As The Dust Settles: Goldman Q&A On Life In Trumplandia

Tyler Durden's picture

Expect the election result to increase policy uncertainty, warns Goldman Sachs, as a result of an increased pace of legislative action in 2017 without clarity, so far, regarding which issues the administration will prioritize. Over the near-term, much will depend on how financial conditions respond to the policy positions of the new administration. Despite today’s favorable market reaction, investors may take a dimmer view on proposals to raise tariffs or otherwise restrict international trade.

Via Goldman Sachs,

Q: Where do the final results stand?

A: Republican sweep. At this point, Mr. Trump is likely to finish with 309 electoral votes but is slightly behind Sec. Clinton in the popular vote (the margin is likely to grow as votes are still being counted). In the Senate, one race has not yet been decided but Republicans look likely to hold 52 seats in the next Congress, two less than the 54 they hold currently. Likewise, in the House, four races have yet to be called, but Republicans look likely to hold 241 seats, down six from the their current level (including one vacant Republican seat).

Q: What does this mean for policy in general?

A: Overall, we think the election result implies greater policy uncertainty, for two reasons. First, the likelihood of significant legislative activity has increased as a result of single-party control for the first time since 2010, and Republican single-party control since 2006. In some areas, like fiscal policy, the question is now less if legislation passes, but what legislation passes. Second, uncertainty also looks likely to rise, at least temporarily, because it is much less clear what the priorities—or, on some issues, even the general views—of a Trump Administration are likely to be compared to most incoming administrations. As a first pass in thinking about policy under the new administration and Congress, we would categorize issues along two dimensions: how much political support Mr. Trump would need from Congress, and which issues have been key to his political success, suggesting a need to follow through directionally though not necessarily on the specifics.

Q: What is likely to be on the Trump Administration’s agenda?

A: The issues on Mr. Trump’s agenda are fairly apparent but it is less clear how priorities will be ordered. The campaign focused on tax reform, trade and immigration restrictions, easing of regulation, repeal of the Affordable Care Act (ACA, or Obamacare) and increased spending on infrastructure and defense. Some of these issues appear more likely to become priorities for the Trump Administration than others. For example, it is clear that congressional Republicans hold tax reform as a top priority, along with ACA repeal. While both of these issues likely resonated with many of Mr. Trump’s supporters, these are issues that congressional Republicans—and the 2012 Republican presidential candidate—have highlighted in the past, with mixed electoral success.

By contrast, Mr. Trump focused new attention on trade policy and immigration, taking more restrictive stances in both areas than many Republican members of Congress support. While there were several factors behind Mr. Trump’s surprising victory, many of the states where he significantly outperformed were those with some of the highest shares of manufacturing-related employment (Exhibit 1). Given this, it would be surprising to see a Trump Administration distance itself entirely from commitments made on the campaign trail regarding trade. He also appears focused, as do many of his advisors, on reducing regulation, particularly in the energy and financial sectors. Some of these changes could require legislation, but many would be possible through executive action.

Exhibit 1: Trump outperformed in manufacturing-intensive swing states

Source: CNN, Department of Labor, Goldman Sachs Global Investment Research

Q: How much congressional support will President Trump need for his agenda?

A: It ranges from needing bipartisan support to unilateral executive authority, depending on the particular issue. He would need bipartisan support for regulatory-focused legislation, for example. Under current Senate rules, it usually takes 60 votes to pass major legislation dealing with most policy areas, such as regulatory changes affecting various sectors, legal changes (for instance, dealing with immigration or anti-trust laws) or labor laws like a minimum wage increase. In some cases, bipartisan support in the Senate might be possible in light of the fact that 10 Democratic senators representing states that Mr. Trump won will be up for reelection in 2018 (only one Republican senator representing a state that Sec. Clinton won will face reelection in 2018). Coalitions will differ based on the issue, but a deregulatory push in some areas, like energy, could receive sufficient support from these Democratic lawmakers to cross the 60-vote threshold. On many other issues, like comprehensive immigration reform, we expect that reaching a compromise would remain difficult.

Fiscal policies could be addressed with only a simple majority in the House and Senate. Under the budget “reconciliation” process, the majority party can pass legislation to cut or raise taxes with only 51 votes in the Senate, rather than the usual 60 votes needed for most legislation. The two issues most likely to be addressed using this process would be tax reform and changes to the ACA. It is possible that certain aspects of federal spending, like Mr. Trump’s infrastructure program, might be addressed through this process as well.

