Authored by Brandon Smith via Alt-Market.com,
First, I would like to say that the timing of Donald Trump’s announcement on expansive trade tariffs is unusual if not impeccable.
I say this only IF Trump’s plan was to benefit establishment globalists by giving them perfect cover for their continued demolition of the market bubbles that they have engineered since the crash of 2008.
If this was not his plan, then I am a bit bewildered by what he hopes to accomplish. It is certainly not the end of trade deficits and the return of American industry. But let’s explore the situation for a moment…
Trump is in my view a modern day Herbert Hoover. One of Hoover’s first actions as president in response to fiscal tensions of 1929 was to support increased tax cuts, primarily for corporations (this was then followed in 1932 by extensive tax increases in the midst of the depression, so let’s see what Trump does in the next couple of years). Then, he instituted tariffs through the Smoot-Hawley Act. His hyperfocus on massive infrastructure spending resulted in U.S. debt expansion and did nothing to dig the U.S. out of its unemployment abyss. In fact, infrastructure projects like the Hoover Dam, which were launched in 1931, were not paid off for over 50 years. Hoover oversaw the beginning of the Great Depression and ended up as a single-term Republican president who paved the way socially for Franklin D. Roosevelt, an essential communist and perhaps the worst president in American history.
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This is not to say Hoover was responsible for the Great Depression. That distinction goes to the Federal Reserve, which had artificially lowered interest rates and then suddenly raised them going into the economic downturn causing an aggressive bubble implosion (just like the central bank is doing right now). But Hoover did actually aid the Fed in their undermining of economic stability by pursuing policies which were poorly timed.
I’m hitting readers with all of this because I am growing rather tired of the contingent of Trump apologists in the liberty movement scrambling to defend every single Trump action no matter how illogical. These people should know better. Sorry, but Trump is not “playing 4D chess” against the globalists. His primary initiatives have only served so far to create a useful distraction away from the globalists.
The disturbing key to all of this is the fact that many of Trump’s policies are things that I and many others have argued for in the past. The problem is, he is implementing them out of order and with bad timing, which will only make such policies appear destructive in the end, rather than constructive.
In terms of the implementation of tariffs, the people who are defending this action at this time do not seem to understand the basics of international trade. Tariffs can only be enacted from a position of economic strength and resource development. This strength comes from internal self-sufficiency in production; meaning, in order for the U.S. to force a trade balance (which is what tariffs are supposed to do) the U.S. must have a strong industrial base and MUST be capable of producing most if not all necessary goods and goods in broad demand.
The fact is, U.S. manufacturing has been utterly outsourced by the very corporations Trump just gave a 10% tax cut to, and rebuilding that industrial base would take decades. Why? Because there are no incentives for corporations to bring manufacturing back.
As I already stated, Trump is instituting potentially solid policies but he is doing so out of order. Tax cuts for corporations should have been enacted only as an incentive for manufacturing jobs to be returned to America. Instead, corporations got tax cuts for absolutely nothing. And will those tax cuts go towards more jobs or innovation? Nope. They will be going to pay off unprecedented corporate debts, and stock buybacks, most of which were accrued through borrowing from the Federal Reserve.
Will this stock buyback bonanza even generate new highs in the Dow? Probably not. But I’ll explain why that is later.
If Trump had given tax incentives for corporations to bring manufacturing back into the U.S., and then given those corporations a few years to make the shift, only then would tariffs have been an effective action. But as the situation stands now, we have minimal tangible production in this country, and, historic debts held by the same overseas competitors that Trump is now seeking to “teach a lesson.”
Debt is the next issue which needs to be addressed before tariffs can ever be implemented in a practical way. In terms of national debt, rather than setting up a plan to reduce U.S. debt expenditures, Trump is increasing debt by reducing taxes while at the same time increasing spending. Trump did not take a hard stand on the debt ceiling debate as he originally claimed he would, and so, the debt train continues unabated.
Who is going to purchase this debt, I wonder? Over the past several years the largest buyer of U.S. treasury debt was the Federal Reserve through fiat money creation. Now, the Fed has tapered quantitative easing and is dumping their balance sheet at a rate faster than anyone expected. The Fed is pulling the plug on its artificial support of the economy.
