The ‘Truth’ about Trump

When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.

Thomas Sowell

When we first arrived here in Rancho Santana on Nicaragua’s Pacific coast, we smelled smoke.

Across the valley, it looked at first like a morning mist rising between the hills. But last night, we looked out from our bedroom and saw what was happening. A brush fire was arcing its way up the mountain to the south of us.

It’s the dry season. The ground is covered with dried-up leaves and grass. A gusty wind blows from the east, often knocking over the chairs on the porch.

Our subject for today and tomorrow is truth.

We begin with an observation: There’s a world of difference between a brush fire and an economic policy.

Hammer and tongs

The truth that many people long to hear is that Donald J Trump is sweating over the Deep State with a hammer and tongs. They want to see him pound it…bend it…break it apart…and put it back together again.

Then, pointing to record-high stock prices, they say: ‘See…he must be doing a good job.’

But this is not a brush fire…

A fire is real. It can scorch your fingers or burn down your house. ‘News’ in the public space is something else. It is like a presidential tweet or an argument between halfwits; there may be some truth involved, but it can be almost impossible to find.

So far, there is no sign of either hammer or tongs in the Trump program.

Yesterday, for example, the GOP-controlled Congress came out with its much-anticipated medical plan.

A quick reading suggests it will be an improvement (slightly fewer win-lose deals). But it won’t significantly change the flow of funds to the crony medical-insurance-ambulance-chasing industry.

And that is probably what the stock market likes.

In other words, investors are not disappointed with ‘The Donald’. He hasn’t hammered the insiders or substantially threatened the Deep State; they’re glad he didn’t.

The markets know that squabbles with Arnold Schwarzenegger, Barack Obama or the FBI don’t matter. What matters is this administration having investors’ backs.

The style is different; the substance is the same.

And the fake-money system — guarded by a phalanx of ex-Goldman guys — is safe.

End of ZIRP

Today marks the beginning of the ninth year of ‘recovery’ from the crisis of 2008–09.

Interest rates have been at emergency lows — near zero — the entire time, even as the stock market added $21 trillion of paper wealth.

That’s how much stock prices have gone up.

But now, word on the street is that ZIRP (zero-interest-rate policy) is coming to an end. And Bank of America Merrill Lynch is telling the Trump team to limber up.

First, the president of the powerful New York Fed, William Dudley, told the press that the market’s ‘animal spirits have been unleashed.

And citing ‘sturdy’ jobs gains, inflation increases, and rising optimism for both consumers and business owners, he also said that ‘the case for monetary policy tightening has become a lot more compelling.

Hence, Dudley and the Fed may increase the price of credit at the next Fed policy-setting meeting later this month. Bloomberg puts the odds of a Fed rate hike at 90%.

In other words, unless the stock market crashes before 15 March, it’s highly likely the Fed will raise the federal funds rate.

Crash alert

Meanwhile, Bank of America Merrill Lynch is telling investors to watch out for a big crash in the second half of the year.

Corporate earnings are falling. And if the Fed’s rate-hiking program gets underway in earnest…it will continue until a financial crisis shows up (i.e., a crash).

Then, the Trump administration will come upon the can that the last three administrations kicked down the road. And when it does, it will do what they did: Give it a whack.

Will that happen? Time will tell.

More to come…


Bill Bonner,
For Markets and Money, Australia

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.

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