Gold Soars, Dollar Sinks After US Treasury Praises Weaker Dollar
The US dollar continued its slide with its worst day since last March when Treasury secretary Steven Mnuchin stated a Weak Dollar is Good for Trade.
Mnuchin made the comment in Davos, Switzerland Wednesday morning to news reporters attending the World Economic Forum. The dollar index, reflecting the dollar's value against a basket of currencies, tumbled 1 percent to about 89.25.
Mnuchin's comments echo statements by President Donald Trump, who famously helped turn a market trend of a stronger dollar last January when he said, prior to his inauguration, that the dollar was "too strong" and that U.S. companies can't compete because of it, particularly against the Chinese. The dollar index has lost more than 10 percent since then, and after Mnuchin's comment Wednesday morning, it sank to the lowest level since December 2014.
"Obviously a weaker dollar is good for us as it relates to trade and opportunities," Mnuchin told reporters, according to Bloomberg, adding that the currency's short-term value is "not a concern of ours at all." Mnuchin speaks on a panel in Davos Wednesday morning, at 11 a.m. CET.
He Didn't Say What He Said
Commerce Secretary Wilbur Ross provides the amusing quote of the day regarding Steve Mnuchin's statements.
"I was there with Steve when he said what he said. And I don't think that's exactly what he said."
See the above link for a CNBC video.
This reminds me of the famous Yogi Berra quote, "I never said most of the things I said."
Empty Feedbag Blues
I was looking for a YouTube video were Mr. Ed said "Now Willllburrrrr" but I liked the "Feedbag Blues" song better.
CNBC reports "The markets will be watching for Mnuchin to clarify his comments when he appears in a panel at the World Economic Forum in Davos, Switzerland early Thursday."
Gee, I can hardly wait for empty "feedback".
Feedback from Gold
Gold, not lame comments from CNBC, Wilbur Ross, and Steven Mnuchin provide all the feedback you need.
The irony in all of these ridiculous comments by Ross and Mnuchin is that a cheaper dollar will not do anything to solve the US trade imbalance.
The problem is not the dollar, nor is it US trade policy. In fact, Trump's trade policy makes matters worse.
Explaining Balance of Trade
The seeds of trade imbalances were sewn in 1971 when Nixon closed the gold window. The trade deficit rose, then skyrocketed.
Few know the true source of the US trade imbalance with China and Mexico.
I discuss the reasons here: Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?
To understand the futility of Trump's new tariffs on solar panels and washing machines, please see New Phase in "America First" Trade Policy.
Mike "Mish" Shedlock