Dear Mr. Trump:
It is an embarassing situation to me to ask you to think through a lot of questions you face today. A first question is what kind of Fed Chairman or Chairwoman you want to help you move the economy of the U.S.A. A second question is what kind of the world you want American people have in this dynamic world.
I still hope Mr. Trump should know those two questions better in the term as a leader. Lately, we find the unemployment rate in the United States goes even lower which makes all the economic theory not workable as used to be due to the vanish of the Phillips curve. Those theories are invented by many American scholars. This time, those theories are not workable as used to be because of the piling up debt in the United States. We don't see the tradeoff of unemployment rate with the inflation. The inflation is gone or even lower when people buy cheaper things to replace much expensive ones. All the manufacturing jobs go abroad and leave American people to be vulnerable. I still urge you to consider seriously about moving lots of jobs back to the United States, especially those necessity goods American people need every day. It is a must-be action even those goods may get more expensive for American people. The outflow of greenback is not permitted forever. American people could not live a life paycheck by paycheck. A greate leader should let all American people have food on the table and a happier life. therefore, Mr. Trump has to break the vicious circle for whole American people this time. Mr. Trump will be a great leader if he could do this one.
For the concern I mention, I still ask you to rethink the reappointment of Mrs. Yellen as the Fed chairwoman. Mrs. Yellen cares about the unemployment rate even more than any Fed leader in the history. I think that is the reason why Mr. Trump get elected because those people do care about the job issue. A lot of poor white families are eager to have a decent life. Moving the necessity goods manufacturing in the United States is a must-be. If it is not workable through the market mechanism, the US governement could riase a fund to support the corporation manufacturing its own products in the United States. To be honest, it is not a mean strategy when American people spend billions of US dollars buying foreign manufacturing goods. How come leave money to foreigners? How come not let American people spend money to help other American people? If the market mechanism doesn't work as Mr. Trump wishes, how come the government could not sponsor those activities that Ameican people would love to pay for their daily necessity needs manufactured by its own people? That is Americans.
A self sustainable economy is a good thing to stop the outflow of US greenback to foreign countries, especially when those countries use the greenback to harm the interest of American people. Mr Trump should consider a serious question when the Trump administration ask to lower corporate tax to 15%. The good thing is to let the greenback largely flow back to the United States. But there are a lot of consequences Mr. Trump could not see. The first one is how to face those money flow back to the United States when the house price and the stock market go even higher already. How to use those inflow well to create a better life for American people? The first thing people may think is to direct those money to the infrastructure project. How to make those investment workable and profitable needs the US government to help. How to use the market mechanism well to create even more jobs for whole American people, especially for those white male with lower education in the United States? You know China does a lot of things to direct their industry development. They use the government intervention to direct its society changing and innovation, including financial technology innovation. The second thing is if it is a necessary thing to lower the tax rate that lower when the United States is a country using the globalization well in the world. I think that is not a good idea to let the corporate tax rate go to 15%. American people should figure out how to use those flowing back money well.
The other question is if Mr. Trump wants to raise the tax for the rich people in the United States and to reduce the burden of the middle class for American people. This kind of fiscal policy should accomodate with the monetary policy. When the US government reduces the tax burden for the middle class of the United States, and at the same time we see the Fed raises the rate or to shrink its balance sheet to increase the interest payment of student loan, the mortgage and the credit loan. All the benefit goes to the banks but leaves little to the ordinary American people. It is not a wise idea. You can't want both of the reduction of US debt and the happiness of whole American people this time when the US goes through so much trouble already. Mr. Trump should ask the help from Mrs. Yellen when the Trump administration wants to reduce the tax burden of the middle class for American people in case to face a counter impact from the process of the normalization of US interest rate, that are to raise the Fed fund rate and to reduce the Fed's balance sheet. If the Fed raises the interst rate level or reduces its balabce sheet too soon too fast, it will largely reduce the benefit of the government's tax cut. We know the banks are so eager to see a higher interest rate level, then they could collect more interest. But this is not the case this time. When people get some money from tax refund but have to pay even higher interest payment from the mortgage, the loan and others, it will make the tax cut not workable as Mr. Trump thinks.
Mr. Trump should think to reappoint Mrs. Yellen as the Fed's leader and ask the help from the elite society also in the United States. Mr. Trump should make the fiscal policy work perfectly with the monetary policy this time when we still not see any inflation happens in the period of even lower unemployment rate in the United States lately. The reason is obvious when American people still contrubite billions of US dollar to buying cheaper foreign goods. It doesn't make the United States better. American people should know better when they buy those goods made in the USA, it just brings more good things to themselves, American people. A self-sustainable economy is what Americans want.
To move the factories back is a must-be, especially those one who manufacture the necessirty goods American people need every day. To make the USA a self-sustainable society is the first priority for the Trump administration. Or we could not see the inflation go even higher when too many lower paid jobs created in the United States and American people still buy a lot of goods made outside the USA. Cheaper is not a good thing for Americans lately when American people need some higher paid jobs. To have a lot of manufacturing jobs first is important, then you will need managers to manage the corporate. After all of those jobs creation, then your MBA could have some values for the American society. Therefore, the borrowiing of student loans may have some meaning eventually. Or American people will still live in a vicious circle until they finally realize the importance of basic jobs, that is the manufacturing jobs.
In summary, there are things Mr. Trump should consider
(1) How to let the fiscal policy work perfectly with the monetary policy, my suggestion is to reappooint Mrs. Yellen and ask her help.
(2) How to reduce the debt burden but not hurt American people and put them in some dire situations.
(3) How to bring manufacturing jobs back to the United States and ask the help from whole American people to help each other have a decent life.
(4)How to unite American people to work together and help each other is a big challenge