President Donald Trump sent out a tweet on Sunday evening using lots of capital letters threatening Iran with all sorts of dire consequences if they’re mean to the United States.
He tweeted: “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”
The tweet from the president followed Iranian President Hassan Rouhani cautioning Trump on Sunday about pursuing hostile policies against Tehran, saying: “War with Iran is the mother of all wars.”
Still, Rouhani did not rule out peace between the two countries.
The tensions come as the U.S. moves closer to imposing sanctions on countries, including key allies, that don’t eliminate or significantly cut imports of Iranian oil by November 4. That effort follows the Trump administration’s decision this year to withdraw from the Iran nuclear accord, which eased economic sanctions on Iran in return for restraints on its nuclear program.
The oil market has reacted only a little bit in early trading: at 5:39 a.m. Eastern time, WTI Crude Oil (Nymex) was up 40 cents to $68.66 and Brent Crude (ICE) was up 67 cents to $73.74.
Maybe, it’s possible that Trump is unfamiliar with Aesop's fable of the little boy who cried wolf.
In Brewer's Dictionary of Phrase and Fable, “to cry wolf” is defined as “to give a false alarm.”
Trump’s threat may have been meant seriously. It was tweeted, and the tweet is a powerful tool in the president’s arsenal, but after Trump tweeted threats against North Korea and the fact that North Korea still seems to be carrying on with its nuclear program unimpeded, it would appear that markets are not inclined to take Trump’s tweets seriously.
Oil traders, at least for now, are not prepared to come running every time that Trump cries wolf.
This was not the only recent tweet, of course, that investors should be aware of.
Trump also tweeted out about central bank tightening. “....The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really? 7:51 AM - Jul 20, 2018”
and he also tweeted:
“China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field... 5:43 AM - 20 Jul 2018”
Fed officials, including Fed Chair Jerome Powell, have raised interest rates twice this year and have pointed to two more before the end of 2018.
The Fed did not comment on the president's remarks.
Trump was in favor of central bank tightening when campaigning for office but appears to have had a change of mind.
Treasury Secretary Steven Mnuchin when speaking to reporters at the Group of 20 nations summit in Buenos Aires, Argentina he said: “I can assure you, because I’ve spoken to the President, that his intention is not in any way to put pressure on the Fed.”
He also said Trump’s comments weren’t a mistake.
Trump was a real-estate businessman and, as such, closely follows interest rates. The Secretary added that the administration continues to have “enormous” confidence in Powell, who Trump appointed to succeed Janet Yellen. “I want to emphasize the administration completely supports the Fed independence.”
It seems very unlikely that the Treasury secretary knows one way or the other, but if true, that would be a good thing. Central bank independence has been critical in maintaining a low and stable cost of inflation.
The last U.S. president who interfered in the independence of the U.S. central Bank or Federal Reserve was simultaneously raising trade taxes on long suffering U.S. consumer was President Richard Nixon.
Nothing else of note came out of the G-20. Of course, it didn’t do anything of any note.
There was a statement that trade risks are rising. This amazing piece of insight probably did not require assorted finance ministers and central bank governors to jet off to Argentina.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
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