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The choas is just beginning

August 30, 2019
By David Kruse - Columnist , Farm News

Who is Donald J. Trump (DJT) going to blame a recession on? According to Fortune Magazine, the length of the current economic expansion has been record-breaking, lasting 121 months from June 2009-through July 2019 surpassing the second longest expansion of 120 months from March 1991-March 2001. The reason was Trump's tax cut coming late in the business cycle which gave the economy another boost just as the recovery was tiring.

DJT sees November 2020 as the finish line so will beat the horse to try to keep it running until then to boost his re-election prospects which is the finish line. He will get no more fiscal stimulus other than adding debt from Federal spending and would like to push Fed Chairman Jerome Powell out of his driver's seat at the Fed if he could, in order to use monetary stimulus to push the sugar high growth into next year.

By the way, all of the stuff that Republicans have said about being fiscal conservatives is pure hypocrisy. Where is that fiscal conservatism now? Those loud tea party activists that used to decry deficits and debt are quiet as a church mouse about them now. It is just one more example of the principles that they have sacrificed because of their fascist leader DJT.

Deficit spending and debt are supposed to be used to stimulate the economy in two instances...when needed to recover from a recession and in order to finance a war in the support of national security. While I would have managed it somewhat differently, as a general statement, Obama was justified by the Great Recession in his deficits and debt. The deficits were shrinking until Trump inflated them again with his tax cut. Trump promised that the tax cut would pay for itself. It is not coming close to that with the deficit and debt rising by a trillion dollars annually. He can blame that on the Fed but they did not make the difference. The tax cut for the rich was never going to pay for itself. The rich are now investing those tax savings in U.S. Treasuries so that the money is safe earning interest while the economy goes into recession. Not enough has trickled down. Remember, Agriculture is first into a recession and last out. At least that is the history. Agriculture is well into recession so the first part has already begun.

Trump is really doing a job on kneecapping U.S. Agriculture with his RFS, trade and immigration policies. He has destroyed global supply chains that U.S. ag was on top of, sending us to the back of the line as a supplier in export markets. He has made our ag competitors great. The U.S. is becoming the residual supplier of Ag products again just like Jimmy Carter accomplished for the wheat market in 1980 with his embargo of Russia. Trump trade policy is worse. When farmland values decline, is he going to compensate farmers for that too? What he has done to ruin the ag economy will long outlast his term in office.

So, is the next president going to continue with MFP payments? If Trump wins a second term, he will no longer give a rip about farmers as he will have no use for their votes anymore. If farmers think he is paying them because he loves them or is rewarding them for being patriotic, they are deluded...as he loves nothing but himself. He is paying them for their vote...pure and simple use of taxpayer money to buy votes. Polls show that it is working.

Trump's trade policy, his abuse of tariffs, is the primary reason for the coming recession. Trump is chaos...and business, investors and markets do not like chaos where he can destroy them with a tweet. The world economy is slowing down because of trade protectionism led by the U.S. The Brits are idiots, opting for jumping out of the EU by leaping off a cliff. If they think that Trump will save them, he will not come to take advantage of them until after they hit bottom. The EU is going down with them.

Trump is incompetent in his grasp of economics. Almost everything he sees...including who pays the tariffs, his view of trade deficits, the Fed and currency manipulation, the federal deficit, the economic impact of immigrants and his not-give-a-crap attitude toward global economic growth are all as wrong as arguing that the sun comes up in the west each morning.

Name a major economy that is showing significant GDP growth that can carry the rest of the global economy? The IMF is constantly revising its global GDP growth estimates lower. Argentina balked at austerity. The slowing global growth is weighing on commodity prices as demand wanes resulting in a falling CRB index. China's economy is decelerating and so is ours, so much so that it will be hard to tell who the winner is if by chance they opt to stop the trade war before it causes a collapse. Canadians told us on our recent vacation that they have a saying that when the U.S. sneezes, Canada gets a cold. My wife suggested to them to get ready for pneumonia.

DJT is said not to read much and must not have learned how Smoot-Hawley tariffs worked out in 1930. History is rhyming. There is a global flight to security going on as the gold and bond markets are serving as their historical safe-havens. 10-and 2-year Treasuries yields inverted as the 10 year fell below the 2 year. That has been a historical bellwether of an economic recession. As noted, the Ag economy is leading into that downturn. Trump will likely declare a national energy and launch a coup to oust Powell from the Fed. The chaos is just beginning.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

 
 

 

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