Note the header on those visuals, which were republished today by SocGen’s Kit Juckes from the IMF’s 2018 External Sector Report, called “Tackling Global Imbalances amid Rising Trade Tensions”, a 150-page tome that no one is ever going to read, least of all Donald Trump.
Late last year, when asked about reports that he spends an inordinate amount of time watching Fox News, the President said this about what he claims is a popular misconception:
But I don’t get to watch much television. Primarily because of documents. I’m reading documents. A lot.
Trump’s imaginary penchant for extensive “document” study notwithstanding, it’s probably safe to say that he hasn’t read the IMF report mentioned above, but if he had, he might find it interesting. Here’s the above-mentioned Kit Juckes explaining the charts:
The chart shows IMF estimates of real effective exchange rate and current account gaps. REER gaps are a variant on FEER gaps, and show where a currency would need to adjust to set the current account on a path towards equilibrium. The countries with excessive current account surpluses include Germany and the Netherlands [which] have significantly undervalued currencies according to the IMF. Of course, the Netherlands and Germany share a currency with the rest of the Eurozone, and Spain has an overvalued currency on this chart. But still, the euro is undervalued and the dollar, correspondingly, is one of the most overvalued currencies.
That would jive well with the President’s tweets from last Friday, when, in a followup to his bombshell interview with CNBC’s Joe Kernen, Trump accused the E.U. of “manipulating” its currency.
China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day – taking away our big competitive edge. As usual, not a level playing field…
— Donald J. Trump (@realDonaldTrump) July 20, 2018
On Wednesday, European Commission President Jean-Claude Juncker is in Washington to try and convince Trump not to move ahead with tariffs on autos and as Bloomberg’s Luke Kawa writes, “Juncker probably hopes President Trump hasn’t pored over the IMF study.”
Don’t worry, Luke. He hasn’t.
See, Trump hasn’t had time to indulge his passion for “documents” over the past several days because there’s been too much to tweet about, a sad state of affairs, as no one likes to see a man so burdened by his job that he has no time for the things he loves, which in this case means spending hours alone in the Oval Office “studying”.
Still, it’s possible that one of his advisors has seen the report, so who knows, maybe SocGen’s Juckes is right to ask the following:
I wonder if that will come up in the trade conversations today?
The EUR had two purposes from its foundation:
To force members of the Eurozone into a political union that their peoples on the whole did not and still do not want. That particular cart seems to have got a fair way ahead of the horse.
To give Germany a next-to-free pass on exports – theoretically as a quid pro quo for getting into bed with all those fiscally profligate southerners, although our German friends still seem to be sitting somewhat reluctantly on the edge of the matrimonial bed. Meanwhile – Ja, danke sehr.
The EUR is a wholly artificial construct, and on this particular issue DJTweet is right. Mind you, the way things are moving there’s a chance by the end of his second term it will have imploded anyway. I know….’second term’… quite bad taste.