It can’t be emphasized enough. On Tuesday night the Wall Street/Washington ruling elites got fired and their policies of war, debt and bubble finance got ash-canned.
So he needs to start by calling out the rotten eggs — especially the anti-worker, anti-saver and Wall Street coddling posse of liberals and Keynesian fools who inhabit the Eccles Building.
In that context, it is to be devoutly hoped that he will take a page from Ronald Reagan’s 1981 playbook.
Namely, to lance the boil early and thoroughly rather than look for ways to placate Wall Street and keep the current destructive regime of Bubble Finance on life support.
That’s what Ronald Reagan did when he gave Paul Volcker leave to slay the inflation monster and then refused to “stimulate” his way out of the resulting sharp recession. So doing, he lined-up on the very opposite side of what the GOP establishment of the day counseled.
Indeed, Senate Majority Leader Howard Baker damned the Reagan tax cuts with faint praise as a “riverboat gamble”. He also tore into Volcker repeatedly, demanding that he “get his foot off the neck” of American business.
Yet Reagan persevered and leaned hard against the accommodationist advice of the beltway regulars. And what came out of it was a stunning victory over inflation and an economy that soon sharply rebounded on its own without a lick of Keynesian “stimulus.”
The GOP leadership today, however, is far worse on the accommodationist front than was Howard Baker and what we then called the Senate College of Cardinals. In fact, Speaker Ryan and Mitch McConnell have proven themselves time and again to be the Washington equivalent of folding lawn chairs — mainstream pols who are utterly unwilling to rock the boat.
Thus, they were part of the GOP establishment cabal that forced the House to reverse its rejection of the TARP bank bailout back in September 2008; and they pulled the rug out from under the Tea Party backbenchers on every showdown over the Federal debt ceiling and continuing resolutions since then.
The excuse offered for raising the white flag during the August 2011 debt ceiling showdown and in subsequent replays was the alleged political fallout. According to the MSM, the public became outraged with the GOP backbenchers because a handful of agencies, such as the Patent Office and Washington Monument, were closed-down owing to the fact that — unlike three-fourths of Washington’s offices — they were not deemed “essential to the public health and safety.”
But that’s unadulterated nonsense as a political matter. It was undoubtedly based on the same faulty polling and punditry that said Hillary was a shoo-in, and that apparently believes the 59 million who voted for Trump are tickled pink by what Washington does for them every day it’s in business.
In fact, however, the remonstrations about fiscally responsible “compromise” emitted by the mainstream media (MSM) and then embraced by the GOP leadership were nothing more than a fig leaf. The real reason is that the GOP leadership is so abysmally ignorant financially and subservient to its Wall Street paymasters that it chokes and runs for cover any time the stock averages drop more than 4-5%.
Yet if Trump starts down that road he will be finished before he is sworn to office. Honest price discovery in the stock market has been thoroughly decimated by decades of monetary heroin from the Fed. What’s left on Wall Street is nothing more than a gambling den for high speed computers and speed-addicted traders — a technology-enabled version of Las Vegas East.
The stock averages measure and signal nothing valid, and instead of allocating capital to the best and highest uses in the main street economy, they actually do the opposite. That is, they misallocate capital on a monumental scale to the financial engineering games of America’s stock option-obsessed C-suites.
Since the crisis, the latter have virtually strip-mined the cash flow and balance sheets of their companies in order to distribute upwards of $15 trillion back to the gaming rooms of Wall Street in the form of stock buybacks, merger and acquisition (M&A) deals and debt-funded dividends.
That’s the consequence of the Fed’s systematic falsification of the price of debt and other financial assets, and dunder-headed belief that keeping the money market pinned to the zero-bound for 94 months running is stimulating the main street economy.
No it isn’t. It is just keeping the Wall Street gamblers in free carry trade money, and the present insanely bloated stock and bond bubbles alive for an even more fiery crash landing in due course.
