EconMatters: Will President Trump Trigger a Recession?

Saturday, June 11, 2016

Will President Trump Trigger a Recession?

BALTIMORE � It is a bright summer day outside. A dry breeze sweeps down Cathedral Street and blows away the hot, humid air.

It is hard for us to imagine that anything bad could happen today. But bad things do happen � even on nice days.

The weather was fine when General Custer rode out to the Little Bighorn, too.

Home of the Brave?

Over the weekend, we worked at putting up a board fence � with half-round treated posts and four 6-inch-by-5/4-inch boards.

It was grim work. On a small farm, nothing works as it should. The augur got stuck on a root and sheared a bolt� and the tractor slipped on the greasy clay.

After a few minutes, our shirt was drenched. Ticks were already crawling up our legs. What�s worse, we barely made a dent in the job. In two days, we only got about 20 posts in place� with 130 to go.

Progress was slow. But at least it was real.

We were thinking about cowardice� the kind of cowardice that runs rampant in the Home of the Brave.

The voter, the patriot, the investor, the churchgoer � there are few Muhammad Alis among them. [See today�s Mailbag below for more on Ali.]

Many readers are annoyed with us. Ali was one of the few real heroes of the Vietnam era, we said. How could we believe it?

Ali challenged the system. He said what all of us must have thought: None of us had a real quarrel with the Viet Cong.

But the typical man hides in solemn conceits and flattering fantasies. He would rather die than challenge the system.

He believes that he is running the country� his sons and daughters, protecting it, are heroes� the Fed will make sure nothing goes too far wrong in the economy�

And as for God� he�s always on our side.

Culp�s Hill

An expert tells us that the world�s climate is changing. He says he cares. It is not that we don�t believe him; we just don�t know what it means.

Is it good? Is it bad? Will it spoil a picnic? Or increase grain harvests? Is it a fence or a fantasy?

We don�t know. We know only that the sun is shining, right here, right now.

You put up Old Glory on Memorial Day; you remembered those who died in the service of their country.

Yes, of course, you did. But who and why?

Did you remember the soldiers who fought for the 1st Maryland Infantry, CSA? Or the Yankees who killed them?

On a hot summer day in 1863, in the fight over Culp�s Hill near Gettysburg, the Marylanders were ordered to attack. Their commander, Brigadier General Steuart (a distant relative) protested. It would be suicide, he said. Then, he put his head in hands and cried: �My poor boys!�

More than half were killed.

Which side are you on� or is he on? What �country� do you serve?

Manhattan? Death Valley? The rednecks of South Georgia? Or the home decorators of Marin County? Blue states or red states? Fundamentalist Christians or fundamentalist Muslims?

Watch and Wait

There was not much forward momentum in the U.S. stock market yesterday, either.

Still, stocks remain near an all-time high.

Fed chief Janet Yellen reassured investors. If rates rise, and stocks tank, it won�t be her fault. She�ll bide her time before hiking rates.

And so, we remain in �watch and wait� mode.

It is one of those things economist Herbert Stein must have had in mind. As he famously put it, �If something cannot go on forever, it will stop.�

The Fed cannot stay in a permanent state of emergency. It will have to come to an end sometime.

What is amazing is that it hasn�t come to an end already� and there�s no telling how much longer it will continue.

In the meantime, the claptrap flows, like beer at an Orioles game.

Trump Risk

One of the most prominent (among many) purveyors of myth and fraud is MIT wunderkind and former U.S. Treasury secretary Larry Summers.

Writing in the Financial Times � a bastion of narrative delusion � he takes aim at the presumptive Republican presidential nominee, Donald Trump.

There are many good reasons to think Trump is a mountebank, but none of them seem to occur to Mr. Summers.

Instead, he refers to the �Trump risk,� which he believes measures the damage that Trump would do to the U.S. economy if he were elected.

�The economic consequences of a Trump win would be severe,� claims Mr. Summers in the headline.

But he has no way of knowing what the consequences would be, let alone if they would be severe.

Would they be worse than if Ms. Clinton were elected?

No one knows.

�If he is elected, I would expect a protracted recession to begin within 18 months.�

Huh?

Look at the numbers. Over the past 12 months, U.S. GDP growth has been falling steadily, quarter after quarter. From 3.9%� to 2%� to 1.4%� to 0.8%.

Within 18 months there should be a protracted recession no matter who is elected to the White House.

Convenient Lies

Mr. Summers also picks up Hillary�s theme: It would be unsafe to have Mr. Trump in charge.

�Who will rest secure with President Trump controlling the Federal Bureau of Investigation and the Central Intelligence Agency?� he asks.

He�s got a point.

But wait, no one should feel safe anyway � no matter who is in the White House. These agencies are plainly out of control� and have been for many years.

Remember, it was rogue elements of the CIA that launched the Bay of Pigs Invasion � apparently, without informing President Kennedy. And that was more than a half-century ago.

Kennedy vowed to �splinter� the organization into a thousand pieces and throw them �into the wind.� Instead, it was JFK who was splintered.

Since then, the Deep State has grown as fast as the credit that supports it.

But that�s the difference between politics and putting up a fence� The bigger the scale, and the farther away, the less we really know what is going on.

So, we resort to convenient lies to fill in the blanks� until the �poor boys� die.

Courtesy of Bill Bonner of Bonner & Partners (More by Bill Here)