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Jeffrey Frankel’s Blog

RMB reaches 7.0; US names China a manipulator

TweetAugust 12, 2019 –The US-China trade war heated up in the first week of August.  On August 1, Donald Trump abruptly announced plans to impose a 10 % tariff on the remaining $300 billion of imports from China that he had not already hit with earlier tariffs.   The Chinese authorities then allowed their currency, the renminbi (RMB), to fall in value below the highly visible line of 7.0 RMB/$.  The US Administration promptly reacted on August 5 by naming China a “currency manipulator” —...

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Parallel to US-China trade war, Japan & Korea fall out

TweetAugust 8, 2019 — I responded to 9 questions in an interview today with Chosun Ilbo.  They concern the US-China trade war and the new simultaneous dispute between Korea and Japan.  The trade war between the world’s two largest economies continues and it appears the war is spilling over to currency now. What do you think are the fundamental reasons for this conflict? JF         It was legitimate for the outside world to ask China to make some changes.  But we did not sit down in a...

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Trump escalates China trade war

TweetAugust 5, 2019 — The China’s People’s Daily in an interview had three questions about the US threat of August 1 to apply tariffs on the remainder of Chinese goods. As the tariff list of Trump now covers all the goods from China, economists are warning that consumers will pay more for the tariff. Do you share this concern? JF Answer: Yes, the additional tariffs — 10% on the remaining $ 300 billion of imports from China — will clearly raise the price that American consumers have to pay...

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Let’s Forget about 2% Inflation

TweetJuly 28, 2019 — The Fed has some reasons for cutting interest rates at its meeting July 31, or subsequently if the US economy weakens. (And there are some good arguments on the other side as well, if growth remains as strong as it has been over the last year.)  But I find less persuasive one argument for easing: a perceived imperative to get inflation up to 2.0% or higher. Federal Reserve Chairman Ben Bernanke set a 2% target for the US inflation rate in January 2012.  Some other...

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Tenth birthday of the June 2009 recovery

TweetJune 17, 2019 — This month marks the 10th birthday of the US economic recovery.  June 2009  saw the “trough,” the end of the Great Recession of 2007-09. (As always, a declaration that the recession was over could as easily have been phrased less cheerfully as a declaration that the economy had hit “rock bottom.”) Why such a long expansion? Who or what deserves credit for the length of the expansion? There is plenty of credit to be parsed out to explain the end of the free-fall that...

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Remembering Martin Feldstein

TweetJune 13, 2019 — Here in Cambridge, we are reeling from the passing of Martin Feldstein on Tuesday. He was tremendously influential both as scholar and teacher.  He was also a  policy-maker:  Below, the last section of this remembrance offers some recollections of his time as Chairman of Ronald Reagan’s Council of Economic Advisers. In addition, remembrances at his funeral service today appropriately emphasized some qualities not known to those who knew of him only as a conservative...

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The Trade War Resumes

TweetDonald Trump on May 5 suddenly revealed that a trade agreement with China was not imminent after all.  To the contrary, the Administration on May 10 raised its earlier 10 percent tariff on $200 billion of Chinese goods to 25%, and threatened to extend 25% tariffs to the remainder of imports from China by late June (roughly $300 billion of goods).  China, of course, retaliated against US exports [announcing reciprocal 25% tariffs on $60 billion of US goods, to start June 1.  Surprised...

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Moore on Gold and Commodities

TweetApril 30, 2019 —   A century ago, the gold standard was considered a guarantor of monetary stability.  That golden era is long-gone.  (If it ever really existed at all.  The general price level fell 53% in US and 45% in the UK during 1873-1896 due to a dearth of gold deposit discoveries.) Continuing my thoughts on the Fed candidacy of Stephen Moore: he has said several times that he favors a return to gold.  In true Trumpian fashion, he recently denied having said it despite the...

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Moore Troubles for the Fed

TweetApril 30, 2019 — Of the two men whom Donald Trump had intended to nominate to empty seats on the Federal Reserve Board, Herman Cain has now withdrawn his name.  This leaves the other one, Stephen Moore. The Senate would have to decide whether to confirm Moore. He has some problems roughly analogous to Cain’s:  he is considered to be under an ethical cloud and he often gets his economic facts wrong.  Cynics might respond that he would thereby fit right in with the roster of Trump...

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Xi & Trump Miss a Chance to Expand Markets

Tweet March 24, 2019 — Donald Trump has postponed until April the supposed deadline for a conclusion to China-US trade negotiations.  A good outcome for both sides would have China agree to better protect private property rights and to reduce the role of the state in its economy; the US agree to strengthen national saving and public investment; and both sides agree to reverse their recent tariff increases and the resulting shrinkage of international markets.  Unfortunately this deal is...

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