Monetary Policy Trumps Tariffs

2025-01-03 03:00:00 ET

Summary

• There's no need to worry about Trump's threatened tariffs causing another bout of inflation.
• Inflation is a monetary phenomenon that can only be caused by excess money, not artificially jacked-up prices.
• In my view, the current strength of the dollar is exercising a gravitational pull on commodity prices; over time, this is likely to result in cheaper commodity prices.
• Spreads have rarely been lower than they are today, which is a strong vote of confidence in the health of the economy and the strength of corporate profits.

There's no need to worry about Trump's threatened tariffs causing another bout of inflation. Inflation is a monetary phenomenon that can only be caused by excess money, not artificially jacked-up prices. A sound monetary policy deals with rising prices for some things by forcing the prices of other things to decline. It's like living on a fixed budget-if you have to pay more for something, that means you have to pay less for others....

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