Clinton or Trump? A Choice Between the Despised and the Despicable

The US market is cautiously positive.

The Aussie dollar is stronger.

The gold price is weaker.

The markets obviously think the odds favour Clinton to win the US presidential election.

At the time of writing, the election result is still pending.

The bounce on Wall Street shows the money-men like the idea of Hillary as Commander-in-Chief…and so they should, after what they’ve donated to her campaign.

Hillary has promised to be a president for everyone…that is, everyone who contributes to ‘The Bill, Hillary & Chelsea Clinton Foundation’.

According to the Foundation’s website, it is a ‘non-profit 501(c)(3) tax-exempt organization.

The easiest way to make an organisation non-profit is to pay out all earnings — seven-figure director fees, first class travel, Fifth Avenue offices…oh how you can spend your way to a luxurious non-profit outcome! And whatever is left over after your personal indulgences have been satisfied, you can spend on a few pet projects.

The Clintons are seen as money grubbers who’d sell their own family members for the right price. Hillary is a despised person.

Donald is no better. The only difference between him and Hillary is that he is openly corrupt. Whereas Hillary hides her corruption behind a cloak of establishment respectability.

If I had to choose between the despised and the despicable, I’d go for Trump.

For one reason and one reason only.

He promised to get rid of Federal Reserve Chief Janet Yellen.

According to CNBC:

Trump, at the first presidential debate, said Fed Chair Janet Yellen has kept rates low for political reasons and that the Fed is creating a problem for the stock market that will show up when it starts raising interest rates.

Trump is stating what we all know. But no one in the establishment — not Clinton nor Obama — are calling it as it is. And why should they? Their retirement capital is not at stake.

Again from CNBC:

“If Donald Trump wins November’s presidential election, there is now a clear possibility that Fed Chair Janet Yellen would resign almost immediately, perhaps even before the mid-December (Federal Open Market Committee) meeting,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a note. “It is hard to see how she could continue in her position until her current term expires in early 2018.”

If I was eligible, Yellen’s resignation would be reason enough for me to vote for Trump. It is the thinnest of pieces of rope to hang on to, but Clinton only throws out the prospect of more red tape, more government intrusion into peoples’ lives, more unfunded socialist programs, and more of the same ‘go along to get along and sling me a few dollars on the way’ culture that gives the political class such a putrid stench.

Trump stench is out there for all to smell — an egotistical, unethical, womanising, bigoted bully. Personally, I like to see what’s coming. That way, the surprises are hopefully kept to a minimum. You know he is going to be an absolute embarrassment as president.

Hillary’s ‘I’m here for the people’ routine is galling. Clinton’s con is not quite on the scale that Yellen and Co. are pulling on the investing public, but it is up there. Unfortunately, people actually think/hope/believe Clinton (like they did with Obama) has the ability to make their life better. What a massive let down that’s going to be.

The reality is neither Clinton nor Trump will make ‘America Great Again’.

Under Obama, US Federal debt has doubled — from US$10 trillion to US$20 trillion.

Obama is a great orator. But words are cheap. Actions really count:

That is why today, I am pledging to cut the deficit we inherited in half by the end of my first term in office.

This will not be easy. It will require us to make difficult decisions and face challenges we have long neglected. But I refuse to leave our children with a debt they cannot repay — and that means taking responsibility right now, in this Administration, for getting our spending under control.

— President Obama’s address to the Fiscal Responsibility Summit

23 February 2009

But understand — understand if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery — all of which would have an even worse effect on our job growth and family incomes.

— President Obama’s State of the Union address

27 January 2010

As I said, talk is cheap.

Obama is leaving behind a debt and deficit legacy that ensures the next administration — led by either Clinton or Trump — is on a path towards US$30 trillion of federal debt in the next 4–5 years.

Whoever sits in the Oval Office can be reasonably assured they’ll find themselves dealing with a US recession in the next couple of years. Recessions have the tendency to play havoc with budget bottom lines — tax revenues shrink and outgoings (welfare and healthcare) increase.

More red ink. More debt to throw on the pile. And that depends on it being a mild recession.

What if it’s worse than 2008/09? The problems compound.

In last weekend’s Markets and Money, I wrote about the US fiscal gap — the cost of promises made but not funded — being in the order of US$200 trillion. To plug this shortfall would require an immediate 58% increase in taxes. Well, that’s not going to happen.

In the absence of the political class ‘growing a pair’, what’s going to happen is that the powers that be will let the ‘economic train wreck’ happen and then deliver the bad news…welfare cuts all around.

In addition to government public pensions being reduced, US employer pension schemes are also facing their own ‘fiscal gap’…what’s been promised cannot be funded.

Here’s a table summarising research by MacroMavens into US pension funds and the impact a very modest 10% decline in share (equity) and bond markets would do to the existing funding deficit (in US dollars):

Employer plan Current Funding Deficit Equity Assets Bond Assets 10% Decline in Equities 10% Decline in Bonds
US Federal Government Pensions -$1,833 billion $220 billion $1,720 billion $22 billion $172 billion
State & Local Government Pensions -$1,984 billion $2,720 billion $970 billion $549 billion $97 billion
Corporate Pensions -$552 billion $5,490 billion $1,460 billion $549 billion $146 billion
Total -$4,383 billion $8,430 billion $4,150 billion -$843 billion -$415 billion


A 10% market correction increases the already $4.3 trillion shortfall by another US$1,258 billion…a blowout to US$5.5 trillion.

A 50% market fall would blow the fiscal gap out to over US$10 trillion.

In recent times, market falls of 50% or more are not exactly rare beasts…1987, 2000/01 and 2008/09.

But let’s say the not-so-rare beast doesn’t come out to play, and markets only fall 10% instead; how is the US$5.5 trillion difference between what’s in the kitty and what’s promised going to be made whole?

Increased taxes? More corporate profits siphoned off to the company pension fund, and less paid to shareholders? Or do the funds renege on their promises?

Whichever way it is sliced and diced, it’s deflationary. Pay more taxes = someone has less to spend. Pay out fewer dividends = someone has less to spend. Cut back on pension promises = someone has less to spend.

There are no good outcomes from the mess that’s been created…too much debt-funded growth has led to far too many promises being made that cannot be kept.

Hillary or Donald? It doesn’t matter.

The numbers are baked into the cake. A recession/depression is going to expose the lies of presidents past and present.

When Obama said ‘But I refuse to leave our children with a debt they cannot repay,’ I think he must have been referring to his own children.

Unless the US does the unthinkable and defaults on its debt, future generations will be indentured into paying for the failure of politicians to turn their words into actions.


Vern Gowdie,
For Markets and Money

Vern Gowdie has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners. His previous firm, Gowdie Financial Planning was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser (IFA) magazine as one of the top five financial planning firms in Australia. He has been writing his 'Big Picture' column for regional newspapers since 2005 and has been a commentator on financial matters for Prime Radio talkback. His contrarian views often place him at odds with the financial planning profession. Vern is is Founder and Chairman of the Gowdie Family Wealth advisory service, a monthly newsletter with a clear aim: to help you build and protect wealth for future generations of your family. He is also editor of The Gowdie Letter, which aims to help you protect and grow your wealth during the great credit contraction. To have Vern’s enlightening market critique and commentary delivered straight to your inbox, take out a free subscription to Markets and Money here. Official websites and financial eletters Vern writes for:

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