Trump's Bite May Be Worse Than His Bark: Stockman Slams "Absurd, Dangerous, Stupid" Policies

Via Global Macro Monitor,

Excellent CNBC interview with David Stockman, President Reagan’s head of OMB, who speaks his mind and never holds back.    Some dismiss him as a perma-bear and doomsayer.

We certainly don’t, just has been a bit early, like every analyst and economist worth their salt.   His analysis and model are sound.

By the way, if you ever meet someone who claims they always top tick or buy every bottom,  and have perfect timing, run as fast as you can.

Moreover, the former “beltway boy wonder” doesn’t have to make his money trading and can maintain his conviction without going bankrupt or losing his career.   He will eventually be right.   It’s all timing, my friends.

Listening to him today, we respect him even more for his intellectual honesty.   We have always perceived Mr. Stockman as a supporter of the president, but we could be wrong.

He never allows his politics to warp his analysis.  Rare and refreshing.

Taken To Woodshed

He was famously “taken to the woodshed” by President Reagan for his statements in a 1981 Atlantic Monthly article, that supply-side economics — the backbone of the Reagan economic revolution – was a ‘Trojan horse’ that would ultimately benefit the rich.”

He laid it all out there today and held nothing back.

Massive trade war won't solve deficits, says former Reagan WH budget director from CNBC.

Money quotes from today’s interview *

  • Imbalances are not the result of bad trade deals

  • We have had 43 straight years of large and growing current account deficits, that is a monetary issue

  • A trade war is not going to solve it…let interest rates find their right level

  • The fact is, we are heading into a massive trade war in the world

  • Trump doesn’t know what he’s doing at all. He is making it up. He is a hopeless protectionist with a 17th-century view of the world

  • We have an absurd policy — dangerous, stupid. The worst that I’ve seen since my whole career started in 1970 under [President Richard] Nixon, and he did some crazy things

  • The market marches to new highs until it doesn’t

  • In 1990…the average tariff in China was about 30 percent, the average tariff in China today is 3 ½ percent. It is not an issue

  • What they [Trump administration] are objecting to is China’s policy of “no ticky, no washy.” In other words, if you want to come to China and do business, you have to be in a joint venture and share your technology

  • If somebody wants to go to China so they can come on CNBC and brag they are in a growth market then they ought to put up with the local regulations

  • Don’t start a trade war and throw the soybean farmer under the bus because of some big business lobby in Washington is whining about China’s terms of business

*the interview was concluded before the announcement of a 10 percent on an additional $200 billion of Chinese imports was published by the USTR after the market close.  

Tough words.

No Reagan Moment On Free Trade

Sorry,  Mohamed,  we love you but there will be no Reagan Moment” for International Trade.  We hope we are wrong, and we could be, but we don’t think so.        

Trump is no Reagan, the ultimate free-trader.   Larry Kudlow and Stephen Moore now talking tariffs?    This is not an administration looking to further trade, in our opinion, but one only to protect and coddle its political base. 

Trump’s triggers his base with words such as “free trade,” among others,  and blames much of their problems on the “bad trade deals” of previous administrations.   It works for him.  Why fix it?

But those who, like me, thought Trump’s bark would be worse than his bite on trade are having second thoughts about where all of this might lead.  – Dani Rodrik

President Xi Won’t Back Down

Moreover,  how in the world can President Xi, after consolidating power for life as the country’s ultimate strongman now back down and look weak to the Chinese people?   China has secured the high ground of multilateralism.  Even if it’s bullshit or not.   Furthermore,  the U.S. appears to be growing exponentially more isolated.

Nonlinear Dynamics

As we posted on Friday,  we are now in a nonlinear trajectory.  Things can unravel fast, or be put right quickly.   Maybe the Senate?   Nobody knows where this will end up.

We have all learned over the past 18 months that the president is capable of doing a 180,even in mid-sentence, and convince himself he held the position all along.  That unpredictability makes it a risky trade.

Markets In The Land Of Pharaoh

It does feel the markets are in Egypt, however.  The land of de Nile.

The post-war international order is more at risk of unraveling – and we are not saying its demise is imminent – than is currently priced.

Stay tuned.


takeaction Wed, 07/11/2018 - 10:48 Permalink

He has to say this...

Trump is in Europe kicking some ass....

Can't wait for the Putin photo op...

Another wonderful day ....more Dem/Lib heads exploding.  Should be an interesting news cycle again.  I just went over to CNN...and of course the headline is "Trump insults Allies".  Can these people EVER stop?

