nice chunk of change. But he didn’t keep them simple. They are convoluted, complicated, confusing and without logic. 

The deals are not even legally binding. There is no treaty. There is only a handshake so they can be modified either up or down on a whim – and Trump is pretty whimsical. Take for example, Denmark. Although that country is a member of the EU with 15% tariffs, Trump has levied a 54% tariff on selected Danish products. Actually, I am surprised. I thought Trump would put a 1,000 percent tariff on Denmark unless they relinquished Greenland to the US. Why hasn’t he done this? The same is true with Panama whose tariff is only 14 percent. Trump wants the canal back in US hands, so why doesn’t he hit Panama with a 1,000 percent tariff until they say uncle and give it back to us? If Trump can put a 50% tariff on Brazil – a country that we have a surplus – because he wants them to stop the prosecution of one of his buddies, then why doesn’t he do the same with Denmark and Panama?

Lastly, I wonder if the tariffs will cause a rift in the EU? Several nationalist leaders oppose being ripped off. Marine Le Pen, the leader of France’s National Rally party, which is favored to win the presidential election in 2027, has called the EU deal a “political, economic and moral fiasco.” And that is an understatement. What is the French equivalent of Brexit? Adieu EU!

There they go again.

Once again, democrats in the Texas legislature have fled the state in order to deny republicans a quorum. At issue is the redrawing of congressional seats aimed at giving the republicans five new seats. Since this is not a census year, the redrawing is strictly for partisan reasons. The republicans are not denying it either. One legislator says “I’m not beating around the bush. I’m telling you that we have five new districts and these five new districts are based on political performance.” To create the five new Republican seats, the new map puts more Democrats into already Democratic-held districts and moves around Republican voters from red districts into Democratic districts. The redrawing will force some incumbent democrats to run against each other, put others into majority republican districts and was drawn in such a way to put Jasmine Crockett’s home residence into another district. I am sure that was just a coincidence. 

The democrats responded by fleeing to Illinois to be under the protective very fat wing of billionaire Governor Pritzker. Texas governor Abbott can levy fines of $500 a day or try to remove them from office. But Texas democrats running away is nothing new. In 2021 they fled to Washington, D.C., in an effort to block a bill on voting-by-mail rules. In 2003 the democrats again tried to block republicans from redrawing congressional districts. This time they fled to Oklahoma and New Mexico. In each instance, the democrats eventually came back with tails tucked between their legs and the legislation passed. This time will be no different. Why they went to Springfield, Illinois is anyone’s guess. Couldn’t they pick a better place – say Cancun? It is closer to home. Anyway, Illinois is a bad look. Don’t the Texas dems know that Illinois gerrymandered the republicans out of 2 seats four years ago?

The Texas republicans are saying that they are redrawing districts that make more sense geographically (wink wink) with them having more equal population. It merges two democrat districts in Austin and shifts the volatile Al (Full of Fire) Green into a republican-majority Hispanic district in Houston. I am sure that too was just a coincidence. Jasmine Crockett in her own immutable style says “They have decided that the only way that they can bring about this white supremacy agenda is by diluting the voices of people of color. And so what we have seen is, again, this rogue Department of Justice going out to do the bidding of this Temu Hitler. To the extent that he says, listen, the only way that I can ensure that I will have no checks on me is if I can sure that those voices of color do not have representation.” Temu Hitler? Now that is a new one. Isn’t Temu that online Chinese rival to Amazon? Well in street slang – of which Crockett is proficient – Temu “refers to the action of intentionally ignoring someone’s message. It is used in a dismissive or disrespectful manner when someone doesn’t want to acknowledge or engage with another person’s attempt to communicate.” Who knew? Also, advancing white supremacy by moving Green into a majority brown district? Well that’s novel.

Here is what Crockett said about Al (Full of Fire) Green “And so this is why we see Al Green…who has been a loud and proud voice of dissent against this administration, literally to his face at the State of the Union. And then again, by having the audacity to do what a lot of people had called for, which was to try to initiate the impeachment process. And so Al Green, who has served in Congress for over two decades at this point, is now at risk of losing his seat because those people of color in that particular district, they may now be broken out and parsed apart so that they don’t have this consolidation and this ability to elect Al Green.” Again, isn’t brown a color?

As to her district Crockett claimed that she was asked to verify her address alongside other incumbent Democratic members of Congress. She seemed puzzled by the request stating that she didn’t know why she was being asked because plenty of members (see Maxine Waters) did not live in the district that they represent. Article 1 Section 2 of the Constitution states that a representative must be at least 25 years old, have been a U.S. citizen for seven years, and, at the time of the election, be an “Inhabitant of that State in which he shall be chosen.” The key detail is that a representative must live in the state they represent and not the specific congressional district. Crockett is a lawyer and should know this. Accordingly, instead of being puzzled she should have just told the questioner to go pound sand. BTW, since the Constitution says “he” does that mean that all the women in the congress are there illegally? Just a thought. Of course the Declaration of Independence says “All men are created equal.” Does this imply that all women aren’t? I guess even then they realized there was a difference between Beyonce and Nancy Pelosi.  