A third set of issues could be addressed without congressional involvement at all. The president has broad powers related to trade policy, as discussed below. Once in office, President-elect Trump could also reverse the “deferred action” policies for undocumented immigrants that President Obama put in place in 2012. Beyond this, there are a number of regulatory actions that the current administration has taken that could be modified or reversed, related to labor rules, energy exploration and production, carbon emissions and other aspects of environmental regulation, and financial regulation.

Q: What has President-elect Trump proposed on taxes?

A: Mr. Trump has proposed personal and business tax reform that would reduce tax revenues by an estimated $4.4 trillion over ten years, or roughly 1.9% of GDP over that period. Roughly half of this cost is estimated to come from his proposed corporate tax reform plan, which would reduce the corporate income tax rate to 15% and would impose a one-time 10% tax on all foreign earnings not yet taxed by the US. Companies would be free to repatriate earnings without additional tax once this tax has been paid. Like the House Republican proposal, this would involve a transition to a new corporate tax system for taxing foreign earnings. The two plans are similar in several other respects as well, including a top individual marginal tax rate of 33%. However, the House Republican plan is estimated to cost around half as much over the next ten years as Mr. Trump’s plan, at least in part because it proposes to go further in limiting or eliminating existing individual and corporate tax preferences (Exhibit 2).

Exhibit 2: Tax plans compared

Source: Office of Management and Budget, House Ways and Means Committee, Trump Campaign, Goldman Sachs Global Investment Research

Q: Will his tax proposal pass?

A: We expect that significant tax legislation has a good chance of passing in 2017, but we would not expect it to reduce revenues by as much as Mr. Trump has proposed. We note three potential obstacles to passing such a proposal:

First, the cost is likely to be prohibitive for some members of Congress. While the majority party is able to pass tax legislation with only a simple majority in the Senate using the budget reconciliation process described above, it would require near-unanimity among the 52 Republicans in the Senate next year to do so. Our expectation is that some Republican lawmakers would balk at the deficit impact of his proposal.


Second, while the House Republican proposal would increase the deficit less, it has also generally been proposed in the context of the broader Republican budget proposal, which would also reduce spending in several areas. Mr. Trump has not proposed a significant net spending reduction.


Third, tax reform is complicated, and even under a unified Republican government, it may be too complex to resolve in a matter of months.

Ultimately, the outlook for a tax cut depends on how willing marginal Republican lawmakers are to increase the deficit, and/or how willing they are to find offsetting savings elsewhere. Overall, our expectation is that there is a good chance that some type of tax legislation passes next year, but the obstacles to comprehensive tax reform go beyond partisan disputes, so we would expect tax legislation that is adopted in 2017 to be narrower in scope than the campaign proposal, and significantly smaller in its revenue effect.

Q: What has Mr. Trump proposed in terms of infrastructure spending?

A: His infrastructure plan calls for up to $1 trillion in additional spending over ten years, most of it privately financed. A memo released in late October by Mr. Trump’s economic advisors Wilbur Ross and Peter Navarro detailed a plan to finance up to $1 trillion in infrastructure spending over ten years, equal to $100bn per year or about 0.5% of GDP. We previously estimated that a spending boost of this size would reduce the unemployment rate by about 0.3pp and raise inflation a touch, leading the Fed to eventually hike one or two more times by 2019 relative to a baseline without the infrastructure package.

The plan described by Ross and Navarro would be largely privately financed, but encouraged by tax credits. The plan would seek to incentivize the private sector to increase investment in infrastructure projects that would be supported by future usage fees, such as road tolls. Ross and Navarro suggest that 17% of the initial investments could be financed with equity and the remainder with debt. The government would then provide a tax credit equal to 82% of the equity to reduce the cost of financing. The large role of debt-financed private investment in Mr. Trump’s infrastructure plan implies that a significant increase in interest rates could be a hurdle for the plan’s feasibility.

Ross and Navarro argue that the plan would be revenue neutral because the tax credit would be offset by revenue raised from taxes on income earned by workers employed by the infrastructure projects and on profits earned by contractors. However, their calculations both assume that the workers employed would not otherwise be earning taxable income and assume a tax rate that looks somewhat optimistic under the tax plan proposed by the Trump campaign. We expect that the Congressional Budget Office and Joint Tax Committee would find that the plan increased the deficit under their methodologies.

Q: Will it pass?

A: Mr. Trump appears to be more focused on infrastructure than many Republicans in Congress are. That said, his proposal, which relies on tax credits, might attract more Republican support than a spending plan of the same size. Moreover, there is significant Democratic support for additional infrastructure investment, which raises the possibility that it could be combined with the tax reform legislation discussed earlier to increase support for the overall package.

Q: What does this signal regarding overall fiscal policy?

