Bloomberg; ‘Trumponomics’ Takes a Heavy Toll on the World

Donald Trump’s shadow looms large over the world economy

I came across this Bloomberg article titled, ‘Trumponomics’ Takes a Heavy Toll on the World, and wanted to pass it along to you as much of what the author enumerates is what I have been relaying all along.

My concern has been the massive fiscal stimulus
Despite higher tariffs the US trade deficit continues to widen

I realize that the tariffs issue has taken center stage, and indeed, it is a very troubling situation. It is a politically charged matter and popular with the less learned. Despite the imposition of hundreds of billions in new tariffs the US’s trade deficits continue to widen.

But I have to emphasize that the unprecedented fiscal stimulus, which has been dispensed at the height of the current business cycle has the potential to deteriorate the global economy much more quickly and profoundly. The higher rate of domestic growth, inflation, and interest rates has the potential to cause much more damage. I have been driving this point home, because the stimulus program has been embraced by many in the alt-media and pro-Trump partisan camp.

The U.S. president has pursued two flagship economic policies since becoming president. One was a mammoth tax cut, which could push his country’s budget deficit to its highest point since 2012. The second is an outwardly aggressive trade policy, including steep tariffs against China and the reworking of agreements with long-standing partners such as Mexico, Canada and the EU.

The full impact on the U.S. economy from all of this will take time to assess. Washington has embarked on fiscal stimulus at a time when unemployment was already very low. While that gives the economy a sugar hit, it’s more prudent to shrink public debt when things are going well.

Bloomberg – ‘Trumponomics’ Takes a Heavy Toll on the World (October 9th)

The dollar will benefit
The US dollar continues to find support at these levels
Already behind the curve, the US Fed must now contend with the potential for higher than anticipated growth and inflation

The Fed has been called to action in the wake of the artificially-juiced domestic economic growth. The rising inflationary trend and the large counter-cyclical deficit spending is becoming a concern to those financing the ballooning fiscal deficit, which may touch $1 trillion this fiscal year. This is too high at this point in the business cycle. The US government should be narrowing its budget shortfalls as the economy can generate more tax revenue and organic growth.

Take, first of all, that fiscal stimulus. It has encouraged the U.S. Federal Reserve to raise interest rates at a steady clip. The risk is that investors will try to guess at future hikes in a disorderly manner. Last Wednesday, the yield on 10-year U.S. Treasuries rose by 12 basis points in a single day, ramping up bets that they will rise further.

Emerging markets are already bearing the brunt. Higher U.S. rates will persuade investors to move their funds into assets denominated in dollars, which will push up the value of the greenback. The Bloomberg dollar index has risen nearly 7 percent in six months and could increase further.

Bloomberg – ‘Trumponomics’ Takes a Heavy Toll on the World (October 9th)

I mentioned previously that this also provides the potential for a global USD liquidity crunch. If USD-based borrowing rates continue to rise, the rush to cover USD-loans will grow. Moreover, if the USD continues to appreciate vis-a-vis the other major currencies borrowers could suffer massive losses. The amount of foreign-based USD funding has grown to unprecedented levels.

Many view the stimulus program as a good thing through a partisan lens

It is difficult or nearly impossible to convince those with hard-wired biases that these actions have the potential to be catastrophic to the global debt markets. In addition, the agenda underpinnings of  the America First policy is exactly the worst course of action for global economic stability. Moreover, this policy only helps to denigrate the global standing of the US. This, of course, plays into the agenda for a global government, which makes me wonder why such a reckless economic policy has been implemented.

This is going to turn out differently than most are anticipating.

October 8th Update – Donald Trump, the world’s most renowned bankruptcy expert, has been hired again for the big one

I have uploaded a podcast for October 8,2018. Click here to go to the show archives page to listen and look at the relevant links or you can listen on the link below. You can also right mouse click here to download the podcast.

