No ‘Trump Bump’ for the Economy

Trump and Macron representing changing politics

Nothing really changes.

Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, Édouard Philippe, in Le Monde.

The headline promised to tell us how the country was going to ‘de-block’ itself.

But upon inspection, the proposals were the same old claptrap about favouring ‘green’ energy…changing the tax code to reward one group and punish another…and spending more money on various humbug initiatives.

Crackpot schemes

Philippe claims, for example, that France will ‘invest’ $50 billion in job-training programs, new industries, and infrastructure.

The idea behind it, although not stated expressly, is that a brighter future is out there somewhere, and that France’s politicians and bureaucrats will do a better job of going to meet it than the people themselves.

Just like the US,’ our American companion continued.

In order to ‘invest’ $50 billion, the feds have to get the money from somewhere.

Where?

They earn no money. They can only get funds by taking them away from others. Tax it. Or borrow it.

Either way, the resources used to build a new road or hire a new person must be taken away from other plans and programs set in motion by other people, who came by the resources honestly.

The only possible way in which the economy, or the people as a whole, could benefit from shuffling resources from private use to public use would be if the feds were somehow better resource allocators. But the proposition is laughable.

People invest their resources in many different ways. One wants a new car. Another prepares for his retirement. Still another remodels his home, moving his refrigerator closer to the TV screen so he won’t miss anything when getting another beer.

The feds are completely ignorant about these investments. And completely inconsiderate of them. They just take the resources away…and use them for their own crackpot schemes.

Global Financial Crisis 2017: Three Crisis Scenarios, and How They Could Impact on Australia

Markets & Money Free Report

Markets and Money editor Vern Gowdie reveals the three crisis scenarios that could play out as the next credit crisis hits Aussie shores…and the steps you could take to potentially navigate profitably through the troubling times ahead.

Simply enter your email address in the box below and click ‘Send My Free Report’. Plus…you’ll receive a free subscription to Markets and Money.

We will collect and handle your personal information in accordance with our Privacy Policy.

You can cancel your subscription at any time.

Terrible investors

The feds are always terrible investors.

They have little or no experience with real business. They’ve never earned a dime. They have no appreciation for risk; they never put their own money on the line, so they never learn.

And their motives are always distorted by their own desire for re-election, payoffs, or political advantage.

That is just business as usual. But things DO change. As more and more resources are diverted from bona fide uses…and turned over to cronies and zombies…the more the economy creaks and groans.

It takes real investment, real work, real innovation and competition…real resources and time…to make people better off. In France, as in the USA, the real economy suffers as the claptrap programs and phony ‘investments’ multiply.

In the 50s, 60s and 70s, the French government commanded about 40% of the economy; growth and prosperity boomed. It was the ‘30 glorious’ years.

Now, the feds control 60% of the economy…and it limps along with 10% unemployment and negligible real growth.

Just like the US,’ our companion repeated.

In America, during the 50s, 60s…and even the 70s…government spending made up about 25% of the economy.

Later, by expanding regulation, the feds got control of new segments of the economy — directing money into medical/pharmaceutical industries, schools and universities, housing (via Fannie Mae, Freddie Mac, and mortgage-interest deductions), and Wall Street (via fake money and cheap credit).

The feds now effectively control 60% of the economy — roughly the same percentage as in France.

No ‘Trump bump’

And the US economy, too, struggles to make headway.

Many people thought they saw an unlikely messiah last year — in the person of Donald J. Trump.

Here was a ‘disruptor’ willing to shake up the system. Here was a brawler ready to take on the elite. Taxes and spending would be cut. Regulations, too. The economy would boom.

Alas, there is no ‘Trump bump’ for the economy. At least not yet. The New York Times:

While the June jobs report, coming on Friday, is expected to show that hiring continued at a healthy pace last month, other recent indicators in areas like consumer spending, construction and auto sales have been decidedly less robust.

As a result, Wall Street forecasters have been busy lowering their growth estimates for the second quarter, which ended last Friday, much as they were forced to do over the first three months of the year. Economic expansion for the full year now appears unlikely to be much greater than 2 percent – about the average for the current recovery, which celebrates its eighth year this month.

While hardly terrible, it is not the burst of growth – a “Trump bump” – that many expected to result from an upturn in consumer and business sentiment after Mr. Trump’s election.

What did I tell you?’ asked our companion rhetorically.

America’s new president…and France’s new chief, Emmanuel Macron…promised something new. A breath of fresh air. But to make any real change, each would have to squeeze the power and money now flowing to the elites.

And neither is inclined to do so.

Fresh air?’ she asked again, not posing a question but jumping to a conclusion…

What I smell is the same stale gas. And it stinks.

Regards,

Bill Bonner,
For Markets & Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Bill Bonner

Latest posts by Bill Bonner (see all)

Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au