A: We expect fiscal policy to loosen by about 0.75% of GDP, though there would be only a partial effect in 2017. Our very preliminary view is that fiscal policy might loosen by around 0.75% of GDP, with perhaps 0.5% coming through tax reductions and 0.25% through spending. Our expectation is that the effect in 2017 would probably be smaller, for two reasons. First, tax legislation would probably not pass until around mid-year, at earliest. Second, increases in infrastructure spending (or subsidies) and/or defense spending would likely take until 2018 to materially change spending levels.

Q: What has President-elect Trump proposed regarding trade and tariffs?

A: Mr. Trump has opposed existing trade agreements and suggested large tariff increases. He has proposed to renegotiate the North American Free Trade Agreement (NAFTA) and raised the possibility of withdrawing from the World Trade Organization (WTO). Mr. Trump also opposes the Trans-Pacific Partnership (TPP). In terms of explicit changes, Mr. Trump has suggested imposing a 35% tariff on imports from Mexico and a 45% tariff on imports from China. If tariffs on imports from Mexico and China only were raised to 35 and 45% respectively, the average effective tariff rate would rise by roughly 11-12 percentage points (pp) from 1.5% to roughly 13%, a level not seen since WWII (Exhibit 3).

Exhibit 3: Will tariffs stay low?

Source: International Trade Commission, Goldman Sachs Global Investment Research

Q: What authority does the President have over trade and tariffs?

A: Trade policy is an area of greater presidential discretion. The Constitution gives Congress the power to regulate commerce with foreign nations but as a practical matter Congress has ceded much of this power to the executive branch over the years. Congress approves trade agreements, but the actual legislation that Congress passes usually simply authorizes the president to enter into an agreement that has already been concluded. The consensus among legal scholars is that presidents generally have the authority to withdraw from bilateral and multilateral trade agreements approved this way.

Tariff levels are technically under the purview of Congress, though most levels are governed by commitments in bilateral and multilateral agreements. The executive branch lacks the authority to make broad permanent changes to tariffs on a unilateral basis, such as Mr. Trump’s suggestion that imports from China should face a 45% tariff. That said, the president does have authority to raise tariffs broadly on a temporary basis, or to raise tariffs narrowly on a longer term basis. Regarding the former, authority exists under the Trade Act of 1974 that grants the president power to impose quotas and/or an import surcharge of no more than 15%, though neither could be left in place for longer than 150 days. Regarding the latter, the Department of Commerce and the International Trade Commission oversee anti-dumping and countervailing duty complaints from various US industries seeking relief from import competition. The tariffs imposed in these cases are often substantial, but they are limited to certain narrowly defined products from certain countries, rarely affecting more than 1% of annual imports and averaging less than 0.2% of imports since 1980.

Q: What would be the effects of tariff hikes on the economy?

A: Tariff increases would likely boost inflation, and have mixed short-run but negative long-run growth effects. We estimate that a hypothetical 10pp hike in US import tariffs would 1) depress imports by about 5% and 2) boost the core PCE price level by roughly 0.6% cumulatively. The decline in exports would depend on the extent to which trading partners retaliate.

The growth effects of import tariff increases depend on the horizon. The short-term impact on GDP is uncertain and likely mixed. On the one hand, the shift from imports to domestic production contributes positively to short-term growth, and tariff revenues can finance fiscal stimulus. On the other hand, the real income loss from expensive imports lowers consumption and investment. Other important negative short-term effects include the decline in exports under retaliation, tighter monetary policy, and possibly broader FCI tightening. While trade raises important distributional questions, the long-term aggregate growth effects from trade restrictions are negative in our view. The academic trade literature has highlighted several channels through which trade fosters long-run welfare. Trade can boost output as countries specialize; raise the variety of available products; and increase productivity through larger and more competitive markets.

Q: What are the President-elect’s views on monetary policy and the Federal Reserve?

A: As a candidate Mr. Trump was sometimes critical of the Fed, but his views on the appropriate direction for policy are unclear. On the one hand, Mr. Trump has expressed support for low interest rates, given the current inflation backdrop: “If inflation starts coming in, and we don’t see any signs of that, inflation starts coming in, that’s a different story. You have to go up and you have to slow things down. But right now I am for low interest rates.” He has also expressed concern about excessive dollar appreciation, saying in the same interview: “If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.” He added: “While there are certain benefits, it sounds better to have a strong dollar than it actually is.” Mr. Trump has also often noted that, as a developer, he prefers low rates. For example, at the Economic Club of New York in September, he said: “As a real estate person, I always like low interest rates, of course.”

