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#413 11-13-16: President Trump!
by Mark Lawrence
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Trump got elected, but the much talked-about market crash didn't happen. We're back near or at all-time highs, but in a strange way: a roughly equal number of stocks are hitting all time lows as those hitting all time highs. Also the NASDAQ is dropping like a rock at the same time as the Dow is making new highs. This non-confirmation is a clue that the new highs are not to e trusted. Interest rates and the dollar are leaping upwards in anticipation of inflation. The high dollar is going to put serious pressure on emerging markets - if this continues, expect foreign bankruptcies and crashes.
The market is signaling expectations of inflation, based on Trump's promises to rebuild America's infrastructure and military, all obviously requiring deficit spending. 10 year bonds have crashed as the 10 year interest rate jumped nearly 25%, spiking briefly today over 3%. The dollar is jumping upwards which will lower the cost of imports and raise the cost of our exports; exactly the opposite of what Trump wants.
Oil is dropping on news that Europe's storage facilities are full, the dollar is rising, and OPEC's latest plan is falling apart.
The EU called an emergency meeting to decide on a common response to the election of Trump. Germany wanted to show that the EU was capable of a rapid response in foreign policy. Britain and France declined to attend. European Commission president Jean-Claude Juncker last week accused Mr Trump of ignorance. "We must teach the president-elect what Europe is and how it works. I believe we'll have two years of wasted time while Mr Trump tours a world he doesn't know." I think Mr.Junker belongs in the cell next to Hillary, I don't need him teach my president anything.
What's next in the traveling Globalism Roll-Back Show?
What is Trump? I read he's or savior, or the devil incarnate who will start a race war. Neither are true, of course. I think he's a continuation of Obama in an important way: Obama promised hope and change, an end to politics as usual, finding and forging consensus, a reduction of the influence of money on politics, bringing our men home. He accomplished little or none of that stuff. I find this troubling: I think he meant a lot of that, so that tells you a lot about the limits of presidential power. Anyway, Trump is promising much of the same stuff. Trump is not a new revolution, he's a continuation of an eight year old revolution by other means. And if he fails we're likely to get another outsider promising to clean up Washington. Bernie was a part of the exact same revolution, and it's for just that reason that I would have been more or less satisfied had he won.
In his victory speech he spoke of rebuilding America's infrastructure and creating lots of jobs doing it. While campaigning he spoke of rebuilding America's military. I expect him to spend a lot of money. I think it's obvious that the deficits will continue. It will be unsurprising if, four years from today, the national debt is up around $26 trillion. He's going to spend a lot of money he doesn't have.
Perhaps the single most important thing Trump will do is put people on the Supreme Court. We need a new justice to replace Scalia pretty much immediately. In the next four years it's not hard to imagine Ginsberg leaving - she's 81 and had pancreatic cancer, the same thing that brought down Steve Jobs. Kennedy is 80 and Breyer is 78. Kennedy is a slightly left of center moderate. Breyer is a centrist-leaning liberal. Ginsberg is a wacko; I'd like to call her a singular wacko, but Sotomayor and Kagan are, if anything, worse. At least Ginsberg is smart (or was, there are recent signs that her best thinking days are well behind her). Trump is the first Washington politician ever to express support for the 10th amendment, the one that reserves all powers not spelled out in the constitution for the states or the people. Never before have I heard anyone in Washington speak the words "10th amendment." I'm real good with that. I've been a 10th amendment guy for a long time. He promises his supreme court picks will be strick constitutionalists - they're not going to invent new powers or rights, and they're going to look for chances to limit previously granted new powers and rights.
TPP and TTIP are over, DOA, and I think that's a good thing. These trade pacts are just ways to eliminate national sovereignty in favor of corporations. Had they been in place a year ago, VW could have sued us for screwing up their business model. Before a "neutral" court in Europe.
Trump has said we need to pull out of NATO. NATO exists to fight the soviet union, but there is no soviet union. Well, that's the official story, anyway. Many Europeans think NATO exists so we can keep an army in Europe and keep them in line. In either case, I'm good with winding NATO down.
Perhaps we'll also effectively terminate our defense pact with Japan; the Japanese are certainly concerned that this is coming. Pulling back a lot of our troops from Korea and Okinawa sounds good to me. But if we do Japan will quickly arm and that will be quite destabilizing in Asia. The Chinese, Koreans, Vietnamese, Burmese have not forgotten the WW II Japanese occupations. To my eyes you can still see Japanese cheekbones in a lot of their citizens.
