It's The Trump Slump - But David Stockman Says "Don't Blame The Donald!"

Authored by David Stockman via Contra Corner blog,

The are few snarkier defenders of the current rotten financial status quo than Ben White of Politico's Money Morning. So it's not surprising that he is out this week with the latest Trumb-o-phobe meme from Swamp Dweller's Central.

To wit, the renewed stock market swoon is purportedly all the Donald's fault owing to his unhinged tweet storms, protectionist trade initiatives and attacks on the casino's sacred cow of the moment, Amazon:

WELCOME TO THE TRUMP SLUMP - President Donald Trump is killing his own stock market rally. The president's tweet storm attacking Amazon and his protectionist trade actions against China and other nations helped crush the stock market on Monday with the Dow falling over 700 points in late afternoon trade before closing down 458, or close to 2 percent.

The tech-heavy Nasdaq fell even further, led by a five percent drop in Amazon after the president ripped the company over its delivery deals with the United States Postal Service. The Dow, Nasdaq and S&P are all now down for the year. The Dow has plunged 11 percent since its all-time high of 26,616 on Jan. 26, entering official correction territory.

Traders, money managers and economists on Monday laid much of the blame for recent declines on Trump, who spent most of 2017 bragging on a near daily basis about the massive run-up in stock prices that followed his election and the passage of sweeping corporate tax cuts.

The above is just unadulterated rubbish, of course. It's a tribute to the mindless anti-Trump bias that dominates the Imperial City press and the context-free Recency Bias that passes for financial analysis.

On at least this matter, the Donald is definitely not guilty because he hasn't been around nearly long enough to take the blame or the praise for anything related to the economy. The phony stock market boom has been gestating for three decades owing to central bank monetary madness; the up-leg since election day reflects nothing more than the final phase of an horribly metastasized financial bubble that has now reached its sell-by date.

In fact, our clueless medicine show impresario has confused the last gasp of the robo-machines and dip-buyers for an endorsement of his cockamamie brew of protectionism, nationalism, populism and unhinged Keynesian borrow and spend. So rather than puncturing the bubble he accurately identified during the campaign, he'll soon be dripping with implosion splatter from comb-over to toe.

Likewise, the market's post-election rip has nothing to do with a putative Trump economic boom because there hasn't been one. A 2.0% or lower real GDP growth rate is now virtually baked into the cake for Q1 based on the economic releases to date. That would amount to a $75 billion gain over the Q4 annualized level of real GDP.

Accordingly, the first five quarters of the Trump Economy will have generated an average real GDP gain of $102 billion per quarter. Then again, during the previous three years (2014-2016) the quarterly growth rate was $99 billion per quarter.

We'd call that a distinction without a difference. Indeed, the notion that there has been some-kind of Trump fostered economic acceleration is, well, Fake News.

In fact, what we have is a plodding business expansion that is freighted down by debt and financial engineering---both gifts of a rogue central bank that has been inflicting harm on the main street economy for decades.

As we have frequently demonstrated, the C-suites of corporate America have been strip-mining their cash flows and balance sheets in order to goose near-term share prices and stock option packages, thereby drastically short-changing investments in long term productivity and growth. Since the turn of the century, in fact, upwards of $20 trillion has been shunted into unproductive M&A deals, stock buybacks and leveraged recaps of every dimension.

Not surprisingly, this massive diversion of cash and capital into Wall Street has left main street high and dry. What counts for growth and productivity, of course, is net investment after inflation and replenishment of capital consumed in current year depreciation and amortization.

As the chart makes clear, there hasn't been much of it. Real net investment in 2016 was still 28% below its level in the year 2000. And relative to real GDP, the story is even more dismal: The average net investment level in 1999-2001 computed to 3.8% of GDP, whereas during the most recent three years it averaged only 2.5% of GDP.

Given this dismal long-term trend in real net investment, it is not surprising that real final sales growth since the pre-crisis peak in 2007 has slipped to just 1.3% per annum, or only one-third of its historic 3.3% trend. So even if the Donald had an honest money/pro-growth agenda, which he most definitely does not, it would be nearly impossible to quickly extricate the US economy from the low growth rut shown in the chart below.

And that get's us to the real cause of the so-called Trump Slump. What's happening is that the Keynesian doctors at the Fed have been taking the boys and girls in the casino off their meds, and the latter are now beginning to feel wobbly.

