Can the US Rise in a Period of Severe Economic & Political Instability?

 

Can the US Rise in a Period of Severe Economic & Political Instability?

Will the World Even Accept Stability under Donald Trump?

PETER ON THE WRITERS’ HANGOUT PODCAST!

“I'm telling you, these countries are calling us up, kissing my ass,” 

Trump bragged at the National Republican Congressional Committee Dinner on April 8th

Unless you have an instantaneous super-high-speed fiber connection to the main trading markets, as the major stockbrokerage houses do, you are playing a fool’s game trying to buy low and sell high. And yes, stock markets will rise and fall, sometimes even dramatically as any relevant news or suggestion of any subsidence in the trade wars. Looking for a bottom, where you can buy in? Good luck with that one. We have not yet experienced the sustained decline that typically confirms we are in a recession, but virtually all the top CEOs, economic advisors to such CEOs, at American trading, banking and trading institutions, believe that a recession is an increasing probability.

What is a recession? According to Investopedia, “A recession is a significant and widespread downturn in economic activity that typically lasts for longer than a few months. A common rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth indicate a recession. However, more complex formulas are also used to determine recessions.” But what drives a recession is seldom the actions of one person, which we have with Donald Trump who has support from most of the GOP members of Congress. To sidestep the power of Congress to set or approve tariff rates, Trump simply declared a state of “emergency” which would give him power unilaterally to set rates (albeit Congress could override those rates). What emergency? Nothing of substance comes to mind.

OK, so what? Give Trump time to let the markets reset and accept his view of the world. Aside from understanding “whatever I say, even as a contradict myself” is his view of the world; nobody has a firm grasp of what his tariff/trade goals actually are. Bring new revenue into the federal government so that we can reduce the deficit and fund tax cuts? But as already reflected in the labor market, there will be more unemployment (after good numbers in March) from both the cuts in the number of federal employees and the necessary layoffs in large sectors like automotive. Unemployed workers don’t pay a lot of income tax. The thousands of layoffs at the IRS not only reduces the staff that helps smaller dollar amount taxpayers but also trims those well-trained audit teams able to ferret through the tax avoidance schemes of the mega rich. This defunding of the IRS is estimated to reduce tax revenues actually paid by a rough 10%.

Reshoring manufacturing jobs to the United States? That requires appropriate manufacturing facilities; that takes both time and money. And while there are thousands of abandoned or derelict factories scattered around the country, with a very high concentration in the Rust Belt, virtually none of these facilities is useable without millions and millions of dollars to refurbish them. Like the abandoned Fisher Body Plant 21 in Detroit, pictured above. Exactly where will the capital to rebuild those plants come from? It will take years to rebuild/build those factories. And if we are a global trade pariah, if a recession that the US caused crushes financial institutions who might have otherwise provided such capital, does anything get built? If the relevant corporations do not see obvious consumer growth and acceptance of the accompanying higher prices? If instead of hiring low-wage workers, what if the new facilities are fully automated, requiring only skeleton maintenance and repair crews?

There is begrudging acceptance, even from economists once loyal to Trump, that the impact of new tariffs against products Americans have come to rely on is the functional equivalent of a national sales tax. If prices soar for those imports, US companies will have no reason to be competitive, since the government is effectively price fixing. With the new 104% on Chinese imports to the US, China increased it tariff for US imports to 84%. See Trump balk, below! Not to mention his 15-20% increase, to $1 trillion, ask for the military budget! Let the people suffer from the higher prices you were supposed to reduce, but please cut taxes for billionaires! Let the deficit rise massively if necessary?

China is the world’s largest factory nation (BTW: we’re second!). Consumer prices for computers, smart phones, appliances, furniture, hand tools, toys and small-item goods (that could never be made here at a price), mostly from China, would soar. For those of us in the entertainment sector, we are expecting either total exclusion from China or unsustainable tariffs. China is already telling US companies to pack up and leave.

Trump’s vacillating policies, inconsistencies and willingness to ignore treaties suggests that there will be decades before the world remotely trusts us again! So, what does Donald “I will not pause these tariffs” Trump say: How about a 90-day pause our proposed new reciprocal tariffs? The mega-bully has met a mega-mega-bully. And reinforced his pattern of inconsistency and instability!!! Brain first, mouth second!!! As a parent, one of my most basic lessons for my son: actions, even just words, have consequences! Trump is still learning. He probably gets that even if he could run again… unless he rigs elections Putin-style, his likelihood of winning is zilch!

Trump’s other brilliant revenue generating idea is to sell federal buildings that a downsized workforce will no longer need. But the commercial real estate market is already in shambles with depressed prices in some of the most desirable areas. Flooding the market with thousands of buildings will further depress the market. Gee, who buys such buildings anyway? Billionaire developers… who can hold and redevelop those holdings until the market doubles or triples those values. Billionaire oligarchs to Trump: thank you for the tax cuts, deregulation and lots of cheap real estate. The tea leaves for current growth and investing are abominable. Cash is king again.

In most times, when the stock market falls to any sustainable, measurable degree, the much larger bond market steps in as the go-to investment. But when the overall economics are horrific, like during the subprime market collapse in 2008, both stocks and bonds fall. Guess what? We’re baaaack! Both markets are terrible.

But the biggest fly in the ointment is instability and loss of faith in the institutions that usually function well. Trump seems to enjoy fomenting instability. He reverses course and defines utter failure as “perfect” or “beautiful.” Those supplicants willing to kiss Trump’s ample buttocks are generally smaller nations facing ruination. There is so much turmoil, political and economic, happening at the same time that the MAGA cult seems to being willing to trust Grand Mufti “only I can fix it” Trump to make sense of it all. They love his attack on climate change programs, even as they trapse through their destroyed, burned or flooded homes and businesses.

Meanwhile, using an increasingly ambiguous “DEI” term, Trump is decimating the truest and most consistent job creators by shutting down research grants to those universities with the best track records for creating new technology and medical breakthroughs. Our life expectancy, even for the rich, continues to fall. Eradicated diseases are returning; more people are suffering from preventable diseases, and children are forced into classrooms where there may well be children never inoculated as most of us when we entered elementary school. Conspiracy theories have replaced empirical facts as our guiding principles, a reality that faces continuity as the Department of Education is disabled, forcing many less affluent school districts to hire unqualified teachers aimed at sardine-packed classrooms. Ignorance + conspiracy theories = the mess we are in. Stupid or ignorant America serves Trump well!

I’m Peter Dekom, and while tariffs can sometimes be justified (e.g., to protect our fishing industry from farm-raised alternatives), let me answer the question posed in my title: NOT A SHOT IN HELL!!!