Saturday, February 4, 2017
The US economy is too damaged to be fixed
Alt Market - As I outlined in my article 'The False Economic Narrative Will Die In 2017', the mainstream media has been carefully crafting the propaganda meme that the Trump administration is inheriting a global economy in "ascension," when in fact, the opposite is true. Trump enters office at a time of longstanding decline and will likely witness severe and accelerated decline over the course of the next year. The signs are already present, and this fits exactly with the basis for my prediction of the Trump election win — conservative movements are indeed being set up as scapegoats for a global economic crisis that international financiers actually created.
Plus, it doesn't help that Trump keeps boasting about the farcical Dow hitting record highs after his entry into the White House. Talk about the perfect setup...
With the speed at which Trump is issuing executive orders, my concern is that people's heads will be spinning so fast they will start to assume an appearance of economic progress. Here is the issue — some problems simply cannot be fixed, at least not in a top down fashion. Some disasters cannot be prevented. Sometimes, a crisis has to run its course before a nation or society or economy can return to stability. This is invariably true of the underlying crisis within the U.S. economy.
It is imperative that liberty activists and conservatives avoid false hope in fiscal recovery and remain vigilant and prepared for a breakdown within the system. Despite the sudden political sea change with Trump and the Republican party in majority control of the D.C. apparatus, there is nothing that can be done through government to ease fiscal tensions at this time. Here are some of the primary reasons why:
Government Does Not Create Wealth
Government is a wealth-devouring machine. The bigger the government, the more adept it is at snatching capital and misallocating it. Such a system is inherently unequipped to repair an economy in a stagflationary spiral.
I'm hearing a whole lot of talk lately on all the jobs that will be created through Trump's infrastructure spending plans, which reminds me of the desperation at the onset of the Great Depression and the efforts by Herbert Hoover to reignite the U.S. economy through a series of public works programs. Reality does not support a successful outcome for this endeavor.
First off, Trump's ideas for infrastructure spending to kick start a U.S. recovery are not new. The Obama administration and Congress passed the largest transportation spending bill in more than a decade in 2015 and pushed for a similar strategy to what is now being suggested by Trump. I should point out though that like Herbert Hoover, Obama's efforts in this area were essentially fruitless. Obama was the first president since Hoover to see "official" annual U.S. GDP growth drop below 3 percent for the entirety of his presidency, with GDP in 2016 dropping to a dismal 1.6 percent.
Though projects like the Hoover Dam were epic in scope and electrifying to the public imagination during the Depression, they did little to fuel the overall long-term prospects of the American economy. This is because government is incapable of creating wealth; it can only steal wealth from the citizenry through taxation to pay debts conjured out of thin air, or, it can strike a devil's bargain with central banks to print its way to fake prosperity.
Some might argue that Trump is more likely to redirect funds from poorly conceived Obama-era programs instead of increasing taxes or printing, but this does not change the bigger picture. Redirected funds are still taxpayer funds, and those funds would be far better spent if they were returned to taxpayers rather than wasted in a vain effort to increase GDP by a percentage point. Beyond this, the number of jobs generated through the process will be a drop in the bucket compared to the 100 million plus people no longer employed within the U.S. at this time.
Bottom line? Though new roads and a wall on the southern border are winners for many conservatives, infrastructure spending is a non-solution in preventing a long-term fiscal disaster.
Interdependency Is Hard To Break
Another prospect for raising funds to pay for job generating public works projects is the use of tariffs on foreign imports. Specifically, imports of goods from countries which have maintained unfair trade advantages through global agreements like NAFTA, CAFTA or the China Trade Bill. This is obviously a practical concept and it was always the intention of the founding father post-revolution for government to generate most of its funding through taxation of foreign imports and interstate commerce, rather than taxation of the hard earned incomes of the citizenry. However, the idea is not without consequences.
Unfortunately, globalists have spent the better part of a half-century ensuring that individual nations are completely financially dependent on one another. The U.S. is at the very CENTER of this interdependency with our currency as the world reserve standard. In order to change the nature of the inderdependent system, we have to change the nature of our participation within that system. This means, in order to assert large tariffs on countries like China (which Trump has suggested), America would have to be willing to sacrifice the main advantage it enjoys within the interdependent model — we would have to sacrifice the dollar's world reserve status.
Keep in mind, this is likely to be done for us in an aggressive manner by nations like China. China's considerable dollar and treasury bond holds can be liquidated, and despite claims by mainstream shills, this WILL in fact have destructive effects on the U.S. economy.
