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Stocks on Wall Street
closed broadly higher Mon-
day as investors found rea-
son to be cautiously opti-
mistic again about the po-
tential for progress in the
costly trade war between the
United States and China.
The gains reversed some
of the major stock indexes’
hefty losses from last Friday,
when jitters over the latest
escalation in the trade dis-
pute roiled the market and
contributed to its fourth
consecutive weekly loss.
Monday’s rally got its
start early after President
Trump said his negotiators
had received encouraging
calls from China on Sunday.
China’s foreign ministry
denied knowledge of any
such calls, but that — and
the fact that attempts to ne-
gotiate in the trade war have
repeatedly ended in acrimo-
ny and more tariffs and
trade penalties — did not
wipe out investors’ willing-
ness to bid stocks higher.
Big technology compa-
nies, which do a lot of busi-
ness in China and have
much riding on the outcome
of the trade war, accounted
for a big share of the gains.
Apple climbed 1.9% and
Microsoft advanced 1.5%.
“It always seems that
Trump, after he does some-
thing to freak the market out
or escalate this trade war, he
tries to dial it back to some
degree,” said Brad Bern-
stein, senior portfolio man-
ager at UBS Wealth Man-
agement USA. “As an in-
vestor, you just have to know
there’s a lot of uncertainty
and there is no clarity in the
short term.”
The Standard & Poor’s
500 index climbed 31.27
points, or 1.1%, to 2,878.38.
The Dow Jones industrial
average climbed 269.93

points, or 1.1%, to 25,898.83.

The Nasdaq, which is heavily

weighted with technology

stocks, advanced 101.97

points, or 1.3%, to 7,853.74.

The Russell 2000 index of

smaller companies climbed

16.52 points, or 1.1%, to 1,476.

The major indexes are

each on track for losses of 3%

or more in August. It has

been a volatile month for the

market as investors try to

gauge whether trade con-

flicts and slowing economies

around the world will drag

the United States into a re-

cession.

Along the way, traders

have been whipsawed by the

turns in the trade war be-

tween the United States and

China, the world’s biggest

economies.

The new round of tariff

threats caused a sell-off Fri-

day that erased more than

600 points from the Dow.

Global markets appeared

headed for another wave of

selling early Monday, when

indexes in China closed

sharply lower, until Trump

said his trade negotiators

had received two “very good

calls” from China on Sunday.

Trump expressed his op-

timism about China hours

after he sent mixed mes-

sages on the tariff war. He at

first seemed to express re-

gret Sunday over escalating

the trade dispute, but the

White House later said his

only regret was that he

didn’t impose even higher

tariffs on China.

The White House an-

nounced weeks ago that Chi-

na’s negotiating team was

expected in Washington in

September to continue the

discussions.

Ben Phillips, chief invest-

ment officer at EventShares,

credited Monday’s market

bounce to investors buying

back in after a big sell-off

more than to real optimism

over the trade war.

Index

Dow industrials

S&P 500

Nasdaq composite

S&P 400

Russell 2000

EuroStoxx 50

Nikkei(Japan)

Hang Seng(Hong Kong)

Close

Daily

change

Daily % YTD %

25,898.83 +269.93 +1.05 +11.02

2,878.38 +31.27 +1.10 +14.82

7,853.73 +101.97 +1.32 +18.36

1,851.39 +14.84 +0.81 +11.33

1,476.00 +16.51 +1.13 +9.45

3,070.88 +1.83 +0.06 +11.26

20,261.04 -449.87 -2.17 +1.23

25,680.33 -499.00 -1.91 -0.53

Major stock indexes

change change

Source: AP

MARKET ROUNDUP

Trade optimism

gives stocks a lift

associated press

and economic reasons why

people rely on the dollar —

mainly that it wins a “least

ugly” contest against, say,

the euro or China’s yuan.

While it’s possible to have

multiple reserve currencies,

countries have tried using

synthetic basket currencies

before and that hasn’t really

worked, he said.

“The desire to get out

from total dominance of the

U.S. currency is probably

healthy,” said Posen, who is

now president of the

Peterson Institute for Inter-

national Economics in

Washington. Even so, “the

idea that there’s a techno-

logical fix that will achieve it

strikes me as mistaken.”