On the other hand, Mr. Trump has said he worries low interest rates are artificially supporting asset prices: “In terms of real estate, if I want to develop … from that standpoint I like low interest rates. From the country’s standpoint, I’m just not sure it’s a very good thing, because I really do believe we’re creating a bubble.” Similarly, he has said Fed policy has created a “false stock market”, that the “only reason the stock market is where it is, is because you get free money”, and that the FOMC “should have raised the rates” at its September 2016 meeting. Many conservative economists favor tighter monetary policy, but Mr. Trump’s views appear more nuanced, and we are therefore unsure whether he would favor a more hawkish Fed stance after taking office.

Similarly, Mr. Trump’s preferences for Fed Chair are still unclear. During the campaign he said clearly that he would want to replace Yellen: “She is not a Republican … When her time is up, I would most likely replace her because of the fact that I think it would be appropriate.” And earlier today, a campaign spokesperson said that Mr. Trump would prefer a Fed Chair “whose thinking is more in keeping with his own”. However, at other times during the last year Mr. Trump said that he has “great respect” for the Fed Chair, and that he is “not a person who thinks Janet Yellen is doing a bad job.” So while unlikely, we would not totally rule out a Yellen reappointment. Several past Fed chairmen have been reappointed after the White House changed parties, including Chairmen Martin, Volcker, Greenspan, and Bernanke (Exhibit 4).

Exhibit 4: Fed Chairs have been reappointed by presidents of the other party

Source: Federal Reserve Board, Goldman Sachs Global Investment Research

Q: What changes have you made to your forecasts following the election result?

A: We nudged down the odds of a Fed rate increase next month, but have made no other changes at this point. After the tightening in financial conditions immediately following the election results, we lowered our subjective probability of a December rate increase to 60% from 75% previously. Markets have now recovered substantially—the S&P 500 in fact closed 1.1% higher on the day. If financial conditions remain benign in the coming weeks, the odds of a December rate hike would rise.

For now we are sticking with our forecast that real GDP will grow at a 2% pace in 2017. Over the near-term, much will depend on how financial conditions respond to the policy positions of the new administration. Despite today’s favorable market reaction, investors may take a dimmer view on proposals to raise tariffs or otherwise restrict international trade. Beyond the next couple of quarters, increased potential for fiscal stimulus may be a source of upside risk. Given that the US economy is already close to full employment, aggressive fiscal stimulus would also point to upside risks to inflation.

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NoDebt's picture

They actually paid some guy to write this.  Wouldn't you love to get paid to offer your worthless opinion, too?

Tyler, I want a salary, benefits and a company car.  Tired of doing this shit for free.



DuneCreature's picture

So it wasn't just me?

That was pretty fucking lame, wasn't it?

It may have been written by a news writing bot.

Live Hard, Bots Don't Miss Deadlines, Give The Editor Lip Or Get Drunk And Disappear For A Week, Die Free

~ DC v4.0

RaceToTheBottom's picture

This sounds like mainstream Republican thought with some Trump icing?


WTF, has stupidity taken over all forms of articles?

Since when did Trump say increasing military costs was his goal?   Are they thinking that grunts are going to build or even better, walk the wall.


Kirk2NCC1701's picture

Trump would do very well, by having David Stockman on his Team. Budget Director?

Boy, would Dave kick the crap out of the Fed!  Worthy of a PPV show.

Mountainview's picture

Goldman has already their former Mnuchin on the shortlist for Treasury. I don't think Trump can escape the pressure from the inner Wall Street circle.

BabaLooey's picture

An Open Letter To Donald J. Trump


November 12, 2016

Dear Mr. President-Elect:

I was one of the millions of people that believed in you. Believed what you said. Heard you.

You got “hired” by 60 MILLION people. WE are your boss. YOU BECAME THE EMPLOYEE.

Something you are not used to.

I myself convinced nearly 20 people to vote for you over these last two years. Know what I said?

“He’s NOT a politician. He’s a business man. He’s an outsider – something Washington, D.C. SORELY needs. He’s NOT the same ‘business as usual’ guy. Mr. Trump will change things for the better in Washington. Clean it up. Make peace with Russia – not war. Trump is a BUILDER – not a destroyer. He’ll negotiate FAIR deals with countries. Install sensible immigration policies. Reverse the stranglehold on health care policies that have bankrupted millions.” I made them see how biased the media was against you. How they lied by omission – and sometimes outright lied about you. (To a person, they NO LONGER WATCH, TRUST, OR HEED the media anymore.)

He’ll change the culture of Washington – because that’s EXACTLY WHAT IT NEEDS. CHANGE.”

Washington has become a den of vipers. Self-enriching criminals that have sucked the life blood out of US – YOUR EMPLOYERS. The phrase; “You’re FIRED” must be repeated often to MANY people over the next few years. People that have engorged themselves because of the lies and empty promises of previously employed, who have mismanaged the nation, and lied to it’s people.