-Donald Trump has plenty of experience in bankruptcy cases and it seems he was hired to work on another bankruptcy; the bankruptcy of the world outside the United States.
-The top traders can separate their biases when it comes to party affiliation. For instance, successful traders and investors who are Republican can be objective about government economic policies and how they can affect the markets. The average person cannot, which is why the average person always ends up on the losing end of every bust.
-Trump’s America First policy is seriously impacting most of the countries outside the US. The US asset markets may continue to do OK, as dollar-denominated assets will be sought out over others.
-The tariff talk is small potatoes compared to the impending calamity of rising UST yields.
-The top economists of the world (not the shills on CNBC and Bloomberg) know what is coming.
-When Alan Greenspan talked about the bond bubble unwind in late January and early March he had already taken a look at the Trump fiscal stimulus package and knew we were done. The same goes for Janet Yellen and Ben Bernanke. But they can’t come out and say it as that would make Powell’s job more difficult.
-We may not agree with the fiscal and monetary package promulgated during the market nadir earlier this decade, but at least the timing made sense. Never push fiscal stimulus at the cycle highs.
-The only way to avoid what is coming is for either US economic growth and inflationary pressures to fall quickly or to rescind Trump’s fiscal package.
-Keep in mind that this was completely avoidable. At some level I have to say it was done by design as the people running the government cannot be that stupid. When people join a secret society they are given over to another master.
-There is a substitution effect with sovereign debt. How will the European nations finance their deficits at low rates if the 10- year UST yield is approaching 4%? How will Japan be able to keep their debt machine working with no grease?
-So many nations could topple over and go insolvent.
-A president who provides unprecedented fiscal stimulus at the height of the market cycle is either very foolish or doing it on purpose. I submit that Trump doesn’t have the introspection and understanding, so what he was told comes from a higher level.

Increased Dollar Dependence Sets World Up for “Liquidity Crunch”

Will the US Fed and the federal government both cause a global crisis?

I found this Bloomberg article particularly revealing.  I think it puts my concerns into perspective that there are increased chances of an asset market bust coming in the not-so-distant future. This doesn’t necessarily mean that all assets will fall, but there will be plenty of collateral damage spread around the world. To those who are prepared this will provide opportunity. To those who are not it will be very ugly indeed.

A key feature of the global financial crisis a decade ago was a chronic shortage of dollars that eventually spurred the Federal Reserve to set up swap lines with more than a dozen central banks to ease funding pressures. Yet the world has doubled down since then: dollar credit to borrowers outside the U.S. — excluding banks — climbed to 14 percent of global gross domestic product by March, from 9.5 percent at the end of 2007, according to estimates cited in a Bank for International Settlements paper.

Bloomberg – Increased Dollar Dependence Sets World Up for `Liquidity Crunch’ (October 6th)

Trump tax cuts cause a global liquidity crisis?

The incoming economic data on the real side of the economy have come in stronger than I had been expecting earlier this year. So much stronger, in fact, that the central question in my mind is whether the apparent strength in GDP and job growth is a signal that I have materially underestimated the underlying momentum of aggregate demand. If that’s the case, the potential for overheating would require a higher path for rates than what I had been thinking.

Raphael Bostic – Atlanta Fed President (October 5th)

Every asset bust was preceded by anomalies in the US Treasury yield curve

Contemplate this scenario;

  • The US Fed clearly needs to raise rates in the US as its dovish policy has continued to fuel asset inflation. Moreover, the Fed desperately needs to normalize rates, which will provide fuel to help ameliorate the next downturn. It has worked within a predictable, yet myopic frame of reference.
  • Subsequent to the pre-planned flight path of the Fed, President Trump’s tax cuts have provided domestic economic stimulus at the height of the business cycle. He was cheered on by supply-side economists, greedy asset market bulls, and shills like Larry Kudlow.  Moreover, his brand of demagoguery appeals to middle America who believe the tax cuts will benefit them. Obviously, these people do not understand the ramifications of economic and public spending policy. But this does not matter. They never can make these connections.
  • With the US economy artificially juiced and climbing higher than the Fed members previously predicted the US Fed is being forced to raise rates across the entire yield curve at a level much higher and faster than initially anticipated.
  • Higher rates and an expanding domestic economy in the US, vis a vis other nations, support the US dollar and anyone around the globe borrowing in US dollars is effectively shorting the US dollar.
  • Concepts enumerated in this bloomberg article move closer to reality and an unprecedented global liquidity crunch is the likely outcome. The amount of US dollar funding by foreigners outside the US is at unprecedented levels

Trump was cheered on by supply-side economists, greedy asset market bulls, and shills like Larry Kudlow.

