Is This Trump's "Modest Plan"?

Authored by Dr.D via Raul Ilargi Meijer's Automatic Earth blog,

With all the talk about the bubble market, people are once again saying Donald Trump is a fool, he should never have taken credit for a Dow that’s about to collapse. In addition, how does he think he can get away with claiming we have a great economy made greater? He said in the election the economy was terrible and the Dow was a bubble, that’s why he won.

 

https://www.zerohedge.com/sites/default/files/inline-images/20180124_trump_0.jpg

But hold on: you have to remember, they’re politicians; they may be dishonest but they’re not stupid.

Let’s try a scenario to see what they’re thinking:

We have a situation in the U.S. where 100 million people are out of the workforce, the real economy is on life-support, debt is crushing, and monetary velocity is at an all-time low. The Fed’s every effort at market-rigging, lowering rates and pumping in money, bailing out the banks and giving unearned interest for Fed deposits have run up both the housing market and the stock market, neither of which is their legal mandate. If either one goes higher, they’ll pop as workers, particularly millennials, have no income to buy houses, and stocks are levitating on just 5 insider-paid FAANG stocks.

It’s untenable. However, if either falls, the collateral that upholds the whole system will fail, margins will be called, the housing market will fall, and there will be an instant Depression… You know, more than the 100 million out of work Depression we already have. A Depression that makes Congressmen and government workers lose their profits and 401k’s instead of just turning students to open prostitution, and mass opioid death, and starving people in Oklahoma – you know, a Depression that finally hurts someone who matters.

Since this is self-evident and unsustainable, isn’t Trump just stepping in it by pushing all the same policies as Obama? Not necessarily. Look at what matters to him. A tax plan, and barely, not one he liked, but look at what he settled for: return of foreign profits abroad. Why? Large as it is – and it’s already creating long-withheld bonuses – that’s not enough to turn the dial. But that’s a card he wanted. Tax policy and a high stock market. What else?

Well, we have a crippling high debt, easily 100% even 200% of GDP. With that weight, nothing can move, no way to win. Pensions also are nearly dead, along with insurance companies; the high Dow is all that’s saving them from bankruptcy. What else? Well he was interested in health reform but was willing to let it remain for now. He wrote deferrals but not pardons for 5 banks showing he’d like to keep them functioning for the moment. He wanted to increase the military.

Certainly the only other promise was to create jobs and economies again, in a way saying the few protected industries: Finance, Health Care, and Military would have to become a smaller % of GDP, so those dollars could be returned back to Main Street. But we just said those three aren’t happening.

So. What if instead of pulling money from intractable lobbying groups he got new investment money from abroad? We saw this initially with Carrier and Ford and more recently with Japan. But it’s not enough and he knows all this; they all do. How do you solve the problem? How do you get more?

Calling all 1st year econ students: how do you attract capital to your country? With higher rates. As the US 10-year breaks out above 2.6% you’d have to think that’s attractive. Attractive investing in a bankrupt nation that’s barely moving? It does if you’re a company that must maintain legal investment ratios and you’re getting 0% in Japan, and negative rates in Europe, both with economies as bad or worse.

But aren’t rising rates bad? The Fed model raises rates to clamp down on the economy. Money will leave the stock market and go to bonds. Housing prices will fall as the monthly cost increases. Cats and Dogs living together….except it isn’t true.

Let’s go down the list:

1. Trump starts with plausible seed corn, a billboard sign: a tax cut and a few trillion overseas to start economic motion.

2. If the Fed raises rates, that will draw in trillions of world capital Trump wants, enough to turn the dial and really matter.

3. Enough money flowing into the U.S. will create demand for the US$, and the US$ will rise. This part has to work. Be flashy, attract attention. Go big or go home.

4. The US$ rising will attract foreign buyers into U.S. investment and together the stock market will counterintuitively rise.

5. The Fed will detect overheating and raise rates again and again in a reinforcing cycle, drawing capital to only the U.S. and suffocating the world.

6. The massive investment re-industrializes the U.S. to some extent while the high US$ gives some relief to Main Street.

7. Foreign buying, better jobs, and low exchange rates hold off the housing collapse, while all the mortgage bonds are also sold overseas.

8. Emerging markets are hammered by the high US$ and fail, driving ever-more capital to safe havens like the US.

9. Ultimately, the U.S. does what all reserve currencies do and fails LAST.

See why they think they can get away with this? The U.S. can still ravage the world, and Trump can, in fact, call it his “success.” …Just like all the Presidents since Nixon.

But this is history, and it never ends there.

