We are seven months from probably the most momentous U.S. election in more than a century, yet we have heard little of specific economic policies each candidate proposes to follow.  A majority of the population think that the economy was better under former President Donald Trump from January 2017 to January 2021, despite economic indicators to the contrary.

Edward Lotterman

Yet, President Joe Biden has not articulated an economic platform with any specifics while Trump talks about little but his personal agenda of retribution against those he thinks crossed him. What are voters to do?

Trump is the candidate with the biggest question mark. Expect Biden and Vice President Kamala Harris to continue much of the same. Their first term yielded large outlays on highways, airports and other infrastructure, regulatory mandates and subsidies to reduce carbon emissions, various ploys to circumvent Congress so as to forgive tens of billions in student debt plus greater support for labor unions.

Biden named Janet Yellen, a warhorse from the Obama and Clinton administrations, as Treasury secretary and reappointed Republican Jerome Powell, a Wall Street lawyer who had served in the Treasury in the George H.W. Bush administration, as chair at the Fed. Neither made many waves.

Trump is a mercurial character, to put it mildly, and doesn’t seem to understand or care about coherence in economic policies. Unfair treatment by other trading nations, especially Mexico and China, was the centerpiece of his 2016 campaign along with a reduction of regulation and a reduction in taxes. He imposed tariffs on imports, especially from China but also from Canada, our closest friend and ally, bypassing any action by Congress using policy loopholes created in the past by Democrats. He did ask Congress for, and got, a substantial tax cut highly skewed toward high-income individuals.

He generally left details to his Treasury secretary, Stephen Mnuchin, a once-little-known Wall Streeter who made billions from the mortgage crisis by abusive foreclosing on defaulted home loans. Trump also reappointed Powell to a four-year term as chair at the Fed.

The safest forecast is that when either is re-elected, they will largely continue policies from their first administration. Powell will stay into 2026 in either case. Biden will not precipitously replace Yellen. The question is who Trump would choose for Treasury and what policies each would stress.

There are three possibilities for Trump: recalling Mnuchin, naming some other Wall Streeter or economist, or boosting his U.S. trade representative, Robert Lighthizer, to Treasury.

The last option is tantalizing. Lighthizer is an experienced D.C.-based trade lawyer with no Wall Street connections. He served as a key Senate staffer for the committee headed by GOP Sen. Bob Dole that designed the Reagan tax cuts plus the 1983 Social Security overhaul that, among other things, raised the full retirement age. As U.S. trade representative, a quasi-Cabinet post, for Trump, he designed the tariffs on imports and the superficial overhaul of NAFTA into the U.S.-Mexico-Canada Agreement, or USMCA.

Lighthizer clearly wants the job and has been in the news. One of his key ideas is to reduce the value of the U.S. dollar internationally, relative to other major currencies. See “Trump trade advisers plot dollar devaluation,” by Gavin Bade in the April 15 issue of Politico for details. Lighthizer is the odds-on candidate for Treasury and, if appointed, probably would push to implement the measures to lower the international value of the dollar as listed in Politico.

So what does this have to do with Minnesota, the U.S. economy in general or key sectors, including medical technology and agriculture in particular?

The answer is “a lot,” but one must start by understanding some basic terms and issues.

The “value of the dollar” is the number of units of currencies of other countries needed to buy one dollar. Most commonly, our dollar is the “reference currency” with the price as the number of Japanese yen, Brazilian reis, Chinese yuan or others needed to purchase one U.S. dollar. But it can be the number of U.S. dollars for each of the Euros used by 20 European Union countries.

Understand that for any given set of prices for U.S. goods, fluctuations in exchange rates vary the prices for each of these goods to foreign buyers. Similarly, for any given set of foreign prices, ups and downs in the value of the dollar change the cost of foreign goods to U.S. buyers.

Also, and very crucially for the Twin Cities, understand that exchange rates affect how the profits of U.S. companies with operations abroad end up on their U.S. corporate earnings statements. Several of our medical technology companies have significant subsidiaries in Europe and Asia. If the European subsidiaries of, say, Medtronic, make 10 million Euros in profits, what that contributes to the parent corporation profits in dollars can be high or low depending on the relative worths of the two currencies.