Also keep in mind that with higher tariffs come higher prices on the shelf. The majority of goods consumed by Americans come from outside the country. Higher tariffs only work to our advantage when we have a manufacturing base capable of producing the goods we need at prices we can afford. The American manufacturing base within our own nation is essentially nonexistent compared to the Great Depression. In order to levy tariffs we would need a level of production support we simply do not have.
The point is, an unprecedented change in America's production dynamic would have to happen so that we do not face heavy fiscal consequences for the use of tariffs as an economic weapon.
Manufacturing Takes Time To Rebuild
Much excitement has been garnered by reports that certain U.S. corporations will be bringing some manufacturing back within our borders over the course of Trump's first term as president. And certainly this is something that needs to happen. We should have never outsourced our manufacturing capability in the first place. But, is this too little too late? I believe so.
I remember back in 2008/2009 mainstream economists were applauding the Federal Reserve's bailout efforts and the call for quantitative easing, because, they argued, this would diminish the dollar's value on the global market, which would make American goods less expensive, and by extension inspire a manufacturing renaissance. Of course, this never happened, which only adds to the mountain of evidence proving that most mainstream economists are intellectual idiots.
It is important that we do not fall into the same false-hope trap in 2017. While Trump may or may not handle matters more aggressively, there is only so much that can be accomplished through politics. Rebuilding a manufacturing base after decades of outsourcing takes time. Many years, in fact. Factories have to be commissioned, money has to change many hands, wages have to be scouted for the best possible labor per-dollar spent and people have to be trained from the very ground up in how to produce goods again. In many cases, the skill sets required to maintain functioning factories in the U.S. (from engineers to machinists to assembly line labor to the people who know how to manage it all) just don't exist anymore. All we have left are millions of retail and food service workers forming mobs to demand $15 an hour, which is simply not going to encourage a return to manufacturing.
Beyond this, at least in the short term, America will have a much stronger dollar on the global market, rather than a weaker dollar, due to the fact that the Federal Reserve has initiated a renewed series of interest rate increases just as Trump entered office. While the mainstream theorizes that the Fed will turn "dovish" and back away from rate hikes, I think this is a rather naive notion. It serves the elites far better to create a battle between Trump and the Fed - therefore, I see no reason for the Fed to back away from its rate hike process. Trump will demand a weaker dollar, the Fed won't give it to him, and ultimately, the global economy will start to see the dollar as a risky venture and dump it as the world reserve; which is what the globalist have wanted all along so that they can introduce the SDR as a bridge to a new world currency.
With a "strong" dollar (relative to other indexes) there is even LESS incentive for foreign nations to buy our goods now than there was after the credit crisis in 2008. If the dollar loses world reserve status (as I believe it will during Trump's first term), then at that point we will have a swiftly falling currency — but too swift to fuel a manufacturing reboot.
Is there even enough internal wealth to support the rise of manufacturing within the U.S. for a period of time necessary for our economy to rebalance? If there is I'm not seeing it. We are a nation mired in debt. So much so that even selling off our natural resources would not erase the problem.
Ultimately, the shift away from being tied to a globalized system towards a self-contained producer nation with a citizenry wealthy enough to sustain that production in light of limited exports to foreign buyers is a shift that requires incredible foresight, precision and ample time. It is not something that can be ramrodded into existence through force or by government decree. In fact, the act of trying to force the change haphazardly will only agitate an economy already on the verge of calamity.
Solutions Start With The Citizenry, Not Washington
I understand that conservatives in particular want to "make America great again," and I fully agree with that goal. But, someone has to point out the inconsistencies in the current strategy and recognize that the situation is beyond repair. To make America great again would require decentralized efforts to maximize production and self reliance at a local level, not centralized federal tinkering with the economy. The globalists have been far too thorough in their programs of interdependency. The only way out now is for the system to crash and for the right people to be in place to rebuild.
Sadly, not only will a crash result in great tragedy for many Americans, but it is also an outcome the globalists prefer. They believe that THEY will be the men in the right place at the right time to rebuild the system in an even more centralized fashion. They hope to sacrifice the old world order to inspire the social desperation needed to convince the masses of the need for a "new world order." Again, this crash cannot be avoided, it can only be mitigated. We can prepare and become self sufficient. We can fight to ensure that the globalists are not in a position to rebuild the system in their image once the dust settles. But, we should not place too much expectation that the Trump administration will be able to solve any of our economic problems, if that is even their intent. The solution remains in our hands, not in the hands of the White House.