My gut tells me that hard times are ahead. I called my financial advisor this morning and asked him to scale back the risk level on my investments. I may be wrong (I honestly hope I am), but I have a bad feeling about the near future of the US economy. You don’t have to be an economist to see danger coming.
Let me explain…
The Trump presidency is unpredictable and lacks the credibility to ensure he’ll guide us through rough seas instead of simply hoarding his fortune and abandoning the ship.
Put simply, this president is a liar.
How can I say that? Well, just look. Mexico hasn’t paid for a wall and we aren’t anywhere near paying off the national debt, as he promised.
I don’t trust him one bit to have my interests at heart. I think he’s motivated for us to have a good economy because he knows this is the only reason a good portion of his supporters put up with the circus of 3 am Tweets attacking anyone who is critical of his job performance.
The minute things turn sour, they’ll abandon him like a sinking ship, leaving him with just the voters who stay with him because they like that he hates the same people they do.
It’s very disturbing the way Trump has started trade wars, ripped up diplomatic and economic deals because they were linked to his predecessor, and has exerted pressure on the Federal Reserve to keep interest rates at zero. Trump wants to leave no tools available in the toolbox for stimulating activity in the economy when a slowdown does occur.
I, personally, do not think we should saddle our children with debt that will require national sacrifice just so Trump can win re-election by tricking voters into thinking that the economy is better than it is.
The 2020 election looks to be the darkest in our nation’s history with no basement for Trump’s manipulations along racial lines in particular. Now this fool is actually talking about using nuclear weapons.
America’s Diminishing Leadership in the World Creating a Void Filled by China
If other nations tire of seeing how Trump handles things and removes the US dollar as their reserve currency, we will be in big trouble. We lose a lot of influence in the world if the United States cannot impose unilateral sanctions against actions performed between other countries.
Over in Great Britain, Boris Johnson (their version of Trump) has won the race to become the UK’s next prime minister. He’s pushed for pulling out of trade deals with the European Union, which could ripple across global markets.
It’s almost like a foreign power, say, ummmm, maybe Vladimir Putin, is pulling the strings to damage America’s influence and stability in the world.
The Election Year Blues
When I operated retail businesses, I’ve noticed that sales are lower in election years, possibly due to uncertainty about what to expect.
Maybe that’s because Democrats are more likely to disperse government spending on health care, education, infrastructure rather than sending big chunks of cash to the Pentagon or subsidized industries. Republicans have a reputation for fiscal conservatism, but this hasn’t stopped them from growing the deficit ever larger since Reagan.
How are you supposed to feel positive about things if you are worried that your kids won’t have access to a good education, health care, and a safety net if the worst happens?
“From education to infrastructure to scientific research, Democratic priorities deliver money to projects that free market don’t support on their own, and that have been thoroughly demonstrated to pay off many times over in widespread public prosperity,” Steve Roth writes on the website evonomics.com.
Ronald Reagan is celebrated as a savior of the US economy after the turbulent Carter years of inflation, but of course, there was going to be a massive stimulus effect from lowering the tax rate, slashing social programs, and transforming the country from a creditor nation to the largest borrower.
Plus, Reagan helped to bust the unions and made it easier for companies to move their operations overseas, which helped companies enjoy greater profitability – at the expense of working men and women. His own Vice President and successor had argued against trickle down economics.
Our nation operated with a budget surplus under Bill Clinton, while Barack Obama inherited an economy in shambles from George W. Bush, a big tax cut failing to boost the economy as Republicans had argued. Obama took on massive amounts of public debt, but the strategic spends brought the nation out of the worst recession since the Great Depression.
Trump shows no sign of fiscal prudence and, as mentioned, is playing with fire when it comes to manipulating the options that should only be exercised during downturns in the economy, rather than when it is supposedly thriving.
While the aims may be well-intentioned, trade protectionism will hurt workers in the long term, especially if coupled with the slashing of social programs that provide a level of support and income.
We are Years Overdue for a Recession
It’s simply not natural for any nation to have an eternal expansion or boom. Events like the real estate bubble created during that long expansion period between 1991 and 2001 lead to contractions and corrections as bubbles of speculative investments burst. The longer the expansion lasts, the bigger the recession that follows. We stand to lose a lot of wealth when the bubble does burst.
Unlike the tech boom of the 1990s or the real estate boom of the last decade, there’s nothing sustaining growth except government spending way more money borrowed from China, which ultimately creates more of a drag on the economy once debt payments increase and taxes have to increase and/or Uncle Sam radically scales back social programs that provide security and encourage labor to innovate in the free market and start their own businesses.