The next largest buyers are major foreign central banks in countries like China, Japan and to some extent the supranational EU. If the debt buyers of last resort are now the very same countries Trump is seeking to enact tariffs over, how do you think this little theater will end? Yes, with a dump of U.S. treasury bonds and perhaps the dollar as world reserve by those nations.
But what about the U.S. consumer? Isn’t the consumer market in America so enticing that nations like China would “never dare” dump U.S. debt or the dollar? No, not really. If we are talking about a trade “war,” then a country like China, which has a vast manufacturing base and which has also been building up its own domestic consumer market, would be willing to make the sacrifice. America would be hurt far more by the threat of debt default and the loss of the dollar’s international buying power than China ever would be by the loss of American consumers. With tariffs being implemented, they may lose the American consumer anyway.
Our retail market is hardly as appetizing as it was 10 years ago given the decade of drudgery Americans have endured, with the largest number ever of working age citizens no longer participating in the jobs market, as well as real worker wages in continued decline while the American consumer is now more indebted than at any other time in history.
All of these negative effects are weighing down our economy while the Federal Reserve is quickly deflating the fraudulent markets that the establishment used during the Obama administration to argue that America was “in recovery.” Of course, alternative economists have known since the beginning that this was a lie, and that the only thing propping up the economy and stock markets was central bank manipulation.
The Fed under Jerome Powell has made it crystal clear that they WILL be raising interest rates and cutting the Fed balance sheet, perhaps more than their dot plots had indicated in the past. Without low rates and a steadily rising balance sheet we have already seen the results. Stocks in particular have gone crazy compared to the past few years, dumping nearly 10% one week, spiking about half that the next week. One thing is certain, the supposedly endless bull market induced by the Fed years ago is now over. Stocks are in heart attack mode.
It is no coincidence that the first two times the Fed reduced its balance sheet the Dow plunged over 1,000 points. The latest dump of $23 billion at the end of February resulted in a drop of around 1,500 points. It is too early in this process to know what the trend will be, but it seems to me that stocks are being steam valved down every month. With a marked decline just after a balance sheet dump, followed by a less impressive dead cat bounce the week after.
In the meantime, Trump’s “trade war” is now being blamed in the mainstream for the decline in stocks that the Fed is actually responsible for. As I have always said, Trump is the ideal scapegoat for the inevitable economic crisis the central bankers have staged. Trump’s tariffs might exacerbate the problem, just as Hoover’s policies did in the beginning of the Great Depression, but the blame rests squarely on the Federal Reserve and central banks around the world. Will the average person understand this dynamic once the dust settles on our financial system? Probably not.
So, to summarize, while Trump has indeed set in motion policies that conservatives in general tend to approve of, he has done so in an impractical way that will ultimately be blamed for a market crash the Fed created. If conservative ideals such as limited government and sovereign trade protection get the blame for an unprecedented economic crisis then this could sabotage conservatism for generations to come. If elections are still even a factor as this crisis unfolds, the chances of the public accepting a socialistic nightmare regime after Trump exits the White House are high. And, the banking elites that conjured the whole mess will escape once again without any punishment.
The question we must ask is this – Is Trump aware that his policies are creating a perfect distraction for those same banking elites? I believe we will know for certain the answer to that before 2018 is over.
It seems that the Admin has swallowed the “free trade” Koolaid….In fact, free trade has impoverished every country that has embraced it….The building of America occurred under high tariff walls, in which the government was financed by tariff and excise tax revenues. The decline of America began with institution of the income tax and Federal Reserve in 1913…
“That’s why he WON the presidency against ALL odds don’t ya’ know?!”
Gee, that’s what Bush 2 did. Just one more question. If he won against all odds, doesn’t that mean he wasn’t the country’s favorite? Kinda strange that he won when nobody wanted him, huh? Bush had hanging chads and Trump had Russians in the woodpile making sure he beat the odds. That might explain that thin inauguration crowd, don’t you agree?
Apparently you don’t understand what the meaning of “odds” is….typical for a Clinton supporter.
pyrrhic, What about the movie – Against All Odds – was that about gambling? It’s an expression that conveys the idea that one has tremendous opposition, not just from bookies. You, sir, are a moran.
The stock market chart is looking pretty dicey. Past patterns forecast a 20 – 50% drop and a 3 year
(deep) recession. Then you see a president stacking the deck against the Dow.