So it was therefore troubling in the extreme to see that no even one day after the earth moved on Tuesday night, the Trump campaign trotted out a spokesperson to say the President-elect would not ask Janet Yellen to resign.
That is appalling. Nothing else matters until Trump says that there is a new monetary sheriff in town, and that the first order of business will be to empty the Eccles Building of the job and wealth destroyers who currently occupy it.
Yes, that would cause a stock market crash in short order. But until the massive financial boil that is sucking the lifeblood out of the American economy is lanced, nothing else really matters.
In that regard, the casino’s day traders and robo-machines have already gotten it all wrong. They have been feed Washington stimulants for so long they apparently believe that Trump will be just more of the same, and that the Donald’s roundhouse rhetoric about doubling U.S. growth and rejuvenating American capitalism with tax cuts and regulatory relief should be taken seriously.
No it shouldn’t be. It’s just aspirational oratory that will soon be smothered in the fiscal death trap of the Imperial City.
Here’s why. Trump’s first order of business will be a massive increase in the public debt ceiling to well beyond $20 trillion. Yet there is not a chance that he can assemble a majority from among wounded, hostile Democrats and fractured Congressional Republicans to get the job done by the March 2017 expiration of the existing authorities.
Indeed, the debt ceiling expiration is the skunk currently slinking around in the woodpile. It will not only lead to an immediate crisis of governance and one or more government shutdowns early next spring, but also an ugly round of hostage taking that the Donald and his New York inner circle have not even begun to fathom.
What he will find out soon enough, however, is that every block of votes he manages to wrangle for the debt ceiling increase will require a king’s ransom of compromises on everything he has promised to do in the first 100 days.
President Trump may even be forced to back off from his promise to kill Obamacare in order to get Democratic votes for the debt ceiling increase. And that’s because there is not a chance in the world that Tea Party Republicans will be OK with the idea that an election earthquake happened only so they could vote for trillions more of public debt as their first order of business.
Ironically, no three individuals represent the fiscal hypocrisy of the discredited beltway ruling elites better than former Speaker John Boehner, his successor Paul Ryan, who managed to utter Donald Trump’s name aloud in public for the first time a day before the election, and outgoing President Barack Obama. Yet it is this trio’s backroom deal of October 2015 that left this ticking time bomb on the new President’s doorstep.
What it means is that Washington will be paralyzed for months after the inauguration.
There will be no massive tax cut, no huge infrastructure initiative or any other variation of the “fiscal stimulus” will-0′-the-wisp that seems to have sent the bond markets reeling and the stock averages to giddy flights of fantasy.
As I said on Tuesday night, the 2016 election cycle cleared the decks of the ruling elites and the Clinton and Bush crime families. But unfortunately, the long national nightmare which was lurking in their destructive policies of war, debt, bubble finance and beltway racketeering begins now.
And that’s why Donald Trump should take another page from Ronald Reagan’s playbook. He never stopped blaming Jimmy Carter’s failed policies for all the adversity that unfolded when he and Volcker lanced the inflationary boil of that era.
So the job at hand is to do the same. Trump should demand that Yellen and Fischer take early leave of their four year terms on Inauguration Day so that the monetary stables can be swept clean.
He must lance the boil and blame Yellen and Barack Obama as long as it takes to clear the decks and return Wall Street to its proper role of raiser and allocator of capital — not the petulant gambling casino that is taking American prosperity and political democracy down for the count.
Editor’s note: CNBC reports that President-elect Trump’s advisers have considered JPMorgan CEO Jamie Dimon for Treasury Secretary. Dimon says he’s not interested. But the question remains:
Will Donald Trump end up being a puppet for the financial elite?
This development is exactly the sort of thing David Stockman worries about now that Trump’s been elected — so much so that he’s willing to send you a free copy of his hot-off-the-presses book Trumped! A Nation on the Brink of Ruin — and How to Bring It Back. It’s your essential guide for the next four years. Claim your copy right here…
This story originally appeared in the Daily Reckoning