Aspen, Colorado
December 8, 2016
Dear Reader,
If you need any evidence that the world’s central banks have destroyed honest price discovery in the financial markets, the last few weeks have provided it in spades.
The nearly $2 trillion sell-off in the global bond markets after the election was warranted but happened for the wrong reasons, while the 1,200-point gain in the Dow index gives stupid a whole new definition.
In fact, the whole preposterous episode reminds us once more of my watchwords at my Contra Corner blog: Sell the stocks, sell the bonds, buy some gold and get out of the casino!
As Bob Dylan should have described it — a hard financial rain’s gonna fall.
What we were told by the Wall Street snake oil peddlers, of course, was that it was all about the return of “good” inflation and fiscally stimulated “growth.” That it was time to back up the truck because a new mega-dose of stimulus juice was heading straight for the casino.
That’s right. Donald Trump, in cahoots with the tea party Republicans and the GOP establishment regulars led by Speaker Paul Ryan — who couldn’t even mention the GOP presidential candidate’s name in public before the election — would soon be flooding the economy with giant tax cuts and a huge infrastructure spending program.
And that’s to say nothing of more defense, walls on the border and happy days of budgetary red ink all around.
Folks, the whole Trump reflation trade is based on blithering nonsense.
| Folks, the whole Trump reflation trade is based on blithering nonsense. |
Uncle Sam will be stimulating exactly nothing in the years ahead, because he is dead broke.
Moreover, even before Barack Obama ambles out of the White House, suitcase in hand, the Trump/Ryan regulars/tea party gang will soon be lined up in circular fashion, firing vehemently.
But it won’t be at the ballyhooed stimulus; it will be at each other as the looming expiration (March 15) of the nation’s $20 trillion public debt ceiling crashes upon the smoldering ruins of the Beltway establishment.
In fact, the towering national debt and the exploding annual deficit are the twin elephants in the room. That is, the need for higher and higher debt ceilings will disrupt the process of governance.
Washington will descend into acrimonious clashes over every single aspect of fiscal policy — and the battle between stimulus and austerity will be joined like at no time since 1981.
Under those circumstances, there will be no 100-day plan to reflate the U.S. economy. They will not even be able to kick the debt ceiling can long enough to buy time to enact some kind of Trump tax cut/infrastructure/fiscal stimulus.
Instead, we’ll be treated to a recurring crisis of brinkmanship, government shutdowns and unprecedented, publicly discussed uncertainties about what government bills will be paid.
Tonight, I’m discussing the imminent crash I see just days away. I’m at my second home, in Aspen, right now, getting ready. I’ll show you how to avoid the carnage and how to actually profit from it. Click here now to sign up. Tonight’s live event is only hours away.
Below, I show you why Trumponomics is doomed by the unsustainable mountain of debt Trump will inherit. Read on.
Regards,
David Stockman
for The Daily Reckoning