Trumped! A Nation on the Brink of Ruin... And How to Bring It Back

by David Stockman

  This entire misbegotten regime is now well past its sell-by date; it’s waiting to be monkey-hammered by an unscripted and uninvited disrupter.

  For at least that role, Donald Trump is eminently qualified. He represents a raw insurgency of attack, derision, impertinence and repudiation.

  He’s the battering ram that is needed to shatter the polite lies and delusions on which the current regime rests. If he had been ordered from central casting for that role, in fact, it would have been difficult for Hollywood to confect anything close to the brash, egomaniacal rabble-rouser who now has the ruling elites in a fever pitch of sanctimonious reproach.

  It is no wonder they are virtually screeching that he is “unqualified.” Yes, Donald Trump is rude, impulsive and loutish to a fault.

  That’s why, in fact, his is unsuited for the establishment’s job definition. That is, to preside over another four years of the kind of risible, kick-the-can fantasy-world that serves the interests of our Wall Street and Washington rulers.

  The latter would have the left-behind legions in Flyover America believe that everything is fixed and that the financial crisis and the Great Recession were but a random and unrepeatable bump in the night that will never recur. As Obama blatantly fibbed at the Democratic convention, America is already great and America is already strong.

  No, not even close. America is heading for a devastating financial collapse and prolonged recession that will make the last go-round look tame by comparison. We will present chapter and verse in the pages ahead, but suffice it here to say that the entire recovery is one giant Potemkin village of phony economics and egregious financial asset inflation.

  It isn’t even a mixed or debatable story. Beneath the “all is awesome” propaganda of the establishment institutions is a broken system hurtling toward ruin.

  For example, during the month of July 2016, when the Democrats were convening in Philadelphia to confirm a third Obama term and toast 25-years of Bubble Finance, exactly 98 million Americans in the prime working ages of 25 to 54 years had jobs, including part-time gigs and self-employment. That compares to 98.1 million during July 2000.

  That’s right. After 16 years of the current regime we have 5 million more prime working age Americans and not a single one of them with a job. At the same time, the number of persons in households receiving means-tested benefits has risen from 50 million to 110 million.

  Even as the economic wagon has faltered and become loaded with dependents, however, the financial system has grown by leaps and bounds. For example, during those same 16 years public and private debt outstanding in America has risen from $28 trillion to $64 trillion; the value of publicly traded equity has increased from $25 trillion to $45 trillion; and the net worth of the Forbes 400 has nearly doubled from $1.2 trillion to $2.4 trillion.

  In a word, the U.S. economy is a ticking time bomb. Main Street economics and Wall Street finance have become radically and dangerously disconnected owing to the reckless falsification of financial markets by the Fed and Washington’s addiction to endless deficits and crony capitalist bailouts and boodle. There is not a remote chance that this toxic brew can be sustained much longer.

  Under those circumstances the very last thing America will need in 2017–18 when the brown stuff hits the fan is a lifetime political careerist and clueless acolyte of the state who knows all the right words and harbors all the wrong ideas.

  Indeed, during the coming crisis America will need a brash disrupter of the status quo, not a diehard defender. Yet when the Dow index drops by 7,000 points and unemployment erupts back toward double digits, Hillary Clinton’s only impulse will be to double down.

  That is, to fire-up the printing presses at the Fed from red hot to white heat, plunge the nation’s fiscal equation back into multi-trillion deficits and crank-out Washington’s free stuff like never before. A combination of a Clinton White House and the devastating day of reckoning just ahead would result in Big Government on steroids.

  It would also tilt the Imperial City toward war in order to distract the nation’s disgruntled voters in their tens of millions.

  After all, Hillary the Hawk has never seen a war she didn’t embrace including Bosnia, Kosovo, Afghanistan, Iraq, Syria, Libya, Yemen, and Ukraine. Having fatuously likened Vladimir Putin to Hitler, she and her government in waiting are deeply invested in Washington’s reckless and unnecessary confrontation with Russia, and are now even making the balmy claim that the Kremlin was behind the hacking of the DNC’s trove of email gossip and skullduggery.

