A 100 dollars ticket. (Credits: Adobe Stock)
The trade war initiated by Donald Trump is accompanied by monetary tensions, especially between the dollar and the euro. Jean-Paul Betbeze analyzes the strategy led by the American president, and his limits
How far can the dollar drop? Until Trump says it’s the best currency in the world
And that investing in dollar is safe! Currently, we are far from it. With Trump’s turnaround on Jerome Powell this boss of the American Federal Bank that he wanted to turn, since he has just ensured that he was going to keep him: is it enough to restore confidence? No: there is no power, especially monetary, a fortiori when it comes to the dollar, without responsibility. The financial markets are there to trace more or less curved lines, depending on the tracks that the authorities trace them: IMF, central banks, national budgets, employers’ organizations, before coming to their own business plans. Each time, time has passed so that “percolate” decisions and everyone’s future is built. The markets experience highs, then descents: they are used to it, but not at the Trumpian zigzags.
Trump has just realized that the US scholarships, after their fall, resume each other and wait, like long rates, after their rise, and the dollar, after his drop
When the American scholarship decreases, this means that operators prefer to take shelter by buying treasury bills whose yield drops. This is at constant exchange rate. But if the dollar drops from December to now? This means that investors leave the stock market and treasury bills, so the dollar, forced to drop. But he cannot do it alone, another currency must go up, not just any: the Euro or the Swiss franc. But the Swiss franc is limited by the size of its economy, which would be suffocated. Swiss authorities will do their best by limiting the increase in their currency, lowering the rates and especially by increasing their reserves in dollars. There remains the euro zone, larger but low growing. It can only lower its rates, to 2% or less. When the dollar decreases, the short -term rates of large, ” acceptable “currencies drop. All march in front of the increase, no one thinks of the over -indebted yen, and gold is lacking. Make the yuan go up?
New: Trump wants the dollar to decrease
Never has an American president dared to say it in such a direct way, especially when you want to be Maga. Those who advise him may have indicated that wanting to lower the dollar could not solve the problem of the American trade balance: it pays years of unantegranted budgetary spending, because the dollar was accepted everywhere. It is “the exorbitant privilege of the dollar” to quote Valéry Giscard d’Estaing, “exorbitant” because he is limitless … So far, where we see Trump fighting (with Musk) to reduce expenses, hoping to reduce the deficit and transfer the gains to obtain by increasing the customs rates down taxes, to attract investors.
Who will tell Trump that he is wrong?
Little by little, Trump seems to realize that he is on the wrong track. No one understands his customs duties or his criticisms against Powell. Everyone sees that he comes up against more political and financial oppositions, and especially to economic reality. Trump cannot ask to invest in the United States to build an electronic flea plant: it is not the billions that are missing, but the engineers. If he wants more growth, he also needs workforce in factories, fields restaurants, recognizing that not all are in good standing. Little by little, he will have to come back to his “force ideas” by discovering that the Dollar Currency of the World gives him powers, but also obligations. In one deal, one is forced to sell and the other is forced to buy: any exchange is, at the same time, asymmetrical and symmetrical. The more the economy progresses, the more links it creates. Soon, Trump will have to recognize that the WTO has its advantages and that the world is multilateral. Let’s wait again.
