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Will the Swamp Swallow Trump?

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“Will the Swamp Swallow Trump?”
by Bill Bonner
“Where we left off… Mr. Trump’s triumphant, ragtag army was marching on Washington. After his victory over the forces of Hillary Clinton and the Establishment…he has turned his face towards the nation’s capital. With nothing in his way, he will seize it in a matter of weeks.
Shovels and pumps: Mr Trump has surprised the nation twice. First, the amateur politician trounced Jeb Bush on the sand flats of Florida. Then, he outflanked Ms Clinton in the upper Midwest. Clinton was the odds-on favorite. But she fought an unimaginative battle with mercenary troops who had no stomach for real fighting.
Mr Trump called up citizen soldiers out of the hollows of West Virginia and the old industrial suburbs of Gary, Indiana. They appeared on the battlefield as if out of nowhere, attacking the former secretary of state on her exposed flanks. They were ‘deplorables,’ she had said, but they fought well. And now, with Washington’s two protective armies swept from the field, Mr Trump advances. ‘I will drain the swamp,’ he has promised.
Yesterday, we spent much of the day with someone who knows the swamp well. David Stockman was a very young congressman from Michigan when Ronald Reagan called on him to dig drainage ditches as his chief budget engineer. Reagan was an ‘outsider’, an actor from California, not a lifelong politician. He, too, had beaten the insiders’ man — President Carter. And he, too, brought shovels and pumps with him when he arrived in Washington. ‘Yes, the parallels are certainly there,’ Stockman told us. ‘I’ve been in touch with the Trump team. I’ve even written a book about Trump. But those guys are going to be surprised. They just have no idea what they’re up against.’

Dependent on debt: But to back up a bit…we have an economy that depends on debt. Banks loan new money into the system ex nihilo — out of thin air. Without those new loans, the money supply falls as old debts are settled. Without more money, the economy stiffens. Our friend and economist Richard Duncan estimates that credit (debt) must increase by at least 2% a year or the economy will fall into recession.
For the last 35 years, interest rates have been coming down…to make borrowing easier. Now, there is plenty of debt in the system — $63 trillion in the US alone — but not much room left for interest rates to go down. ‘Monetary policy is exhausted,’ says David. ‘Everybody knows that. What they don’t know is that fiscal policy is exhausted too.’ [Note: Monetary policy attempts to stimulate the economy by setting the price of credit. Fiscal policy attempts to stimulate growth by increasing government spending.]
Donald J Trump has promised to get the economy growing at a 4% annual pace. To do so, he will have to stimulate it somehow. The experts will tell him he has only two tools: monetary or fiscal stimulus. (He hasn’t asked us; we’d advise him to stay in New York.) The ‘reflation trade’ — betting on rising stock and commodities prices and falling bond prices— is a gamble on inflation; it is a bet that Mr Trump will rotate from monetary stimulus to fiscal stimulus. Long term, we think it’s a good bet.
Inflation is what ‘The Donald’ is promising. But fiscal stimulus requires congressional approval. He may not get it. That may be Mr Trump’s biggest surprise of all. He may not drain the swamp. He may sink in it.
Swamp gators: Yesterday, we left you with two possibilities: Either Congress goes along with Mr Trump and the credit bubble ends in an inflationary blow-up… or it holds the line — refusing further fiscal stimulus — and the result will be a deflationary disaster. There are, of course, more twists, turns, and nuances in this plot. But that is the basic storyline.
Stockman believes the swamp will swallow up Mr Trump, his army, and his big budget plans. ‘I’ve seen it happen. There are alligators in that swamp,’ says David, showing his scars. Each gator will fight for his own subsidy, his spending, his budget, his tax break, his job, his power, his agency, his pet project. There will be splashing around…tails swinging wildly…body parts chewed off…and blood in the water up and down the Potomac.
Republicans will want cuts to social programs if they are going to approve more spending on infrastructure and the military. Democrats will refuse to go along with Trump’s spending unless social programs are preserved. Every step the new president takes will bring him deeper into the swamp. The bottom line, says Stockman: ‘Ronald Reagan’s program didn’t survive. Neither will Mr Trump’s.’


Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2016/11/will-swamp-swallow-trump.html



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