Take some examples. A $6 bushel of U.S. soybeans would have varied from 12 to 52 yuan over the last 40 years. In 2008, I ate a bad dinner in Switzerland that cost $30. Over the last 40 years, that same Swiss franc meal might have been as high as U.S. $74 or as low as U.S. $23. And, in the 25 years the Euro has been used, a $10 million profit by the European subsidiary of Medtronic or 3M might have returned anywhere from $8.5 million here or $15.7 million.

So why would a Trump administration want to lower the cost of our currency in terms of those of other nations? It’s simple: to sell more U.S. goods and services abroad and buy fewer foreign ones. This is good for U.S. producers but bad for U.S. consumers, good for farmers and med tech, bad for Target and its customers.

There are two important caveats. First, it is not just the value of the dollar versus the value of the currency of a trading partner. For a Chinese soybean buyer, it is not just what U.S. beans cost but what they are relative to Brazilian ones. So the U.S. dollar versus Brazilian real relative values are what matter. Moreover, for any particular retailer like Target, a lowering of the dollar relative to the yuan and other Asian currencies is not as big a deal as long as Walmart and all its other competitors buy similar fractions of their products from the same exporters.

Higher U.S. interest rates and the safety of our country as a place to park money in politically turbulent times increase the value of the dollar. The average exchange value of the dollar rose sharply at the end of the Trump administration then plunged with COVID. It rose sharply from early 2021 to late 2022 and then eased downward to its current position somewhat above its long-run average.

So Lighthizer, a prominent contender for a key Cabinet position in a second Trump administration, wants to somehow manipulate the international value of our currency to spur producers and retard consumers. Many questions remain. Would it benefit our economy as a whole? Can it even be accomplished, and how? What other collateral effects, especially on inflation and employment, might result? And would it do anything to reduce the large and long-term imbalances in our trade and international payments generally? Those issues must wait for a later column.

ANAHEIM, Calif. — Oh, how quickly things can change.

At one point last week, the Twins had lost five straight games and the slumping offense was searching for answers. Through the Twins’ first 20 games, they had only scored more than five runs once in a nine-inning contest.

And then, the MLB-worst White Sox came to town, and everything seemed to come together for a Twins team that had been underachieving its expectations. Saturday, the Twins’ most prolific offensive output lifted them to their sixth-straight win, once which put them back at .500 for the first time since April 6.

The 16-5 win over the Los Angeles Angels at Angel Stadium saw the Twins score in almost every single inning, and every member of the starting lineup collect at least one hit.

“I couldn’t be happier,” Twins manager Rocco Baldelli said. “I’m about as happy as I can be watching our team go out there and play the game and swing the bats like that.”

Carlos Santana hit his third home run in as many days, Max Kepler crushed his first of the season and Ryan Jeffers hit a blast off former Twins outfielder Aaron Hicks.

There were positive signs up and down the lineup, but perhaps one of the most encouraging signs for the Twins (13-13) was that slumping infielder Kyle Farmer reached base four times, with two walks and a pair of hits, one a two-run double in the third inning to push the score to 7-2.

“It’s a huge relief,” Farmer said. “ … I’ve felt the same way (at the plate). It just kind of fell for me today.”

It’s been a long time coming for Farmer, who had just three hits entering Saturday’s game and was batting .064. Farmer was one of seven Twins to finish the day with multiple hits. Edouard Julien led the way with three, driving in three runs, as well.

The offensive outburst marked the sixth straight game that the Twins have scored at least five runs, and the fifth time in six games in which they’ve plated more than five.

“Guys are feeling good,” Farmer said. “I’ve always said my entire career that hitting is contagious and guys are starting to hit well, swing at good pitches and taking balls.”

It was plenty of support for Chris Paddack, who certainly was not at his best — his velocity ticked down and he had to grind through his five innings. After the Twins scored three runs in each the second and third innings, Paddack gave the Angels (10-17) back two of those runs in each.

But with the offense continuing to pull away, the Twins were able to easily overcome the starter not being at his best.