While the Donald's tweets and policy lurches have been the proximate triggers for the recent plunges, the real cause is the reluctant recognition in the casino that all the Fed's epic money pumping has failed to ignite any real economic acceleration, and that an epochal tightening shift in monetary policy is now actually happening---both here and abroad.

Indeed, we think the punk number that will be added to the bar chart below when the initial Q1 results are posted by the Commerce Department in three weeks will be the straw that breaks the camel's back.

After that, the business expansion will be bumping up against its 1990s tech era expansion record of 119 months-----even as the headwinds of steadily rising bond yields, faltering growth in Europe and Asia and a sharp slowdown of the post-coronation economy in China gather intensity.

The truth is, the Donald has done absolutely nothing to help the US economy since January 20, 2017, but has piled on immense harm by stumbling into the most irresponsible fiscal policy in modern history.

Yet with the Federal deficit now heading toward $1.2 trillion or 6% of GDP in the year ahead, there is no way to avoid a conflagration in the bond pits. The resulting "yield shock", in turn, will finally puncture the Great Bubble that has been inflating since Greenspan panicked at the time of the October 1987 stock market meltdown and launched the present era of monetary central planning.

Still, when one arm of the US government is borrowing at a $1.2 trillion rate at the tippy-top of the business cycle, while the central banking arm is dumping bonds at an annual rate (i.e. $600 billion) which exceeds the level outstanding as recently as 2003, you are talking about a fiscal/monetary collision like never before.

Needless to say, there is not a chance that the debt-bloated US economy can weather that conflagration unscathed. Indeed, it can be well and truly said that the entire nine year so-called recovery has been wasted. If nothing else it was at least a chance to modestly deleverage the US economy----so that monetary normalization could occur with a minimal amount of breakage and disruption on main street.

To the contrary, there has been no deleveraging at all. Compared to the modern 100 year norm (from 1870 to 1970) of a 1.5X debt-to-national income ratio, the national leverage ratio now stands at 3.47X and that's virtually no change from the 3.58X level that triggered the financial crash in 2008.

Stated differently, had the US stayed on the straight and narrow, and had it not launched into a rolling national LBO over the last 35 years, the total public and private debt outstanding would now be $30 trillion, not the $68 trillion shown below from the Fed's flow-of-funds report for Q4 2017.

The irony, therefore, is that the main street economy is failing because it is lugging around $38 trillion of extra debt---yet its supposed to be rescued by the very King of Debt.

We'll take the unders on that one, but also note that the Donald inherited an economy that was leveraged at 3.49X national income in December 2016. That's not even a smidgeon of difference from where we are now.

So don't blame the Donald for the impending day of reckoning. He inherited the current debt-bloated monetary deformation.

And like all the Presidents before him---- since Ronald Reagan got bamboozled by Wall Street into abandoning his desire to return to a Bretton Woods style hard money standard----he has no clue about how to avoid the financial crack-up which lies around the corner.



During our appearance on the Cavuto Show today on Fox Business we expanded on these very same points.


mobius8curve Wed, 04/04/2018 - 21:24 Permalink

This slump has absolutely nothing to do with the Trump and everything to do with TPTB phasing out cash as they phase in a crypto riding on the blockchain riding on the internet accessed by your I Phone accessed through your biometrics:

Then the beast system will control who can and can not buy and sell:

Revelation 13:15-17  And it was given unto him to give breath to it, even to the image of the breast, that the image of the beast should both speak, and cause that as many as should not worship the image of the beast should be killed.  (16)  And he causeth all, the small and the great, and the rich and the poor, and the free and the bond, that there be given them a mark on their right hand, or upon their forehead;  (17)  and that no man should be able to buy or to sell, save he that hath the mark, even the name of the beast or the number of his name.

Its a 7 year plan:…

mobius8curve beepbop Wed, 04/04/2018 - 22:10 Permalink

Wow take a moment to read those two links as in many ways we are closer in belief than you think:

Romans 2:28-29  For he is not a Jew who is one outwardly; neither is that circumcision which is outward in the flesh:  (29)  but he is a Jew who is one inwardly; and circumcision is that of the heart, in the spirit not in the letter; whose praise is not of men, but of God.