By economists’ projects, we are overdue for a recession by more than four years. This is not a matter of if but when. According to the National Bureau of Economic Research, the average length of a growing economy is 3.2 years, the average recession lasting a year-and-a-half.
We are 16 months away from an election. If it appears that a recession is unavoidable, Republicans may very well borrow even more money rather than restoring the tax cuts in an election year, hoping to keep the economy afloat just long enough for Democrats to face a crisis once they are sworn in, presuming Trump loses re-election and Democrats win back the Senate. In that scenario, they’ll hope that low-information voters perceive the economy as better managed under Trump and GOP Senators than their Democratic replacements.
The presidential campaign of the late Sen. John McCain, who was the Republican nominee in 2008, was hurt by the timing of the Great Recession. With a Republican already in the White House, mortgage giants Fannie Mae and Freddie Mac succumbed to the subprime crisis in August 2008 after taking too many risks in their drive for profits. The stock market crashed that September, forcing lawmakers to bail out troubled banks by purchasing preferred stock.
George W. Bush had to take some responsibility for the economic woes under his tenure, just like his father had before losing to Bill Clinton, who promised to “focus on the economy like a laser beam”.
Coupled with the invasion of Iraq, which found no “weapons of mass destruction” as promised, the disastrous handling of Hurricane Katrina, and a lack of regulation on banks, Bush Jr.’s presidency threatened to be the nation’s worst in recent history.
Many in the GOP tried to assign blame for the shattered economy on the nation’s first black president, Obama, who wouldn’t take the oath of office for another four months after shit had already hit the fan. These politicians count on voters having short attention spans and merely recalling how they’ve felt and done recently.
That last recession was a hard one. The Dow lost more than half its value at the low point. Older Americans who counted on their investments to retire had to start fresh and postpone their golden years.
I worry that we are again at that place, celebrating record high numbers as if they can last forever, and many will be utterly unprepared for large sums of money to simply vanish.
Our National Debt: A Ticking Time Bomb
The amount we now pay on interest on our national debt is more than 7.5 % of our entire budget as a country.
“In 2018, Donald Trump increased government spending by about $300 billion and decreased tax revenues by $230 billion. Thus, we’ve artificially inflated the economy to extend our current expansion or economic boom,” writes Cameron Keng in Forbes magazine.
In other words, this is going to get ugly once the party is over. I have the feeling that Donald Trump will give a head’s up to his billionaire buddies, but the rest of us will be left to fend for ourselves.
You like squirrel meat, right?
After the crash, the fortunate ones will have the means to buy up stocks once the markets drop, getting a bargain once the correction ends in a year to 18 months after recession begins.
Congress and the President have announced a plan to raise discretionary spending caps for Fiscal Years (FY) 2020 and 2021. The plan would increase discretionary spending by $320 billion over the next two years and, add roughly $1.7 trillion to projected debt levels over the next decade.
The national debt under Donald Trump is now $22 trillion. Our deficit is a trillion. A $4 trillion increase since Trump became president. His supporters in the Tea Party were extremely vocal when Obama raised the debt to spend our way out of a recession, but they don’t seem to mind at all that Trump is running up the country’s credit card in alarming ways.
Looks like he’s running our country the way he ran Trump Airlines, Trump Beverages, Trump: The Board Game, the Trump Taj Mahal Casino, Trump Magazine, Trump Mortgage, Trump Steaks, his Travel website, Trump University, Trump Vodka, and so on… just before they declared bankruptcy!
He promised us we could trust him to make America prosperous because he was a great businessman who is worth billions. However, he’s refused to let anyone see his tax returns, so who can really say?
Signs Point to Troubled Days Ahead
For all of the reasons I’ve explained here, the hot economy isn’t going to last forever. Millions of people will suffer. Let’s just hope we have enough time to react and the economy doesn’t crash due to Trump posting something reckless on Twitter that sets off a worldwide panic.
How scared am I? Well, I haven’t taken all of my money out of the market and stuffed converted curency into my mattress yet, but I am taken steps to protect my assets within the system we have now.
I’m most scared for America’s vulnerable populations. I’ve blogged a significant amount about the high costs of senior care. I’m afraid that as the debt balloons, cuts will be necessary to pay for the party and those seniors won’t even be able to count on social security.
Let’s hope this doesn’t end in disaster.