Of Markets And Mayhem

It is early Tuesday morning as I pen this and the stock markets are up just a tad after a disastrous day yesterday. My assumption is that some bargain hunting is going on. As my regular readers know I regard the stock market as mainly a gambling casino for rich boys (often using other people’s money) and a poor barometer of the overall economy. It’s kind of like evaluating the economy by the size of the Powerball jackpot. With that “disclaimer” given let’s explore.

Friday Trump slapped a bunch of tariffs on China (which the American consumers will pay for). Monday the Dow Jones dropped over 600 points. This is far from the first huge drop day under Trump’s “leadership”. There is one thing that any economic advisor regardless of philosophy believes is that markets hate uncertainty. The example I like to use is John Boehner and yours truly. If you put the two of us in a room I doubt we could agree on any economic paths or principles except that we would both want to avoid uncertainty.

Trump doesn’t seem to have any clear economic philosophy and therefore he is largely unpredictable. That unpredictability, coupled with the economic ignorance he seems to constantly display creates a plethora of uncertain situations.

His personal business history adds to the uncertainty. He likes to portray himself as a business genius who has enjoyed mega success during a long career. Due in large part to great investigative reporting by the New York Times the truth seems to be 180 degrees opposite. There is a history of bankruptcies, business failure and loan defaults. In addition countless stories have unveiled themselves of sub-contractors who were cheated and undocumented immigrants employed who were often forced to work off the clock.

The only things that appear to have saved Trump from himself were loans from his father, a nine figure inheritance and what I suspect will be proven to be some very questionable bank loans. (My use of the term “very questionable” is being kind, but that is another article for another day which at this point calls for some speculation on my part.)

Many of the current economic numbers are admittedly very good but if Trump stays on his current path – and there is little if any reason to think he won’t – the ending will be a very unpleasant Trump Recession. Economics is like life in that you simply cannot continue to do all the wrong things without eventually paying a severe price for your actions. But for some lucky breaks (membership in the Lucky Sperm Cell Club chief among them) Trump would be a colossal business failure. His Chief Economic Advisor, Larry Kudlow, is far from an economic guru. If you closely listened to Chris Wallace’s Sunday interview of Kudlow you would have heard that Kudlow’s “admission” that Americans are paying for the Trump tariffs was quite veiled.

At the moment one of the few things saving Trump is that for the most part big business is supporting him. Why wouldn’t they? The Trump Tower Tax Cut went almost exclusively to them, their largest stockholders and top executives. Trump has been successful in deregulation and where he couldn’t deregulate simply not having the federal laws on the books enforced with any vigor. How long can that last? At some point those pigeons will have to come home to roost. By the way, when that “Humpty Dumpty” falls the American taxpayers will end up paying for “picking up the pieces” because the big businesses will simply file bankruptcy and reconstitute themselves under another name. Besides, with the mega-ego known as Trump in the Oval Office the only rule for big business is: don’t anger Trump.

Trump’s lack of a clear path, lack of the necessary economic knowledge, practicing of self-deception and surrounding himself with (often unqualified) sycophants who will not correct and/or challenge his thinking is a recipe for mayhem and disaster. Here is the really scary thought: Which of these “economic geniuses” will get us out of the seemingly inevitable jam?

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