“We’re winning as a team. You forget about my four earned fairly quickly,” Paddack said. “ … We know what we’re capable of, and it’s good to finally see some things on our side this time.”

With the offense finally starting to click, the Twins have started to see plenty of things fall on their side in recent days, putting themselves into a much different position than they were in just a week ago.

“I just like that we’re piggybacking game after game and continually doing different things, better things, playing better just as the season goes on,” Baldelli said. “I like what I’m seeing. I just want more of it.”

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Mira James is back in Battle Lake, where the fictional Nut Goodie-eating librarian/sleuth lives in a doublewide with her pets in the Murder by Month series written by Jess Lourey of Minneapolis.

Some fans of Lourey’s mystery/romcom series might not know that Battle Lake is a real town in north central Minnesota, population 875 (which doubles in summer when Twin Cities vacationers arrive). Now, thanks to Kristin Lyman, owner of Battle Lake’s The Lionseed Bookstore & Learning Commons, Mira and her wacky senior citizen pal Mrs. Berns will reach a wider audience with publication of all 12 books in the series that began in 2006 with “May Day,” and the new Mira James Battle Lake Book Club.

“This book club is a unique opportunity for me,” Lyman says. “I grew up in Battle Lake. To have a chance to bring small-town living to a bigger audience in different ways is exciting. I am an event planner and this is right up my alley.”

Kristin Lyman’s family helped cut the ribbon to open the Lionseed Bookstore and Learning Commons in Battle Lake, Minn., May 29, 2022. Behind Kristin is son Taedan, husband Andy, right rear, and son Aaron, center right, and daughter Bria. (Courtesy of Kristin Lyman)

Murder by Month books were first published by Minnesota-based Midnight Ink, but when the imprint was closed in 2019 by parent company Lewellyn Worldwide, rights reverted to Lourey. Her series’ new publisher is Thomas & Mercer.

To celebrate the books’ new covers, new content, and deep edits, Lyman created the yearlong book club with Lourey’s blessings. It will be launched at 2 p.m. May 5 with Lourey virtually hosting and Lyman moderating. It’s free and open to the public (go to thelionseed.com/pages/events).

Lourey, who grew up in Paynesville, lived in Battle Lake in 1989 and 1996 and she loves the town where she wrote the first of the books in which Mira finds a corpse every month. After finishing this series Lourey went on to win awards for bestselling thrillers such as “Unspeakable Things,” “Salem’s Cipher,” “The Quarry Girls” and “The Taken Ones.”

“Jess and I are both from small towns and I think those of us who grew up in farm towns — have left and come back — have a connection, a certain unspoken understanding of what that experience is like,” Lyman said. “Jess, Mira James and I — we have each ‘come home’ to Battle Lake to empower and reset. My heart is here and it is where I belong among the beauty of the people, places and landscape. Being wrapped in the embrace, albeit sometimes passive-aggressive, of your small town is unlike anything else.”

In “May Day” Mira has a dead-end job in Minneapolis and a cheating boyfriend. She jumps at the chance to reinvent herself in Battle lake, where she meets sexy Jeff. When her lover is found dead between the library’s reference stacks, Mira turns detective by digging into Jeff’s life and uncovering secrets in the small town. In later books Mira is a reporter for the local newspaper and heads to the State Fair where she investigates the murder of the dairy princess. She spends time in Minneapolis where her old haunts have disappeared, reminding her that too much alcohol was one of the reasons she left the city. When the series ended in 2019 with “April Fool,”  Mira had a new boyfriend and was working to become a private investigator.

“The Murder by Month series has a huge following of readers from all walks of life who have identified with this idea of getting back to your roots, coming home,” Lyman says. “As a character in ‘May Day’ tells Mira, ‘You got to get back to the dirt…’ But these are not overly serious books — they are the fun, humorous misadventures of 30-something Mira James, who is daring to start over in Battle Lake.”

Jess Lourey admits on social media that there are mixed feelings among Battle Lake residents about her mysteries being set there, but that doesn’t bother Lyman

“This doesn’t matter in my mind,” she says. “There are going to be grumpy people about it but that’s not who we are. These are works of fiction in which there is definitely a type of truth. This is how small towns work. There’s good things living in a small town”.

