The NYTimes has an article today discussing the global slowdown happening around the world with the notable exception of the US.

It is not entirely unusual to have a recession after an 8 year recovery except that this recovery was so meager. The US average growth rate for the 8 years to 2017 was 1.5%. For the prior 25 years the average rate was 3.5%.

As I’ve mentioned the US on-boarded 19 million people during those 8 years and only added 5.5 million employed meaning that the normal 50% employment of Americans was only 25% in the new entrants or overall the participation rate fell 3-4%.

This drop is a partial manifestation of the melancholy that drove the 2016 election and is driving the populism in the US and if similar conditions exist in other countries might explain similar problems.

Another aspect that is less frequently mentioned is that the wealth of the middle class fell by 40% and has not fully recovered. Whereas the wealth of the rich has rebounded hugely.

Part of this drop in wealth of the middle class is related to the persistent lack of jobs. This has forced people to lower paying jobs, part time jobs or temporary jobs. The middle class has fewer resources than the wealthy to sustain long term economic weakness. They have eaten into it and other macro trends have hurt.

Lower wealth makes middle class people feel more despondent about their future prospects, lengthens the time to retirement, makes retirement seem impossible and increases the chances of homelessness.

A respected hedge fund manager I worked for (Ray Dalio) who has spent his life studying downturns has pointed out that another recession in the US would have led to widespread and much more severe poverty and homelessness.

Because of the lower wealth, fewer backup resources many people if hit with another recession before they have recovered from the last one will be devastated. Did the Democrats care about that?

No!

Interest rates were at roughly 0%. The extreme monetarist measures had not worked. If we had another recession we also had less fuel to reinvigorate the economy. This put the US in a very risky position.

Another recession when the middle class was already down 40% in wealth and had lower paying jobs and 4% lower participation would have been catastrophic by itself but with 0% interest rates the panic and the recovery might have been more lasting and would have created the conditions of depression.

The way I put this is that it is possible up to 100 million people might be on the streets if we had another downturn. Many people’s wealth had declined to the point that significant additional stress would result in losing their homes possibly.

This is why I have tried to explain that the most important thing is to restore the middle class as much as possible.

If we had continued with Hillary and Obama’s policies we would be where the world is which is looking at recession. With a recession the US would be far far worse off than what is the situation today.

Donald Trump did the right thing

Donald Trump’s tax cuts, decreased regulation, work on bad trade flows and immigration concerns are all targeted at buttressing the middle class and boosting business in the US.

Democrats have poo-poohed these measures and continue to downplay the significance of what he has done. The evidence of which is now becoming more and more evident that his measures have been all to significant.

With the rest of the world in recession the US looks almost prescient in its policies.

The Democrats said the economy was doing great. Looking at the rest of the world shows their assessment was totally wrong. We weren’t and they only now acknowledge that wages hasn’t made gains and that the middle class was behind, that maybe we should address trade imbalances but just a year ago they couldn’t stop criticizing everything Donald Trump did end predicting demise.

We now see it is the rest of the world facing demise and the US is winning as predicted by President Donald Trump.

The result of what he has done is to massively change and redirect the flow of billions and trillions. The US for instance has become the largest energy producer and the largest oil producer in the world again.

Trillions of dollars are being repatriated into the US that were removed due to high tax rates. Manufacturing has soared by 500,000 jobs which the Democrats said COULD NOT be recovered without the use of a magic wand.

Apparently Donald Trump has a magic wand they didn’t know about.

The Democrats and CBO completely misunderstands the tax cuts that were deployed by Reagan and Trump.

As liberals with a penchant for believing in monetarism and fiscal policy over tax policy they are biased against the private sector.

I have a whole blog on this topic here you can review but the tax cuts that Ronald Reagan and Donald Trump have deployed incentivize business to redirect investment from tax avoidance strategies to growth strategies. It also encourages companies around the world to invest in the US.

It also causes companies to hire people into jobs that are more leverage-able to longer term future which government jobs don’t.

For many reasons these tax cuts were responsible for the US outperforming the world for 25 years. Liberals believe the tax cuts will fizzle in a year or two and we will slip into recession like the other countries they talk about.

They are horribly wrong.

  • I say horribly because of the long term impact of better economic results on real people is massive. 8 years of poor growth has devastated the lives of many people in the middle class and made their life massively more stressful and this may be a partial reason for the rise in drug use and suicides.
  • The point is these economic policies have a dramatic impact on the lives of Americans at every strata. It is clear Democratic policies produced far too little growth and they took in too many people. They supported trade policies that were hollowing American business and jobs. They didn’t criticize or deal with illegal activities and unfair practices of our trading partners.
  • They never criticized these problems and they spent the last 3 years excoriating Donald Trump for even talking about such policy changes. Yet today it is apparent Donald Trump was 100% correct.
  • Donald Trump is winning the debate just as Ronald Reagan did 36 years ago. I see a repeat of the same pattern of 36 years ago.

    Today the debate is not if we have more free trade but how we get trade to benefit the US. Donald Trump has turned the debate on many issues. Not just trade.

    Today Democrats are already running away from the free trade policies they espoused and criticized Donald Trump for during the election. They are running away from their open border policies and ideas. They are running away from their hate for the middle class. All of these things they criticized Donald Trump for 2 and 3 years ago. Now they claim they are for them but just not the way Trump is doing it.

    Yeah right! China, Europe and other countries will sit down and talk to us about giving us billions without having to threaten them. That’s bullshit.

    Obama tried to get Nato to put more money into defense. He gave up. Donald Trump threatened we would pull out. They suddenly decide to put more in. People who don’t understand how the real world works and think that it’s possible to get change without lots of pressure are naive idiots that don’t deserve power.