Billy the Poet Occams_Razor_Trader Wed, 07/11/2018 - 11:06 Permalink

In 1990…the average tariff in China was about 30 percent, the average tariff in China today is 3 ½ percent. It is not an issue

That shows that the Chinese used tariffs to protect domestic industries while they got up to speed and could compete against foreign imports. Then they reduced tariffs. That's exactly how this game is played and I see no reason why China's successful use of that strategy suggests that the US should not do likewise.

In reply to by Occams_Razor_Trader

helloimjohnnycat eatthebanksters Wed, 07/11/2018 - 13:33 Permalink

Stockman needs to shut-it-down and shave.

I respect his knowledge, but he's NOT the American savior he projects himself to be.

He & his wife hob-nob with elitist joos. Doing so seals his Fate.

The mofo'er is also anti-gun. Therefore, his splendid mind doesn't comprehend " shall not be infringed ".

He's a gaslighter's gaslighter and will never name the JOO !

Take it to the bank, he's a spook / controlled opposition.

In reply to by eatthebanksters

vladiki eatthebanksters Wed, 07/11/2018 - 17:48 Permalink

No. He sees way further than the market, which makes him a bad investment adviser because he's always 'too soon'.  The good advisors don't just see where the market SHOULD be, they take into account the "now" thinking of the average investor. 

But Stockman's wrong on this issue because he's thinking too narrowly i.e. about US GDP, which will be hurt by tariffs in the short term  Currently soybean farmers might be getting thrown under the trade war bus.  But for 25 yrs the US' manufacturing base has been thrown under the 'free trade' bus.  This bus was great for the top 10% and overall US GDP, but it's been destructive to the US as a whole.  Trump senses this and his trade war is right.  Total GDP is an absurd measure of economic wellbeing (ignores so much that matters and overrates so much that doesn't) and the sooner we stop worshiping it the better.  Average GDP/person is just as bad, because it ignores the 10%/90% skew we've seen, that has ripped the guts out of the country. 

In reply to by eatthebanksters

Dilluminati Pinto Currency Wed, 07/11/2018 - 11:30 Permalink

The 1% get 99% of the press coverage.  The 1% and their policies have destroyed American workers, take home ownership to new lows, pushed student debt through the ceiling.. and the 1% always blame someone else.  

Don’t start a trade war and throw the soybean farmer under the bus because of some big business lobby in Washington is whining about China’s terms of business

Ok Cunt.. name names.. what is the big business lobby you are referring too?  Can you name that 1% cabal?

Disgusting cocksuckers.. 

There he is smiling on camera saying the easiest trade is the deteriorating USA economy once we have the policy in affect.. cocksucker

In reply to by Pinto Currency

the artist blindfaith Wed, 07/11/2018 - 14:33 Permalink

 President Xi, after consolidating power for life as the country’s ultimate strongman now back down and look weak to the Chinese people?   China has secured the high ground of multilateralism.  Even if it’s bullshit or not.   Furthermore,  the U.S. appears to be growing exponentially more isolated.

This paragraph is idiotic...Strongman for life...Secured the high ground...U.S. isolated...

Where do you even start???

It is China that will find itself surrounded and isolated with the end goal of ratcheting down its power, influence and access to resources. 

We should all be shunning China simply on the grounds that it has a dictator...I thought they were bad? 

In reply to by blindfaith

shovelhead Pinto Currency Wed, 07/11/2018 - 11:50 Permalink

Evening out tariffs is a good thing but Stockman is correct. It won't change the trade deficit. That's a function of monetary policy but the bigger issue beyond that is simply buying more than you sell.

Add to that the Triffin dilemma with having a reserve currency that requires you to export money so the world can trade and you really end up with an insolvable problem.

But the heart of the matter is still spending more than you make. There's no business concern or household that can continue that without a day of reckoning, no matter how you fudge the numbers.

In reply to by Pinto Currency

Md4 Billy the Poet Wed, 07/11/2018 - 12:47 Permalink

They’re really only bitching now that they’re being called out on their mob-like tactics...for decades:

What they [Trump administration] are objecting to is China’s policy of “no ticky, no washy.” In other words, if you want to come to China and do business, you have to be in a joint venture and share your technology


And, it’s the stinking western corporate traitors that placed us, and first-world Europe, in this position.

Essentially, they paid the mob to play...because that was cheaper than paying American middle class workers (aka customers) first-world wages.

Escaping regulatory burdens, that China could give a shit about, was a big plus too. 

Of course, China is choking on the fumes today, but, oh well...

No matter how you slice it, it all comes back to more than four decades of traitorous, western corporate outsourcing.

All of it.

