Trump Needs the Trade War to Maintain the Illusion of a Strong Economy

The Dow is feeling the jitters.

The proximate source of unease in the markets is the fear that Donald Trump has gone Full Retard.

Yes, Dear Reader, we may be wrong about our president, after all.

What if…instead of being the cynical, canny, conniving, calculating, self-promoting genius we took him for, Donald Trump turns out to be an earnest, world-improving imbecile?

And what if…his trade war isn’t the fake war we supposed it to be…but a messianic crusade ginned up by a True Believer?

Chosen one

POTUS told the world that he is the ‘chosen one’ to deal with the China issue (whatever the issue is…), and then he tweeted a proclamation…

Henceforth, American businesses are ‘ordered’ to withdraw from China, and they shall have no truck with the Middle Kingdom, unless and until, of course, their lobbyists pay off the appropriate Deep State fixer.

Then Mr Trump let fly that he had regrets about his China trade war.

The press corps was shocked; this was the first time Mr Trump showed a hint of doubt or reflection.

But a White House press secretary quickly clarified that the president regrets not having hit the Chinese harder!

Divine right

One of the remarkable features of modern American democracy is that a president may win with the support of only about a third of adults…but then he feels entitled to tell the other two thirds what to do.

Back in the days of kings and queens, a monarch justified his power by claiming a ‘divine right’ — given to him by God.

Now, he asserts a more profane source of power, a majority vote.

On the evidence, the chosen ones of democracy are no better leaders than the accidents of birth that gave us the Sun King (Louis XIV) or Mad King Ludwig of Bavaria.

Venezuela elected its nutty government; Argentina’s recent election led to an immediate 50% drop in stock prices. Hitler won 44% of the popular vote in 1932. (Trump got 46% in 2016.)

It was a genetic lottery that gave us King Charles VI of France, who refused to bathe and believed he was made of glass, and Ferdinand I of Austria, who reportedly never opened his mouth except to ask for dumplings.

But the ballot box gave us George Dubya Bush; in apparent revenge for an attack on New York, he started a $5 trillion war against a country that had nothing to do with it.

Murderous mischief

As far as we know, the voters have never rejected a candidate because he was too stupid, too ignorant, or too malevolent.

Instead, they are like turkeys voting to make Thanksgiving a national holiday.

Nor does there seem to be any limit to the zany and murderous mischief a leader will get up to.

Stalin personally approved the lists of thousands who would be rounded up and sent to the gulags.

Barack Obama, too, claimed to personally approve the assassination list.

And now, Trump subcontracts the work of keeping 500,000 people on the ‘sanctioned’ list, where — without the benefit of formal charges or their day in court — they are cut off from travel, credit, and commerce.

More fake money

This brings us to the latest escalation of the trade war with China.

Mr Trump’s main re-election selling point is the economy. People think it is doing well. And to maintain that illusion, Mr Trump needs to put more fake money into the system.

How?

Another tax cut? There is no way Nancy Pelosi’s House is going to agree to another tax cut before the election. The Democrats want the economy to be sour in 2020…not robust.

Big infrastructure projects? Again, the Democrats will do nothing to boost the economy before the election. They will hope to win in 2020 and then roll out their own boondoggles.

Rate cuts? Yes, rate cuts can put some silicone in the sagging flesh of an aging bull market, but member banks and speculators can already borrow at or near the inflation rate. A few basis points lower is not going to make much difference to the economy.

Also, Federal Reserve Chief Jay Powell is beginning to show some backbone.

Again last week, the president blamed stock market volatility on the Fed. But Powell fired back that the trade war was the cause.

Mock battle

No tax cut, no big boondoggles, not much from the Fed…What does that leave?

The China trade war!

This is a battle Mr Trump needs to win. And wait…what’s this? This morning, Mr Trump says trade talks will resume! Stocks are going back up!

Who could have seen that coming?

So, we stick with our prediction: Trump will not go Full Retard. Instead, he will settle up with the Chinese before the 2020 election.

A further prediction: That won’t stop a recession or a crash on Wall Street.

Regards,

Bill Bonner


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.


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