    Today the US’s populism worked whereas the slowdown in other countries demonstrates they were wrong.

    Hillary Clinton admitted this to Europeans when she said it would be dangerous to the globalist agenda to continue some of their policies essentially admitting they were and are wrong.

    For once some Democrats are finally admitting reality. It’s a step but they have a long long long way to go.

    The growth rate in the US for the last year has expanded and is investment based meaning that a lot of the growth has to do with companies growing their business infrastructure in the US. This will have long term massive benefit for jobs.

    There are companies that have tariffs and have decided its cheaper to build in the US and companies who see the vastly better tax policies as attractive to grow in the US. Companies that are repatriating trillions and need someplace to put it.

    All that investment means they will continue to hire people on a massive scale. In other words. The growth we are seeing is just starting and can’t be undone easily. We won’t follow Europe in recession as the morons at the CBO or other liberals say.

    Our economy has expanded so that it is now compensating finally for the malaise of the Obama recovery.

    The participation rate is rising again after we have slightly reduced the population growth rate due to immigration changes explicitly or implicitly implemented. Also increasing jobs combined with this has started to push up participation.

    In addition, the rising pressure on jobs is creating higher wages. For the first time in a decade and longer really real wages have started to climb. This is extremely notable because of the lack of real wage growth for decades. Something Donald Trump has done has made a significant enough impact to start to drive wages higher.

    This is a critical thing in order to buttress the middle class. Growing wages means they can save more. Put more into their houses and possibly buy up or pay off debt and boost their wealth.

    The middle class

    The recovery of middle class wealth and helping the poor class have high mobility as the US has traditionally had will massively strengthen our society and is in the interests of the rich class as well who want to live in a stable society.

    It’s also important to note that the middle class in America has been large. These are people who are the bulwark of American exceptionalism and democracy. Having a strong middle class is critical to the stability of America and it is proof to other nations that it is possible to have a society that is full of free independent people who have the means to enjoy their lives, think what they want, have freedom and enjoy that freedom.

    Populism is the idea that the average person makes decisions that are in their interest. Some people think such people are poor decision makers and are ill equipped to make the decisions for our society and an elite of intellectuals are better suited to guiding the nation along a righteous course.

    The founders believed in the middle class or “the people”. I believe this is a significant thing that Democrats have forgotten or purposely try to circumvent. The middle class in America controls the vote and should continue to do so if we believe in democracy. We have to listen and do what the middle class wants generally.

    Obviously there are boundaries set out by the constitution but liberals believe the average person in America is a dreg and despicable racist. They prefer the votes of highly animated and incited identity groups that they have selected who are spun to believe they are being wronged and a donor class who pay for globalism and some special interest groups.

    For the grace of Trump go we

    It’s quite clear that the policies of Donald Trump could not have come at a better time ( except possibly earlier.).

    The US is growing while virtually every other country in the world is shrinking or stagnating, including the juggernaut China which is facing financial collapse. This is very similar to what happened in the early 80s after Ronald Reagan.

    Ronald Reagan won 49 states in his re-election after it because apparent everything he said was true and the US surged out from the rest of the world. I believe by the time 2 more years progresses it will be incredibly obvious that everything liberals said was wrong and everything Donald Trump said was true just as happened with Ronald Reagan 36 years ago.

    The Democrats lambasted Reagan endlessly calling his economics voodoo. They criticized every foreign policy move. In the end he transformed the world.

    It was so stunning a victory that virtually every country in the world copied the US economic policies of Reagan. Our enemies collapsed.

    We are seeing the same thing. It may not be obvious but China is facing the same collapse if they don’t modify their behavior FAST. The rest of the world will definitely move to more and more populist policies.

    Why? Because the other policies hurt the majority of people and these people if we have a democracy are the people who vote and control our society. For that not to happen would mean we weren’t a democracy anymore.

    Democrats here and liberals abroad want populism to be associated with negative stereotypes of German racism which is silly. Nobody is saying they want to destroy other people or conquer the world. They simply want rational policies that are not suicidal.

    They don’t see why we should have to endure policies which they can see obviously aren’t working and can’t work.

    As just one example.

    In the US we grew population 19 million and jobs only 5.5 million. If we continued this for decades the US would go bankrupt. The middle class would disappear and the US would become a third world country with 20% or greater real unemployment.

    You cannot simultaneously grow immigration arbitrarily or at high rate and have a low economic growth rate.

    Paradoxically for liberals they have the idea the US has some sort of ethical requirement to accept a billion people or whatever and simultaneously don’t have any problems with low growth rates brought about by their hate business ideology. You can’t do both.

    Populism will win if Europe is a democracy or republic of democracies. This is by definition.

    So those who wish to impose policies that are counter to the perception of the citizens of their country will simply have to convince those citizens that it is not in their interest through the marketplace of ideas not by condescension and moralizing but by explaining clearly why it is beneficial to take in millions of migrants who are complete unassimilated.

    Summary

    I think I’ve said it all. Populism will win. Donald Trump will win in 2020 because the policies he has put forward are not short term fixes. He is instituting large generational changes that will strengthen the US for decades and decades after years of practical suicide.

    The benefits of these policies are becoming more and more evident every day and won’t go away but will grow. Just as with Ronald Reagan the support for Trump has nowhere to go but up.

    The impact of trade policies, restructuring our tax and regulatory system, immigration reform will strengthen America. There is no way they can’t. The result will only get more and more obvious.

    We see today the fact the world is in recession and the US has the best growth rate in the world and the best for itself in over a decade.

    We will see less lawlessness as we reduce insane policies and the economy improves and the middle class gains and lower class sees higher mobility.

    Advertisements