  Indeed, her prospective war cabinet—including Victoria Nuland and Michéle Flournoy—is comprised of the actual architects of Washington’s unprovoked NATO siege on Russia’s own doorsteps.

  So Hillary Clinton may be perfectly qualified to wonk and conciliate her way through the fantasyland jabber of The New York Times editorial boardroom. But that’s the wrong venue entirely.

  The next four years, by contrast, will not be a time when Washington connections, manners and an extensive official resume will count for anything at all. Nor will a facility for establishment double-talk about how Uncle Sam is riding to the rescue be a virtue.

  In fact, the credibility of every financial institution along the Acela corridor will be in tatters. That includes the fiscal firemen of Capitol Hill, the money printers at the Fed, the IMF bailout brigades headquartered in D.C., the global banking cartels domiciled in NYC, the gambling houses and fast money hedge funds of Wall Street and the mutual fund combines of Boston.

  In that context, Donald Trump’s overwhelming virtue is that he is not Hillary Clinton. He may be lacking in policy tutorials, but so what?

  At least Donald Trump does not carry a bulging 30-year-old bag of bad ideas. By contrast, Hillary’s ideas—and those of the establishment for which she shills—about how to fix the coming economic and foreign policy crises are so unequivocally and irremediably bad that it is not possible that there is anything worse.

  That’s not to say that Donald Trump’s economic policy ideas—to the extent that they are semi-coherent and describable—aren’t plenty dubious. You can find much that is pretty awful in his public quips and bromides.

  Indeed, if you are a “low-interest-rate man,” as he claims to be, you are clueless about the central menace of our times: to wit, the rogue central banks and the massive falsification of financial markets that have resulted from their heavy-handed intrusion and money pumping.

  If you don’t want to touch Social Security and Medicare—ever—you have your head buried in the fiscal sand. On that score, even Trump’s prodigious comb-over has disappeared below the surface.

  If you think that fraud, waste and abuse have anything to do with the nation’s suffocating national debt, you are not thinking at all; you are channeling Ronald Reagan.

  If you think, in fact, that giant corporate and individual tax cuts will pay for themselves in higher economic growth you are also channeling Ronald Reagan; and you are also propagating a patently false GOP revisionist history of the 1980s budget debacle.

  The Reagan tax cuts didn’t come close to self-funding. The only reason that the national debt rose by a mere 250% on the Gipper’s watch is that upwards of 40% of the original revenue loss was rescinded with tax increases later in his term.

  If you think a $10 minimum wage is warranted, as apparently the GOP candidate does on alternating days of the week, you haven’t meet any robots lately.

  The minimum wage was always a jobs killer because it causes capital substitution for labor. Yet with today’s breakthroughs in robotics a big minimum wage hike will literally ionize millions of low-skill jobs.

  If you think a big public infrastructure program is needed to prime the economic pump, you don’t understand federalism or even where productivity comes from.

  The only genuine federal infrastructure responsibility is the Interstate Highway System, but that’s generally in good shape already—and could be perfected with a modest hike in the gas tax. The rest of it
is either pork or public works, and the difference can only be sorted out by local governments, affected voters and taxpayers who actually foot the bill.

  Finally, if you think that the $8 trillion in cumulative current account deficits that the United States has run without interruption for the last 35 years is due to bad trade deals, you are essentially clueless as to why America is on the brink of economic ruin. The $60 billion we import from Mexico and $500 billion from China is a symptom of the nation’s rotten regime of Bubble Finance, not its cause.

  Unfortunately, Donald Trump appears to be an economic blank slate who can embrace any and all of the above errors and delusions. That’s because his economics are purely glandular. Insofar as it is possible to discern, he has never been troubled by any kind of economic model or coherent philosophy at all.

  But, alas, that is also his virtue. What needs to happen when the next recession and stock market plunge unfolds is exactly nothing. “Policy” is what is ruining American capitalism, and the corpulent bailout and pork-barrel state is it creating is what is eviscerating political democracy.