Is the American Eagle nonsense due to TDS?

I don’t understand this American Eagle brouhaha. First I had never heard of American Eagle which is probably why they started their ad campaign which has gotten them billions of free advertising with their stock price surging 25 percent. I bet it made every business green with envy. The story even made the front page of the Wall Street Journal’s business section. Second I have never heard of Sydney Sweeney. From what I gather, the ad campaign is about blue jeans and Sweeney is provocative. Maybe to some but to us old folk its just another big busted blond selling stuff. 

Are some people upset that good looking women are used to sell stuff to other women? One really dumb comment was “Why is American Eagle using Sydney Sweeney to attract the male gaze when she’s wearing jeans for WOMEN?” Well then explain to me Victoria Secret you grouch. Surely they can’t be selling that racy lacy stuff to only trans people. By the way, Sweeney looks human – even if part of her may be enhanced – which is more than I can say for those Victoria Secret models which must be AI generated. In my 80 years, I have never seen a real live woman who looks even remotely like a Victoria Secret model. Have you? 

The Journal’s article says “American Eagle Confuses with Ads.” Huh? Confuses who? One person whined “It harkens to a dated sexuality that was common in ads of the past.” I guess the past was yesterday? Ok I get it. We have been going through the cancel culture period of wokeness in which sexuality was neutered. Boys were being made ashamed of being male. Target selling anti-male children’s clothing. Even Walmart has a trans section on its website. Yet I can see why some people may be offended. There are the men who wish their other halves (if they are women) looked a bit like Sweeney. And then there are the women who are just plain jealous. Sweeney is probably laughing all the way to the bank (probably wearing American Eagle jeans and a top open to her navel). But dated sexuality? Haven’t these people been near a college campus the past two years? Most of the coeds are in tights, short tennis type skirts or super short short running shorts. The guys are wearing baggy shorts. So the college women are flaunting their sexuality while the men are hiding theirs. I remember my other half commenting once “Don’t you think her shorts are a bit too short?” I demurred. Do you think any of the college crowd are offended by Sweeney? No. It’s the whining wimps on the left that wished they looked as good as Sweeney. 

I actually think that all the brushback is another symptom of TDS. Trump said that Sweeney was HOT and that the ad was the HOTTEST out there. “It’s for American Eagle, and the jeans are ‘flying off the shelves.’ Go get ‘em Sydney!” I guess Trump has first hand knowledge of hot big busted blonds (BBB) doesn’t he? I wonder what Melania had to say about that? Also Trump noted that Sweeney was a registered republican. Well she certainly couldn’t be a democrat looking like that could she? Sweeney is certainly no Dylan Mulvaney – who is probably a democrat. 

Would you believe that “The ad triggered backlash from critics on social media who felt the ad comes close to promoting eugenics, implying Sweeney’s blonde-haired, blue-eyed genes are more desirable than other traits?” Yes you would and indeed the media went out there and find some pseudo-expert to opine that “American Eagle was aligning themselves with a white nationalist, MAGA-friendly identity.” I’m serious. Sounds like Jasmine Crockett (who by the way has “straight” hair) but was instead some professor of anthropology at Northwestern. Anthropology? Give me a break. Apparently, this “expert” found offensive the line “Sydney Sweeney Has Great Jeans”. I wish they showed a picture of the anthropology professor. I also wish that American Eagle had been smart enough to run a set of companion ads featuring Beyonce. Now that woman has got some genes! On second thought, is that her real hair? Who cares?

When I was growing up, a lot of black people wanted to look like white people. The paragons of feminine beauty were Billy Holiday, Lena Horne, Dorothy Dandridge, Vanessa Williams and other light skinned beauties with straight hair. Black women were straightening their hair and putting stuff on their skin to lighten them up. Meanwhile the men were getting their hair processed. Some even tried wearing Nehru suits but I don’t think many tried going sockless in Bass Weejuns.

 Many of the big entertainers like James Brown, Jackie Wilson and BB King also straightened their hair. So did the famous vocal groups both men and women. The Black is Beautiful movement changed all that and you could look like Cicely Tyson then or Lupita Nyong’o and Adut Akech now and be acknowledged as beautiful. Blacks started wearing Afros and getting their hair braided. I went for several years without a haircut being on a graduate student’s stipend and married with two small children. In order to keep the hair somewhat manageable sometimes the whole family would be in braids. And this was in the 1960’s! I wish we had a picture taken of us four. Maybe one surfaced and is why the University of Florida threatened to deny me promotion and tenure. But that is a story for another day. Still though, I bet if you googled “The most beautiful black women” that the vast majority of them will have “straight” hair. Blame our white genetics or the women’s hairdressers but Rihanna would look good even with her head shaved.