Smaller countries

suffer the brunt

Having the dollar as the

dominant reserve currency

works reasonably well as

long as the United States

and the rest of the world are

more or less in sync. But now

that the United States’ econ-

omy is doing better than

most, pushing the dollar

higher, smaller countries are

suffering more than they

should. Trump’s tariffs on

imports from China and

elsewhere are adding to the

dollar’s strength as well,

making matters even worse.

Additionally, emerging-

market countries increas-

ingly pay for imports in dol-

lars, which means they can

no longer rely on moves in

their own currencies to ab-

sorb shocks.

Stanford University

economists Arvind Krishna-

murthy and Hanno Lustig

presented a paper at Jack-

son Hole saying the dollar

had become like gold. They

said increased demand for

Treasurys, as well as tighter

U.S. monetary policy, causes

the dollar to appreciate.

Libra-like currency

posed as a solution

“Mark [Carney] shone a

light on something that’s im-

portant,” Krishnamurthy

said in an interview. “From

my work in studying the role

of the dollar in the interna-

tional monetary system, it

does strike me that he’s

right,” yet “I don’t think the

central banking community

has really taken it into ac-

count.”

Carney suggested there

may be a solution in new

technology that hasn’t been

tested. Facebook Inc.’s Li-

bra is planned to be a world-

wide digital currency that

could lie outside the direct

control of central banks, but

so far most policymakers

have been skeptical.

Carney, who leaves the

Bank of England next year,

said the new currency he has

in mind would be controlled

by public authorities.

“It was a remarkable

speech,” said Olli Rehn, who

sits on the European Central

Bank’s Governing Council.

“It’s an idea worth ponder-

ing in a wider context of the

digitization of our monetary

and banking system.”

Dollar sneezes, but

world catches cold

Carney warned that the

global economy risks falling

into a liquidity trap in which

no amount of monetary eas-

ing revives prices. With

Trump escalating the U.S.

trade war with China, pro-

tectionism rising and cen-

tral banks already deploying

ultra-low interest rates to

prop up growth, Carney said

something needs to be done.

“Blithe acceptance of the

status quo is misguided,”

and dramatic steps will ulti-

mately be needed, Carney

said Friday.

His idea attempts to ad-

dress an issue that has

resurfaced almost five dec-

ades after President Nixon’s

then-Treasury chief John

Connally uttered the words,

“The dollar is our currency,

but your problem.”

Stanley Fischer, the for-

mer Federal Reserve vice

chairman and grandee of the

central banking world, re-

sponded to Carney’s presen-

tation by saying Trump was

the bigger threat.

“We are in a system in

which things are getting

worse day by day,” he said.

“It’s not service to anybody,

at least privately, to not fo-

cus on what the problems

are, and they are the behav-

ior of the United States.”

Fischer’s frustration was

probably shared by many,

not least among them Fed-

eral Reserve Chairman

Jerome H. Powell.

On Friday, Trump asked

in a tweet whether Powell

was a bigger enemy than

Chinese President Xi Jin-

ping. Dallas Fed President

Robert Kaplan and Phila-

delphia Fed President Pat-

rick Harker lined up to say

the thing standing in the

way of faster U.S. economic

growth is trade policy — not,

as Trump has contended for

more than a year, the level of

interest rates.

Carney’s sweeping pro-

posal could be joined by

other ideas as central

bankers rethink the basics of

their field.

“It’s always worth look-

ing into different issues and

exploring,” said Kristin

Forbes, an MIT economist

and former Bank of England

policymaker. “But it feels

like we’re far from any sort of

viable solution just now.

We’re just starting the con-

versation.”

Swint and Boesler write for

Bloomberg.

Anxiety builds over U.S. dollar

[Dollar,from C1]

Baruch College who special-

izes in colonial-era econo-

mic matters.

“Yes, the Founding Fa-

thers had business inter-

ests,” he told me. “But they

never attempted to steer

government contracts to

themselves or to directly

profit from their public

service. There was an

understanding that this was

a line that couldn’t be

crossed.”

Trump, he said, recog-

nizes no such lines.

“This thing with the

Doral, it has to be the most

egregious, the most insidi-

ous example of violating the

emoluments clause in the

history of the country,”

Murphy said.

The emoluments clause

has come up repeatedly

since Trump took office.

Article I, Section 9 of the

U.S. Constitution addressed

a common occurrence dur-

ing the 18th century, the

practice of foreign govern-

ments bestowing gifts on

public officials.

