The Deep State Swamp Will Not Be Drained

This is Crash Awareness Week at the Diary.

If Team Trump stumbles, investors will be disappointed.

Gradually…then all of a sudden…they will realise that the premise behind this rally was false.

Already, we’re seeing signs of trouble…

Mystery solved

A growth spurt should raise the demand for capital. It should also increase labour rates and consumer prices.

Interest rates should go up, too. So should corporate sales. (Compared to sales revenues, US stock prices are at their highest level — ever.)

This suggests to investors a ‘rotation’ — out of bonds and into stocks.

Since Election Day, the yield on the widely watched 10-year Treasury note rose from about 1.7% to about 2.4% as prices fell. And the US stock market shot up by about 10%.

But now, bond yields are falling as prices once again rally.

What’s going on? From His budget shall ye know Him.

The future is still unknowable. But thanks to his proposed spending plans, the mystery known as Donald J Trump is largely solved. At least we can eliminate some possibilities.

Now we know what he won’t do…

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 ‘Claim 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.

Cosy collusion

You already know the backstory.

The Deep State — the ‘shadow government’ that runs the country no matter whom you vote for — makes the major decisions.

Its goal is to hold on to, and expand, its power, using it to transfer real wealth to itself.

You know, too, that real growth can only be achieved if the drag of debt and the Deep State is reduced.

President Trump’s ‘drain the swamp’ catchphrase was shorthand for getting the federales, the cronies, the zombies, and the Establishment insiders out of the way so the economy could function properly.

We have a fair idea of what would have happened if Hillary Clinton had been elected: more of the same.

What we wondered about was whether Donald J Trump, a great disruptor, would break up the cosy collusion between government, crony industry, and zombie clients.

We doubted he could do it, even if he wanted to. Deep State apparatchiks control the regulatory process. They control all major government agencies. They control Congress. They control the spies and the military-industrial complex. And they control the money.

Still, it looked for a moment as though Mr Trump might mean business. The spooks appeared to be out to get him. Certainly, the mainstream media was.

The spy agencies are the deepest part of the Deep State. Was Trump angling to reduce their power, as President Kennedy vowed to do before he was assassinated?

Or was it just more of The Trump Show — a bit of theatre designed to flatter Trump’s ‘tough guy’ image?

No Deep State cuts

But now that the broad contours of the Trump budget plan are out in the open, we have our answer.

Now we know…

The Deep State has nothing to worry about. Its funding is secure. Even if President Trump succeeds in passing his budget intact, the money will still flow. There are to be no substantial cuts to the Deep State.

Reports the Associated Press:

The White House says President Donald Trump’s upcoming budget will propose a whopping $54 billion increase in defense spending and impose corresponding cuts to domestic programs and foreign aid. The result is that Trump’s initial budget wouldn’t dent budget deficits projected to run about $500 billion.

Prices are jumping in Northern Virginia already, anticipating the flow of $54 billion more into the swamp. Restaurants and bars are already thinking of stretching hours and adding more expensive drinks.

Housing in Fairfax and Loudoun counties is booming as builders take their McMansion plans out of the drawers. Investment advisers are recommending shares in crony military industries.

Today’s budget speech might fill in more details. But, in addition to calling for more money for the swamp, it is supposed to reaffirm ‘The Donald’s’ campaign pledge not to cut entitlements.

And reports from the Republicans in Congress tell us that the new TrumpCare proposal will make only trivial cuts to the real cost of medical care and in no way cut the flow of wealth to the medical-insurance-legal complex.

Warfare and welfare

Medical costs are already way out of line…and growing fast.

Unlike any other government program, they are essentially uncontrollable under present conditions. The demand for drugs and medical procedures is almost unlimited…as long as someone else pays for them.

Healthcare costs have been growing 10 times as fast as GDP over the last half-century. The combustibles in this explosion are complex.

But there is one critical element — one sine qua non — for the whole phenomenon: The person who benefits is not the same as the person who pays.

Gains are realised individually; costs are suffered collectively.

The winners: zombies (often obese, alcoholic, diabetic, or chain-smoking…who receive pills and treatments they don’t pay for) and cronies (the medical, insurance, and legal insiders with a grip on the system).

The losers: taxpayers, young families, the general public, healthy people, young people, or those who simply don’t consume many medical services.

So let’s get this straight: The Deep State relies on two sources of income: fake money borrowed at ultra-low rates…and federal spending.

The fake-money system will not even be challenged; federal spending will increase. There will be no cuts to entitlements. The swamp fauna with guns will get more money to buy more guns.

There will be a little dry ground around the Environmental Protection Agency and other marginal malefactors…but enough only to pay for the increases in military spending.

So, what’s new?

The Warfare State will get more money. The Welfare State will continue to grow based on past legislation.

Neither will be cut back.

The moneymen are still counting their shekels. The gunmen are still building their warplanes. And the con men are still running the show.

The swamp won’t be drained. There will be no real boom.

Regards,

Bill Bonner,
For Markets and Money, Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.

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@dailyreckoning.com.au