GUALFIN, ARGENTINA – By our calculation, it took just 76 days for President Trump to get on board with the Clinton-Bush-Obama agenda. Now there can be no doubt where he’s headed. He’s gone Full Empire. Not that it was unexpected. But the speed with which the president abandoned his supporters and went over to the Deep State is breathtaking.
Once there was only a Trump fragrance called Empire… now he has gone full empire himself
Among the noise and hubbub of the election campaign, there was one message coming from the Trump team that was music to our ears. Middle East wars? He was against them, he said.
He claimed to have opposed the 2003 attack on Iraq. He said it was one of the “worst mistakes” the country ever made. As for further involvement, why waste American lives and American wealth on wars you can’t win?
“America First,” he said. This was a refreshing position. It put the Republican neo-cons and Establishment Republicans against him; many went over to Hillary rather than risk giving up their think tank grants and consulting fees.
Tweets by Bill Kristol, one of the best known pro-war neo-con think tank appendages and political pundits in the US. It is quite amazing that this man is actually considered a “conservative”. He is probably not in the least concerned that his views are widely rejected by American citizens, safe in the knowledge that they can be “brought around” every time with a sufficient dose of war propaganda (generally, this has always been true). However, mainstream media are fading away, reaching fewer and fewer people every year. Controlling the narrative is no longer as easy as it once was.
A 2013 poll showed 52% of Americans thought the U.S. should “mind its own business internationally.” But the elite gained power and money from foreign wars; they weren’t going to give them up. Non-entitlement spending in the swamp goes largely to cronies in the military-security industry.
Perfect Deep State War
But Donald Trump promised a “new foreign policy.” No more trying to be the world’s policeman. No more fighting other people’s battles… and making things worse. No more wasting American money and American lives on foolish, unwinnable wars.
Ending America’s pointless and unsettling romp in the desert would be a good first move. The bill for these misadventures is now said to be $7 trillion. As to Syria, Trump was typically direct. Don’t attack the country, he warned Barack Obama in a 2013 tweet, or “MANY VERY BAD THINGS WILL HAPPEN…”
The Donald couldn’t have been any clearer in 2013… but that was then, and this is now.
But then, last week the last great hope for the Trump administration blew up in Syria. Now the neo-cons are delighted. And the cronies. And the zombies, too.
Here’s the outlook: no real change to O’care. No cutbacks in entitlements. No attempt to balance the budget. No belt-tightening at the pudgy Pentagon (instead, it will get more money).
And now this: The wars in the Middle East will not only go on… they will accelerate. For now, the U.S. is not only fighting terrorists. It is also fighting the people who are fighting the terrorists.
It’s a perfect Deep State war: It is guaranteed neither to win nor to lose, but simply to go on indefinitely. This gives the insiders more and more of the nation’s wealth to piddle away in absurd wars in preposterous places.
Meanwhile, Congress adjourned. When it returns in two weeks, it will confront another crisis of its own making. Bloomberg reports:
Government funding expires on April 28, which will give Congress five days to unveil, debate, and pass an enormous spending bill… or trigger a government shutdown.
“What a mess,” said Paul Brace, a congressional expert at Rice University in Houston, offering his own pessimistic view of the unified Republican control of the House and Senate so far under President Donald Trump. “It was so much easier when all you had to do was oppose Obama.”[…]
House Republicans “have differences of opinion. And they aren’t just political differences. They are policy differences,” said Republican Senator Rob Portman of Ohio.
Old & New Wounds
And so our incipient Doom Index is still flashing a warning. It will be tough for Congress to come to terms with its budget. The debate will open old wounds and gouge new ones.
Already, the federal budget deficit is expected to average $1 trillion a year over the next 10 years. Mr. Trump will want to spend more. We need to spend more on infrastructure, on the military, and to revive the economy… he’ll argue.
Many House Republicans, especially the idealists in the Freedom Caucus, will find it difficult to go along. Some will notice, cynically, that the whole program – including the attack on Syria – is little different from what Hillary had offered.
Long-term projection of the public debt-to-GDP ratio by the Congressional Budget Office (CBO); note that the CBO could easily turn out to be too optimistic with regard to future economic growth and the inexorable rise in entitlement spending – click to enlarge.
Consumer prices are already rising, others will note. Besides, who wants to go back to his home district after having signed on to $30 trillion of U.S. debt?
