Dollar Crash After Trump's Re-election?
“He’s back” – If Donald Trump wins the presidential election in November, he would move back into the White House early next year. From there, he would ideally like to dismiss J. Powell, the head of the central bank, and declare the Fed’s financial business a top priority for himself – with unknown consequences for the dollar.
Interest Rate Cut Far Off
“My question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Trump tweeted in 2019. Although he had nominated the central bank chief himself in 2017, he did so under the firm assumption that Powell would lower interest rates. However, this has not happened to date. Only recently, Powell signaled that the tight monetary policy line must be maintained for longer in order to break inflation.
Should the Fed Finance Government Finances in the Future?
As early as the beginning of February, Trump had signaled that he would not grant Fed Chairman Jerome Powell another term should he return to the White House. Instead, according to research by the “Wall Street Journal,” Trump intends to expand his own influence over the Fed. Interest rate decisions would then pass through his desk. But not only that: a small group of Trump’s allies has drafted a nearly 10-page document outlining a political vision for the central bank. The details are not yet known, but it is to be feared that the Fed will eventually be tasked with financing government finances.
Financial Autocracy Prevented Turkish Economic Miracle
Turkey, plagued by corruption and mismanagement, has already shown where it can lead when autocratic figures interfere with the financial system. Under Erdogan’s leadership, rapid currency devaluation occurred because Erdogan had always insisted on further interest rate cuts: the inflation rate had risen by a full 80% since 2021. This led to the country suffering a severe economic downturn despite very favorable demographic conditions. The USA could face a similar fate if global confidence in the dollar wanes in light of the Trump administration’s overly casual interference in the financial market.
Low Interest Rates Equal “Artificial Boom”
Low interest rates make it easy for governments to initiate economic success, as they trigger a certain boom. Coupled with a weak dollar, which benefits the export economy, this upswing then writes the unsustainable success story for the “new” president.
Commodities ALWAYS Benefit from a Weak Dollar
No one knows yet whether Trump will actually be elected. But the probability is high, looking at the polls. Investors would therefore do well to consider a certain volatility factor for the dollar in their portfolio. Commodities are a good way to do this, as they can benefit from a weak dollar. They act as a hedge against central bank failures.