On Friday the U.S. announced tariffs on Chinese goods. Over the weekend, as expected, China and India announced tariffs on U.S. goods. As long as the trade war talks continues we could very well see some volatility in the markets. This will be something to keep a very close eye on.
Oil actually factors into tariffs as well. China buys a lot of our energy, several hundred barrels of oil a day. If they stop that activity it could decrease the demand for U.S. energy. Outside the U.S., OPEC is meeting in Vienna this week. Currently, there are huge disagreements. Russia and Saudi Arabia want to see an increase in oil production. This would bring prices down, which would be good for U.S. consumer but bad for U.S. oil producers. Countries like Iran, Iraq and Venezuela want to see prices stay up largely in part to their inability to increase production. We could see gas prices come down this summer. While this is good for the consumer, at a certain price point oil companies will start to lose money. In the case of what we saw in 2014 with oil prices collapsing, this activity would hurt the U.S. economy as well, and ultimately affect the global economy and markets.
We have discussed Dodd-Frank in previous Vlogs and how it had a lot of unintended consequences on the economy following the financial crisis. Over the weekend, some economic research has come out suggesting that from 2010 forward, Dodd-Frank has stifled growth in the economy by greatly reducing credit available to owner managed businesses. Loans of $1,000,000 or above from banks to large corporations increased by about 80%. The problem is loan volume dropped by 9% to owner managed businesses. Two thirds of job growth is in owner managed business. Looking back, this could have played a part in why we stuck around the 2% range of economic growth over the last several years. Now we are starting to see around 3% from tax relief, regulatory reform and some limitations on Dodd-Frank. Some of this relief of Dodd-Frank is starting to reflect in higher growth.
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