Chris Pirnak

Will Trump’s America First policy of never before seen fiscal stimulus at this stage of the business cycle be the cause of a global dollar liquidity crunch? Will it be at the root of an upcoming global economic calamity? I am betting on it and preparing accordingly.

As always, economic downturns in developed nations are deflationary, and the upcoming one will be as well. My advice to the dollar bashers will be to reconfigure your confirmation bias and deep hatred of the dollar… and fast.

 

October 6th Update – US Fed way behind curve, next bust is certain; The globalists played us with Kavanaugh; Trump will consolidate his power

I have uploaded a podcast for October 6,2018. Click here to go to the show archives page to listen and look at the relevant links or you can listen on the link below. You can also right mouse click here to download the podcast.

-The US Fed has been way behind the curve for at least three years. This was intentional, just like with the last few times the Fed kept rates too low for too long. This was not a mistake.
-For those with cash and low leverage this provides upcoming opportunities.
-This does not mean there will be catastrophe. It only means another planned downturn is in the works. As always it will be deflationary, so the dollar bashers need to realign their confirmation bias.
-My recommendations will ensure us that if catastrophe ensues we will be properly prepared.
-We may be surprised how far the Fed may be forced to raise rates to reign in inflation, GDP growth, and asset markets (real estate) inflation. The 10- and 30-year UST may rise higher than we think.
-This was totally intentional. We discussed the uber-dovish policy as far back as 2015 and that the Fed should have begun to raise rates as early as late 2012. The Fed needed to begin normalizing interest rates  as far back as six years ago. They didn’t have to unwind the balance sheet until later.
-The giant monolithic force that was long 10-year UST futures and that was sponsored by the Fed and Treasury is gradually retreating. Will 3.5% be sooner rather than later?
-It is too late to fix this cycle and the next bust is baked into the cake. Done by design.
-Yesterday, the Atlanta Fed President said he totally underestimated the US economy’s strength.
Banks Brace for the Downside of Higher Rates
-The US federal budget deficit is much larger for this time in the business cycle. The increases in government spending and tax cut stimulus are to blame right now more than the low interest rates. It is like an out of control bus now and there is nothing that can be done except to raise rates across the board until it folds.
-The best suggested investment strategy is to increase cash and short-term investments and pair down debt. We are now running into the late stages of this current cycle strength.
-My concern is that the US government will be out of bullets come the next downturn. That is unless it intends to go over $2 trillion in annual deficits (I think Ben Bernanke’s Wiley Coyote comment is accurate).
-If the US government didn’t provide all this front-loaded stimulus, economic growth, inflationary pressures, and the Fed’s urgency in raising rates would be lower.
-An analysis in how the Trump supporters and patriots supported a Bush and Ken Starr retread for Supreme Court justice. Before the confirmation hearings many in the truther movement were very disappointed in Kavanaugh. However, the over-the-top “liberals” channeled the patriots into the corner to come together for a judge well-known to support federal government heavy-handedness and 4th amendment evisceration.
-I predict Trump will consolidate power after the mid-terms. THIS IS NOT BY ACCIDENT. If this is true then the over-the-top “liberal” grandstanding was just for show.
-I see pastors who should know better on YouTube praying for the Kavanaugh confirmation. We are done and the church in the US is completely rudderless.

October 4th Update – The US Fed is intentionally raising bond yields; We were warned already.

I have uploaded a podcast for October 4, 2018. Click here to go to the show archives page to listen and look at the relevant links or you can listen on the link below. You can also right mouse click here to download the podcast.

