In the past I have written of the danger that uncertainty poses in economic markets. Today I want to concentrate on using a phrase who others more skilled than I have in the past: The certainty of uncertainty. By that I meant that uncertainty will undoubtedly lead to a bad outcome. I must credit Rudiger Dornbusch for my inspiration. His law, appropriately called Dornbusch’s Law, states: Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine. This all very much applies to American today under Donald Trump. Let’s explore.
A few nights ago I was chatting with a former State Senator who I very much respect when I happened to mention that I felt a recession was coming. Being the intelligent man that he is he looked at me a bit askance and mentioned that the economy was currently red hot. I told him that the Trump administration was making too many mistakes primarily by creating way too much uncertainty and that coupled with too much GOP control (think Great Depression and Great Recession) made a severe downturn inevitable.
I feel that economics is much like life in general in that if you keep doing the wrong thing(s) and/or making mistakes it eventually comes back to bite you. In school if you consistently skip class, don’t do your homework and refuse to study you will eventually fail the course. In adult life if you consistently drive while drunk and disobey the traffic laws you will eventually end up in the hospital, in trouble with the law or both. I could go on, but you get the picture.
In addition to the problems created by being primarily an organized criminal enterprise the Trump administration is headed by a man who is economically ignorant, surrounded by the same (who in many cases also have “private agendas”), refuses to learn and is beholden to (in too many cases) greed driven financiers.
One of the few “achievements” of the Trump administration has been the dismantling of environmental and financial regulations. The inevitable social costs of those moves will be borne primarily by the masses. This is typical right wing socialization of the costs/losses after having privatized the profits. A lot of people who never bought a stock on margin lost it all in the Great Depression. Decades later many Americans who never even heard of a derivative lost jobs, homes and often more in the Great Recession. By and large the investment bankers who caused the downturn were bailed out by those same American taxpayers. The Great Depression was before the adult lifetime of all but a small handful of living Americans, but the Great Recession was only about a decade ago. How soon we forget.
The Trump Tower Tax Cut is the only major piece of legislation Trump and the Republicans managed to get through. (For that we should be thankful!) It is the largest single redistribution of income to the top in American history. It will do next to nothing to stimulate consumer demand and thereby the economy. Adding insult to injury we will be forced to borrow the money (primarily from foreigners) to finance it thereby blowing up the deficit and national debt. In the future the masses (socialization) will be forced to pay for the (privatized) greed of today.
Health care costs are among the largest expenses the average American family faces. They are paid for by a combination of employee benefits (part of your compensation package), out of pocket payments (a reduction of disposable income) and the social safety net (tax payments). Any way you slice it average Americans pays the freight. The vast majority of environmental regulations are there for a good reason and prevent illness. Remove the regulations and people will inevitably get sick and possibly die. Those event are expensive and since we have exempt the polluters (who will probably declare bankruptcy in the worst case scenario if they are still around when the chickens come home to roost after years of litigation) we as a society will have to bear the costs. What about less severe repercussion like relatively minor illnesses or a sick child? Coming to work but feeling a bit under the weather? They certainly entail a loss in productivity which eventually the consumer bears the cost of.
Looking at the international front for a bit, how is a foreign (or for that matter domestic) enterprise to do business in America when they have no idea what the near term rules are? In my cynical way I have often referred to the American economy as the least ugly girl at the dance but under Trump some of the other “girls” are more stable and perhaps less ugly. Under Trump and his Capos American trade policy is inconsistent and unpredictable to the point of often being contrary in a matter of days or hours. Trump’s Capos are often caught saying one thing in the morning only for Don Trump to contradict them in a matter of hours.
I remain certain that the American economy is headed for a recession. I am just uncertain as to when it will commence and how severe it will be. 74 years after the Greatest Generation landed on the beaches of France in the D-Day assault is this what they fought and too often died for?
This article is the property of tellthetruthonthem.com and its content may not be used without citing the source. It may not be reproduced without the permission of Larry Marciniak.