NB: Trump is going to try to 'fund' his tax cuts with savings from getting the Fed to lower the policy rate--even if doing that is politically messy and there are significantly lagged effects to any savings. It's gonna look like a free money win/win to him, and it's easy to sell to rubes & journos - ThreadSky

dow.bsky.social • 101 days ago

NB: Trump is going to try to 'fund' his tax cuts with savings from getting the Fed to lower the policy rate--even if doing that is politically messy and there are significantly lagged effects to any savings. It's gonna look like a free money win/win to him, and it's easy to sell to rubes & journos

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itagc.bsky.social•101 days ago

I think he is going to hike those tariffs to pay for that. Sell it to the MAGA crowd by saying they are punishing China or something like that.

dow.bsky.social•101 days ago

The numbers don't work for that.

itagc.bsky.social•101 days ago

I’ve seen estimates of $2.6T over 10 years but there is also the substitutions and the retaliation story. All this feels like a bad dream

dow.bsky.social•101 days ago

US imports are only 15% of GDP. Makes it hard to make the math work--even with crazy assumptions.

drogen.bsky.social•101 days ago

How does this control the long end though?

One thing I would do, I would badger the Fed to restart mbs purchases to narrow the spread to bring down housing inflation via lower rates

mrdicus.bsky.social•101 days ago

I hate the MBS purchases. I’d argue that is a top 3 reason why prices skyrocketed over last 20 years.

dow.bsky.social•101 days ago

It's not. The PSTD effect on homebuilders led to a decade of underbuilding and a housing shortage. The effect of purchases on MBS spreads is negligible compared to the effects from UST moves. Everyone wants to blame government for the rise in home prices bc it allows us to focus our anger on someone

dow.bsky.social•101 days ago

Wouldn't get you much. Maybe 30bps in yield. Lowing the policy rate 150bps will lower the mortgage yield by much more and you don't have to mess with the balance sheet.

drogen.bsky.social•101 days ago

I’m not sure the long end cooperates like that unless Trump disavows his inflationary policy proposals

dow.bsky.social•101 days ago

Buying MBS won't help under this scenario either tho.

fadedance.bsky.social•101 days ago

I'm not sure such policies are exactly taking the long view... It's not a problem until it is a problem, after which the full fledged financial repression thesis quickly moves into the main line of likely outcomes unless there is a pivot.

mannwich.bsky.social•101 days ago

Art of the Con. His real brilliance

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