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Brian Ghilliotti

Naugatuck Valley Community College

Economics 250

Money and Banking

Article Summary: Analysis

3/5/2018

Analysis

The Trump Administration will face challenges between balancing the growth of

Main Street, primarily through tax incentives, while sustaining the growth of Wall Street,

which relies on low interest rates. However, the growth of Main Street pressures

interest rates, and Wall Street is sensitive toward the threats inflation poses toward low

interest rates. Their concern is that the growth of Main Street will generate inflation that

will force the Federal Reserve into raising interest rates.

The Trump Administration cannot afford to raise interest rates anyway, as it will

have sensitive impacts on the interest of the national debt. Also, it is in the interest of

the Trump Administration to keep the value of the dollar up by the relatively low interest

rates that are associated with dollars. Other nations will want to borrow funds in

dollars, with low interest rates, which increases the value of the dollar, sustaining its

purchasing power.

Sustaining the purchasing power of the dollar is one way that the Trump

Administration may negate the impacts of inflation. This will help resist the pattern of

raising interest rates in the face of inflation. It will also support bond markets measured

in US dollars. The growth of the U.S. dollar may hurt exports, but the analyst suspects

that the growing middle classes in emerging markets will be willing to absorb the

higher costs of goods produced in dollars.

The Trump Administration is well aware of the fiscal impacts of its tax incentives.

The analyst suspects that the Trump Administration may pursue a two pronged attack

against this problem. First, the Trump Administration will seek to aggressively tax

corporations earning profits overseas. These proceeds could be used to address the

national debt.

Secondly, the Trump Administration will pressure nations that have resisted

foreign trade to open up their markets to investment from U.S. based corporations The

long term effect of these trade policies is to hopefully encourage the growth of middle

classes in developing nations, who can better afford U.S. goods produced in dollars. It

will also have a democratizing impact on these societies.

Finally, the Trump Administration will also seek ways to controll the costs of

basic goods that contribute toward inflation. The primary way of addressing this

problem is by continuing to pursue energy policies that focus on domestic production,

as well as seeking alternative sources of energy that support U.S. manufacturing in the

long term.

Works Cited

Racanelli, Vito J. “Seat Belts Fastened.” Barrons, (Vol. XCVII, No. 7).”

12 February 2018. Pages 21-25.

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