BTW, this would have been my Mother’s 107th birthday. Happy birthday Mom. i sure do miss you.

Fire Lutnick!

When I wrote the posting on how to lie with statistics, little did I know that the news world would blow up over the firing of the commissioner of the Bureau of Labor Statistics Dr. Erika McEntarfer turning her into a cause celebre. I had pointed out that the initial jobs numbers were always overstated and having to be revised downward. This is due to the first numbers resulting from employer surveys. Those surveys have lousy response rates and are unreliable. That is why the numbers keep getting revised downward when the real figures come in. This year the average revision downward has been 55,000 per month. So I mused that if July’s number of 70,000 jobs was the estimate, then what was the real number. I also cautioned that most of the previous month’s job growth had been state and local government jobs and that the private sector job growth was negative. I said that Dr. McEntarfer should have been fired long before Trump did it for overseeing the production of such awful statistics during her tenure. 

So Trump did a really dumb thing. Surprise! Surprise! Instead of firing her because of having to adjust downward each month the previous month’s numbers, he fired her because he did not like the initial estimate of July’s numbers. This is beyond stupid. Trump said on Truth Social “I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She will be replaced with someone much more competent and qualified.” Mind you she was confirmed by the Senate 86-9. Does that sound like a Biden lackey to you?  Trump then said “In my opinion, today’s Jobs Numbers were RIGGED in order to make the Republicans, and ME, look bad.” A group called the Friends of BLS (I am not kidding) responded “This rationale for firing Dr. McEntarfer is without merit and undermines the credibility of federal economic statistics that are a cornerstone of intelligent economic decision-making by businesses, families, and policymakers.” You think? Trump’s Labor secretary Lori Chavez-Deremer who is a political hack first said when the numbers were reported that even though the jobs data was revised downward for May and June, “we’ve seen positive job growth.” Then in almost the same breath when McEntarfer was fired said “I agree wholeheartedly with @POTUS that our jobs numbers must be fair, accurate, and never manipulated for political purposes.” Well so much for her integrity.

If Trump did not like July’s jobs numbers he should have fired Howard Lutnick, the Commerce Secretary not McEntarfer. Mind you Dr. McEntarfer was the messenger but Lutnick played a bigger rule. Back in February he terminated two unpaid expert advisory committees on economic data. Mind you, these were nonpaid committees. The committees were advising the administration on how to improve the reporting of statistical data. One panel was the Federal Economic Statistics Advisory Committee which made recommendations on improving inflation and employment numbers and reporting on GDP (gross domestic product). The second group was the Bureau of Economic Analysis Advisory Committee, which consulted on labor statistics. Mind you the committees were comprised was made of academics, private-sector economists and data scientists, and focused on continually improving economic data produced by the BLS as well as the Commerce Department’s statistical agencies, the Census Bureau and Bureau of Economic Analysis. One might argue that they were doing a lousy job and should have been fired – provided the BLS head, the secretary of commerce and the secretary of labor were taking their advice. One may even argue that most were probably democrats and hated Trump. That might be true but it doesn’t explain the wildly inaccurate numbers under Biden. One expert said “This will impact the quality of the data.” No kidding. As a side note, I was appointed to be on the unpaid committee that advised the FDIC on its merger with the bankrupt Savings and Loan Insurance Corporation (FSLIC). Somehow we escaped the ire of George Bush.

Now with the firing of the advisory committees and McEntarfer, Trump’s critics have more ammunition to question any data reporting coming out of this administration. I earlier commented on how several democrat senators were wondering if the cutting back on cities surveyed for the CPI was an attempt to skew inflation numbers. All this means is that every number is now going to be called into question. The market realized that the initial numbers were estimates and knew that they would be revised. However, the media usually ran with the initial numbers and wrote the headlines. Seldom were the revisions reported with the same gusto. I doubt very seriously if any business decisions were made on these numbers. Now going forward, they will likely be ignored. Given that Trump will now put into these positions his own people (re: political hacks) who knowing that their jobs are on the line will be motivated to report only data designed to keep their jobs. I guarantee that no one will believe any of these data now being reported. So how reliable will be the government’s numbers? Need I say Rosy Scenario is alive and well?

Again Dr. McEntarfer just reported the numbers and was fired. But Lutnick is partly responsible in that he fired the advisory committees months before. What was that about chickens coming home to roost? Advice to Trump, fire Lutnick!

