Unfortunately, former CNBC personality (and “Gordon Gekko doll, original, in box”) Larry Kudlow showed up on Bloomberg Television Friday to
lie talk about the worsening trade dispute with China.
Kudlow was already something of a standing punchline before deciding it might be a good idea to try and resurrect whatever wasn’t left of his not-at-all-illustrious career by filling a recently vacant spot on the deck of the USS Trump-tanic after Gary Cohn grabbed one of the last remaining lifeboats back in March.
Why Kudlow thought that was a good idea is anyone’s guess, but since condemning himself to the wrong side of history earlier this year, Larry has struggled mightily to explain to the public how his characterization of the President as a “free trader” is consistent with Trump slapping tariffs on everything from residential washing machines to steel to Chinese badger hair.
That effort isn’t going well. And the longer Kudlow stays on, the more afflicted he becomes with Trump’s cognitive incapacity. On June 29, Larry told Fox News the following about the deficit:
The deficit is coming down and it’s coming down rapidly.
That’s not true. As in, it is a demonstrable lie. “Now that one is simply off the charts on the ‘Pinocchio meter'”, Jeff Gundlach said of Kudlow’s deficit comment.
Last week, Kudlow accused corporate management teams of misleading investors by blaming tariffs for poor execution, a contention that, if true, would be something the SEC should look into. Of course it’s not true. Larry is just lying because he’s morphed into a Trump sycophant.
Given all of the above, it comes as absolutely no surprise that Kudlow’s comments to Bloomberg were riddled with spin and propaganda.
“The yuan has fallen in part because China has stopped defending it”, Kudlow said of the recent depreciation in the Chinese currency, adding that “they think it’s going to help offset the U.S. efforts to get rid of their unfair trading.”
Yes and no. “Yes”, they’ve stopped defending it (until Friday morning). But “no”, they do not “think” it’s going to help, they know it’s going to help.
Kudlow is implicitly suggesting that China’s efforts to offset the tariffs by countenancing yuan depreciation aren’t working. But they are working. And everyone (including Donald Trump) knows it.
“The nearly 10% USD/CNY move since March has almost completely offset the impact of Trump’s potential tariffs before they have even happened”, Deutsche Bank wrote last month, before dryly suggesting that “perhaps this is why the US President’s Twitter feed has turned back to talking down the dollar.” Goldman and JPMorgan (to name a couple) have also done the math on this. The currency depreciation has offset the tariffs. Period. There is no “think” to it, Larry.
Kudlow went on to call China a “lousy investment”. Here’s the quote:
Some of the currency fall though I think is just money leaving China because it’s a lousy investment, and if that continues that will really damage the Chinese economy. If money leaves China — and the currency could be a leading indicator — they’re going to be in a heap of trouble. And so I’m going to make the case that they are in a weak economic position. That’s not a good place for them to be vis-a-vis the trade negotiations.
— Bloomberg TV (@BloombergTV) August 3, 2018
He’s right that Beijing is keen to avoid capital flight, but what exactly is Kudlow basing his “lousy investment” thesis on? And what EM country isn’t trying to avoid capital flight? Kudlow continued:
We want to see trade reform, China’s not delivering. Their economy is weak, their currency is weak. It looks to me like the China economy is declining in growth. It’s weakening almost across the board. And it looks like the People’s Bank of China is trying to pump it up by adding high-powered money and new credit.
Again, “yes”, but also “no”. “Yes”, China’s economy is decelerating, but that’s hardly news. People have been predicting a “hard landing” for years and not to put too fine a point on it, but that thesis has never played out. Not entirely, anyway. And “yes”, China’s credit impulse is important, but not just for China, for the entire world. Larry better hope that credit impulse doesn’t roll over entirely, because if it does, it’s not just going to be China that suffers.
But “no”, China’s economy is not “weak”, at least not according to Donald Trump, because it was just a week ago today when the President described a 4.1% annualized rate of economic expansion as “amazing”. Remember that? Well if 4.1% is “amazing”, then what superlative is applicable for China’s numbers? “Astonishing”? “Astronomical”? “Space Force”, maybe? I don’t know, let’s ask Larry what he’d be “happy with” when it comes to growth in the third quarter (from a Fox interview that aired earlier on Friday):
— FOX Business (@FoxBusiness) August 3, 2018
So Larry would be “happy with three”, but somehow China’s economy (which, if you believe the “official” data, is growing at more than twice that rate) is “weak.”
In that same interview with Fox, Larry said the measures China announced on Friday morning don’t qualify as “tit-for-tat” because – and he actually said this, or something like it – $60 billion is smaller than $200 billion.
I’ll leave you with a clip of Kudlow explaining to Fox that because he’s not a communist, he has no way of knowing what Xi Jinping is thinking, but he is “privy” to Donald Trump’s “very good brain” and as such, he knows just how “tough” this President really is.
— FOX Business (@FoxBusiness) August 3, 2018