During that sit-down, on Nov. 29, Mr. Cohn briefed Mr. Trump on what he regarded as the chief hurdle to expanding the economy, according to people who were briefed on the discussion: a stronger dollar, which would undermine efforts to create jobs.
.. They have also generated outrage in some quarters. “The way I see this, there was a devastating financial crisis just over eight years ago,” Senator Elizabeth Warren, Democrat of Massachusetts, said. “Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country’s economic policy to a senior Goldman executive turns my stomach.”
.. Along with Mr. Kushner and his wife, Ivanka Trump, Mr. Cohn recently helped persuade the president not to pursue an executive order that would have rolled back rights for gay, lesbian, bisexual and transgender people.
.. Still, Mr. Cohn’s 26-year career at Goldman, where he performed an array of jobs, including trading commodities, running mortgages and eventually overseeing day-to-day operations, ended with a remarkable windfall: cash and stock valued at $285 million.
Making the Rust Belt Rustier
Why does he want this? Because he sees international trade the way he sees everything else: as a struggle for dominance, in which you only win at somebody else’s expense.
.. What Reagan did do, however, was blow up the budget deficit with military spending and tax cuts. This drove up interest rates, which drew in foreign capital. The inflow of capital, in turn, led to a stronger dollar, which made U.S. manufacturing uncompetitive. The trade deficit soared — and the long-term decline in the share of manufacturing in overall employment accelerated sharply.
Donald Trump and Janet Yellen Look to Be on a Collision Course
The president-elect and his advisers have often spoken of seeking stronger economic growth than the United States has experienced the last several years, perhaps seeking 3.5 percent to 4 percent instead of the sub-2 percent growth that has been the standard since 2009. A white paper by advisers to Mr. Trump released in the fall assessed the view that this lower growth rate reflected demographics and that it amounted to a “new normal,” and declared it “incomplete — and unnecessarily defeatist.”
That view is at odds with both Ms. Yellen’s comments Wednesday and longer-term economic projects that Fed officials have released. For example, the median Fed policy maker viewed the economy’s long-term rate of G.D.P. growth as only 1.8 percent a year, very much in the ballpark that Trump advisers would view as unnecessarily defeatist.
.. It’s possible that what people in Mr. Trump’s orbit view as a desirable boom will look to Ms. Yellen and her colleagues as overheating, and prompt equal and opposite interest rate increases.
.. There are a couple of potential twists in this story. The first would involve potential Trump appointments to the Fed; the second could involve big moves in the dollar.
.. Economists believe a key element of a corporate income tax overhaul advanced by House Republicans, known as a border adjustment tax, would have the effect of creating a huge rally in the value of the dollar compared with other major currencies, perhaps 20 percent or more.
.. it is looking like a distinct possibility that Ms. Yellen could wake up one morning in the year ahead to early-morning tweets directed her way, originating from 1600 Pennsylvania Avenue.
The serious contradiction in Trump’s views on the dollar
Regardless of what China does, experts say that Trump’s other policies could lead to a stronger dollar.
Among Trump’s biggest proposals are plans to cut taxes and spend more on infrastructure, plans that economists say would boost growth. But since the economy is already relatively strong, these measures would also translate into inflation. To head off inflation, the Federal Reserve would likely raise interest rates. These higher rates of return attract more international investors to buy the dollar to invest in the U.S., which in turn bids up the dollar’s price.
Trade measures that Trump has proposed, like tariffs or a border adjustment tax, could also strengthen the dollar, economists said. In the short term, the prospect of a trade war may unsettle markets and lead to flight to the safest asset in the world — dollar-denominated Treasury bonds, bidding them up.
.. “Ironically, the policies being advocated by Trump are likely to make the problem worse. The tax cuts (and possible spending increases), enacted at a time of full employment, will result in higher interest rates and this will boost the dollar,”
.. Furthermore, economists emphasized that the value of the dollar is not in itself a policy goal – but rather, the inevitable outcome of other factors, including the strength of the U.S. economy and global investment patterns.
“We don’t set the value of the dollar… it’s just a reflection of the goal of having a stronger economy, a better economy, a more dynamic economy, one that attracts global capital,” said Mark Zandi, chief economist at Moody’s Analytics. “[Trump] has very little control over the value of the dollar other than his policies that affect growth, and at the end of the day you want a strong economy and a strong dollar.”
.. Of course, if Trump did succeed in engineering a drop in the value of the dollar, he would be accomplishing something for which he has frequently criticized other economies. “The irony here is that we’re accusing other nations of manipulating their currencies, but if we want to solve that problem we’re going to have to end up doing the same thing,” says Zandi.