-We were warned by Greenspan, Yellen, and Bernanke in carefully scripted interviews early in the year that bonds were going to suffer losses and to prepare accordingly. I pay attention to the broadcast interviews for clues.
-The Fed is not losing control. The Fed needs to raise the entire yield curve in preparation for the next bust. It could easily lower bond yields if it wanted, but it has clearly mapped out its strategy and seems to be sticking to it for now.
-The biases in the alt-financial media are too ingrained to overcome. Peter Schiff, USA Watchdog, and ZeroHedge are all telling their followers that things are spinning out of control.
-The collapse talk provides tasty click bait and added revenue for the alt-financial media. Schiff has been barking the same trash since at least 2003.
-The dollar collapse talk is in high gear again. These prophets are recommending gold over dollars. I say otherwise. Owing dollar-denominated debt is the last thing we want as that is an effective dollar short.
-The US Fed is at the top of the financial hierarchy and all other monetary authorities play off the Fed.
-I don’t get distracted with the anti-dollar rhetoric coming out of the IMF and ECB. They are controlled opposition and just trash-talking players on different teams. They all play for the same group of owners. It reminds me of the Giants/Cowboys rivalry.
-Martin Armstrong; controlled opposition and collapse talker. Why would I listen to a person who rejects conspiracy out of hand? He says it’s just the greedy politicians trying to keep their jobs. He also thinks the Romans crucified Jesus. He praises the private central bank concept.
-If you want to know about climate change just look up in the sky. It’s all a big lie, so don’t confront the adversary with opposite findings. We just play into their hand. Proverbs 26:4.
-The Trump tax cuts are just making things easier for the elites to carry out their agenda. If all spins out of control, much of the blame can be leveled on Trump. He juiced the economy at the worst time.
-Bernanke talked of the US economy’s Wiley Coyote moment and bond unwind.
-Don’t look to the media, TV, patriot media heads, newspapers to provide the answers. Once someone mentions that the left/right paradigm is a fraud and that there is no real difference between the two sides, he or she is banished.
-We need to be prepared for the next bust. We need to think for ourselves.
-I LOVE MARKET BUSTS! YOU SHOULD, TOO.

Was the internet a good thing for mankind?

I received a question from a reader:

Most people spend the vast majority of their web surfing time on the large corporate web sites

Question:
This question doesn’t pertain to economics, but your opinion on the internet. Do you think the internet was a bad invention by mankind or was it a mostly great one, and if you had the power to abolish it, would you do it?

Answer:
I know I spend much time discussing the development of the internet and how it is being used against us, but if it wasn’t for the internet our understanding of the world would be more opaque.

Our phones know everything about us, including where we are at every moment

Indeed, the globalists ultimately developed the internet as a vehicle to analyze the world and human condition in real time. We must never lose sight of this. Moreover, it is a vehicle that naturally speeds up the concentration of the world’s wealth and power. As the images on this page remind us, the vast majority of a web surfer’s time is spent on the large corporate websites. For most people, the internet provides them with entertainment, easy communication, financial stuff, and convenience and that’s the extent of it. For the globalists the evolution and build out of the internet is a necessary achievement to get their final objectives of the new world order in place. It is a system that builds its knowledge base by what the users provide it, so imagine what the world wide web will look like in another 20 years. The globalists are pushing 5G for a reason. They have grand plans.

With the web time seems to be speeding up

On some level I have to conclude that the internet has helped to make this world a much more complex place to exist. I have to believe that without the internet time would be dragging much more slowly than it is. With the web time and things are speeding up quickly.

Imagine a world without the internet. You and I would find it so much more difficult to connect with other like-minded people and to learn and develop the required knowledge we must have in these last days. During the early 1990s, in order to perform the research to write papers for school I used to spend countless hours at the main branch of the NY Public Library. It was always such an arduous endeavor and the results were less than inspiring. Trying to get timely international economic data was challenging. But with the internet, everything I need is at my fingertips.

The internet is one of the greatest ever inventions
The internet has taken humanity in a new direction

In my opinion, I think the internet is probably one of the greatest inventions ever created. It has the power to vastly expand our horizons and knowledge base. It truly is a marvelous concept, but whether I think it is a good or bad thing for mankind is another question. The toothpaste is out of the tube, so we must live our lives with the web.

