Behind the Mueller Distraction… a Hellish Catastrophe
The last two years have been full of absurd distractions. The Mueller Report, for example – one big, fat, waste of time.
So were the trade wars… first with Canada and Mexico… and now with China. Lots of blah, blah… gumming and jawing…
And there was the “taking the knee”… which many people took seriously. And remember Stormy Daniels? And two summits with North Korea?
What was the point? Why the circus?
Headed to $40 Trillion
Let’s look at what is really going on.
First, the Trump administration increased military spending by $190 billion – practically every penny of which went to the insiders in Northern Virginia “defense” industries.
Second, it imposed tariffs on cheap goods from China. A tariff is essentially a tax paid (mostly) by middle-income consumers.
Third, it passed a tax cut, which lowered revenues… even while expenses were still going up.
Fourth, the Trump Team also boosted the federal deficit to a one-month record of $234 billion in February.
That is, more than half of what it spent was borrowed… bringing the annual borrowing total to about a trillion a year – even without a recession.
When a recession comes, the total will soar to $2 trillion, probably sending total government debt to $40 trillion by 2030.
In short, while the public is distracted by the Mueller Report et al., the feds are setting up a hellish catastrophe – with runaway expenses and falling revenues (which we’ll look at more closely anon).
Stephen Moore (Mr. Trump’s choice for the Fed) and other “supply siders” think they have the answer. They believe they can sit around… study their “data”… and come up with tax-and-spend policies needed to stimulate the economy… and grow our way out of the problem.
Well… it won’t work.
Stimulating doesn’t work. Never did. Never will.
We went to a luxury hotel yesterday. We took two rooms, including the nicest room in the place. And we had a dinner for four, with two bottles of one of its best wines.
The bill came to 14,282 pesos. Seems like a lot of money. A marketing assistant in Buenos Aires might make over a million pesos per year. A banker expects to bring home several million. The Argentines have added so much stimulus to the economy, prices are doubling every year.
But the hotel owner, the marketing assistant, the banker – are they rich? Not at all. The economy is shrinking at a rate of 6% per year. The whole country is on the edge… holding its breath as it sorts itself out from decades of overspending and excess debt.
But let’s stick with the USA.
Since the beginning of the 21st century, the Fed has added $4 trillion in new money. Plus, it’s been lending money below zero, in real terms, for the last 10 years.
Congress and the White House did their parts, too. The Obama/Trump administrations added some $13 trillion in deficit spending.
You’d think that would be enough to stimulate the economy.
But no. It produced the weakest recovery in history… and an average growth rate of only about half of what it used to be.
What gives? What’s wrong with stimulus?
Oh, you know, don’t you? It’s in our formula – TS = rv (w/w – w/l). Tune in tomorrow for the details.
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