BALTIMORE – “I couldn’t believe it,” said a friend with grandchildren in a private school in the Washington area. “Their school provided grief counseling!”
“Yes. Apparently, students were so upset by Donald Trump’s victory that the school thought it should provide psychologists to help them get over it.”
The New York Times, too, seemed to need therapy.
Its weekend edition is full of blaming, scapegoating, and flagellation. Hillary blames FBI Director Comey for her defeat. One columnist says white Americans have become racists.
Another says women are deplorable, too. They didn’t support Ms. Clinton as they should have. “Behind these angry white men are angry white women,” it points out.
Five days have passed since the election results were announced. Many people are still hysterical. They should calm down and take a closer look.
The System Works
Already, the dots are coming together. What we see is this: The system works!
That is, the system whose main purpose is to protect the system continues to do so.
“The Donald” may be getting ready to mount his throne. But the Deep State – America’s “shadow government”– stays in Heaven.
First, Mr. Trump used his victory announcement to signal that easy credit – upon which the system depends for funding – will get even easier.
To the easy monetary policy, he will add easy fiscal policy. As much as an additional $1 trillion will be spent on “infrastructure.” On credit, of course.
As one of Mr. Trump’s economic advisers, Anthony Scaramucci, wrote in the Financial Times this weekend:
While easy-money monetary policies have exacerbated the income divide, central bankers handcuffed by political dysfunction have had little choice but to provide extraordinary accommodation… [B]usiness people like Mr. Trump understand you can grow yourself out of excessive debt.
What we think he meant to say was that you can “inflate” your way out of excessive debt by spending more than you can afford – if you can get Congress to go along.
This new spending was just what President Obama asked Congress for and couldn’t get. It was what big-spending economists such as Larry Summers, Paul Krugman, and Joseph Stiglitz had urged.
It’s what the Financial Times has called for from the get-go. And now the same Republicans who stopped President Obama’s infrastructure spending proposals are expected to come forward and approve Mr. Trump’s program.
Steel! Ships! Concrete! Woohoo!
All Hell Will Break Loose
Politically, this is a great move. It is what Mr. Trump will have to do anyway (there’s no monetary stimulus left). And it will come as honey to working-class men, big business, Wall Street, and the Establishment. Even better, it could take years before their teeth begin to rot.
The Rooseveltian-Reaganesque agenda will come with tax cuts, too.
We have never met a tax cut we didn’t like, especially when they are aimed in our direction. So we are pleased to see Team Trump pledging to lower taxes on the rich… and possibly get rid of the estate tax.
You go, Donald!
In the long run, an easier fiscal policy will be catastrophic. The world economy now depends on ultra-low bond yields. And that depends on ultra-low inflation rates. You can get ultra-low inflation with easy monetary policies but not with easy fiscal policies.
The Treasury market is already anticipating rising inflation. Bond prices are falling; yields are rising… exactly what you’d expect if investors were no longer worried about deflation. [See more below in today’s “Market Insight.”]
When consumer price inflation starts to spike in earnest… bonds will fall hard… and all Hell will break loose.
What will the feds do?
What could they do? The responsible thing would be to raise interest rates to head off the inflation. But that would bring on the correction that they’ve worked so hard to avoid. Instead, they will do what all irresponsible governments do.
More spending… more stimulus… more inflation. Buenos Aires, here we come! Or maybe even Harare.
Inflation could become hyperinflation.
But that is still in the future… perhaps long in the future…
Hacks and Has-Beens
The third big dot we can connect is the rapid recovery of the stock market following its election-eve jitters.
When it became clear that Mr. Trump would be the 45th president of the United States, the first reaction was panic. Then the market sat down. Took a drink. And quickly realized that he posed no threat to the cronies or their inflated asset prices.
Au contraire – his program may give them a boost.
From an 800-point plunge in Dow futures following the Florida state returns… the index rebounded and then began a rally into a new all-time high.
In short, Wall Street is confident that “The Donald” poses no real threat.
As though to underline the point, Goldman Sachs CEO Lloyd Blankfein appeared in the news. Trump could be a good thing, he hinted to employees.
By the end of the week, we also had a look at Trump’s transition team.
Where were the outsiders? Where were the bomb-throwing revolutionaries?
Instead, the people entering the transition headquarters near the White House were the same hacks and has-beens who have been hanging around Washington for the last 40 years.
They were insiders, not outsiders.
Some were even veterans of the Reagan Revolution 36 years ago. Alas, they were the wrong veterans – the ones who stopped President Reagan from doing what he intended to do.