I look at how the world has evolved since the advent of the internet and I have to consider that the vast majority of humanity has not benefited as much as many believe, but the negative externalities are impossible to objectively measure. How we measure is purely subjective, and whether we can make a causation statement about the world and the internet is another question.

We must never mistake the access to data and information with increasing intelligence. Our level of intelligence is our ability to analyze and process information and the internet does not do that for us – unless, of course, we use it to help us learn this skill set. Sadly, too many rely on the internet for affirmation of preexisting biases and our adversary is always willing to help out.

We see that our sudden loss of personal liberties, freedoms, and right to privacy have a high positive correlation to the progression of the internet’s evolution. I fear there will come a time when just about everything we think, say, and do will be logged somewhere forever. Thus, it is incumbent on each of us to keep this in mind whenever we create a social media account or comment on message boards. Providing the internet with all our personal data just speeds up the process of the new world order.

It depends how we use it

So, while our knowledge of the world and our adversary expands at a geometric rate, so does the globalists’ understanding of us. The internet is here to stay, so we must make the best of it.

The problem with the internet lies in how people use it. For instance, if we are aware of our inherent biases then we will be more objective when looking for the truth. If we are not careful, the internet can be nothing more than an electronic echo chamber.

For those of you who are of the remnant, it is easy to see how the internet is a prerequisite for the bringing about the final days. The knowledge and understanding required to save ourselves is at our fingertips. We can use the internet to grow our understanding of the world and why we are here. We can use the internet to help us figure our of worldly adversary. We can also use the internet to surf porn, reaffirm our preexisting biases, and entertain ourselves. It’s up to us to choose.

So, is the internet a good or bad thing? I think we have to look at the person using it and how it is used.

US Fed was naive? World Economic Forum whitewashes last decade’s economic crisis

The true intention of the US Fed can never be revealed

I came across an article this morning from the World Economic Forum (WEF) titled, Two myths about the 2008 financial crisis, debunked, and wanted to mention a few comments with respect to their conclusions.

To better understand the WEF we should take a look at its Leadership and Governance webpage, including its Board of Trustee members. They include, David M. Rubenstein,  Co-Founder and Co-Executive Chairman, Carlyle Group; Christine Lagarde, Managing Director, International Monetary Fund (IMF); Mark Carney, Governor, Bank of England; Al Gore, former US Vice President; Jack Ma, Executive Chairman, Alibaba Group; Queen of Jordan; and Marc R. Benioff, Chairman and Chief Executive Officer, Salesforce.com.

As anyone who is familiar with my blog and analysis, one of my overriding determinations is that the boom/bust cycles are cultivated and allowed to grow until the bust. It is the cycle that allows the insiders to sell high, buy low, and scoop up the world’s assets and consolidate their wealth. These cycles are produced with malice and intent and powered with the fuel of central bank monetary policy. Of course, these central banks are privately owned and do the dirty work for their owners.

Over the last decade, research by many economists, including us, arrived at a broadly shared narrative of the 2008-2009 financial crisis… [T]he fundamental cause of the crisis was the deflation of the housing bubble, starting in early 2007. For several years until then, home prices in the United States rose dramatically, fueled by massive borrowing by homebuyers and banks’ investments in mortgages and mortgage-backed securities. As the housing bubble burst, both borrowers and bankers suffered.

Two myths about the 2008 financial crisis, debunked (WEF, October 1st)

Indeed, the writers state the obvious about the genesis of last decade’s bust. The “deflating” housing market was the primary cause of all the problems last decade.  In explaining its analysis of why so many people and parties could be so careless in allowing it to happen the writers discount moral hazard of the lending banks as the cause and place the blame squarely on the failure of the policymakers (US Fed and government officials) and all the other parties involved to not recognize the warning signs caused by their blind trust in the strength of the housing market.

It is surely the case that the banks, along with rating agencies, mortgage underwriters, investment banks, and others, engaged in unsavory practices. But the moral hazard view misses the central point: as we document in our book, households, banks, rating agencies, investors, and policymakers all believed in the housing market, and all failed to see the risks.