Your very words from your speeches that convinced us to hire you. Your platform.  Your slogans;

“Make America Great Again.” “I’ll take back this country for you”.

You said that to 60 MILLION of us – and we hired you based on it.

We hired you because we’re SICK AND TIRED OF CAREER POLITICIANS. We hired you because we are sick of the GREED, DUPLICITY, THE CORRUPTION of Congress and the past administrations that have enriched the elite, while robbing from the American taxpayer.

Already, the public has noticed that you have had a LOT of the old-guard/same ol’ same ol’ Republican Washington “insiders”. We understand that you will need some guidance in the first few months. All “apprentices” do.

However, we, as your employers, will NOT TOLERATE THE SAME OL’ SAME OL’ …ANYMORE.

We hired YOU to do the right THINGS. “Drain The Swamp” “Take Our Country BACK”.

Commencing January 21, 2017, that’s exactly what we demand of you – our new employee.



 Just like you monitored your “apprentices”, and judged them on their performances, WE ARE JUDGING YOU. And we are NOT going to be fooled, like the oppositions legions were and are; by a biased media that lies to them. No one is going to get a “pass” anymore. Especially like your immediate predecessor.


That’s over.

On January 21, 2017, your official duties commence.

We all wish you the best, and are with you.


Because the last thing we want to do is tell you;

You’re Fired.

GUS100CORRINA's picture

This is a well written letter ... THANKS FOR SHARING.


Not Goldman Sachs's picture

Good luck with that. I am not optimistic.  Remember the chronic party, the party of money.

e_goldstein's picture

Q: Will President Trump string up Lloyd Blankfein and beat him like a pinata?

A: While President-elect Trump has made no reference to Mr Blankfein, it is too early to say if he will give in to the will of the American people. We find it more likely that instead of beating Mr Blankfein like a pinata, Mr Trump may decide to have him 'disappeared' into the concrete for the Mexican wall.*


*Sources in Mexico say that Mr Blankfein's corpse would be too toxic and create a hazardous work environment. They refuse to work with him.

Not Goldman Sachs's picture

Or appoint him to a cabinet position...oh wait Jamie got the first offer.

Fathead Slim's picture
Fathead Slim (not verified) Nov 12, 2016 9:10 PM

The vampire squid speaks. About as relevant as a fart, wasn't it?

DuneCreature's picture

Hey, Ghoulman And Sucks, sitting on all those digital dollars. .... You better check those back-up generators and fuel supply so you can still pay your armed guards and those electric door locks still work when the lights go out. ....... The end is near for ya, I fear. (Actually, I'm kinda giddy about it!)

Welcome to the Lunatic Asylum - Guess What? - ThE ImaTES fOuNd tHE kEYs tO rOoms aND MEds cABinET

Trump might not be who he says he is and it may not matter at all. Once the Genie of Awakening is out of the bottle she goes bonkers sounding the alarm and breaking bottles all over the shelves.

Good lord, chaos can be fun!

When they call you crazy, you know you're on the right track.

I have a long history of being crazy, acting the part and sounding like I've slipped a cog and I'm proud of it.

Crazy Cat Pictures On The Internet For The Calming Effect

Live Hard, Quick, Change Clothes With The Doctors And The Nurses Before The Orderlies With The Straight Jackets Show Up, Die Free

~ DC v4.0

Nobodys Home's picture

"investors may take a dimmer view on proposals to raise tariffs or otherwise restrict international trade."

Any of you guys? ...

Ya could just readjust and do what's good for your country. The corruption gold mine ain't lookin so good!

Shhh dont wake the VIX's picture

Fuck Goldman Sachs!  They lie more than Hillary and that's saying something.  They don't believe any of the bullshit they spout so neither should you.  I have a very long list of individual stocks that they have bottom-ticked by having their analysts downgrade with a SELL recommendation right when stocks were sitting at their low's.  And still waiting for that $200 Oil call they made so many years ago because supply was going to get so fucking scarce.  I hate Goldman Sachs.  I hate everything about Goldman Sachs. And Fuck you too Warren Buffett for taking a stake in those fuckers.  Fuck Goldman Sachs.

firstdivision's picture

We handed the country back to the neo-cons.  Make no mistake about it, those FBI agents aligned with Giulani, have lots of dirt on Trump as well.  Giulani will be calling all the shots. 

Fathead Slim's picture
Fathead Slim (not verified) firstdivision Nov 13, 2016 11:00 AM

If he gets the AG spot and can hold it for several years. Rudy is a walking corpse, just waiting for his dirt nap.

Yen Cross's picture

    This was an MUCUS meeting for the Libtard managed asset/ annuity community?