Others, the activists, will want to back Trump. The Obama years have been disastrous, they will say. The typical household is little better off than it was at the bottom of the last recession. Half of Americans are living paycheck to paycheck. And there are 66 million working-age adults without jobs, they’ll report.
The feds must do something! Increase spending to stimulate the economy (and not coincidentally steer a few bucks to major campaign contributors and other important hacks).
The more financially alert among members of Congress will recognize that eight years of stimulus has done little to help the real economy. These realists will see a runaway locomotive headed to a dangerous curve.
They’ll want to know how the feds will finance huge new deficits just as the Fed tightens interest rates. But the shrewdest among them will call their brokers.
Two famous “1-800-GET-ME-OUT” moments on Wall Street (charts via John Hussman), a.k.a. “sudden repricing events”, or as Bob Bronson refers to them, “mass-correlated hyper-volatile illiquidity events” (MCHVIE). It is generally advisable to sell before these events take place, even if one risks missing a little more upside. The investor class as a whole cannot avoid taking these losses, as all outstanding stocks are held by someone at all times. There is no mysterious Wall Street aether in which unowned stocks are floating about. Only a small number of investors will be able to side-step such events by selling to future bag-holders in time – click to enlarge.
The highest stock prices since the dot-com crash are based on the belief that, somehow, Team Trump will push through a corporate tax cut, leaving businesses with more after-tax money.
“That’s not going to happen,” they will say to themselves. They will want to get out of the stock market before other investors catch on.
Charts by CBO, John Hussman
Chart and image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
Most read in the last 20 days:
- Gold – An Overview of Macroeconomic Price Drivers
Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
- India – Is Kashmir Gone?
Everything Gets Worse (Part XII) - Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
- Cracks in Ponzi-Finance Land
Retail Debt Debacles The retail sector has replaced the oil sector in a sense, and not in a good way. It is the sector that is most likely to see a large surge in bankruptcies this year. Junk bonds issued by retailers are performing dismally, and within the group the bonds of companies that were subject to leveraged buyouts by private equity firms seem to be doing the worst (a function of their outsized debt loads). Here is a chart showing the y-t-d performance of a number of these...
- Pulling Levers to Steer the Machine
Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg: “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
- French Election – Bad Dream Intrusion
The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...
- The Cost of a Trump Presidency
Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront. It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better. Unlike...
- Central Banks Have a $13 Trillion Problem
Paycheck to Paycheck GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy. DJIA daily (incl. Thursday)... it was just taking a rest - click to enlarge. Nearly half of all American families live “paycheck to paycheck,” say researchers. Without...
- Heavily Armed Swamp Critters
Worst Mistake GUALFIN, ARGENTINA – By our calculation, it took just 76 days for President Trump to get on board with the Clinton-Bush-Obama agenda. Now there can be no doubt where he’s headed. He’s gone Full Empire. Not that it was unexpected. But the speed with which the president abandoned his supporters and went over to the Deep State is breathtaking. Once there was only a Trump fragrance called Empire... now he has gone full empire himself Among the noise...
- Hell To Pay
Behind the Curve Economic nonsense comes a dime a dozen. For example, Federal Reserve Chair Janet Yellen “think(s) we have a healthy economy now.” She even told the University of Michigan’s Ford School of Public Policy so earlier this week. Does she know what she’s talking about? Somehow, this cartoon never gets old... If you go by a partial subset of the ‘official’ government statistics, perhaps, it appears she does. The unemployment...
- French Selection Ritual, Round Two
Slightly Premature Victory Laps The nightmare of nightmares of the globalist elites and France's political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon's late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly...
- Trump Is An Insider Now
Conspiracy of the Few GUALFIN, ARGENTINA – “U.S. stocks fall on Trump talk…” began a headline at Bloomberg. Or it may be Trump action. We had already counted six major campaign promises – including no O’care repeal and no “America First” foreign policy – already buried (some for the better). A bunch of campaign promises get the MOAB treatment... A great many theories have been proposed to explain Trump's recent series of u-turns: 1. he is in thrall to...
- Simple Math of Bank Horse-Puckey
The Raw Deal We stepped out on our front stoop Wednesday morning and paused to take it all in. The sky was at its darkest hour just before dawn. The air was crisp. There was a soft coastal fog. The faint light of several stars that likely burned out millennia ago danced just above the glow of the street lights. And this is what they saw watching the sky from Mt. Wilson that night... After a brief moment, we locked the door behind us and got into our...