Dark Clouds Gather
Over The Trump Economy
August 08, 2018
Storm clouds gather on US Highway 2 in east Snohomish County, Washington. Sky Valley Chronicle photo.
Rex D. Cain
(NATIONAL) – Donald Trump, arguably the most immature and narcissistic President of many a generation loves to congratulate himself publicly on how well the current economy is doing.
In Trump’s brain, always in a seemingly perpetual state of over-the-top narcissism that’s stuck in over-drive, “It’s all my doing! Fake news won’t give me the credit I deserve! Get me booked on Sean Hannity tonight!”
“But in the year since Trump’s inauguration, most analysts tend to agree on this: The economy remains essentially the same sturdy one he inherited from Barack Obama,” says a January 21, 2018 Denver Post report.
The same story notes that while growth has picked up under Trump’s Presidency, “It’s not clear if it can sustain a faster expansion. Hiring and wage growth actually slowed slightly from Obama’s last year in office. Consumers and businesses are much more optimistic, but their spending has yet to move meaningfully higher.”
Obama, who was handed the Great Recession ,a tanked economy, massive unemployment and a collapsed housing market by the outgoing Republican George W. Bush administration, in the end handed off to Trump a stabilized economy, rebounding stock market and 75 consecutive months of job growth.
And now there’s a new a new report which shows there are most definitely dark clouds forming over the Trumpian economy. If you think America’s current economy is structurally sound, if you think there are not things gathering steam on the horizon which could tip the economy (and your life) sideways, then you might want to read a new opinion piece written by the Editorial Board at the New York Times called Clouds Darken Trump’s Sunny Economic View for a dose of reality.
We strongly urge those who are planning to buy a big ticket item in the next 24 months, such as a house, to read that Times piece.
Here’s a few condensed gems from it to wet your whistle:
~ The economy is already firing on all cylinders and there is reason to believe that growth is “likely peaking” as we speak. One economist said this year’s 2nd quarter (Apr-May-June period) in his forecast marked “a high-water mark for growth.” High water, meaning it is downhill from there.
~ The effects of the $1.5 Trillion in tax cuts for the rich the Republican Congress slammed out? Well, Instead of boosting wages and building more plants and jobs, most of the corporations (predictably) used those tax cuts to “buy back” $437 billion of their own stock shares which benefit not workers but the wealthy investor class, the richest 1%, CEO’s and Wall Street types. And those stock buy-backs leave corporations that much less money to invest in new production capabilities or wages. In fact, says the Times piece, spending on business equipment “slowed.”
~ Then there’s this Boogey Man called “the flattening yield curve.” All you need to know about that is this. It could “invert” late this year if current conditions persist. That inversion means short term interest rates run higher than long term rates, “A sign of pessimism that is a well known flag,” says the Times report. “Recessions tend to follow an inverted yield curve like a stray cat looking for a meal.”
~ Purchases of goods drove about a third of that second-quarter economic increase. Consumers were spending but that spending spree might not continue because at some point in there, consumers were spending the bank’s money via credit cards and other revolving loans. One recent analysis found that that the bottom 60 percent of income-earners have been fueling their spending, and thus the economy’s, “by using their savings or credit cards.” Not a good sign. No no no.
~ But, “They almost have to (use credit cards and savings),” says the Times piece, “Because wage growth is expanding at a disappointing 2.7 percent annual clip."
~ Wages should be expanding, given the tighter labor supply, “But American companies have made an art form of not sharing the wealth with workers,” says the report. Read that: workers are ripped off. So what's new?
All in all says the report, “friction is building" around the Trumpian economy.
This current economic expansion is in its 10th year. And eventually all these expansions run out of gas and then there’s a contraction. The big question is, will it happen on Trump’s watch in his first term? The dark clouds say that is a firm possibility.
Note: Economists are not very good at predicting when Recessions will hit. But it is known that they tend to appear, on average every five years (or every 60 months). As of March 27th of this year it had already been 105 months since the last Recession.