In reply to by beepbop

mobius8curve beepbop Wed, 04/04/2018 - 22:24 Permalink

So what your saying is that the king of Syria had all 12 tribes DNA tested to make sure he only drove out the tribe of Judah but left the other 11 tribes in Elath:

2 Kings 16:6  At that time Rezin king of Syria recovered Elath to Syria, and drove the Jews from Elath; and the Syrians came to Elath, and dwelt there, unto this day.


In reply to by beepbop

silverer uhland62 Wed, 04/04/2018 - 23:10 Permalink

These charts scream something else many miss: The real decline in productivity. There is a human factor here. One that models don't include. It's the effect of a decline in the human spirit. The onset of cynicism. When a decline in productivity was first reported, the government should have slammed on the spending brakes immediately. Those reports were totally ignored. Americans, in their heart of hearts, must intuitively know that if their government can no longer screw it out of a foreign country, they'll soon be coming back home to hold out the tax basket for "donations". It makes a patriot want to just sit down and stop trying. After all, what's the point of taking up music lessons when you know you'll be playing to a sinking ship?

In reply to by uhland62

August silverer Thu, 04/05/2018 - 00:06 Permalink

>>>It makes a patriot want to just sit down and stop trying. 

About the only things a patriot can do these days is maximally withdraw from the "national economy", or take one's life and energy to some other country. 

My own solution has been to "retire", though I am a healthy, highly skilled, conscientious doctoral-level worker. 

In Modern Amerikan Society... fuck economic participation, and fuck work.

In reply to by silverer

Ron_Mexico silverer Thu, 04/05/2018 - 10:57 Permalink

"People disagreeing everywhere you look
Makes you want to stop and read a book
Why only yesterday I saw somebody on the street
That was really shook
But this ol' river keeps on rollin', though
No matter what gets in the way and which way the wind does blow
And as long as it does I'll just sit here
And watch the river flow"

Watching the River Flow, Bob Dylan

In reply to by silverer

jin187 mobius8curve Wed, 04/04/2018 - 22:17 Permalink

There's almost nothing any president does that has a direct and immediate effect on the economy other than taxes.  Blaming the guy that's currently in office is usually just a political ploy from their enemies, especially if he hasn't even completed a full term.  Same goes for all presidents.  I got a similar laugh from all the people blaming Obeezy for their economic woes 6-months into his first term.  As if he just went around on his first day, telling businesses to fire people and repo houses.  Hell, as much of a meme as it is at this point, there's probably Bush policies that are just now starting to really take effect.  The Obama depression will probably be in a year or two, and we'll blame it on Trump.  The Trump recession will be in 2024, and we'll blame it on Zuckerberg, or Oprah.

In reply to by mobius8curve

DownWithYogaPants Jack Oliver Thu, 04/05/2018 - 08:24 Permalink

Don't be naive.  Before the election when they thought Shrillary would win it was "ooh we gotta go slow on rate hikes".............

.........then when Trump won they said "oooh noes we gotta go fast on rate hikes".

And so they have been raising the discount rate as fast as they think they can without being noticed that they are crimping everything.  

I knew when they made this about face that they had decided to sabotage Trump.  And the muppets will fall for it.

In reply to by Jack Oliver

Oldguy05 Wed, 04/04/2018 - 21:32 Permalink

Our President called out the bubble while campaigning. It really depressed me when he then took credit for it's further inflation. Worst call he's made so far! He should have called it for what it is and what he said it was instead of taking credit for it. He's now the financialists patsy. When it bursts he'll be blamed even though he had next to nothing to do with it.

Endgame Napoleon Oldguy05 Wed, 04/04/2018 - 22:08 Permalink

It is not just the stock bubble and the less-than-half of US citizens who own stock. It is the mass underemployment of citizens that Trump should not have denied. After winning, he should have kept railing against the fake BLS numbers and the rigged labor market that he inherited. 

Since Stockman aptly points out the low-net-investment issue, which is ignored by all of the stock-obsessed types, I do not see why he is lamenting Trump’s populist economics. It is the attitude of putting America First that might lead to more net investment in this country.

Net investment is probably what Trump is trying to promote through his economic nationalism, albeit maybe without getting these American-in-name-only companies to do anything but buy back their own stock. We need for them to invest in American manufacturing. 

