|»Vivek Kaul's Diary|
The One Promise Trump Can Keep
30 AUGUST 2017
POITOU, FRANCE - 'We live in a slow-growth world,' summarised a canny friend, 'but with high-growth debt and high-growth asset prices.'
Today, we turn to a report on Zero Hedge for further precision. But we'll get to that in a minute.
First, let's begin with less precision...
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In yesterday's mailbag alone, several readers objected. For example:
IYI group? We had to look it up.
Black Swan author Nassim Taleb is writing a new book called Skin in the Game. In an excerpt, he argues that many of the elite are 'Intellectual-Yet-Idiots'.
We don't contest the 'idiot' allegation, but we know Nassim, and we doubt that we are the sort of idiot he has in mind.
Uh...that was just our point. One man - especially one as limited as Donald J. Trump - couldn't beat the Deep State.
As to how that makes us a swamp critter, we have no idea.
Another comment from the Diary mailbag:
But today, we will leap even further with an even bolder prediction: The only thing the president will achieve is a partial implementation of his least worthy objective: putting up trade barriers.
A major reform of the tax code...O'care...entitlements...even the border wall with Mexico...will require Congress to go along. Mr Trump won't get it. He's a win-lose guy. Not a cooperation guy.
That leaves only war making and trade - areas where the chief executive can put up his own walls.
Mr Trump has already given up his America First foreign policy pledge. Next, he will turn over tax reform and monetary policy to the Goldman Group - led by Cohn and Mnuchin. That will leave him with only one wall left: trade policy.
A report out yesterday by news outlet Axios tells us that Mr Trump is getting frustrated. In a private meeting, he urged his underlings to get out their trowels. He reportedly said to them, 'I want tariffs. Bring me some tariffs!'
Tariffs he will probably get. And they will have the result they always have: stifling international win-win deals, slowing trade, and reducing economic growth.
Which brings us back to the point of departure...
US asset prices...and debt...depend on future output. People must pay their debts...and buy their products and services...with tomorrow's income.
Keeping it simple, US national debt - at least according to the official tally - doubled over the last eight years. But output and incomes didn't double.
Instead, GDP went from $14 trillion to $18 trillion, an increase of less than 30% (again, based on official figures).
In other words, government debt is increasing more than three times faster than the economy that sustains it.
And over the same eight-year period, US stock prices tripled, increasing 10 times faster than the economy they depend on!
As reported in this space, in terms of sales - which can't be fudged - US stock prices haven't been this high since the heady days of the dot-com bubble.
And a new report on Zero Hedge, by fund manager Francesco Filia, tells us that in terms of anticipated growth, stock prices are higher than ever before:
Future incomes will support neither stocks nor bonds. Prices of both must come down.
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