OPINION

Inconceivable

President Donald Trump thinks the "dollar is getting too strong, and that's partially my fault because people have confidence in me." That's true . . . except for the part about the dollar really getting much stronger or people really having any confidence in him. Measured against a broad basket of currencies, the dollar is up only 1 percent since the election.

Which is to say that markets aren't betting on a big Trump stimulus any more.

They did for a while. It didn't take investors long, in the immediate aftermath of Trump's shock victory, to learn to stop worrying and love the Trump tax cuts. A couple of hours, really.

Wall Street fell victim to one of the classic blunders. The most famous is: Never get involved in a land war in Asia. But only slightly less well-known is this: Never trust Donald Trump when money is on the line. His creditors, his contractors and Trump University students could all tell you that. But if you looked at the way the dollar went up, traders forgot it. They listened to Trump say he was going to pass all this stimulus, and they believed him.

Here's why investors thought that would send the dollar up. If Trump really did pass deficit-financed tax cuts and infrastructure spending, then investors expected that the Federal Reserve would have to raise rates more than it had said it would to keep inflation in check. And if it did that, more money would come into the country. Why? Because money always moves to where it can get the best return, which is just another way of saying where interest rates are higher.

After all, would you rather buy a U.S. 10-year bond that pays 2.2 percent or a German 10-year bond that pays 0.2 percent? That's a pretty easy math question, and one with pretty big implications for the value of the dollar.

But a funny thing happened on the way to Trump's making great deals. It turns out that everything is more complicated than anyone named Donald Trump knew. It isn't easy to get Republicans to agree on a health-care plan when some of them think the problem with Obamacare is everything, and others think it's just the name. Or to get the whole party to agree on which tax loopholes to close to pay for all their tax cuts. The result, according to Trump, is that health-care reform is always a week away, and tax reform, always two weeks.

In the meantime, though, the economy is still chugging along at the same 2 percent pace it has been the whole recovery. So when you add it all up--a government that's doing nothing today, that looks as if it will be doing nothing tomorrow, and an economy that's doing nothing different from what it has been the last decade--there's no reason to expect the dollar to go up any more. And it hasn't. It has given back most of its post-election gains to now only be up 1 percent over that time.

Wall Street is like the last kid on the block to figure out that Santa isn't real. For a long time bankers believed that Trump was going to deliver all the tax cut and infrastructure goodies their bonuses desired. But now it's Dec. 26, metaphorically speaking, and they're beginning to doubt their parents' promises that Santa will show up any day now with something terrific. That's why the dollar isn't rising any more. Nobody trusts Trump to pass his agenda any more.

Editorial on 04/23/2017

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