If you ask the majority of Trump supporters about the economy, you’re likely to get a similar response, “The economy is booming and it’s the greatest we’ve ever seen!” This is true to some extent but it doesn’t matter whether you think the economy is good or bad now; what really matters are future expectations.
Your tenure as President has to last at least one term before you can claim ownership of a booming economy. Whether you loathe Trump or not, all that matters are the facts. So, how’s our future U.S economy looking, Mr. President?
After studying at the numbers year-on-year, it’s not a convincing story. If anything the forward-looking data appears to expose a rather gloomy outlook. You could make the case that employment is growing and you'd be somewhat right, but using the labor market as a metric for economic health is a big mistake made by most political leaders.
The major flaw when exercising such a strategy is employment lags all other reliable indicators of economic activity. In the end, companies don’t begin laying off workers until shit really hits the fan, evident by bad jobs data seen during the Tech Boom/Bust and Subprime Crisis periods. Only when the bubble bursts do we see an acceleration in redundancies.
“Employment lags all other reliable indicators of economic activity.”
When you add tariffs into the mix you have a recipe for disaster when it comes to consumption. Increasing tariffs on goods and services can never be positive for consumers, let alone in America. It’s a well-known phenomenon that the world economy currently runs on the optimism of U.S consumers, so when tariffs eventually trickle down and they reject higher prices, that’s when the real global slowdown begins. The fact Trump came out and publicly stated this means he’s admitting the trade war is hurting U.S consumers more than the “great outsourcing” to China. The Chinese know they can wait out Trump; they’ve spent 20 years taking advantage of the U.S on trade so they’d be pretty stupid to give it all up now over a few tariffs.
Despite the fact Trump supporters are buying into the “booming economy” narrative, he knows the market is starting to fall — and fast as of August. He outed himself by remaining constantly vocal about the Fed’s policy and their reluctance to not cut rates at a faster pace, despite the evidence of slowing global growth.
Laughably, the president has also started using the bond market as a proxy for his narrative in an effort to divert people’s attention away from recent stock market performance issues, claiming that global investors are looking to the U.S for safety which is a contradiction that the economy is strong and stable — investors piling into safe havens is never a good indication of economic expansion. The U.S bond market is screaming, “recession”, indicating that we’re on a downward path to 0% interest rates; it’s not a matter of if but when.
The issue with Trump’s view is his 100% conviction that lowering rates will equal an additional boost to economic activity and prosperity. Europe & Japan clearly didn’t get the memo as they’ve battled against negative rates, barely creating any inflation and GDP over the past two years. His other incentive for rate cuts is the fact he’s a real estate tycoon, an industry that thrives on cheap money bolstered by a lower interest rate environment. More depressed rates appear to be a win-win for Trump.
“Europe & Japan clearly didn’t get the memo as they’ve battled against negative rates, barely creating any inflation and GDP over the past two years.”
History shows us that Presidents get their way when it comes to economic stimulus, it’s just consensual dichotomy of whether consumers believe this will actually benefit them or remind them of when rate cuts were last in a downward spiral: the Tech Bubble and the Global Financial Crisis. Have consumers finally learned their lesson from gorging on too much debt provided by cheap money? Trump hopes not, he is relying on it.
The rest of the year should be very interesting and it’s vital for him to keep the bubble from bursting, so don’t be surprised if there are fireworks on Twitter as he’ll use all means necessary to do so. It’s a race to November 6th, 2020.
Trump sees the warning signs ahead; he knows the economy’s slowing but yet claims it’s strong. Once his dedicated followers realize this they will abandon him quickly and look for an alternative. Recently, political analysts in the media seem to underestimate the chance of the Democrat Party winning in the next election but if the economy takes a turn for the worst, it’s the ultimate catalyst for a socialist candidate to gain popularity and become the next president of the United States in 2020.