Obamacare will die, which needs to happen. Unfortunately it needs to be replaced with something else, and it's very unobvious Trump will have good enough relations with Congress to get anything done. In his campaign Trump promised to let states regulate health insurance. I don't think I like this: drug companies, doctors and insurance companies have too much power, I think the feds have to be involved to level the playing field.
We're on the brink of war with Russia right now; if Obama can keep his pants zipped up for 10 more weeks perhaps Trump can pull us back from the brink. I would be happy if the US and Nato pulled back their armies from the Russian border, where Obama has recently rather provocatively placed them. There's no earthly reason to fight Russia: 1) we don't really have much in the way of conflicting interests; 2) we share problems with muslim terrorism; and 3) they're going to go bankrupt in the next 10 years or so on their own. We need to be on good terms so we can secure their nukes when their government comes crumbling down.
My sense is Trump doesn't like China so well. This could turn into sanctions and get very ugly very quickly. Trade wars always hurt everyone and all too often turn into shooting wars.
Dodd-Frank is coming down. I'm good with this, Dodd-Frank is a huge failure. I would simply reinstate Glass-Steagall; or perhaps I would meet with Elizabeth Warren and encourage her to bring Glass-Steagall back and update it. Elizabeth hates the banks perhaps even more than I do, and she understands them better. Trump has said he wants Glass-Steagall back and I hope that's true. Banks need to be boring businesses. They need to be out of the stock markets; they especially need to be out of the derivatives markets. Personally, I would add a law that no single bank can have assets exceeding ½% of GDP. This would force JP Morgan, BofA, CITI and Wells Fargo to break up. I would have no more of this too big to fail nonsense.
Trump says he will simplify the tax code. Yup. And so has every other president, ever. I'll get excited when I see it. The tax code is a bit over 74,000 pages. If I wrote it would be about 15 pages, and everything you ever need to know would be on page 1.
I have no sense of what Trump will do about N.Korea or the S.China sea, but I suspect that may not be so pretty either. I don't see how he can initiate tariffs on China then ask for their help with N.Korea. If we decide to go into N.Korea on our own, well, we did that in 1950 and it didn't end well.
I think there's a chance Trump will ask Yellen for her resignation. Or perhaps she'll just freely offer it. Or not. She doesn't report to the president and she doesn't have to leave. I think she's done a terrible job; however she will keep rates low, and Trump is going to need that so he can afford his deficit spending. Curiously, most of Wall Street thinks she's very likely to raise rates in December. Her term ends in 2018, so Trump could replace most of the Fed board with hawks at that time. But because the government is addicted to low rates, at best she'll be replaced with another academic who will continue the same suicidal monetary policies. Plus ca change.
Comey will go too, but that was going to happen no matter who got elected. According to Hillary, 54,000,000 people voted for Trump because of Comey. These Washington people vastly overestimate their power. I'd give Comey a 5% chance of sticking around with Trump; with Hillary as president the way to bet is he would commit "suicide." And heads will roll at Homeland Security. Lots of muslims at the top are going to be sent packing. The CIA may well get a new director too; that's another muslim that may just drift into retirement.
The 650,000 muslim refugees Hillary would have taken in are going to have to find a different home. Perhaps we'll take in some Syrian christians. Christians are 10% of Syria's population and are highly persecuted, but they make up only 0.5% of the Syrian refugees Obama has taken in.
Illegals in the US are going to find it much harder to get welfare, section 8 housing, food stamps. Sanctuary cities are going to come under intense pressure. Imho, US businesses that employ illegals should face steep fines, and Trump has indicated this is part of his plan, but I suspect that's unlikely. Border security is going to be dramatically enhanced. Illegals who commit crimes are going bye-bye. And visas will only go to countries that have "adequate screening," meaning the middle east and much of Africa is out. I hope something is done about Dearborn, MI - a US city of 35,000 muslims and the first US city to vote to implement Sharia law. Dearborn has the highest welfare rates in Michigan; muslim men are encouraged to put their family on welfare then list their other wives as "extended family" and put them on welfare too; million dollar welfare fraud rings have been found among the Dearborn muslims.
And when Europe has its banking crisis sometime next year, I suspect Trump will just sit and watch.
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Revised Monday, 14-Nov-2016 11:42:51 CST