The Trump Risk: Will President Trump Trigger a Recession?

Home of the Brave?

BALTIMORE – It is a bright summer day outside. A dry breeze sweeps down Cathedral Street and blows away the hot, humid air.

It is hard for us to imagine that anything bad could happen today. But bad things do happen – even on nice days. The weather was fine when General Custer rode out to the Little Bighorn, too.

Over the weekend, we worked at putting up a board fence – with half-round treated posts and four 6-inch-by-5/4-inch boards. It was grim work. On a small farm, nothing works as it should. The augur got stuck on a root and sheared a bolt, and the tractor slipped on the greasy clay.

After a few minutes, our shirt was drenched. Ticks were already crawling up our legs. What’s worse, we barely made a dent in the job. In two days, we only got about 20 posts in place…with 130 to go. Progress was slow. But at least it was real.

We were thinking about cowardice – the kind of cowardice that runs rampant in the Home of the Brave. The voter, the patriot, the investor, the churchgoer – there are few Muhammad Alis among them.

On June 20 1967, Muhammad Ali was fined $10,000 and sentenced to 5 years in jail for refusing to be drafted (the papers still referred to him as Cassius Clay). He remained free on bail while the sentence was on appeal. For years, the US government tried to buy him off behind the scenes by offering him all sorts of deals that would have allowed it to save face. Ali refused to back down though, very likely because he was afraid the Nation of Islam would make another Malcolm X out of him. In the end, the Supreme Court gave in and annulled the sentence – on purely political grounds as we know today (so much for the “law”).

But the typical man hides in solemn conceits and flattering fantasies. He would rather die than challenge the system.  He believes that he is running the country… his sons and daughters, protecting it, are heroes… the Fed will make sure nothing goes too far wrong in the economy.

And as for God – he’s always on our side.

Culp’s Hill

An expert tells us that the world’s climate is changing. He says he cares. It is not that we don’t believe him; we just don’t know what it means. Is it good? Is it bad? Will it spoil a picnic? Or increase grain harvests? Is it a fence or a fantasy? We don’t know. We know only that the sun is shining, right here, right now.

You put up Old Glory on Memorial Day; you remembered those who died in the service of their country. Yes, of course, you did. But who and why? Did you remember the soldiers who fought for the 1st Maryland Infantry, CSA? Or the Yankees who killed them?

On a hot summer day in 1863, in the fight over Culp’s Hill near Gettysburg, the Marylanders were ordered to attack. Their commander, Brigadier General Steuart (a distant relative) protested. It would be suicide, he said.  Then, he put his head in hands and cried: “My poor boys!” More than half were killed.

Which side are you on… or is he on? What “country” do you serve? Manhattan? Death Valley? The rednecks of South Georgia? Or the home decorators of Marin County? Blue states or red states? Fundamentalist Christians or fundamentalist Muslims?

Watch and Wait

There was not much forward momentum in the U.S. stock market yesterday, either. Still, stocks remain near an all-time high. Fed chief Janet Yellen reassured investors. If rates rise, and stocks tank, it won’t be her fault.

She’ll bide her time before hiking rates. And so, we remain in “watch and wait” mode. It is one of those things economist Herbert Stein must have had in mind. As he famously put it, “If something cannot go on forever, it will stop.”

The Fed cannot stay in a permanent state of emergency. It will have to come to an end sometime.

What is amazing is that it hasn’t come to an end already – and there’s no telling how much longer it will continue. In the meantime, the claptrap flows, like beer at an Orioles game.

Trump Risk

One of the most prominent (among many) purveyors of myth and fraud is MIT wunderkind and former U.S. Treasury secretary Larry Summers. Writing in the Financial Times – a bastion of narrative delusion – he takes aim at the presumptive Republican presidential nominee, Donald Trump.

There are many good reasons to think Trump is a mountebank, but none of them seem to occur to Mr. Summers. Instead, he refers to the “Trump risk,” which he believes measures the damage that Trump would do to the U.S. economy if he were elected.

Economic quack and know-it-all Larry Summers, letting loose in the bastion of narrative delusion known as the Financial Times. We actually happen to think that few men are more dangerous to the economy than Summers himself (the economy is only truly safe when he sleeps). It is quite ironic that he is now warning us of the terrible economic danger other people allegedly represent.

“If he is elected, I would expect a protracted recession to begin within 18 months.”

Huh?

Look at the numbers. Over the past 12 months, U.S. GDP growth has been falling steadily, quarter after quarter. From 3.9%… to 2%… to 1.4%… to 0.8%. Within 18 months there should be a protracted recession no matter who is elected to the White House.