  If Donald Trump is elected president, there will be no shovel-ready stimulus plan or any other economic policy fix within the first 100 days. Instead, there will be a gong show of such fury and fractiousness as to immobilize the Imperial City indefinitely.

  If Hillary Clinton wins, the GOP-controlled House of Representatives will lapse into a partisan killing field for any economic tonics the White House may offer.

  Either way, both ends of Pennsylvania Avenue will end up in political trench warfare. And either way, the Fed will end up even more paralyzed.

  If it attempts negative interest rates to combat the coming recession, the savers and retirees of Flyover America will finally erupt with torches and pitchforks.

  On the other hand, if it goes for another massive QE campaign, it will be an admission that $3.5 trillion of it was an utter failure. Even the Wall Street gamblers will stampede for the exits.

  In a word, the historic virtue of Donald Trump is that win or lose, his candidacy means that the illicit Washington and Wall Street “policy” regime will finally come to a grinding halt.

  The Great Liquidation of crushing debts, insanely inflated assets prices, rampant carry-trade speculation, debilitating malinvestments and unspeakable windfalls to the gambling classes will finally commence. And none too soon.

  TWO SIDES OF THE STATIST COIN—TRUMP, PRO AND CON

  Donald Trump’s inchoate views on economics are a virtue mainly because he has not been schooled in the follies of bipartisan fiscal and monetary “stimulus policy.” Essentially, the Beltway’s incumbent practitioners of this misbegotten policy regime are statist advocates of CINO (capitalism in name only).

  Not The Donald. Whether the business empire Trump claims to have built is all it’s cracked-up to be (by him) or not, there is a secret sauce to it that the mainstream liberal journalists fails to grasp. They would find it downright frightening if they did.

  To wit, Trump’s incessant bragging about his business prowess and accomplishments is not merely or even mainly an unbridled and uncouth expression of egotism and self-absorption. Actually, it is a profession of rudimentary faith—a policy conviction—that America’s capitalist economy grows owing to what capitalists like himself create and foster, not because of the “policy” interventions of the Imperial City’s knaves, crooks and scolds.

  To some considerable degree, “making America great” is about unleashing the nation’s capitalists again. It’s an expression that prosperity is not bestowed by the state but won by the kind of builders, investors, innovators and workers that The Donald fancies to be the essence of Trump Inc.

  To that extent, Donald Trump could be regarded as an incipient antistatist. While this might seem like an overly generous characterization, it is a measure, alas, of the degree to which the bipartisan “policy” consensus on economics has congealed around what is essentially a Keynesian axiom of endless macroeconomic intervention and “stimulus.”

  To be sure, the GOP proposes to accomplish the fiscal stimulus side of this task via “tax cuts” for business and “job creators” everywhere and always. By contrast, the Democrats favor the targeting of “tax credits” and spending increases to constituencies mainly inside the DNC political umbrella such as education, Medicaid and green energy. Both are not loath in the slightest, however, to charge-off the trillions of fiscal leakage to our mountainous national debt.

  And both parties are fully onboard, of course, with the massive fraud that has become central bank policy both here and around the world.

  Starting in the year 2000 with just a $500 billion balance sheet after 86 years of operation, the Fed has actually purchased $4 trillion of additional Treasury debt and GSE securities since then and funded it with credits conjured from thin air. This has been a monumental act of “something for nothing” economics in which the trillions Congress has wasted on war and welfare have been financed with digital money magic.

  So when it comes to economics, it is hard to see how Trump could end up more statist than the bipartisan status quo. But the problem is that Donald Trump has a domineering and authoritarian personality and extreme penchant for believing in the efficacy of his own personal force of action.

  In fact, he undoubtedly fancies himself as Horatius at the Bridge, but the truth of the matter is that he seems to have far more tendencies toward the opposite. Namely, the proverbial man on the white horse.