The White House ballroom and Trump’s unlawful tariffs 

After lambasting the Fed for spending $2.7 billion of its own money on renovations to its aging headquarters and subsequent cost overruns, the White House has announced its own renovations. Actually it is not a renovation, it is an entirely new structure. The administration has no shame. It seems that the president wants a new 90,000 square foot ballroom. I guess Trump is going to throw some awfully big parties. Well it does leave a lot of room for his dancing. I wonder if he is going to invite the Village People to the grand opening to play YMCA? The cost is supposed to be $200 million with Trump and his buddies funding it. Trump is supposed to pay for any cost overruns. Want to bet? The press calls this a “massive” renovation and they found some “experts” to raise concerns about whether it will “respect the historic nature of the building.” Others were found that were “aghast” at the enormity of the project which will be twice the size of the White House complex. We also get the predictable whining about spending money on a golden ballroom while nixing money for pediatric cancer research. Or how about “Donald Trump wants your kids to go with fewer dolls while he gets a billion dollar airplane and a ballroom”? Oh boy. This is the administration of bad optics. But if you have Trump Derangement Syndrome any optic is a bad one.

The case involving Trump’s tariffs is now being heard at the US Court of Appeals. One court, the US Court of International Trade ruled that Trump did not have the authority to implement his “reciprocal” tariffs. The administration appealed to the Court of Appeals which allowed the tariffs while it deliberated. If Trump loses here – and I expect that he will – it will be interesting if he ignores this court’s ruling while he appeals to the Supreme Court. For an excellent summary of the first day in court and the economic analysis of the arguments see Don Boudreaux’s “A note on today’s oral arguments in VOS v Trump.” 

A Note On Today’s Oral Arguments In V.O.S. v. Trump

Trump’s final set of tariffs are supposed to have been implemented on August 1 and were full of surprises like his 39% tariff on the Swiss. Hey, you got to protect Hershey, don’t you? The question then arises as to whether the administration will dismantle the tariffs when it loses or will it wait for a judgment by the Supreme Court. To recap: to impose his tariffs the president invoked the International Emergency Economic Powers Act (IEEPA) claiming that trade deficits constitute a “national emergency.” Of course, this is nonsense and Don Boudreaux does a wonderful job explaining the speciousness of the argument. Trump knows that this is a lie but could probably not find any other basis to invoke the tariffs. Certainly a president does not have unlimited authority to unilaterally impose tariffs. The Constitution gives that power to the Congress making the president’s lawyers having to defend the indefensible. The president in his usual hyperbole said to his lawyers, “Good luck in America’s big case today. If our Country was not able to protect itself by using TARIFFS AGAINST TARIFFS, WEWOULD BE ‘DEAD,’ WITH NO CHANCE OF SURVIVAL OR SUCCESS.” Good grief. 

In the first day of questioning, the judges seemed skeptical of the administration’s arguments. Said one judge, “One of the major concerns that I have is that IEEPA doesn’t even mention the word tariffs anywhere.” Another judge said “It’s just hard for me to see that Congress intended to give the president in IEEPA the wholesale authority to throw out the tariff schedule that Congress has adopted after years of careful work and revise every one of these tariff rates.” I hope one of the eleven judges asks that if the trade deficits posed such a threat to national security then why did Trump levy them on countries with whom we have a surplus. 

Although the Justice Department said that the trade deficit has been “exploding” in recent years, rising from $559 billion in 2019 to $903 billion in 2024 it could not explain why such an “explosion” constituted a threat. On the contrary Boudreaux shows why our trade deficits are hardly a threat to the country and certainly not to its national security. 

I would be stunned if the Appeals court did not affirm the International Trade Court’s decision and blocked the imposition of the tariffs. Then it will be interesting if Trump decided to ignore the decision of a US Appeals Court.

What would you do if you were Jerome Powell?

If you were Jay Powell would you cut the Fed funds target rate now? Why? I wonder if anyone noticed that when the media said that the Fed left “rates unchanged” that the bond market rates fell? But yet we are told that the Fed left rates unchanged. What is going on? It is that the market determines interest rates regardless of what the Fed is doing. However, the Fed influences the range within which interest rates move. Currently, the Fed is reluctant to push that range downward stemming from its position that there is too much uncertainty with all the disruption caused by Trump’s policies. Powell as much said so when he said that absent the tariffs it is likely that the Fed funds rate would have been lowered. Back to you Mr President – who responded by calling Powell a moron. Wouldn’t it be nice to have a president who had a little class?

The presidents of the New York, Atlanta and San Francisco reserve banks all say to wait until all the tariff shakedowns have been completed and see what happens to prices. Not any prices mind you because the Fed doesn’t pay attention to the CPI rather it looks at the Personal Consumption Expenditures index or PCE. The CPI is a rather narrow measure of inflation. It looks at a basket of goods purchased by urban household. The PCE is a broader measure of price changes with weights that are different from the CPI. For example housing has a weight of 35 in the CPI but only 15 in the PCE. It is the PCE that just came in 3.4% well above the Fed’s target of 2.0 percent. Hum. Does that mean that the Fed should raise rates?

The Fed has two main objectives of stable prices and full employment. It seldom can do both and I suggest that it abandon the full employment goal. First, we really have no idea of what constitutes full employment. For example, last quarter the employment numbers looked good mainly because workers had dropped out of the work force reducing the labor force participation rate. State and local government hiring drove the numbers while private sector employment fell. I have long suggested that government hiring be excluded from the employment numbers. 