In reply to by Billy the Poet

Westcoastliberal Occams_Razor_Trader Wed, 07/11/2018 - 21:46 Permalink

Damn straight. All Trump is trying to do is achieve parity in tariff for you, no tariff for me, and neither of us can demand you include my Cousin in the deal as your local "sponsor".  McConnell's wife, Elaine Cho, is ass-deep in the Chinese backdoor deals through her daddy who's a big shot in China. He recently gave the couple between $5 and $30 million as a "gift".  She's secretary of something or other.

In reply to by Occams_Razor_Trader

Endgame Napoleon Four Star Wed, 07/11/2018 - 12:45 Permalink

Trump [might] be open to the ultimate free-trader philosophy. He mentioned the “no tariffs” option, throwing it out there. Don’t know how a no-tariffs option would affect farmers, but according to the linked article, Stockman grew up on a farm and likely does.

The no-tariffs option would not bring back 5 million breadwinner jobs and the potential SS contributions that American-in-name-only companies exported to racially homogenous, cheap-labor-laden China & Mexico. 

It is...not...clear that the current approach will, either, which is why most Deplorables want Trump to focus on immigration policy.

Even if manufacturing jobs came back to the USA, without halting illegal immigration, employers would just fill the jobs with low-paid illegal aliens, with welfare for US-born instant-citizen kids making it easy for them to accept low wages. They would fire them all when the SS Administration caught up with them 5 or 6 months later, hiring another batch of welfare-buttressed illegals.

Ticky / Washy: Okay, that is exactly what I wondered, but did not understand.

They keep talking about China opening up its “financial system” to American businesses, while also portraying this as an issue of national security and protecting trade secrets, not as an issue of bringing a high quantity of breadwinner jobs back to the USA to employ 101 million US citizens who are out of the workforce, 78 million self-employed gig pieceworkers and 42 million EBT-qualified citizens & noncitizens who are working part time to stay under the extremely low income limits for food stamps and other welfare programs. 

Reagan was the last Republican POTUS with the brass to critique the system of means-tested welfare and refundable child tax credits up to $6,431 that props up the part-time, in-substantially employed labor market of the globalist era.

Reagan predates this America Last economy. The Japanese, the main competitors of his era, did not compete based on rock-bottom-low labor costs. It was all tariff issues with them, whereas the US has lost millions of [jobs] to China. 

We no longer export finished goods, just raw materials for the most part, so the tariffs do hurt farmers more than any group since that is the kind of thing we export: live hogs and soybeans. Steel is one of the few things we export in quantity that requires some finishing by workers. 

It is interesting that Stockman predicted that supply-side theory would only help the rich.  

Stockman was right..............

President Reagan was wrong, but still had the admirable humility not to fire him. 

The part about Deaver, maneuvering behind the scenes to get him fired, casts a new light on Nancy Reagan, getting Deaver fired. It sounds like there was a lot of office cutthroatery. That ends up hurting imagery more than letting people with honest, thoughtful critiques make their arguments. If you have a solid argument to refute a critic’s position, it will win out in the end, but at least, you allowed the debate to occur. That is the way that intelligent decisions are made. 

Everyone takes sides, but in truth, there are many sides to complex issues. If you limit debate, you miss out on important information. 

Stockman characterizes this current situation, where the US is producing a dearth of breadwinner jobs, as a matter of “monetary” policy. 

I, too, am just a 17th century thinker, like President Trump, regarding the offshoring of jobs as the bigly problem. Or maybe, I, a Deplorable, am a true 17th-century thinker, while the Administration is just using tariffs to gain greater entry into China’s finance market. 

That won’t produce a large quantity jobs, not even low-wage back-office jobs for absentee moms with unearned income for womb productivity from spouses, ex spouses or monthly welfare and refundable child tax credits up to $6,431. The financial services fields are quickly automating, and American-owned companies already [outsource] a ton of that work to cheap-labor Asian countries.  

Economic strength is symbiotic to military strength. 

That leaves the national security argument, albeit Stockman seems to regard China, “the red ponzi,” as not as much of an economic threat as we Deplorables think it is.

When companies share proprietary information, they strengthen other economies, while weakening ours, especially if the information could have military applications. 

When companies take production abroad, most of the jobs and the money from that enterprise circulates in overseas economies, helping them to build up their militaries. 

I am all for farmers and see where Stockman is coming from on that issue, especially the part about opportunities for American-owned companies to expand [inside of China] put ahead of American farmers and their exports to China. 

But American farms are no longer as independently owned. They are mostly big corporate farms, and big government picks and chooses which farms to subsidize, more or less.

If trade agreements are not the problem—with monetary policy alone responsible for Goliath slewing David—why did the small farmers in America & Mexico suffer so much after NAFTA was signed by Bill Clinton and upheld by subsequent Globalist Uniparty administrations?  

In reply to by Four Star