NobodyNowhere's picture

Goldman Sachs has sponsored research within regulatory bodies (eg the FEC) that appear to support market practices that benefit Goldman in its trading and underwriting businesses.  Those results are then used to formulate regulations so GS can then fleece the financial markets.  This is just one of 100s of ways the Zioists have defrauded the West in ways even informed people are ynaware.

NobodyNowhere's picture

CORRECTION: I meant the SEC (not FEC)

Herodotus's picture

Thats ok.  The FEC is in on it too.

Shlomo Schwartzman's picture
Shlomo Schwartzman (not verified) Nov 13, 2016 1:15 AM

Boy, what would happen if droves of folks posted tweets about assassinating Yellen?

Batman11's picture

Show me a version of Capitalism that hasn’t failed.

We need to recognise that we have been through many versions of Capitalism and they all fail as this version is failing now.

As John Kenneth Galbraith points out in “The Affluent Society” there is always a desperate attempt to hold onto the “conventional wisdom” that those at the top have invested so much time and effort in.

The death throes of each system are maintained for as long as feasible until it is almost impossible for anyone to believe that the current system can work.

A new system comes along with promises that everything will be much better, and it is, for a decade or two.

Capitalism mark 1 – Unfettered Capitalism

Crashed and burned in 1929 with a global recession in the 1930s.

The New Deal and Keynesian ideas promised a bright new world.

Capitalism mark 2 – Keynesian Capitalism

Ended with stagflation in the 1970s.

Market led Capitalism ideas promised a bright new world.

Capitalism mark 3 - Unfettered Capitalism (Part 2 – Market led Capitalism)

Crashed and burned in 2008 with a global recession in the 2010s.

It has followed the same path as Unfettered Capitalism (Mark 1).

1920s/2000s - high inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase

1929/2008 - Wall Street crash

1930s/2010s - Global recession, currency wars, rising nationalism and extremism

Unfettered Capitalism has a catastrophic failure mode and dressing it up in the Emperor’s New Clothes of supply side economics didn’t make a blind bit of difference.

We've done Neo-Keynesian stimulus.

After eight years of pumping trillions into the top of the economic pyramid, banks, and waiting for it to trickle down.

It didn’t work, hardly anything trickled down.

The powers that be are now for Keynesian stimulus.

Carry out infrastructure projects that create jobs and wages which will be spent into the economy and trickle up (pumping money into the bottom of the economic pyramid).

A new brush sweeps clean, the old ideologues stuck in their old failed ways must go.

The Left is still full of neoliberal ideologues; it’s time to move on.



Batman11's picture

Today’s economics is a discipline in need of euthanasia.

We tried to form a global economy.

1980s – boom

Early 1990s – bust

Late 1990s – boom

Early 2000s – bust

Mid 2000s - boom

Late 2000s - bust 

2008 on – stagnation

We even put the economy top of the agenda with economic liberalism.

We put in place a technocrat elite in Central Banks to ensure things would run smoothly.

We have lost hope that the Central Bankers will deliver after eight years.

What’s wrong with economics?

John Bates Clark is the father of today’s neoclassical economics.

His economics hides the distinction between “earned” income and “unearned” income made by the Classical Economists.

Most of the UK now dreams of giving up work and living off the “unearned” income from a BTL portfolio, extracting the “earned” income of generation rent.

The UK dream is to be like the idle rich, rentier, living off “unearned” income and doing nothing productive.

It went wrong over one hundred years ago and everyone has been building on these flawed foundations.

Start again, from the point where it went wrong.


Michael Hudson has extracted most of the important information from Classical Economics to show us where we went wrong in his book “Killing the Host”.

Though Michael Hudson is missing the well hidden secrets of money.

It is not really the 1% lending their money to the 99%.

Money and debt are opposite sides of the same coin.

If there is no debt there is no money.

Money is created by loans and destroyed by repayments of those loans.

From the BoE:

Fuller description:

“Where does money come from?” available from Amazon.

You need to really understand money and debt, this leads to Minsky Moments and Debt Deflation.

“Minsky Moments”

1929 – US (margin lending into US stocks)

1989 – Japan (real estate)

2008 – US (real estate bubble leveraged up with derivatives for global contagion)

2010 – Ireland (real estate)

2012 – Spain (real estate)

2015 – China (margin lending into Chinese stocks)

Debt inflated asset bubbles.  

The work of Irving Fischer, Hyman Minsky and Steve Keen, each one built on the work of his predecessor.

How to get out of debt deflation?

Studied by Richard Koo after watching Japan for 25 years after 1989.

Not forgetting markets have two modes of operation, not one.