  For any constitutionalist, this should be a cause for concern during any season, but in the current fraught environment it’s a clanging alarm bell. That is, a genuine capitalist like Trump is unlikely to see the state as a battering ram for economic recovery and prosperity. But when it comes to the issues of law and order and terrorism, his glandular impulses go all the wrong way.

  Donald Trump, in fact, is also an incipient police statist. In that modality he offers himself as the “strongman” who will marshal all of the vast resources and coercive powers of the state to protect an allegedly imperiled and fearful citizenry from a wave of crime and terrorist attacks.

  TRUMP’S ANTICRIME DEMAGOGUERY—DANGERS AND DIGRESSIONS

  But unlike the Horatius of Roman lore, there are no Etruscan hordes of criminals or terrorists at the bridge of America’s 19,345 towns and cities. Virtually 99.9% of them are safe, secure and peaceful almost all of the time—save for motorists reading their I-Phones on the freeways.

  The purported crime and terrorism wave, in fact, is essentially a figment of the cable news version of reality TV, and most especially the CNN war channel and its perennial black versus blue & white race narrative.

  Needless to say, Donald Trump has great difficulty distinguishing the actual facts on these matters from the simulacrum of reality conveyed by cable TV because he is a product of that very thing. Without his 11-year run on “The Apprentice,” the nation would have been stuck with Clinton versus Bush redux.

  On the purported domestic “crime wave” that rang-out from the rafters during the GOP convention in Cleveland, however, it’s not even a close call. According to the FBI data, there has been an astonishing 50% reduction in the U.S. violent crime rate since the early 1990s.

  That’s not just a little bit of improvement or a heartening directional vector; it’s a powerfully embedded trend and slam-dunk proof that the last thing America needs is a Washington led war on crime, and especially a White House pre-occupied with it.

  Donald Trump is not only dead wrong about the purported crime wave, but in blatantly demagogueing the issue he is inflaming cable TV’s black versus blue & white narrative. So doing, he actually fuels the establishment’s specious argument that he is not qualified to be president because he is “divisive.”

  The latter charge, of course, is too rich for words. What establishment economic and war policies actually do is to essentially pit the 1% against the 90%. Yet by foolishly flogging the crime card The Donald threatens to obfuscate the socioeco
nomic class divide that is at the heart of the real crisis which stalks the nation.

  Yes, in selective cities like Chicago and Baltimore there has been a surge in violent crimes. But those are examples of the rotating exceptions, which, as the chart above proves beyond a shadow of doubt, have been more than offset by the overwhelming trend of sharply declining violent crime rates throughout the United States.

  Yet Trump’s anti-crime digression is not the half of it. The entire cable reality-TV narrative about police killings of civilians and the killing of officers on duty by criminals is entirely about goosing viewership ratings, not about rising homicide rates. In truth, there is no epidemic of either—just a massive, unwarranted, sensationalized and context-free surfeit of media coverage.

  Regrettably, Trump has embraced—hook, line and sinker—the non-existent war on cops. Yet during the three years ending in 2014, the number of on-duty police officer deaths was lower than at any time since 1960!

  And, as the chart below makes clear, well less than half of the 126 deaths in 2014 were due to the deliberate shooting of cops by criminals. A much larger portion was due to traffic accidents involving patrolman and other causes such as heart attacks—perhaps prompted by too many donuts in the line of duty.

  In fact, the actual rate of intentional, felonious killings per 100,000 officers has been plummeting for decades. During 2014 it was actually 71% lower than the year Ronald Reagan left office.

  Nor can some run-rate blip extracted from recent months or a rash of headline events like the recent Dallas assassinations negate that truth. The police forces of America are not suddenly imperiled by cop-killers, and, in fact, police work is not even among the “top 10” most hazardous occupations.

  There are about 750,000 police officers in the United States, so the above results for 2014 computes to about 17 deaths on the job per 100,000. That’s way below logging workers at 128 per 100,000, pilots at 53 per 100,000, garbage collectors at 37 per 100,000 and even farmers and ranchers at 21.3 per 100,000.