Rather the Fed should concentrate on inflation. Scott Bessent who seems to be Mr Know It All – with apologies to Stevie Wonder – has started criticizing the Fed. He says that AI will ignite a boom in production. Because AI could require fewer human resources, Bessent believes this economic boom could come without reignited inflation. When asked how the country should prepare for such a boom, Bessent said: “If the inflation numbers are low, then we should be cutting rates.” Well Scott the inflation numbers are not low.

However, the economy is showing signs of weakness. Job growth for July was awful. The numbers within the numbers show private sector employment falling. Immigration is taking a toll on businesses yet this may be unreported or underreported if the businesses were hiring illegals. Construction and agriculture are sure to be adversely affected. Consumer buying is slowing. Private domestic investment is falling. All these signs point to the Fed lowering rates. But inflation has started to rise because of the tariffs. If the Fed had lowered rates (by increasing the money supply) then the inflation would be exacerbated and we would have inflationary recession (stagflation). The folks who are now yelling at the Fed to lower rates would then be yelling at the Fed for having lowered rates.

I have heard some people saying that the rates should be lowered to lower mortgage rates. Well most mortgages are fixed rate and those rates are dependent upon the 10 year Treasury and not the Fed funds rate. The adjustable rate mortgages are the ones influenced by changes in Fed funds which mainly affect short term rates, not longer term rates. But don’t you think that Trump’s tariffs on aluminum, steel and especially lumber will affect housing costs more than mortgage rates? If these tariffs mirror those of Trump’s first term then expect the mortgage industry to crater. Anyway, the last time the Fed aggressively cut rates in 2024, fixed term mortgage rates went up.

Trump is trying to have the Fed save him from himself. Right now he has a convenient scapegoat for his policies. And if the Fed lowers the Fed funds rate and inflation rises, it will still be the Fed’s fault. Look back in December when the Fed cut 25 basis points, the market tanked. Then the Fed was criticized for lowering rates in the face of persistent inflation. Now we essentially have higher inflation rates but now the critics want rates even lower. Kindly explain why this makes sense? If the Fed was wrong to lower rates then why should they lower rates now when there is becoming some clarity about the effects of Trump’s tariff follies.

The next Open Market Committee meeting is September 16-17. It will be interesting to see if what the vote will be. If I were Powell I would have the committee lower the rate by 50 basis points just for the hell of it and sit back and see the reaction of the media, the markets, and Trump and his cronies. I bet the stock markets would tank and bond market rates would rise – just the opposite of what Trump wants. But absent that, let’s see what the economic picture looks like then and the predictions going forward. 

What job growth? What inflation?

Far be it for me to say “I told you so” but I told you so. Recall I wrote that the monthly jobs report is usually a fabrication. The results come from surveys and are always revised downward when the real numbers come in. On July 7 I said that the jobs report was a lesson in how to lie with statistics with employment figures revised downward by 55,000 jobs on average. Folks are highly critical of the Fed for its macro models but I have heard hardly a peep about the models used by the Labor Department in its surveys.

When the numbers were announced for May and June and the administration was doing high fives, I asked what would be the revisions? Turns out it was a whopping 258,000 lower making a three month growth in jobs of only 35,000. Recall that most of the job growth was in state and local government jobs. The jobs figure for July was a paltry 73,000. Now if that is the estimate, then what will be the revision? Well Trump did not like the 73,000 number and fired the commissioner of the Bureau of Labor Statistics. Mind you Trump fired the commissioner Erika McEntarfer and accused her of being a Biden appointee who was manipulating the numbers. Strange, but didn’t Trump like the numbers she manipulated (estimated) the previous month? The commissioner should have been fired long ago for not dealing with the poor estimates from the job surveys. As a good friend points out her firing smacks of Bolshevism with the disgraced commissioner sent to the gulag. Would that be Alligator Alcatraz?

Now Trump’s policies wouldn’t have anything to do with the poor job numbers would they? I can just hear the chorus now howling for the Fed to cut the target Fed funds rate. Indeed, Wall Street traders just increased the odds of a rate cut from 38% to 70%. But wait a minute. The inflation numbers have just come in as well. The Bureau of Economic Analysis reports that in June the Personal Consumption Expenditures index (used by the Fed) went up at a 3.4% annual rate. Now it was 2.0% in May and Trump and the MAGAverse were beating their chests and shouting to all the doubters (like me) “Where’s the inflation?” Well, here it is. Trump won’t like these numbers either. The Bureau of Economic Analysis is within the Department of Commerce. Watch out! The director is Vipin Arora. Look for Trump to fire him too.