In reply to by Oldguy05

DuneCreature Wed, 04/04/2018 - 21:32 Permalink

No wonder Trump can't get any traction.


~~~~)))   HEADS UP! - SES Skullduggery Below   (((~~~~


Here is a PERFECT example of how the Evil SES Pirates have TAKEN OVER the White House so that president Trump CAN NOT get anything done. ............. Ever.


Remove the unconstitutional 9000 Senior Executive Services (SES) members


Notice the URL of the above WH petition. .... There is a YouTube redirect tacked on the end of the URL. ....... You don't notice it because the address is so long it is out of your address bar to the right.


Go to =


Check the WH website for yourself. .. Some IT genius (SES probably) has allowed redirect to be added to the petition address posted there.


Trump will never see that petition because the signatures have been BLACK HOLED on some look-alike YouTube page. ..... It won't matter if there are 500,000 sigs.


Live Hard, Trust No One In Washington DC To Do the Right Thing Especially A SES Bozo, Die Free


~ DC v8.8

DuneCreature Oldguy05 Wed, 04/04/2018 - 22:27 Permalink

I didn't notice it either until someone complained about how it was dragging them around on the redirects and eating bandwidth.

If I had Trump's Email addy I'd send him the heads up.

We should get a Mungie-gan on the petition at the very least.

Live Hard, It Loaded Very Fast For Me First Time There, Die Free

~ DC v8.8

In reply to by Oldguy05

Curiously_Crazy Wed, 04/04/2018 - 21:57 Permalink

Everything the mainstream financial analysts say is bullshit and always has been. They always try to find some static reason as to the state of affairs and will use anything to do so. In this case they might be using Trump as a factor, but if it wasn't Trump it would be someone or something else. They're just pulling at straws as always.

For example I'll hear something like ".. following the fall on wall street the ASX has dropped by..." with no mention of the fact BHP or RIO has mothballed a few billion in mines. That shit's to complicated for sheeple, they want an easily identifiable reason even if it's totally made up.


Yen Cross Wed, 04/04/2018 - 22:00 Permalink

  Ooops, the 10 year is creeping higher.

U.S. 10Y  2.808  +0.018   +0.65%

Not good for equities, unless we {don't have stagflation} I love fucking with the worthless, bean counting, sell side, ass clowns.

 The flows are all central bank based at the current moment.

  The BoJ, Kampo, Mrs. Watanabe, Postal System, GDP, Politicians, are all shitting their knickers right now.

  What a fucking farce! Once again the $usd barely budges, and the usd/jpy goes ballistic again.

 This is going to be such a good short in the near future. [like 12-24 hours]

Herdee Wed, 04/04/2018 - 22:11 Permalink

I say, Audit the Fed, get rid of it and let Treasury handle the Currency. It's time for a change of mindset to bring about fiscal responsibility. It could actually stop a lot of this endless war.

Cabreado Wed, 04/04/2018 - 22:41 Permalink

Now that it's all about Trump, defending him or demonizing him (with reckless disregard for the Rule of Law), it's pretty clear that We're much further down that rabbit hole of... No, in fact, We don't know how to keep the Republic.

The onus is on the People, per design and as prescribed, and the People have failed.

Yen Cross Wed, 04/04/2018 - 23:44 Permalink

  What's up with all this " Trump Slump" hoopla?

   Last I checked, his ratings were close to 50%.

  What exactly were TOTUS Obungas?

 I don't have time for this shit!   It's like Watching commercials, with pretty brain dead girls.

  I'm about 20 seconds away from cancelling cable TV. never watch it


  Much better ways for secure feeds, over the webs.

  Women, pftt.  They don't exist.

SuperCycleBear Thu, 04/05/2018 - 03:45 Permalink

The big rally in the US equity market was accompanied by a 20% fall in the USD since the Donald ascended to the throne. The sell off this year is in response to the dollar not falling anymore and people anticipating higher rates from the Fed (and thus a stronger dollar down the track). But I think that isn't going to happen, we will see 2008 all over again as credit dries up, big names fail and debt deflation takes off. Not a time to be long bonds.

francis scott … Thu, 04/05/2018 - 04:23 Permalink

The slump we're in now can be traced back to the

subprime mortgage bubble and everybody knows

that Alan Greenspan is responsible for that and

everything that happened since.  


But Al has a get out of jail free card and doesn't care.

haruspicio Thu, 04/05/2018 - 05:16 Permalink

Trump claimed he caused the rally...and so he is responsible for the fall. The recent fall has been caused by his stupid reckless macho policy of starting a trade war with China. He's a total dickhead.