The Prime Minister was in Luxembourg this week. Promising to free Britain from the shackles of Europe, Johnson invoked the persona of Bruce Banner. "The Madder Hulk Gets, the Stronger Hulk Gets" explained the PM.
The prospect of a mad man in negotiations with Europe presented nothing new for EU leaders. For Boris Johnson, it's about as green as the new administration will get in pursuit of an eco friendly agenda.
Sadly, the "Incredible Hulk" turned into the "Invisible Man". Johnson walked away from a planned press conference with the Grand Duchy Premier Xavier Bettel. A small but vociferous group of anti Brexit protestors was enough to put off the Hulk. "I wanted to move inside but the others would not agree", explained the PM. On such small things will the bigger issues founder. Time is ticking with no real solutions in sight.
In economic news this week, inflation slowed in August to 1.7% from 2.1% prior month. Goods inflation fell to just 1.3% assisted by falls in clothing and footwear prices. Producer prices were equally muted, output prices fell to 1.6%.
The Bank of England decided to hold rates this week at 0.75%. Concerns about the trade war with China and uncertainties about Brexit continue. In the event of an EU deal, the next move for U.K. rates will be up "at a gradual pace and to a limited extent".
No Guts, No Vision ...
In the U.S. the fed cut rates by 25 basis points this week. Despite headlines, that U.S.Indicators are trouncing forecasts. The Bloomberg Economic Surprise Index reached an 11 month high this month after four indicators released on Thursday including home sales and jobless claims surpassed expectations.
The U.S. fundamentals remain strong. Uncertainty as a result of the Trump tariffs and trade wars is a cause for concern among FOMC members.
Trump attacked the decision "No Guts, No Vision" the criticism. Jay Powell and the Boneheads resisted the opportunity to slash rates to zero, enabling the economy to soar like a rocket, until November 2020 at least. The President has one eye on the economic barometer and another on the poll results which are not moving higher in his favor.
Seven of the ten officials voted for the cut, two opposed the move. One voted for a larger move of around 50 basis points. Either way the Fed made it clear no further reductions were expected this year. The next move for rates will be to the upside, assuming the trade war with China does not impact further on growth this year.
The OECD warned this week of the impact of trade wars and tariffs on production and growth around the world. U.S. growth forecasts have been cut to 2.3% this year and 1.8% in 2020. The economy should have been expanding at 3% plus this year and next but for the havoc the Trump trade myopia presents.
Headline articles in the Guardian this week included "Trump is seriously, frighteningly, dangerously unstable and the world is in danger ..."
We include this in our series on The Economic Consequences of Mr Trump Chapter 1 Inside the mind of the President, it is becoming a chilling read ...
Trade war enters new phase ...
The trade wars entered a new phase this week. The President was under fire from whistle blower leaks. Trump had offered favors to Ukraine in exchange for dishing the dirt on Joe Biden's son.
The Ukrainians were awaiting a decision on a multi million dollar aid package. Trump explained to President Volodymyr Zelensky the country could "improve it's image", if it concluded the investigation of certain corruption cases.
Notably the investigation of a certain Ukraine energy tycoon. Joe Biden's son was on the board of one of his companies. Giuliani, Trump's personal lawyer, met with an aide to the Ukrainian President to thrash out the details.
Asked if he had discussed Biden on his call with Zelensky in July, Trump told reporters, "It doesn't matter what I discussed, someone ought to look into Joe Biden". National security experts confirmed Trump's pressure on Ukraine was highly inappropriate. The Washington Post suggested Trump has done much to warrant impeachment but the Ukraine conversations are over the top, even for the President.
Trump needed a distraction and ramped up the rhetoric with China. "Obviously, China is a threat to the world, because they are building a military faster than anybody. I view China in may different ways, but right now I am thinking about trade. And you know trade equals military."
Last week trade tensions were easing, stock markets rallied. This week trade tensions increased and markets fell. Trump claimed to be in no rush to complete a deal before the election in 2020. The Chinese made note and packed up early leaving for home.
A scheduled visit to the farmlands of Montana and Nebraska was abruptly cancelled. "We didn't even get to know what they wanted to discuss" said Scott Kulbeck, director of the Montana Farm Bureau.
Should we be worried? Trump insisted he continues to have fond feelings for China’s leader, Xi Jinping.
“My relationship with President Xi is a very amazing one, a very good one,” he said. “But we have right now a little spat.”
Yep a little spat which if left unchecked could push the world into recession. When Peter Navarro, Trump's adviser on trade and manufacturing, penned "Death by China" he failed to include the Chapter on mutually assured destruction, as a result of his policy response.
That's all for this week, have a great weekend. We will be back with more news and updates next week!
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