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Opinion: This Is the One Thing That Can Sink Trump in 2020
Money and Markets ^
| 05/07/2019
| JT Crowe
Posted on 05/08/2019 11:04:51 AM PDT by SeekAndFind
President Donald Trump is well aware that the U.S. economy is just a few short weeks away from setting a record for the longest expansion ever, but he knows the business cycle has not been repealed and the next economic downturn is always lurking.
Its a vicious circle: low interest rates entice the politicians to amass more deficits and debt, and the politicians want more spending given ultra-low borrowing costs. Profligate monetary policy enables profligate fiscal policy.
If one happens before 2020, Trump fears his reelection bid chances will be slim-to-none, says former Deputy Assistant to George H.W. Bush, Charles Kolb, in a recent opinion piece in The Daily Caller.
These fears, Kolb says, explain the constant jawboning and blaming of the Fed against raising short-term interest rates and actually has Trump calling for recession-level stimulus while the economy is supposedly booming.
What’s fueling the boom? According to David Stockman (and Kolb’s former boss), loose monetary and fiscal policy is fueling the boom and a world awash in debt is what could ultimately derail Trump 2020.
Per The Daily Caller:
For almost a decade, the Federal Reserves easy monetary policy entailed three rounds of quantitative easing (pumping money into the economy by expanding its balance sheet to include some $4.5 trillion in government bonds and other asset purchases) plus a zero-interest-rate policy (after inflation) that has distorted real asset price discovery and deepened the financialization of the American economy.
Only now are economists beginning to assess the potential distortions of the Federal Reserves accommodative monetary policy. Theoretically, financial markets exist to direct capital to its most productive economic uses. So far, the biggest beneficiary has been Wall Street, with record mergers and acquisitions, stock buybacks, dividends, and exorbitant CEO compensation. Tech stocks are flying high with share prices often divorced from earnings reality. Meanwhile, American manufacturing still languishes.
Money is an asset that, according to the economic textbooks, plays three roles: a store of value, a medium of exchange, and a unit of accounting. Moneys value is not zero, and, until recently, it has not been negative. Today, however, we have nearly a quarter of the worlds economy (Europe, Japan, Denmark, Sweden, and Switzerland) still experimenting with negative interest rates intended to stimulate spending.
A nickel is worth five cents as a means of exchange. The value of the metal itself may be less than five cents, but its value is definitely not zero or negative. Negative interest rates mean that you pay the bank to hold your money. The economic incentives are to spend now, not save for later. In todays economic world, Benjamin Franklins famous adage that a penny saved is a penny earned appears quaint; thrift now seems foolish.
Fiscal policy also presents an alarming trend. Barack Obama almost doubled the national debt during his term, and Donald Trumps policies have us, again, anticipating $1 trillion annual budget deficits. Its a vicious circle: low interest rates entice the politicians to amass more deficits and debt, and the politicians want more spending given ultra-low borrowing costs. Profligate monetary policy enables profligate fiscal policy.
Immediately before the 2007-2009 Great Recession, the prevailing assumption among economists and on Wall Street was that housing prices would never go down. Todays prevailing assumption is that interest rates will never go up. As we have seen with previous bubbles, prevailing assumptions are often wrong, and todays economic assumption is clearly unsustainable. The late Herbert Stein, chairman of President Nixons Council of Economic Advisers, put it memorably: if something is unsustainable, it will stop. The question is when?
Look around the world. With the possible exception of Germany, todays good times have been underwritten by unsustainable financial engineering and deficit spending. China, too, has been goosing its economy through massive deficit spending on infrastructure projects to counter the Global Recession. Stockman calls Chinas economy a giant Red Ponzi scheme.
George H.W. Bush lost re-election after only a mild economic downturn that ended months before 1992s election day. The next economic downturn will make that Bush recession look like a minor blip. Trump and his advisers surely recall 1992, and theyll do anything they can to push the next downturn well beyond November 2020.
Expect more borrowing and spending. How about $2 trillion for infrastructure?
Charles Kolb served as deputy assistant to the president for domestic policy in the Bush White House from 1990-92.
TOPICS: Business/Economy; Government; Politics
KEYWORDS: 2020; economy; elections; stockmarket; thefed; trump2020; trumpeconomy
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To: cuban leaf; SeekAndFind
GHWB lost re-election because he didn't want to be reelected and was ready to turn the reigns over to his boy protege... Bill Clinton.
To: SeekAndFind
The Obama Presidency = The Lost Decade
22
posted on
05/08/2019 11:37:49 AM PDT
by
Cowboy Bob
("Other People's Money" = The life blood of Liberalism)
To: SeekAndFind
Stupidity on parade.
The ONLY thing that can sink Trump is not enforcing the election laws and borders.
23
posted on
05/08/2019 11:38:58 AM PDT
by
MrEdd
(Caveat Emptor)
To: cuban leaf
“GHWB lost re-election because he violated a campaign promise. Read my lips... “
That and that buffoon Ross Perot siphoning off 19% of the vote.
To: cuban leaf
And the Deep State can manipulate the economy to suit their timetable.