Analysts say that June inflation is due to the first signs of the price increases due to the tariffs. Really? Just remember that importers and companies are bearing most of the initial increase in cost and only passing a small portion on to consumers. Imagine what the inflation figures will be once the full impact of the tariffs are passed on to the consumers. The analysts also note that domestic producers are starting to charge higher prices for their products as the foreign competitors’ goods are priced even higher. Surprise surprise. Breaking down the numbers, goods prices went up 4.8 percent in June compared to 0.9 percent in May. Durable goods prices went up a whopping 5.7% compared to 0.3% in the previous month. In contrast prices on services went up only 2.8% compared to 2.5% in May. Again recall the tariffs are on goods and not services.

These numbers are bad enough but are they understated too? Probably. The Bureau of Labor Statistics has reported that it is missing 15 percent of the data it normally collects on prices due to staffing shortfalls caused by Trump’s firings and a hiring freeze. This hasn’t gone unnoticed as democrat senators have questioned the accuracy of the data. Clearly, they are implying that the missing data must be due to the Trump administration trying to lie about the magnitude of the change in inflation. They wouldn’t do that. Would they?

What is the Fed to do? The abysmal jobs numbers say cut, cut, cut! But the inflation numbers say raise the rate. If the Fed were using the Taylor rule which says if the actual rate of inflation is above the target rate, it should increase the Fed funds rate. Trump would have a cow. If the Fed were reluctant to cut before when it was adopting a wait-and-see approach to whether the tariffs were going to cause inflation, isn’t the wait over? What is going to be this Fed’s main objective, job growth or inflation control? This is another case in which their mandate of full employment and stable prices is in conflict. If the Fed starts a policy of easy money in hopes of stimulating employment – one of Trump’s many demands – then what of inflation? Regardless of what action taken by the Fed, they will be the scapegoat. Trump will yell that if they had cut when he wanted it to then none of this would have happened. Of course that is BS but it is what we have come to expect from this president and his economic policies. I bet Jay Powell is thinking that May 2026 won’t come fast enough.

What out Gramps! ICE is out to get you!

The left’s strategy on immigration is focused on turning illegals into victims. Here what they are saying. Every illegal arrested by ICE is an innocent. Every illegal is now a hardworking person with a devoted family. Illegals who are now imprisoned awaiting deportations are mistreated, deprived on medications and malnourished. ICE is a bunch of brown shirted masked terrorists grabbing people off the streets, raiding places of work willy nilly. Legal residents are being harassed. ICE is profiling. Here is what one advocate says “The Trump administration’s first six months of immigration policy are a case study in unimaginable cruelty that makes no distinction between legal immigrants and the undocumented, that targets undocumented people who have been here for decades, and that uses brute force police tactics to intimidate communities.” “The U.S. Immigration and Customs Enforcement agency is raiding churches, courthouses, and schools and locking up undocumented grandmothers. The Homeland Security Department is revoking the protected status of tens of thousands of legal immigrants, clearing the way to deport people who have lived here for more than 20 years.”

The left having lost being able to open the borders to all comers is now diligently trying to keep those who entered illegally here by lying and misinformation.  It appears to be working as polls now show shifting opinions on illegals. Once supportive, now polls show only 35% of Americans surveyed approve of how the administration is handling illegal immigrants. Of course, I wonder how the questions were phrased. I bet the questions were written so as to evoke a certain response.

But the media is compliant and doing its best to sway public opinion away from the deportation of illegals. The Department of Homeland Security is trying to counter the false stories in the press but must make a concerted effort on social media to tell its story because the mainstream media will not. Here are just a few of the false stories debunked by Homeland Security:

“ICE Facilities are Overcrowding and Inmates are Starving with No MedicalAssistance”

“Less than 10% of Immigrants taken into ICE Custody since October had Serious Criminal Convictions”

“A Massachusetts High School Illegal Alien was Held in Solitary Confinement”

“ICE is “Racial Profiling” – Resulting in U.S. Citizens being Arrested”

“DHS Provided No Advance Notice to Los Angeles Police Department Prior toEnforcement”

“ICE Targeted Nannies at Parks”

“ICE Arrested a 6-Year-old with Leukemia at an LA Immigration Court”

“ICE Raid on the Home of a Pregnant Lady”

“DHS Agents Entered UCLA Medical Building”

“ICE Tried to Stake-out the Dodgers’ Stadium, but were Denied Access”

“ICE Failed to Provide a Pregnant Illegal Alien with Medical Care, Causing aMiscarriage”

“ICE Targeted Youth Shelters in Florida”

“DHS Deported a Father after a Traffic Stop”

What about the headline “Trump Administration Deports 82 Year Old Pennsylvania Grandfather to Guatemala?” That too was false and was a hoax. Also the story of the grandmother being locked up involved a woman who was “documenting the detention of asylum-seekers with the group Detention Resistance in San Diego.” She was arrested for pushing an officer – which of course she denies and was cited for assault. Or famously the reporting on Abrego Garcia the “kindly Maryland family man” illegally deported to El Salvador? Or the stories of democrat politicians trying to visit detention centers housing illegals? 