10. The whole world, strangled by the US and its dollar have no choice but to reject the US system entirely in private contracts and move to an alternative.

11. We now have at least three alternatives: the CIPS/Yuan banking bloc, gold, and cryptocurrencies. They aren’t exclusive: the most likely outcome is a gold-backed trading note priced in Yuan on a blockchain, perhaps in the Shanghai Exchange.

12. Being entirely too high the US$ ultimately cripples the U.S. as well, but the alternative currency the world creates becomes the lifeboat to escape. Let’s be simple and say it’s Bitcoin (it won’t be): Bitcoin hits John McAfee’s $1 million. What do you call it when a currency rapidly becomes worth 1/10th, 1/100th, 1/1,000,000th of the standard? Isn’t that hyperinflation?

13. The U.S., like every nation since Adam Smith, defaults on its $20T in $ debt – and all its internal consumer, corporate, and pension debt – using “hyperinflation” of the dollar. New twist is that, instead of gold, it hyperinflates vs. cryptos or the new world exchange standard as planned in 1971 and publicized in 1988.

14. The reset occurs, no one dies (in the U.S.), supply chains are maintained, oil flows, and the economy stops being a feral, diabolical means of theft and control and returns to being a fair, voluntary exchange. For now.

That’s not to say they’ll succeed, but this is why they think they can go this way and win at it.

What does the Trump world look like?

1. Stock market rose, like he said.

2. Manufacturing returns, reindustrializing a hollow nation and allowing the country to catch up to the stock prices, like he said.

3. Unemployment drops, like he said.

4. Crime is reduced and the cities are improved, like he said.

5. This helps win the black vote, snatching the rest of the Democratic base and locking them out for years, like Bannon said.

6. Economic growth normalizes the banking/medical oversize, like he wanted.

7. Free, untracked money for bribes and illegal cover end and law and order returns with fair exchange, like he said.

8. The U.S. is unwelcome overseas, and the breaking of bonds re-sets the multipolar world, where the U.S. is just one trading nation among many, like he said.

9. Without the money of empire the military returns home, like he said.

10. The world is pretty mad at us and that renewed military came in handy. That’s okay, they’ll be consoled that the economy now works and the U.S. can no longer start wars and act terribly.

What does the world look like after? A lot more like it was before 1945. You know, back when we were great and before we got terrible.

Again, not to say this WILL happen, but you can see that it CAN happen, and they are now in control of most of the levers required. From their rhetoric, you can see the glass darkly that this is what they find a priority, a possibility, and therefore a doorway out. In addition, downsizing and re-establishing honesty will not allow their opponents to wiggle out and reverse it.

Why wasn’t this done before? My guess is that a) previous planners thought with a little more effort they could take over the world, as seen in the Arab Spring plan that would culminate in the capture of Iran, the only remaining oilfields on the planet, and b) given the world’s first entirely fiat financial system, it was too complex and disruptive to return to a gold standard.

Without a lighting fast crypto base, banking and trade would fail and millions would die. Only when the one was burned out and the other made available could this move be attempted. Watch and see.

Comments

Winston Churchill Dratpmurt Wed, 01/24/2018 - 21:43 Permalink

He's good at buff and bluster, when that doesn't work he whines like only New Yorker's can.

I've seen it firsthand,its not pretty.No he has no plan, but Red Shield does, and it isn't the above gobbleygook

and wishful thinking.The USA would be lucky to just be shunned by the RoW in that scenario.SoP is to

kick the fucker when he's down, just like Uncle Scam does.Don't expect better.

 

 

In reply to by Dratpmurt

Jim in MN Wed, 01/24/2018 - 20:50 Permalink

What if more tweets + less bombs = world peace and doubled economic growth?

How stupid is that?

(World Bank:  Global economy recently clocked the highest growth quarter since 2010)

(Down to less than a handful of hot wars globally)

(Billions of people LEFT THE FUCK ALONE to make money)

 

People just can't seem to get out of their comfort zones and actually look at the DATA.......ferchrissakes

ejmoosa Wed, 01/24/2018 - 20:50 Permalink

It's great that the US corporate profits from overseas are returning home, because the US trade deficit dollars have been coming back for years buying the country out from under our own feet.

gatorengineer New_Meat Wed, 01/24/2018 - 20:59 Permalink

The Hedge is really getting articles written by Morons...  If you cant smells something much larger afoot, then well you have your nose way to far up an Orange Ass. 

With rising rates, and a cheap dollar the carry trade should be booming.

With repatriated dollars the dollar should be rising.....

Its not....  Why....

Simple Answer

Brussels is Deepstate and the Deepstate say Brussels no buy US Tbills no more.  Just a message brought to Trump by our sponsors not to get carried away with his Schtick and think he really is in charge.

