….Can the Federal Reserve Save Trump?…
Other countries are boycotting USA products and services. Last month, China cut its purchase of USA products by 31%. And it is not just because of Trump’s Tariffs. Trump treats Russia, Saudi Arabia and North Korea well. But he treats other countries like crap. So they hate Trump and don’t want to do business with us. And its not just other countries who have stopped spending. Businesses have lost confidence in Trump and cut back on their investments.
If it wasn’t for the USA consumer on a spending spree, we would already be in a recession. Trump needs the USA consumer to keep spending until after the 2020 election, or it’s all over for him. He ordered the Federal Reserve to reduce interest rates to “juice” domestic consumer spending. Trump hopes he does not have to address the real problem facing the USA, the lost confidence of businesses and the “boycotting” of the USA.
The Federal Reserve hinted they will do as Trump ordered and cut interest rates. This may cause a bigger problem than just letting the economy slow down now.
- Boycotts of USA goods and services by other countries are likely to accelerate, especially if Trump wins in 2020. Foreign tourism and investments in the USA has also declined sharply. And we likely lost this business forever. Our old trading partners are not going to blow off their new trading partners once the trade war ends.
- Business confidence and business spending will continue to erode. Many companies are already seeing a decline in business from the boycotts by other countries of their goods and services. And Trump is unlikely to back off his attacks on Mexico, China, Europe and Canada.
The big unknown is what happens to consumer spending after the Federal reserve cuts interest rates.. Many of us are running out of borrowing power, are behind on our monthly payments, or have already defaulted on our loans. For example, seven million people are ninety days or more behind on their auto loans. Lower interest rates may save over-leveraged consumers. And if consumers remain on a spending spree, the USA economy may remain robust….at least for awhile.