Lyman and Lourey didn’t live in Battle Lake at the same time, but Lyman read the Mira books after she learned they were set in her town. Then she got busy opening
The Lionseed Books in May of 2022, housed in a Victorian-style 1903 house with a turret. It features a real wardrobe and a tunnel with stuffed lions in homage to “The Witch and the Wardrobe.” The shop has already hosted a wedding proposal in the tunnel and the ceremony a year later.

Lourey and Lyman met at The Lionseed when Jess and Minnesota author Sarah Stonich were on a reading tour. Lourey returned to promote “The Taken Ones” and Lyman approached her about a book club for Mira. Lourey, who’s full of ideas and always one for trying new things, thought it was an awesome idea.

Kristin Lyman, center, owner of The Lionseed Bookstore & Learning Commons in Battle Lake, Minn., with authors Jess Lourey, right, author of the Murder by Month series, and Minnesota author Sarah Stonich, left, at the bookstore on Dec. 22, 2023. Lyman began the Mira James Murder by Month book club featuring a series of romcom/mysteries set in Battle Lake. She credits Lourey and Stonich with mentoring her as she moved into carrying new books as well as used. (Courtesy of Kristin Lyman)

“This was my first foray into new books,” recalled Lyman, whose store had mostly dealt with used books. “Jess and Sarah were such amazing mentors. Both helped me with who I needed to know, contacts. Since then we’ve hosted quite a few Minnesota authors.”

When it comes to small towns, everybody is connected to everybody, Lyman points out. Jennifer Reiter, who attended the College of St. Benedict, as did Lyman, has roots in Battle Lake and is a friend of Lyman and Lourey.

Reiter and Lyman collaborated on creating the book club.

“It was fun,” Lyman says of their brainstorming. “Together we came up with what’s on the website, all the things we are doing with this club, showing parts of the books that are real people and places.”

There are four levels of book club membership — chat, meeting, book box and special events. Chat level is free; the rest are on a fee basis. Lyman emphasizes that she wants all the club activities to be fun, including gifts and prizes at some of the membership levels. “We’re not going to sit around and talk about the philosophy of life,” she jokes. (For information go to thelionseed.com/collections/mira-james-battle-lake-book-club.)

Besides running Lionseed, Lyman has a full-time job as owner of Tending Windmills, focused on serving local communities through creative education and community-building endeavors. She helps students learn organization and prioritizing, including those with ADHD who are smart but learn differently. In 2020 she was selected as a PACER Leader, providing her with training to become an advocate and resource for students with special needs.

“A lot of my work is building students’ confidence,” she says. “Growing up I saw my classmates suffer, thought of as ‘dumb farmers’ who would never amount to anything. They were brilliant people with different skills.” Her friend Reiter is in a similar field as head of Le Grandest Productions, offering inclusive arts programming for people with disabilities.

Lyman is so busy now she admits she’s thinking about hiring help at the store, even though her husband, Andy, staffs the cash register when he can. But they have three children so time is at a premium in their lives.

Still, Lyman is excited about the new club, which goes beyond reading the Murder by Month books.

“I’ve been planning this business since I was 7 years old,” she says. “I’ve always wanted to have a cultural center based around books to expand curiosity and education, someplace to bring people together that isn’t the local bar, a place of true community where generations and people of any background could gather and exchange stories, ideas, skills and dreams. All this plays into the Mira James Battle Lake Book Club.”

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Bruce Helmer and Peg Webb

An alarming article in the Wall Street Journal recently reported a growing number of people using their retirement accounts like cash machines — even to cover emergencies. About a quarter of 401(k) account owners who do tap their funds prematurely borrow an average of 11% of their account assets. And even if roughly 90% of those borrowers pay the loans back on time, 1 in 10 will struggle to do so or
simply never pay the money back.

Today’s article discusses why you should always resist the urge to take early withdrawals from your 401(k), either through loans or hardship distributions.

