Michael Klein | Econofact

International Macroeconomics and Exchange Rates

Is China Weakening the Yuan to Fight U.S. Tariffs?

August 7, 2018

The Issue:

The Chinese currency has declined in value against the dollar by over 7 percent since mid-May. This lowers the cost of Chinese exports to the United States and could help counteract the effect of United States tariffs that would make imports from China more expensive. The Trump administration has interpreted ...
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Monetary Policy

What Information Does the Yield Curve Yield?

April 26, 2018

The Issue:

Forecasting the twists and turns of the economy is difficult. One set of indicators used to gauge where the economy is headed draws on information from financial markets since the yields paid by financial assets reflect the collective market view of the future state of the economy. An inverted yield ...
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Monetary Policy

What’s the Problem with Low Inflation?

August 6, 2017

The Issue:

Today's low inflation has some economists puzzled. The Federal Reserve has persistently undershot its inflation target of 2 percent since 2012, when it established this level of inflation as one of its policy goals. Modest inflation has a number of benefits, and some concerns have been raised by the persistence ...
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Fiscal Policy

Government Budget Deficits and Economic Growth

July 12, 2017

The Issue:

The United States government budget deficit was $587 billion in 2016, representing 3.2 percent of that year’s Gross Domestic Product (GDP). The Congressional Budget Office (CBO) projects that the budget deficit will rise to 5 percent of GDP in 2027, even if the economy is operating near full capacity ...
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Monetary Policy

Leaning on The Fed

April 13, 2017

The Issue:

The Federal Reserve walks a tight balance between maintaining low unemployment and preventing the economy from heating up and unleashing inflation. Its decisions impact groups differently: raising interest rates can be painful for borrowers and businesses seeking to invest and expand; lowering them can ...
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International Trade

Who Owns Us? Foreign Investment and Trade Deficits

March 13, 2017

The Issue:

Peter Navarro, head of the White House Council on Trade, argues that trade deficits not only reduce America’s economic self-reliance but could also pose a threat to national security. He warns in an op-ed in the Wall Street Journal that China and other trading partners use proceeds from export sales ...
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Monetary Policy

Who is Responsible for the Strong Dollar? And What can be Done?

February 1, 2017

The Issue:

In a series of recent statements, the new administration has alleged that several U.S. trading partners are making their currencies artificially cheap in order to sell more exports to the U.S. and import fewer American goods. For instance President Trump accused Japan and China of using monetary policy ...
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International Trade

Is the Trade Deficit a Drag on Growth?

January 20, 2017

The Issue:

Donald Trump has made reducing the trade deficit one of his economic goals. And two of his top administration picks, Peter Navarro, who is slated to lead a new White House office on trade, and Secretary of Commerce nominee Wilbur Ross, have publicly stated that reducing the "trade deficit drag" would increase ...
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International Macroeconomics and Exchange Rates

Is China a Currency Manipulator?

January 20, 2017

The Issue:

Donald Trump has said that, upon taking office, he will declare China a currency manipulator. Many Americans, understandably angered by factory closings and job loss seemingly due to Chinese competition, appear to support this. An artificially cheap yuan enables Chinese exporters to unfairly undercut ...
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