The clause makes clear

that “any person holding

any office of profit or trust

under the United States”

cannot “accept any present,

emolument, office or title of

any kind whatever from any

King, Prince or foreign

State.” The idea, of course,

is to prevent coercion by

foreign powers.

“This was in part an

anti-aristocratic gesture

and a way to prevent any

U.S. official from being, in

effect, bribed by a king or

foreign government,” said

Virginia Anderson, a history

professor at the University

of Colorado, Boulder.

I’ll leave it to constitu-

tional law scholars to deter-

mine whether or not Trump

hosting the foreign govern-

ments of the G-7 at his Mi-

ami resort represents a

violation of the law. (Many,

including Harvard Law

School’s Laurence Tribe,

say it does.)

What I find particularly

interesting is how Trump’s

situation differs from that of

our first president, George

Washington, who, like the

current holder of the office,

was heavy into real estate.

Washington, both as a

private citizen and as a

military leader, recognized

there were opportunities to

benefit from America’s

westward expansion. He

bought a number of parcels

from Virginia to the Ohio

Valley, including his 7,000-

acre Mount Vernon estate.

Where Washington’s

land speculation becomes

even more intriguing is his

recognizing that the proper-

ties would become immea-

surably more valuable if

there was a safe and conven-

ient way to transport goods

to and from the Atlantic

Coast.

He co-founded a busi-

ness called Potomac Co.,

which aimed to connect the

Potomac, James and Ohio

rivers with a network of

roads, canals and locks to

create a transit system for

goods and passengers.

The company was a

modest success, although it

never came close to accom-

plishing its ambitious goals.

Its canals and locks were

taken over by Chesapeake

and Ohio Co. in 1828. Ulti-

mately, the canals fell by the

wayside as America em-

braced railroads.

What’s most striking,

though, is that there’s no

evidence that Washington

in any way used the presi-

dency to influence his canal

scheme, other than to gen-

erally encourage devel-

opment of east-west transit

corridors. Nor is there any

evidence he used his office

to profit from the venture.

Moreover, after his

death, Washington willed

his shares in Potomac Co. to

be used for endowment of a

university in the District of

Columbia.

Robert Parkinson, an

associate professor of his-

tory at Binghamton Uni-

versity, said the Founding

Fathers didn’t build more

anti-corruption measures

into the Constitution be-

cause they never antici-

pated a federal public serv-

ant being so self-serving.

“There was a strong

cultural group dynamic

among the Constitution’s

framers,” he said. “And

coming out of the Revolu-

tion, they shared a belief in

putting the nation’s interest

before their own.”

Parkinson said the rise of

the party system in the 1790s

added a greater level of

self-interest to political

affairs, “but the framers left

a lot of these types of rules

unwritten, relying on group

goodwill.”

“Venal corruption to an

extent we’ve seen develop in

recent decades, they

would’ve associated with

the destructive nature

inherent to monarchy and

aristocracy,” he said.

Murphy at Baruch Col-

lege said the Founding

Fathers weren’t naive.

“If you’re imagining

people in the early republic

didn’t have conflicts — that

wasn’t the case,” he said.

“Everybody had business

interests.”

What was different from

now, he said, is that it was

implicit in public service

that your private interests

would be set aside for the

greater good of society (not

including slavery, which was

neither set aside nor for the

greater good of anything).

The Founding Fathers

didn’t need to codify all

aspects of acceptable be-

havior into law, Murphy

continued, because “they

had an understanding that

they’d be able to recognize

corruption when they saw

it.”

I asked what the framers

would have made of Trump

hosting foreign leaders at

his own resort.

“If you could dig up Mad-

ison,” Murphy replied, “he’d

probably say, ‘We gave you

the impeachment clause.

Why don’t you use it?’”

David Lazarus’ column runs

Tuesdays and Fridays. He

also can be seen daily on

KTLA-TV Channel 5 and

followed on Twitter

@davidlaz. Send your

tips or feedback to

[email protected].

THEN-CANDIDATE Donald Trump speaks at his Doral resort near Miami in 2016. He has suggested hosting

the next G-7 summit at the resort, a self-serving proposal that would have horrified the Founding Fathers.

Evan VucciAssociated Press

Our disgraceful president

[Lazarus,from C1]