The question is why would anyone believe anything reported in the media? According to Gallup, America’s trust in the media is at a historic low. A Gallup survey found that only 31 percent of Americans still believe that the media “fully, accurately and fairly” reports the news. Attention: that 31 percent is delusional. I don’t believe any of it – including Fox. 

ICE needs to constantly combat the media disinformation. But it needs some help from the Trump folks. Stephen Miller should keep his mouth shut. He reeks of wanting to deport every illegal regardless of circumstance. I hear nothing positive from him. No suggestion of a migrant worker program. No suggestion of any thought but ship them out. It was also a bad look for the administration when it revoked the temporary protected status of 300,000 Haitians given by Biden in 2024. The total number of Haitians given protected status by Biden is around 500,000. The first group of Haitians came after the devastating earthquakes of 2022. The latter group was fleeing the takeover of the country by gangs after the president fled. The in 2025, Trump revokes the legal status of the Haitians along with 30,000 Cubans, Venezuelans and Nicaraguans. I think many if not most of us would sympathize with anyone living under those regimes.

Then there is the ugliness of Trump moving to deport the Afghans who aided the Americans and fled the country when the Taliban took over. These too came to the country under temporary protected status and are now facing deportation. I know that Miller has talked about Biden’s abuse of the temporary protected status program, but blanket expulsions seem a bit harsh. Mind you the optics of kicking these people out while waiving all restrictions to bring in a bunch of white South African farmers is a bad look.

Fed funds target rate, ICE sit-ins and the new GDP numbers

The Fed funds rate

Ok I was wrong. I thought the Fed would flip off the president by lowering the Fed funds target rate by 25 basis point. Instead, the Fed’s Open Market Committee stood defiant and voted to keep the rate unchanged. Boy I bet Trump is having a cow. However, this time the vote was not unanimous. Trump’s appointees not named Powell dissented. One, Christopher Waller had gone public advocating a 25 basis point drop which was not a surprise since Waller would like to be appointed the next Fed chairman. The other dissent was Michelle Bowman which was a bit of a surprise since she has always supported tighter monetary policy while resisting rate cuts. Since Trump has already appointed her to be vice chair for regulation, one wonders why the change of heart. Could she, too, want to be named Fed chair? Regardless, this is a bad sign. The Fed board now looks partisan. But at least keep in mind that when Harry Truman appointed William McChesney Martin chair and expected the Fed to accommodate him, once installed Martin went his own way causing Truman to regret his appointment. It will be interesting to see if the next Fed chair goes his or her own way once nominated.

The Baltimore sit-in 

Speaking of nominations, both Maryland senators are on the Senate Banking Committee which vets the Fed nominees. Both were involved in a sit in at an ICE facility in Baltimore. Pardon me but I don’t understand these stunts. The democrats must have polling that tells them to go make fools out of themselves. Remember the one where the mayor of Newark was arrested and a congresswoman was indicted for interfering with law enforcement?  Then there was the one in Los Angeles where a bunch of democrat congressmen showed up at an ICE facility and were denied entry. One whined “The Trump Administration blocked my colleagues and me from conducting our congressional oversight duties into the reported abuses and neglect that is taking place at this facility.”

At all these facilities, the democrats are reading from the same script. In Baltimore, one of the congressmen said “We were not allowed entry, so we had to stand outside, bang on the door, and ultimately sit in front of the door. “Finally, a director came out and explained to us that she had been given direction not to allow anyone, member of the House, Senate, or anyone into the facility.” So the dems show up and are denied entry and stage a sit-in. All the while, the deportation czar Tom Homan issued a statement saying that the dems are protecting felons, rapists, murderers and other bad types – like Abrego Garcia? Maryland’s Chris Van Hollen embarrassed himself with that one and not surprisingly was one of those sitting in at the Baltimore facility. Of Van Hollen, Homan said “He’s an embarrassment to the position he holds.” Homan further said that Van Hollen did not hold demonstrations regarding the “record numbers” of women and children being sex trafficked, fentanyl deaths or terrorists crossing the border.” Of course not. It will be interesting to see what questions he and fellow sit-iner Angela Alsobrooks ask at the Fed chair’s confirmation hearing.

Can numbers lie?

Get ready for some weird economic numbers and even weirder statements from the so-called experts. This last quarter’s GDP numbers are in and show solid growth at 3%. The Trumpers are doing high fives and are saying that the economists were wrong. The previous quarter GDP fell 0.5 percent. Just like the employment numbers have to be dissected to discover that while job growth grew, private sector employment fell, what is the story about the swings in GDP? It’s the tariffs. When GDP fell it was because businesses stocked up on imports in the face of increasing tariffs. This past quarter, because of the tariffs, imports fell a staggering 30 percent. The GDP accounting measures domestic production so importing goods subtracts from GDP because the production of those goods was abroad. So if Trump wants to show strong GDP growth he should increase all tariffs to 1,000 percent! But like the employment numbers, the other numbers point to a slowing economy. Private domestic investment fell 16 percent. This is likely from companies that use imports as an input.  Private domestic final purchases also slowed to just 1.2%.  Inflation rose 2.5% which is still above the Fed’s target of 2 percent. Some wag said that in order to appease Trump that the Fed should simply raise its inflation target to 3 percent and then cut rates.

