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RECESSION NEXT YEAR?

December 8, 2018

RECESSION NEXT YEAR?

To all you 401-Kers and stock market gurus – head for the hills! The WSJ and Trump apologists have told us that with the Trump/Ryan tax cuts all will be well. It isn’t, and predictably, and even if we had zero unemployment (which we have never had) and historic corporate profits (which we do have now) a recession is coming, one I have been predicting for months on end to happen either this year or next year at the latest. Since it’s now December, 2018, I’ll re-predict 2019.

There is more to an economy than unemployment and profit statistics touted by Trump and breathless business journalists, like structural woes, global slowdowns, political troubles, wage inequality etc., and when Trump, that grand wizard of trade and international commerce, added tariffs and trade wars to the mix in an attempt to extend his bullying tactics beyond his cabinet, the Senate and the media, I knew he was tempting the gods of recession, hence my prediction, and of course our call yesterday to Canada asking them to detain and extradite a Chinese electronics executive charged with sanctions fraud in dealing with Iran when Trump is selling no or little enforcement of our sanctions against Russia in return for the building of a Trump tower in Moscow while we are in a very delicate 90-day waiting period in trade talks with China doesn’t help. Such hare-brained and probably criminal leadership makes me think that the coming recession will be within the first rather than the last half of year 2019, but with the possible leavening effect of a Democratic House that won’t be bullied and with  Democratic control of the purse strings, I’ll leave it at 2019.

We are now witnessing the froth arising from the Trump/Ryan giveaway of nearly two trillion dollars to the already rich when interest over time (which is rising) is considered. The froth is now being spent for stock buybacks, increases in executive pay and other non-productive uses. Had such a giveaway gone exclusively to workers, the rise in demand and the revenues to government could have paid for itself because workers spend the money across a broad array of goods and services but not so the rich.

The result is that, contrary to claims of Trump and Ryan and Wall Street propaganda, the giveaway not only did not pay for itself but has instead given us an HBO estimate of our first-ever current budget deficit of one trillion dollars, which will (at interest) be added to our some 22 trillion dollar long term debt (also at interest). Trump left Washington for his Mar-a-Lago resort in Florida in the afternoon of the day in December, 2017, when he signed the giveaway to the rich bill and, upon arrival, is said to have told his billionaire friends there as follows: “I made you a lot of money today” which, of course, included himself. He was right; he did make them and himself a lot of money because the superrich not only were awarded this huge windfall, but the same bill reduced their obligation to pay for it.

So guess who gets to pay the disproportionate share of this gift Republicans engineered for the rich that was transferred to our long term debt? You got it – you and your children’s children (speaking of taxation without representation). So is this a Bunker Hill moment? It’s getting closer every day and we can only hope that Mueller will provide us with the relief we need so that we can put our pitchforks back in the shed.       GERALD         E

 

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2 Comments
  1. Niel Johnson permalink

    Jerry – As you probably suspect, I concur completely with your concern about the irresponsible tax bill that was passed, and which carries an enormous debt–to be loaded onto our kids and grand kids, and which has the makings of another 2008 great recession.  We must, somehow, get across to the voters who side with Trump what kind of risk they are incurring, and how the purchasing power of the middle class, as well as the low-income working class, is like the Titanic,  heading toward a disastrous iceberg.  Greed has no limit, which we should have learned by now.  Blinded by greed is an axiom we should take seriously.  Of course, all investors are running an unnecessary risk, and I am hoping especially, that Brighthouse Insurance (formerly MetLife) and Thrivent Financial, will be among the hardiest survivors. I have conservative investments in both, but even they will be in peril.   We know full well the daunting responsibility the new Congress will face, and I am wondering how the ill-conceived Trump-Ryan tax fiasco, can be reversed for the good of the country.  Your voice must be heard among the new majority taking over the House only a month from now.  

    • I don’t think the American public has come to grips with just what the Trump-Ryan tax bill has done and is going to do to our now and future economy. They have been too busy trying to digest Trump’s daily antics to notice, I suppose. Thus addition to our long term debt is not necessarily bad if for good purposes and provision is made for repayment but I don’t call enriching the already rich a good reason. I would like to play financial adviser and tell my readers to get into cash but I think the dollar is way overvalued set for devaluation because of the beating we are taking with hundreds of billions in trade deficits per annum (which keeps our exports costly and imports cheap,not a good setting for getting into cash). With a rogue at the helm, tariffs and threats of tariffs in hand, I honestly don’t know what to do. Maybe it’s CD time.- where I have retreated with my modest assets. I also don’t know what the effect of Wall Street will be if Trump is indicted or a bill of impeachment is filed. So many variables involved in trying to play Nostradamus! Cooler here – 70 today, but with sunshine it promises to be comfortable. Stay warm. Jerry

      Gerald E. Read my blog at: elderblogger.wordpress.com and follow me at @GeraldKnows on Twitter

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