But it’s all for show. Hope nobody remembers the ‘crisis is too good an opportunity’ and imposes martial law. We’d be up shit creek then.
Q says it’s all a scam to skim the cream. Don’t worry, the good guys win in the end. Too bad you haven’t gotten your membership cards in the mail yet.
“Free Trade” only works in situations where countries are on somewhat equal footing. When 3rd world countries established what was essentially slave labor to replace American workers, then American workers suffered, since they could not / would not match the labor prices of the 3rd world slaves. “Free Trade” no longer means what it used too, it’s now used to represent a way that corporations can excuse the miserable wage increases coupled with massive profit increases, accomplished on the backs of the surfs. You.
Mega-corporations, like the huge cities we now have, are artificial constructs that MUST be supported through GovCo legislation and immense taxation. Without GovCo, these artificial constructs collapse and die.
I’m a simple man so I may way off here but I still can’t fathom how one person can somehow defeat TPTB.
We all know our congress is bought and paid for, we all know media is controlled, we all know central bankers go to work in government and government goes to work for the the central bank and we all know the central bank is ultimately responsible with the blessing of government.
When us little peons were given the choice of another Clinton or Trump my suspicion went up, and I thought either candidate would be the perfect choice to place the blame for an economic winter that we all know can’t be avoided without much pain, for us little peons only.
Trump won the coin toss.
Next up will be a younger, energetic, charismatic, influential, confidant leader that will show us the way back to prosperity…… and bondage.
Card, I agree with those who call him the accidental president, you seem to be one of them. I was flaming T4C for saying he actually won. It just may be a case of the wrong envelope. Hillary won and the gods intervened. Gnome Sane?
Well, seeing as how president and vice president are the only offices not chosen by our vote, who’s to say he was actually elected or simply picked to win? We’ll never know.
And on the note, I think most of us have seen the videos on how our voting booths can be manipulated as well. I sat down once and looked at the two party control of the white house and congress since 1910 on, darn near split 50-50 between democrat and republican control. You’d think if one party had the answer we’d stick with that party more. But as our two parties seem to switch their platform back and forth between themselves….
Driving into work this morning and listening to POTUS on SIRIUS radio and the topics of the day are, Stormy Davis, Mueller, gun bans, and the such, it’s like we are living in the matrix and our news is controlled by AI to keep us bouncing from one stupid media composed crisis of the day to the next.
Just along for the ride and hoping it doesn’t get too bumpy going forward.
Unfortunately, the only thing us little people can do is not actively support or participate in the scam. You do that by staying healthy, not buying things on credit, only working as much as you need to, thus starving the beast of tax revenue legally etc. Their life blood is your continuing to play their game, with their rules. Once you stop being a tax donkey and battery for the 1% then you are in a much better position when / if an engineered financial problem happens.
Imagine the trouble TPTB would be in if millions of people simply stopped consuming stuff they don’t need and began living debt free and simply being smarter about their choices. Those chains would fall quickly off of the enslaved.
It is really stupid to say that the Federal Reserve caused the Depression. The reality is, like in all things related to the economy, nobody really knows. Industrial production was plummeting in the months before the stock market crash and the only way business could respond was to lay people off. Layoffs led to less consumer spending leading to more layoffs.
Only economists are stupid enough to single out one thing in a complex train of events.
Well, you are somewhat correct MarkinLA, however what the Fed does do is “raise the bar” of asset prices, therefore forcing people to take on more debt to stay at the same place financially. It also forces corps, because of the constantly raised prices, to either pay higher wages (whereas they can’t possibly keep up since they can’t just print money) or outsource to cheaper labor markets. Price stability, you now that thing that actually is in the Federal Reserves charter, is NOT 2% a year inflation, it is 0% / year inflation. You don’t get that by pumping huge amounts of currency in to a market, in order to run huge trillion dollar deficits. No, the fed cannot be directly blamed for recessions, but they do make them a lot more acute when they occur, and they through maintaining dead preferred companies, don’t allow the market to clear so the recession is short, and growth after the recession is robust. Thus, today’s 10 years of funk in the real world (not the Wall Street, Washington fantasy island).
The fed can, and will, resume QE at the drop of a hat.
The 1% benefits greatly from the proceeds.
Sorta makes the whole argument moot.