Old yes; Blood, yes; Guts, Not Even Close
(Patton vs. Trump No Contest)
By way of introduction to
this post and fine
article from the Washington Post and these key background facts:
Ø Trump said Friday (August 23, 2019) he would retaliate
against China's latest tariffs with more increases of his own.
Ø Trump tweeted that tariffs on the $250 billion of
imports already in place will be raised to 30% from 25% on October 1.
Ø Trump the said the remaining $300 billion of imports
set to go into effect September 1 will be 15%, rather than 10%.
Ø All this added to a rapid series of trade escalations
between the world's two largest economies.
Ø Just hours earlier, China announced it would levy new
tariffs on thousands of American products, and now they have.
Ø Trump then in true fashion tweeted this nastiness: “Who is our worst enemy the Fed or China.”
(sic)
The simple sad fact is clear: Our government is so big and so intricate and so
intertwined in the nasty, rabid partisan politics of today that it cannot correct
itself. It feeds on itself and is therefore incapable of correcting itself. It
protects the very system many in office say they dislike.
However, corrections
must be made otherwise in a very short period of time at this rate, there will
be no United States as we all want.
I not crying wolf, either. But, we all will be
crying as the wolf gets closer and then knocks on our front door! BTW: He just turned
the corner on our national street.
Now the basic summary from
the Washington Post article.
Donald Trump is a salesman. So can he sweet-talk the economy out of a
downturn? Probably not.
First, Trump is a bad salesman. He is not so much talking up the economy as trying to
redirect blame toward the Fed, toward other countries, toward Democrats, toward
anyone but himself. Furthermore, even when he tries to talk up his economy, he
can’t find the right words.
In his effort to do so, Trump recently said: “I mean, the world is in a recession right
now — although that’s too big a statement.”
His lack of clarity is not going
to buck up investor spirits.
Trump faces the same problem
in trying to reduce trade war tensions. He is stuck between his core beliefs
and what business executives want to hear. In this scenario, Trump is likely to
say all things to all people, thereby sounding incoherent.
Second, this White House leaks so badly that there is
no way Trump can maintain the long con of self-assurance. Indeed, between the start of me writing this column
and now, my Post colleague Damian Paletta broke the story that “several senior
White House officials have begun discussing whether to push for a temporary
payroll tax cut as a way to arrest an economic slowdown, three people familiar
with the discussions said, revealing growing concerns about the economy among
President Trump’s top economic aides.”
More news of White House preparations
for a downturn undercuts Trump’s efforts to claim all is well.
Third, the only tool Trump can deploy unilaterally is
what Barry Eichengreen labeled “open mouth operations.” He can try to jawbone the Fed into lowering interest rates, but as noted last week, the Fed might not play. More
significantly, as the New York Times’s Neil Irwin noted recently, this White
House has no other bullets to fire. Any payroll tax cut would require a
congressional buy-in. Lacking that, there ain’t much ammunition left.
In past recessions, the Fed
had plenty of room to cut interest rates as a stimulus measure, and fiscal
policymakers have been willing to pour money into weaker economies. The Fed’s
main target interest rate is just over 2 percent now, compared with 5.25
percent heading into the last recession in 2007.
Other global central banks
have even less wiggle room. And a polarizing president and a divided Congress
are unlikely to find much common ground in stimulating the economy.
In early 2008, for example,
as a recession took hold, the George W. Bush administration negotiated a $152
billion stimulus package with a Democratic Congress to try to lessen the
damage. It seems unlikely that President Trump, heading into a re-election
battle, would find the same harmony with Democrats today.
Trump is not crazy to try to
talk his way out of a slowdown. He’s just crazy to think it will work.
My 2 cents: A lot of good stuff in the above article and all across main
street media and from reputable economists – the one’s Trump calls “Fake News”
and no-nothings.
Time will prove him wrong like so many other economic deals in
Trump’s failed past. Wait and see.
Thanks for stopping by.
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