1)    Price discovery of rational investors

2)    Bigger fool mode when everyone rides the bubble for capital gains

The US housing market was in mode 2 before 2008.

The Japanese housing market was in mode 2 before 1989.

The US stock market was in mode 2 before 1929.

Nearly every housing market in the world has been, or is, in mode 2 in the last decade or so, everyone riding the bubble for capital gains.

Most Chinese markets usually operate in mode 2; they are not very keen on price discovery.

Mode 2 ends in the big bust, not a stable equilibrium.

Get all this into the new economics and we should be off to a good start.

Herodotus's picture

Just make the dollar convertible to gold at a fixed rate, quit tampering with the economy and the markets, and most of these problems will resolve themselves.

Batman11's picture

The US housing boom resolved itself and blew up the global economy.

Let's try understanding the economy.


Batman11's picture

Capitalism gets itself into dead ends – 1930s, 1970s, today’s secular stagnation and new normal.

You need to change your ideas as current ideas don’t work.

Let’s keep lowering interest rates and adding more QE forever, it hasn’t worked for eight years maybe in a hundred years time it will start to work or perhaps it won’t.

Kayman's picture


We have crony protectionism for the dirty wealthy.  Free Market Capitalism exists only in a textbook.  
Without government protection and restricted markets, NONE of today's billionaires in Finance and Banking would exist.

Fathead Slim's picture
Fathead Slim (not verified) Kayman Nov 13, 2016 10:58 AM

Fucking A right.

Fathead Slim's picture
Fathead Slim (not verified) Batman11 Nov 13, 2016 10:56 AM

These aren't new/old versions of capitalism at all. You've described an unbroken chain of mercantilism (imported here from England) that has been in place since the early 19th century and has been enforced by government edict since 1913 or thereabouts.

The string of crashed followed by new versions you're describing just show the evolution of mercantilism here. Capitalism should be tried. So far, in the US, it has been suppressed since the formation of the Fed.

Maybe it's time that mercantilism was dismantled, allowing capitalism to show what can be done in the absence of government stultification.

hedgiex's picture

In brief, the draining of the swamp is on. GS is one squid that will mutate. Notice the subtle pandering shift to the new boss. The pretty boys/gals in Wall Strret have to empty their desks to serve in Starbucks for replacements. Hope some of them turn up as lap dancers. 

truthalwayswinsout's picture

I just found this. It is a must read.


Ignore the New CPI™ at Your Peril

By Paul Owen


The Corruption Price Index™ (CPI™)


Modern companies have a great need to quantify the processes and corruption level(s) of our current form of crony capitalist government. The CPI™ does this. It will allow for prior planning to prevent poor performance and guarantee that you will not make a major faux pas when dealing with economic and legislative issues. Also as individuals you will begin to understand why most of our major problems will never get fixed and why you must plan for the worst case scenario.


The formula is simple and highly accurate. In our current form of corrupt government, as the amount of money at stake in the legislation increases by digits above $1 million, the amount of difficulty in passing the law generally grows exponentially from the previous level and the money needed in bribes grows at the rate of .1% of the money involved. For example, if legislation were to affect $1 million, you would need $1,000 in bribes and it would have a difficulty of 1 in passing any given legislature.


Here is a table for the CPI™, which you can use to calculate difficulty and bribes needed.


            Money involved          Difficulty        Bribes needed

            $1,000,000                  1                      $1,000

            $10,000,000                2                      $10,000

            $100,000,000              4                      $100,000

            $1,000,000,000           16                    $1,000,000

            $10,000,000,000         256                  $10,000,000

            $100,000,000,000       65536              $100,000,000

            $1,000,000,000,000    4 Billion+       $1,000,000,000


Now you understand why it is so difficult to properly fix health care, social security, and immigration in the U.S. They all involve sums well in excess of the trillion dollar range and their difficulty level is in excess of a whopping 4,294,967,296! The bribes needed to prevail are in the billions of dollars.


Of course, We The People just don’t understand all the issues related to solving most of the current issues that affect our society. But, if money is spread around, it is amazing how all the barriers to problems disappear. But that only assumes that you bribe more money than those who oppose you.


Here is an example on how to use the CPI™:


Money Factor: We have legislation that affects $28 billion. We look down the left column and locate the sum that is closest to being lesser than the $28 billion. That would be $10,000,000,000. Divide 28 billion by 10 billion and get 2.8 which is the Money Factor.


Difficulty: Go to the right to the difficulty column and we find that the difficulty for $10 billion is 256. We multiply that sum by the 2.8 money factor. This means that the difficulty level for our legislation would be 2.8 x 256 or 716.80. The square root of this number, 26.77. The 716.80 gives you an idea of the number of key people and organizations who can influence the legislation. The square root of that number (26.77) gives you a general idea of the number of setbacks and “problems” that will be encountered along the way.