Two myths about the 2008 financial crisis, debunked (WEF, October 1st)

While the article claims the IMF was almost alone in predicting the crash, the writers say the US Fed totally underestimated the impending calamity and fallout from a deflating bubble.

Several institutions, including Bear Stearns, had to be rescued earlier that year. The Lehman failure did precipitate a fast and furious run that was hard to stop once it started. But its occurrence was a growing possibility for months. It did not come out of the blue.

One reason it may have felt that way is that, as late as August 2008, the Fed expected only a small slowdown of the US economy should home prices continue falling. The crisis was a surprise to investors and policymakers because they gravely underestimated the risks building up in the financial system. Lehman was a heart attack, but the patient was already terminally ill.

Two myths about the 2008 financial crisis, debunked (WEF, October 1st)

It wasn’t a surprise to those who understood the agenda.

The true intentions of the US Fed and its reason for existing

How can the US Fed be so obtuse? How could they have been so misguided in their determination that a deflating bubble never deflates as intended? Why did they not reign in speculative loan underwriting years earlier? I have the answers.

The US Fed’s main role is to help facilitate, amplify, and accentuate the boom/bust cycles. We discussed how Ben Bernanke and Alan Greenspan in 2005 stated that while the US Fed did not cause the growing housing bubble they were going to continue raising short term rates until it deflated.

Job well done!

The Fed maintains relaxed policy for much longer than it should. It does this to create the boom that turns into the bust. It’s done with intent, not by ignorance.

Of course, US Fed monetary policy was key in causing last decade’s housing bubble. There are three reasons I can think of off the top of my head;

First, in the wake of 9/11 the US Fed lowered the Fed funds rate to a 40-year low of just under 1% and it remained accommodative long after it should have removed its dovish policy objective.

Second, the US Fed completely misread the tax changes incorporated into the IRC as a result of the 1997 Taxpayer Relief Act (phased in for 1998). The cap gains exclusions to owner-occupied real estate created wild speculation by the average homeowner that remains in place today.

Third, the Fed could have easily instructed its member banks to reign in lending and tighten underwriting criteria. It chose to do nothing.

The WEF says crises can be anticipated, but the US Fed differs

In order for the elites to continue using the central banking concept to corner the world’s wealth they need to condition us to believe that the boom/bust cycles cannot be anticipated and that they are just a product of human behavior. Only the true globalists tell us otherwise, because they can appear to be wise. However, they have no monetary policy power yet.

But I submit they know far in advance and depend on us not spotting the inconsistencies. These elites use the media to help talk up asset markets and get us to be on the wrong side when things either turn up or turn down.

The second misconception is that the crisis could not be anticipated. This argument is most popular with policymakers who acknowledge that they failed to see what was coming. As Timothy Geithner, President Barack Obama’s Treasury Secretary, put it in his memoir, “Financial crises can’t be reliably anticipated or preempted.” Likewise, Hank Paulson, Geithner’s predecessor under President George W. Bush, recently said, “my strong belief is that these crises are unpredictable in terms of cause or timing or the severity when they hit.”

One version of this view holds that the Lehman failure resulted from an unpredictable run, with investors rushing all at once to withdraw short-term financing from the banks. “This crisis involved a 21st century electronic panic by institutions,” as former Federal Reserve Chairman Ben Bernanke put it. In other words, “it was an old-fashioned run in new clothes.”

The evidence does not support this view. Our book shows that deflating asset bubbles, particularly in housing markets, pose a serious danger to the financial system. When highly leveraged banks and other institutions face the abyss of massive losses, the probability of a panic rises sharply. In this respect, the 2008 crisis looked very much like all the others.

Two myths about the 2008 financial crisis, debunked (WEF, October 1st)

The next bust is being carefully planned

Keep in mind that with the advent of the internet and access to immediate news and analysis it is getting much more difficult for the central banks to make obvious mistakes. But, the agenda to consolidate the global wealth must continue. This is why there are so many diversions and red-herrings that keep most readers, even those in the alt-media, flat-footed and expecting collapse around every corner. It will happen, but in due time. We see the signs, so let’s take action. The US Fed and Treasury officials will certainly not warn us in time, nor is it their obligation to tell us.