There was no official press conference from the Federal Open Markets Committee following the completion of July meeting. Perhaps Janet Yellen & co. reckon that there’s enough sound and fury coming from other areas of the US government without any further weighing in from the Federal Reserve.
But it was also true to say that the July meeting represented the Fed as being back to its cautious old self. At the dawning of the Trump era there was a long flurry of interest in the Fed and its activities both from the mainstream media and from economic illuminati as the election corresponded with a return to a monetary tightening and, apparently, an uptick in the economy.
Exactly how well the US economy is doing remains open to question, but doubts about whether or not inflation targets will be kept will probably be enough to push back any further rate hikes for now, which in turn should remove any lingering downward pressure on gold.
But other aspects of the US economic and political situation remain a concern. Markets are soaring away, and the VIX, the sophisticated investor’s favoured measure of volatility, has plumbed new depths.
That augurs well for the US economy in general, but whether Donald Trump is managing to bring this good cheer to his own constituency is another matter.
The headlines, such as there are headlines in this internet age, remain dominated by the Russia scandal and the tortuous progress of Trump’s healthcare policies.
The exuberant tweets about the number of new jobs that his administration have been creating by the day seem to have dried up for the most part, following three soft months for jobs numbers in the spring, although a manufacturer for Apple has just announced that it will build a US$10bn factory in Wisconsin that will employ 3,000 people.
But therein lies a clear illustration of the problem: that’s an investment of well over US$3 mln per job. Or to put it another way, in terms of economic enterprise, it’s not the jobs that are the key thing here.
What that means for Trump’s constituency of voters in the mining areas Pennsylvania and the mid-West is pretty clear: respite is not coming any time soon.
To be sure, there are indications of the direction of travel. The recent indications from the EPA that it will reverse restrictions placed on the development of Northern Dynasty’s (TSE:NDM) huge Pebble Mine in Alaska [https://www.epa.gov/bristolbay] has been met with predictable outrage from liberals, and also from the fishing communities affected, but it’s not exactly out of step with what Donald Trump said in his election campaign.
Another well-flagged mine development that’s been given additional encouragement by the Trump administration is the Resolution copper project in Arizona, jointly owned by London stalwarts Rio Tinto (LON:RIO) and BHP Billiton (LON:BLT).
Rio has been working on permitting at Resolution for four years now, and US Secretary for Commerce Wilbur Ross has spoken out against the length of time it is taking for Rio to be given permission to go mining.
To be fair, Resolution is in a national park and so has had to face additional scrutiny from the US Forest Service. But Secretary for Commerce Ross is not satisfied with this as an explanation and has carried out a major review of government regulation that’s due for release shortly.
According to the Mining Journal, this could flag “big changes to mine permitting” in the US, although knowing the US way of doing things, by the time the law-suits and counter-suits have been filed, Donald Trump will be long gone.
And therein lies the risk for Trump, and one form of hope for liberals. But liberals should be careful what they wish for too: the US system of checks and balances is extensive and effective. Neither the legislative nor the executive can implement sweeping changes without scrutiny.
That’s to the good of freedom and, on the whole, good for business too as it mitigates against uncertainty – you only need to look at the performance of VIX to get the market view on risk at the moment.
But if President Trump and his millions of supporters begin to feel that the checks and balances themselves are part of the problem, then the US will start to enter uncharted waters. Already, you get a feel for this with Trump’s unprecedented attacks on the judiciary, on other arms of government and even on his own appointees.
If there comes a time when it serves the purposes of US elected officials to undermine their own system of government, then all bets will be off.
Even making such a statement would have seemed ludicrous before the election of Donald Trump. Now though, the context has been set, and it may be that in the future gold at US$1,265 will seem like a steal.