‘I used to try to get things done by saying “please.” Now, I dynamite ‘em out of my path.’
—Former senator from Louisiana, Huey Long
This morning, an Associated Press headline caught our eye.
‘Conservatives agitate for change after GOP loses the House.’
What? We didn’t know there were any conservatives left.
Among the many things we were wrong about was our guess two years ago that Mr Trump would end up starting a new party — like Juan Perón or Emmanuel Macron.
We figured the conservatives in the Republican party would resist his brand of reality TV politics, and that he’d have to break away and begin a new movement.
Instead, he remade the GOP in his own image. The party — which used to favour a conservative agenda of small government and balanced budgets — is now ready to go along with anything Mr Trump proposes.
But there has never been anything conservative about Donald J Trump. He is bigger than life, and willing to go where no president has ever gone before.
Parallels can be found in history, in foreign countries mainly — particularly in Latin America — and in some of America’s most baroque provinces (Huey Long comes to mind).
But Mr Trump is sui generis…at least in the White House.
In another era, The Donald would have been taken no more seriously as a candidate than a showman like P T Barnum or a matinee idol like Rudolph Valentino.
And if, by some fluke, either had been elected, he would have been a mere entertainment — a real boost to journalists and the media, but of little other significance.
But Mr Trump did not get elected by accident or by fluke. And he did not come along at a time when things were moving along nicely.
Instead, we believe he has a major role to play in the historical swing of the US economy from mistake to catastrophe.
Trump was voted in because the common American has been getting ripped off for the last 40 years. During that period, the main…and often only…asset the typical person had to offer — his time — declined in value.
As we have shown in this space, he now has to labour for two to three times longer to buy an average car or an average house.
As for paying his share of the national debt…or his share of total debt — forget it; he will never be able to do it. He hasn’t enough time.
And while the typical working stiff grew poorer, other people — the elites, the one percent, stockholders, insiders, the well-educated and well-connected — got rich. In inflation-adjusted terms, the Dow is up 760% since 1978. Real wage growth has gone nowhere.
Using time as the ultimate measure of wealth, today, the top 10% are so wealthy that they can command about four times as much of the labourers’ time as they could in the 1970s.
Voters didn’t necessarily see it that way…But they felt that something wasn’t right. And they voted for Mr Trump to do something about it. ‘Make America Great Again,’ they pleaded.
Alas, the president did not understand the challenge and missed his opportunity to do anything about it. America could only be made great again by returning to the conservative principles that made it great in the first place — limited government, limited deficits, limited wars, and limited bureaucracy.
Instead, the president increased the deficit and diverted attention with public feuds, border walls, and trade wars.
And now, with the Democrats in control of the House…and Mr Trump in control of the Republicans…the opportunity is gone. There will be no real reform of any sort.
Which, of course, is just what the insiders were hoping for.
$20 trillion loss
The trouble is, change is coming anyway. It is the change Mr Trump couldn’t stop…and few will welcome.
The collision comes in the form of a huge sell-off on Wall Street. What we’ve seen so far are only faint hints — like the grumbling of Vesuvius — of a much bigger collision still to come.
Wall Street analyst, Dr John Hussman:
‘…the Fed created yet another yield-seeking bubble that has encouraged vastly expanded indebtedness in every sector of the economy, and has set US equity market investors up for a likely loss in excess of $20 trillion in market capitalization in the coming years.
‘A $20 trillion market loss? Preposterous. […]
‘Unfortunately, that’s how valuations work over the complete cycle. That’s how it was possible to correctly project an -83% loss in tech stocks in March 2000, and a loss in the S&P 500 of about -50% at the 2007 peak. When you’re pushing $40 trillion in US equity market capitalization, the highest multiple of US GDP in history, a loss of half of that capitalization over the completion of the cycle is a conservative estimate. It’s certainly not a worst-case scenario.
‘Also, remember from the 2000–2002 and 2007–2009 collapses that Fed easing does nothing to provoke speculation in periods where investors are risk-averse, because in a risk-averse environment, safe liquidity is a desirable asset rather than an inferior one.’
Yes, change happens, whether you want it to or not.
And change is natural…and healthy (a ‘correction’ washes out mistakes).
But the story doesn’t end there. That $20 trillion market loss will come out of the pockets of the rich…the Deep State…and a certain D.J.T.
And here is where we predict Mr Trump will make his real mark on history. The president will not say ‘please’ to the Fed. He — along with the Democrats and the new Republicans — will dynamite the obstacles out of his way…
And…well…we’ll see what happens next…
But our guess is that you won’t like it.