So let’s wait and see. It looks like instead of 10%, Trump’s universal tariffs will be 15 percent. Trump’s deals with Vietnam, the UK, Japan and the EU have imports at 15 percent and exports at zero. Why the president wants Americans to pay more for foreign goods while they pay less for ours is pure mercantilism. After all the deals are done with the major trading “partners” let’s see if the administration didn’t spike the ball before crossing the goal line.

Random thoughts #65

Trump keeps crowing about foreign countries investing in the US. Japan has agreed to invest $500 billion. The EU has agreed to invest $600 billion. Where do you think the $500 billion from the Japanese and the $600 billion from the EU come from? It will be part of the US dollars the countries accrue through the sale of goods to the US. When the investment occurs, our trade deficit will widen. Won’t somebody tell the president that the only way that the trade deficit will decline is if the foreigners buy American exports. If instead of buying more US goods, when the foreign countries use those dollars to invest in the US then the trade deficit will increase. Since Trump thinks that trade deficits endanger national security, why is he making the deficit larger? Instead he should demand that the countries buy more US exports instead of investing it in this country.

Hulk Hogan just died. I met him once. I was in a Crown room at the Atlanta airport when he walked in wearing his signature cut off tee shirt and a bandana, totally in violation of the dress code. I guess he was always in character and who was going to tell him that he couldn’t come in?

Pinnacle and Synovous banks have announced a merger. Two of my former students are presidents of Pinnacle banks and a University of Georgia classmate, Jim Blanchard, was the CEO of Synovous who converted it from a sleepy bank in Columbus, GA into a financial powerhouse, By the way, at the same time in Georgia’s College of Business were three US senators, Reagan’s OMB secretary, Jimmy Carter’s chief of staff, the chief economist of another major US bank, the Synovous CEO and of course me.

Trump toured the Federal Reserve building to inspect the renovation. Trump said that the cost was $3.1 billion. Powell corrected him saying it was $2.7 billion but Trump, insisted that it was $3.1. Basically, who really cares? That cost overrun is within budget in government spending. What was interesting is that Powell did not back down to Trump. Not exactly friends, these two.

The Fed’s Open Market Committee meets July 30-31 and my guess is that it will lower the Fed Funds target rate by 25 basis points just to further tick Trump off who wants them to lower it by 350 basis points. (a basis point is one-one hundred of a percent).

Trump should just shut up about Powell. His term ends in May 2026 and Trump can pick some lackey to take his place. That senate confirmation hearing will be a must see. You think the democrats lose their minds on a Trump supreme court nominee? Wait until you see how badly they will go off the deep end in this one. Elizabeth Warren is no longer on Senate banking so it will be interesting to see who takes up her mantle – Chris Van Hollen maybe? Tennessee’s Bill Hagerty is on the committee and Louisiana’s John Kennedy will provide comedic relief. Tim Scott is chair,

France just announced that it will recognize a “Palestinian state.” Problem is they didn’t know where this so-called “state” is located. I guess if the French can ever find it, they would be able to recognize it. Bon soir le etat, Britain is also making noise that it will recognize it too, if it can find it. Since Trump objects so vehemently why doesn’t he threaten to double their tariffs?

Some dems are trying to stop the Blue Angels from participating in Seattle’s Seafair. There is a billboard claiming noise pollution and damage to their precious climate. Some looney woman is suing the Blue Angels accusing them for killing her cat with their noise. Of course, they can’t come out and say that they hate America. If these folk were serious about jet pollution– which they are not – they would be suing every leftist owner of a private jet to park it. Wouldn’t they? They also could down the street and protest Boeing.

When the Supreme Court ruled on Trump’s immunity from prosecution, the left had a cow. “This decision by the Supreme Court today is a travesty and perhaps the most dangerous judicial opinion from our Supreme Court in generations. By smooth and naive legalese, these partisan justices have created a framework for a President to commit any acts he or she chooses.” “This opinion is nothing less than a blueprint for a lawless dictator to take root in the Oval Office of the White House.” “The Supreme Court’s ruling gives expansive immunity to a corrupt president who purports to use acts within his official authority to conspire to overturn a lawful election.” What are they saying now that Obama has been accused of treason by Tulsi Gabbard for initiating the Russia hoax? Gabbard says that their silence speaks volumes. President Trump said that Obama has immunity and should thank him. “He owes me big. Obama owes me big,” 

Indeed he does. I have said this before that the democrats should be helping Trump explore the limits of the executive rather than fighting him at every turn. The next democrat who is president will thank Trump and of course the Trump supporters who are then will be resisting the same actions of a democrat when one is in the office.