Will the Swamp Swallow Trump? by Bill Bonner
TRUMP HOTEL, New York City – Yesterday, 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. [Find it here.] 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 U.S. 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.)