It doesn’t matter who wins the presidential election Tuesday night, say financial experts who are warning investors to prepare for market turmoil in the months ahead.
That’s because this year’s election comes at the end of a lengthy list of unprecedented economic and geopolitical occurrences. And, unlike past U.S. presidential elections, experts throughout the world who spend their time carefully studying global political and financial events aren’t so sure the changing of the guard here will change much about what has already been set into motion.
And they’re all right.
Despite what many U.S. voters would prefer to believe, the most important bad bit of economic news following the election centers on the fact that the next president will be powerless to reverse the extraordinary amount of damage done to the U.S. economy via the Federal Reserve’s more than a half decade of quantitative easing. Quantitative easing (QE) is the easy money policy that’s made Wall Street happy over the years, but done little to strengthen small business or the average American’s retirement account.
Republican Donald Trump has been talking about QE for years. In fact, he even explained why a guy like himself would be in favor of easy government money way back in September 2013.
“Selfishly, as a developer, I love cheap money,” he told Fox’s Neil Cavuto at the time.
But he also noted why it’s no good for average folks, saying: “The only people that get money are people like me that don’t need it…”
And while Trump has talked a great deal on the campaign trail about how the nation’s growing debt and shrinking assets are going to cause big trouble, there’s absolutely no indication that he has a revolutionary fix in mind.
That’s why the political mainstreamers, for all their Trump-bashing, have declared the GOP candidate “sane” at least on federal monetary policy.
He’s said he’d replace Fed chair Janet Yellen; but noted that she isn’t so bad.
After all, a President Trump is likely to call on the Fed to pull a Hail Mary even the Obama administration hasn’t yet been brazen enough to greenlight: full on helicopter money. Helicopter money is what it sounds like, creating however much is needed out of thin air.
Don’t take my word for it.
“This is the United States government. You never have to default— because you print the money, I hate to tell you. So there’s never a default.” Trump said during an interview in May.
That is, technically, true. But that money must then be backed by something, I hate to tell you.
This isn’t, of course, a denouncement of Trump. But only because a Hillary Clinton administration would mean the continuance of Obama administration economic policy at the macro level. In other words, you never have to default… you print the money. The end result is the helicopter.
Increasing interest rates and ratcheting down on the Fed’s money printing is an unworkable solution for either administration—because it will result in too much blame and too much pain at all levels of the economic house of cards.
You see, the big guys who love that easy money do put it to some use. They build things. They finance things. And they buy all sorts of products.
How they spend that money affects how you spend your days… Working versus looking for jobs that aren’t there. Driving to work versus taking a cab until you can make the money to pay off the repo man and what you owe the bank. And, after chasing the American dream all day, retiring to your home with the white picket fence versus your mother-in-law’s house, where you’ve been living since the first round of easy money bit everyone in the ass.
Whoever gets elected, they don’t want another housing crisis… or an automobile loan bubble… or massive corporate layoffs because they shut off the spigot to the too-big-too-fails.
If they’d done it eight years ago, Obama would have been a one-term president. But I bet you’d like him better today.
That’s because after the initial pain, the market would’ve eventually begun to right itself in a real way.
But politics is the art of prolonging death. And the current iteration of our economy isn’t quite dead yet.
So, rather than a quick death and an economic rebirth, our next president will continue us on the slow path toward the inevitable.
It’s that tired trope about boiling frogs…
Helicopter money, or just a little more QE… is what we’ll get. And things will feel about the same for a few years. If your job is to get elected every few years, that’s good news.
The runaway inflation… That’ll be the next guy’s (or gal’s) problem.
And it’ll be our problem… and our children’s.
There are just a couple of major differences between how we’ll deal with it and the people who pushed us there— our paychecks and retirement accounts are going to disappear long before any living former president sees a pay cut. And guess who usually gets the first of the government rations in countries where governments destroy their economies via inflation?
I’ll give you a hint, “People like me that don’t need it.”