In reply to by New_Meat

steve2241 sheikurbootie Wed, 01/24/2018 - 23:23 Permalink

I believe the thinking is that higher rates bring down the stock market.  The money fleeing the stock market floods into government bonds, the 500-pound gorilla in the room, which dwarfs equities.  In the end, the success of a national government is determined by the value of its national debt.  Investors cheer on governments that hand them capital gains on their bond investments, like the environment that we have currently.  The cheering is going to become deafening. Higher bond values - lower interest rates, that's the game plan.  That chain reaction starts with higher rates.

In reply to by sheikurbootie

OverTheHedge Juggernaut x2 Wed, 01/24/2018 - 23:30 Permalink

According to mad Marxist Varufakis, Volker hiked interest rates to insane levels not to combat inflation, but to attract investment from the rest of the world. Eurodollar recycling, to replace the dollar recycling from the good old days when the US had a surplus (being the only manufacturing country left standing after the war). Given that interest rates are no longer a thing, the eurodollar recycling has stopped, hence the economic failure. This article would suggest that rebooting the capital investment by increasing interest rates would be a good thing for the US to do. I imagine the BIS probably doesn't agree, nor do all the Davos Denizens, whose international Holdings will take a huge hit. The early 80s were probably a bit grim in the US, but they were appalling for everyone else, as all the available capital rushed to New York, instead of playing at home.

In reply to by Juggernaut x2

LetThemEatRand Wed, 01/24/2018 - 21:01 Permalink

The only thing that would bring the US economy back is pain.  A lot of pain, including giving up the dollar as the world reserve currency and putting an end to globalism.  And ending the Fed of course.  If he were going to do any of these things, he would have started the process already.  He's already in the 2nd quarter.  What I see is rearrangement of deck chairs.

To change the course of this ship in a meaningful way we need a President who doesn't care if he is hated by just about everybody for maybe 10 or 20 years after his term ends, and who would be satisfied with being held up by history as the greatest President long after he is dead.  Trump ain't that guy.

hedgeless_horseman LetThemEatRand Wed, 01/24/2018 - 21:06 Permalink

 

He hasn't just rearranged the deck chairs.  He has advanced the throttle. struck up the band, and ordered MOAR chocolate cake...

During the week of Christmas, the Federal Register announced that the Trump Administration had issued waivers to Citigroup, JPMorgan, Barclays, UBS, and Deutsche Bank - all megabanks facing charges of fraud and corruption.

https://www.zerohedge.com/news/2018-01-15/no-one-watched-trump-pardoned…

In reply to by LetThemEatRand

lester1 Wed, 01/24/2018 - 21:04 Permalink

Bitcoin is dying. Demand is drying up. Other cryptocurrencies are rising faster and taking away market share. Bitcoin is basically AOL.

OverTheHedge lester1 Wed, 01/24/2018 - 23:19 Permalink

My crypto theory is that as each coin reaches a plateau, the fast money looking for the ten-bagger moves to the next shiny coin, leaving the last, greater fool holding the bag, who then can't sell without taking a bit, so will hodl instead. Each successive coin that peaks will peak at a lower level, because of the crypto players stuck in the previous plateaued coin. Lower highs every time, until the very last coin can barely remain erect long enough to be noticed. Margin calls or real life will put an end to the nonsense at some point.

Of course, this presupposes that the bankers don't want to win big on one of the coins, because they have unlimited free money, which is cheating.

In reply to by lester1

turkey george palmer Wed, 01/24/2018 - 21:13 Permalink

Bwwwaaahahhahahaaaaa.  We are fucked seven wys from sunday.  Ain't no gold for Americans dumbass. Like what value is interest on a defaulting currency.

Who had the billions and billions of dollars to invest?  Japan? China? You believe Korea will step up and shoot themselves. They may as well buy a lead swimsuit.

Cabreado Wed, 01/24/2018 - 21:57 Permalink

Unfortunately We are at the point where the People have failed... and there is absolutely no mass of the People who understand, let alone care.  

We're at Control vs Ignorance.

It knows no social, or economic class.

This is the Rise of the Self-Absorbed -- the Narcissist and Sociopath -- to a critical mass of places of influence and control.

The only antidote is a vigorous protection of the Rule of Law.

It's not that difficult.

Read it and weep.

Rex Andrus Wed, 01/24/2018 - 22:32 Permalink

The US government would be 100x more productive and cost 1000x less building infrastructure on Steyer's private prison chain gang. Steyer must be related to all the prospective cons to pass this up.