Trump Must Outrun the Inevitable Bear Market

Trump looks like a hero now, but he could become a goat when the bull market ends. He campaigned as the man who would make America great again, and no one should doubt the sincerity of this quest or his commitment to returning the nation to its core values. To judge from his accomplishments so far, he is up to the task. Few could have imagined he would crush the entrenched woke movement and hamstring Deep State within less than a year of taking office. If he can finish the job by bringing criminal charges against Obama, Hillary Clinton, Comey, Clapper, Brennan et al., and make the charges stick, his presidency would become one for the ages.

But odds are considerably less favorable that he will be able to prevent the stock market and the U.S. economy from imploding under the weight of public debts grown far too large to repay. They include $37 trillion owed by the U.S. Treasury, as well as the financial liabilities of at least two dozen states, led by the breathtakingly reckless Illinois, whose pension system, along with many others, is just a bear market away from failure. The sums involved are much too big for a taxpayer bailout, and when they are ultimately deflated to zero by bankruptcies, the result will distance America more than ever from greatness.

Many Jobs — for Robots

Trump’s plan is to ignite economic growth robust enough to make public debts manageable and homes more affordable. But the way he is going about it, with a surge in deficit spending and a Federal Reserve Board hand-picked to turbocharge an already overheated financial system, will only add more IOUs to the mountainous pile that already exists. Although there will eventually be offsets from tariff collections and the re-shoring of U.S. manufacturing, revenue growth will take years to make a dent in what Americans owe. And no economist or pundit I am aware of has even mentioned that the new factories would necessarily employ relatively few workers if they are to compete in markets where labor is cheap.

Making America Great before a bear market wrecks the economy is the crux of the challenge Trump faces. But only a blind optimist could believe that revving up debt stimulus past the redline will be a winning strategy.

(Click here for my latest interview — a real doozy — with Jim Goddard on This Week in Money. We discuss the limitations of AI (and Bitcoin!), as well as the reason America’s debts can never be liquidated with a Weimar-style hyperinflation.)