25
posted on
05/08/2019 11:44:18 AM PDT
by
DivineMomentsOfTruth
("There is but one straight course, and that is to seek truth and pursue it steadily." -GW)
To: SeekAndFind
President Donald Trump is well aware that the U.S. economy is just a few short weeks away from setting a record for the longest expansion ever, but he knows the business cycle has not been repealed and the next economic downturn is always lurking. What the author didn't point out here is that U.S. expansions have almost consistently become longer and weaker over time. That's why we're celebrating a 3% growth rate that would have seemed almost like a depression 30 years ago ... even while we're in the midst of a "record" expansion.
These are classic characteristics of a nation with an aging population and a fascist economic model.
26
posted on
05/08/2019 11:45:22 AM PDT
by
Alberta's Child
("Out on the road today I saw a Deadhead sticker on a Cadillac.")
To: KamperKen
And the people who wanted him permanently removed from political office for deciding to leave Iraq in the hands of Saddam Hussein.
The meme that he lost the election over taxes never stood up to even the most cursory scrutiny. That was a notion promoted by the neocons because the rejection of HW was a direct rejection of their policy of eternal foreign wars.
27
posted on
05/08/2019 11:48:11 AM PDT
by
MrEdd
(Caveat Emptor)
To: SeekAndFind
I’ll name three:
1. Trade war with China
2. War with Venezuela
3. War with Iran
To: SeekAndFind
Any recession will be caused by raising taxes, raising interest rates too high or too fast, cutting the rate of increase in the money supply, and credit crunch.
29
posted on
05/08/2019 11:53:45 AM PDT
by
mjp
((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
To: MrEdd
Subjectively speaking what you said is not true relative to me.
I deliberately did not vote for him because he lied about increasing our taxes. Every of my conservative friends threw him under the bus for the same exact reason.
WE did so with spite as he was a read my lips LIAR.
To: DivineMomentsOfTruth
And the Deep State can manipulate the economy to suit their timetable.
Yep. That is why I see it as his single greatest threat.
Of course, at his age, he could be dead by election day. We don’t know what the future holds.
I wonder what would happen if he did die a few months before the election.
To: SeekAndFind
I still contend that the Fed intended to cause a recession just before the 2008 Presidential elections, but they messed up and went too far, causing the banking crisis.
32
posted on
05/08/2019 12:17:01 PM PDT
by
Yo-Yo
( is the /sarc tag really necessary?)
To: MIA_eccl1212
Subjectively speaking, none of the people in the Tow Company I served with during Desert Storm with whom I served gave a crap about the tax pledge because we recognized that using such an overwhelming force cost a tremendous amount of money.
It was an expensive gamble which paid off in the Soviet Union realizing that overwhelming the west militarily was never going to happen for them.
Not finishing Saddam off was stupid, however. That resulted in decades of preventable U.S. Mideast entanglement.
So the bottom line in our differences is that the faction to which I belong believes that collapsing the Soviet State (that's an established result which is no longer rationally debatable) was worth it. You belong (by your own post) to a faction who believes that collapsing the Soviet Union wasn't necessary.
You may believe as you wish, but the article's assertion that the tax increase caused H.W. to lose the election all by its lonesome is still utter trash because there are not enough of you to have made that happen all by yourselves.
33
posted on
05/08/2019 12:19:18 PM PDT
by
MrEdd
(Caveat Emptor)
To: MichaelRDanger
Hi.
“The is another variable in the current boom: an influx of foreign capital seeking safe haven.”
Good point. Increasing the money supply (M1), without printing the money is non inflationary. More over, the multiplier effect will expand disposable income and increase savings.
Imho...and other things.
5.56mm
34
posted on
05/08/2019 12:52:29 PM PDT
by
M Kehoe
(DRAIN THE SWAMP! BUILD THE WALL!)
To: SeekAndFind
No need for a massive, pork-barrel “infrastructure bill” with the Dems in the House!
Just send those illegals packing and we’ll have plenty of infrastructure capacity (that the states can more modestly upgrade as needed), as well as far less of an immediate and long-term drain on our coffers from the illegals nesting themselves in here.
To: SeekAndFind
George H.W. Bush lost re-election after only a mild economic downturn that ended months before 1992s election day.
That may be true time wise, however his election was lost
after democrats were able to make him go back on his word
by agreeing to new taxes.
Never, never trust a democrat!
36
posted on
05/08/2019 12:59:39 PM PDT
by
tet68
( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
To: BobL
At last.
Im glad to see someone gets it around here, Were going to be getting nothing but the-sky-is-falling about the economy from now until Election Day. RINODEMS have absolutely no other possible path than to convince America that the smoking Trump Economy will crash and burn any second no .
It will be The Grapes of Wrath all over again.
Werent these the same imbeciles who were always yammering on about green shoots?
37
posted on
05/08/2019 1:02:32 PM PDT
by
jazminerose
(Adorable DeplorablCNN)
To: tet68
George H.W. Bush lost re-election after only a mild economic downturn that ended months before 1992s election day. GHWB lost because of Ross Perot ...
38
posted on
05/08/2019 1:04:18 PM PDT
by
bankwalker
(Immigration without assimilation is an invasion.)
To: SeekAndFind
Hand wringing bump.
39
posted on
05/08/2019 1:04:58 PM PDT
by
central_va
(I won't be reconstructed and I do not give a damn.)
To: bankwalker
40
posted on
05/08/2019 1:05:11 PM PDT
by
tet68
( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
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