Bribes Needed: We next look to the Bribes Needed column and find that $10 million is needed for $10 billion. Take the 2.8 Money Factor and multiple it by the $10 million and this gets us the total bribes needed to get our legislation passed. Bribes have to be equal to or exceed $28,000,000. You can include in this sum all matters related to campaign contributions, hiring the relatives of the corrupt officials and prior legislators or, their cronies and up to 2 levels removed for such items as stock options, director appointments, and grants for any activities of the targeted officials as well as such items related to the funding of think tanks, charities, etc. involving the targets of your money


You can actually see how the CPI™ works and how valuable it is for making sure you do not screw up and get someone upset over the monies you offer in “bribes.” Take our friends at MF Global. It appears from all the indications and daily reports that close to $1.2 billion was “stolen” from client accounts. And yet, who has been arrested, charged or detained over such a serious matter? Of course, even when the monies that Corzine and others have used to “bribe” elected officials are returned, the effects of his intentionally or inadvertently following the CPI™ has kept him out of jail and has in fact allowed the allegedly “illegal” activities of MF Global to happen in the first instance.


Of course, modernly the prime example of someone who did not follow the CPI™ is Bernie Madoff and we all know where he is sitting right now.


The CPI™ is a valuable tool to use every day for future planning. It will give you the proper sense of how to buy and pay for any legislation you need. For someone not part of the corruption itself it will reinforce the need to plan for all worst case scenarios where the government is involved.  



Paul Owen

Copyright 2012

Squidbilly's picture
Squidbilly (not verified) Nov 13, 2016 9:13 AM

The dust has not settled and will only grow thicker. The JEWS who have created the mess we unconsciously inheritied from them while they were allowed to destroy our civilizations is now being rectified. They are being exposed finally and will be removed from all positions of power, particularly in government, education, media and banking. These filthy parasites have taken advantage of humanities natural order by attacking it's most vulnerable parts like a virus. They are so sickening that they have no concern about being caught in the act. These are not the kinds of humans we want on the planet with us, they are worse than ISIS.

AlbertthePudding's picture

So says the Biggest Loser!

AlbertthePudding's picture

Q: Where do the final results stand?

Is that with or without dead people and frequent and bussed in voters in the rotten boroughs of the inner cities.

Heroic Couplet's picture

1. Rank and file should already be listening for Mitch McConnell to support Trump on term limits and vow not to run again. Like that will happen.

2. Chris Christie removed from the Transition Team because he prosecuted the son-in-law's father for tax evasion and making illegal campaign contributions (doesn't matter which party).

3. Trump has no previous elected office or foreign policy experience. See #1 for making sure election campaign platforms get followed. If there has to be a couple to follow the Obamas, the Trumps afford a perfect comedy. Of course, don't laugh to loud, because after the Trumps, the next Democrat may be even more cringe-worthy.

Fathead Slim's picture
Fathead Slim (not verified) Heroic Couplet Nov 13, 2016 10:06 AM

"3. Trump has no previous elected office or foreign policy experience."

That's a feature, not a defect. Experience in such matters requires that the person drink the kool-aid, and become assimilated into the Jonestown congregation. A non-politician is exactly the correct antidote for the poison we've had in office for the past 4 generations.

"See #1 for making sure election campaign platforms get followed."

If you're referring to the first question in the above Q&A, remember that this is the Vampire Squid asking and answering the questions.

"If there has to be a couple to follow the Obamas, the Trumps afford a perfect comedy. "

Trump is no joke, and all politicians are cringe worthy. Trump's VP is cringe-worthy as are all the GOP gasbags who are circling in hopes of an appointment.

the grateful unemployed's picture

this is Hope and Change Republican style. too much McConnell is too much of a bad thing, most of the these long standing senators (think Reid) are better seen and not heard, they become a public embarrassment when they have the mic shoved in their face too often.

Christie was removed because the offramp closure debacle is going to get to him, sooner or later. (and he is not one of the beautiful people) campaign finance reform and term limits are dead. Trumps a RINO, and while that works during an election, its counter productive when you try to govern unless the other party has congress.

all we know for certain is that when Bush had the same setup he drove the economy in the ditch and his approval ratings were consistently less than half. gridlock works, its only when congress is PASSING new laws that things go sour. medicare D for instance.

i think he could build a vertical economy in america, but resistance to that is strong. it would work especially as transportation costs rise, with higher energy costs, lower demand will make it possible. less is more, where have i heard that?

south40_dreams's picture

No hog will willingly give up its place at the trough.  Expect the slaughter to be a "surprise"