Retirement plans use incentives and penalties specifically designed to keep you from tapping your nest egg until later in life. Contributions to a traditional 401(k) plan are made with pre-tax dollars, meaning if you have a retirement plan at work, you never see the money contributed to your account. It’s deducted from payroll before you get your paycheck.

However, if you take withdrawals from these traditional accounts, the IRS will require you to pay income tax on the full amount, plus often a 10% early withdrawal penalty if you are age 59½ or younger. It’s a strong incentive not to use this money before you retire.

Rules on loans and hardship withdrawals are designed to discourage early withdrawals

Despite the stiff penalties for taking money out early, most 401(k) plans allow you to borrow up to 50% of your vested balance, to a limit of $50,000, and for up to five years. On the surface, it seems like a great deal: Funds can be used for any reason and, because the funds are borrowed and not withdrawn, the loan is tax-free. Even better, you’re allowed to repay the loan gradually — including both principal and interest — and you pay the principal and interest to yourself, often at lower rates than you can get at a bank.

If this sounds too good to be true, it is! We’ll explain why in a minute.

The IRS also allows withdrawals for hardship-related reasons, such as preventing evictions, paying medical and educational expenses, or becoming permanently disabled. Hardship loans are marginally better than traditional loans because they do not need to be repaid. But they do have their own set of rules. For example, the amount of the withdrawal is limited to the amount necessary to satisfy that need. In addition, you’ll be taxed on the amount withdrawn (unless withdrawals are made from after-tax Roth contributions). Finally, you won’t be able to roll the distribution amount over to an IRA or another plan.

The Bipartisan Budget Act of 2018 and SECURE Act 2.0 relaxed some of the rules around taking hardship loans, and that, in part, has made them more popular as sources of emergency cash.

Why taking a loan is not a great idea

From a tax perspective, taking a loan from your 401(k) is inefficient. For one thing, you must pay the loan back with after-tax dollars. This means repayment will cost you more than your original contributions. For example, if you’re in the 24% tax bracket, every dollar you earn to repay your loan leaves you with only 76 cents for that purpose; the rest goes to income tax.

Furthermore, if you take a loan, you lose the earnings on your money while it’s outside the account, creating a huge opportunity cost. If the return on your 401(k) balance is 8% for a year in which you borrowed funds, for example, the effective interest on your loan is 8% — that’s an expensive loan!

Should you lose your job, you’ll have to repay the loan more rapidly — generally by the due date of your next tax return — when you already could be financially vulnerable.

Finally, if you default on the loan repayment, the amount you still owe converts to a withdrawal, and income tax and possible penalties will be due.

The law of unintended consequences

One of the reasons the use of hardship loans has increased is that more employers, to improve retirement security for their workers, are auto-enrolling them into the plans. This means a worker must opt out of their plan if they don’t want to save for retirement. The positive effect is that workers immediately begin to build a nest egg without thinking about it. On the other side, some participants often don’t take the time to understand the rules and penalties that come with participating in a workplace plan and view their 401(k) as a ready source of cash. In fact, according to data from Vanguard, 3.6% of its plan participants took early withdrawals from their accounts in 2023 for financial emergencies, up from a pre-pandemic average of about 2%.

This is not to minimize the very real hardships people were facing. In 2022 and 2023, everyday costs of gas and groceries were going up, and credit card debt began to rise significantly. Nearly 40% of those who took hardship distributions last year did so to avoid foreclosure. More than 75% of hardship distributions totaled $5,000 or less.

In a way, the success that 401(k) plans have recently enjoyed in getting more people to save and invest through auto-enrollment is sowing the seeds of a potential long-term crisis — the retirement savings gap is proving stubbornly difficult to close.

Unless it’s their only recourse, we advise most people against taking a loan from their 401(k). People think they will pay back the loan later, but in our experience, it rarely happens. The tax consequences of paying a loan back with after-tax money erode the value of your hard-earned retirement savings and potentially put you on the sidelines while you service the loan. Moreover, taking a loan could be a red flag that you are living beyond your means and need to consider changes to your lifestyle.

A better approach to the “nuclear loan option” is to build a more liquid emergency fund that will pay for six months or more of living expenses, leaving your retirement fund to build long-term wealth where it’s needed — for your retirement.

Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.