Let it burn.

I’ve written before on the effects of tariffs on our economy, or more specifically the possibility of a trade war that could ensue as a result. We’re not quite in a trade war, but it’s certainly not beyond the realm of possibility. Regardless, it has already affected the bottom line for many US companies, and we’re beginning to see that in the falling stock markets as valuations have plummeted. The one thing that I haven’t talked about here though is the tax cuts that were passed about a year ago.

One thing to get out of the way right off the bat is any notion that the tax cuts were for anybody else but the rich. Those who needed the cuts the least got the vast majority of the spoils, while the lowest income earners saw minuscule decreases in their tax burdens, if at all. On that other forum (the one so susceptible to Russian influence during election time that shall not be named), I said at the time that Republicans were being fiscally irresponsible. They trotted out the same old lines about tax cuts paying for themselves. They said tax revenue would just come magically out of thin air once all those companies started raising wages so high that tax revenues would actually increase.

Well… that hasn’t happened so far, and by my estimation, won’t ever happen. They will be forced to raise taxes in the future, just as the Reagan administration was forced to do a couple of years later after they made massive cuts in taxes. The reason being that whenever taxes are cut, tax revenues predictably go down, and when tax revenues go down, budget deficits go up, and when budget deficits go up, government borrowing goes up, and when government borrowing goes up, the national debt goes up, and then the economy goes straight in the shitter. It’s not fucking rocket surgery here, and simple math should make that apparent to anyone who knows how to count to 10 without using their fingers.

The only reason that tax cuts seem to work at boosting the economy is that for a little while they do in fact boost the economy. However, it’s similar to injecting nitrous oxide into an automobile engine. It will make the engine go much faster and the automobile will cover a lot of ground in a short time, but it’s also burning a shit-ton of fuel in the process. So while it will speed up the economy in the short term, in the long term there won’t be nearly as much fuel left to keep things going and the economy will eventually start to sputter.

Even worse, instead of increasing capital investment like Republicans foolishly expected to happen, most corporations have taken their corporate tax cuts and divvied them out to investors in the form of stock buybacks and increased dividends. In other words, if you weren’t invested in the stock market since Republicans took over Congress and the White House 2 years ago, you probably didn’t get much of a benefit at all from the tax cuts. What’s more, for the vast majority of low to middle wage earners the tax cuts are temporary and will slowly vanish over the next decade. In short, the vast majority of American’s got screwed out of their cut.

Now mix in the possibility of a trade war over tit-for-tat tariffs, and you have the perfect economical shit storm that’s about to rain down on all of us in the near future. Last October’s stock market correction was no fluke, and although I hope that I’m wrong, the damage done will likely manifest itself over the coming months as a bear market. And lest I forget, the raising interest will also take a toll as the era of cheap money comes to an end and begins eating into valuations as well. The Fed, faced with the binary choice of an economic slowdown or runaway inflation, have wisely chosen the former and will continue to apply the brakes.

The canary in the coal mine.

Today I’m going to talk about the economy, and I’ll direct your attention dear non-existent reader to this article, because I love these guys for their unfiltered views on the stock market and the broader economy as a whole. Now they aren’t reading some arcane tome or reading the tea leaves here, and the data is there for anyone willing to dig into it. Most of us have other things on our minds besides what the employment rates were for the past decade, despite polling that suggests the economy is a top concern among likely voters. That’s why it’s important to look beyond what current and former presidents are saying about it, and go directly to the numbers.

When it comes to U.S presidents, former and sitting, they all follow the same pattern. Obviously anything bad is quickly attributed to their predecessors in the White House. They are also quick to claim credit when the numbers are glowing. That should make blame or credit taking on behalf of any particular administration immediately suspect, and the current administration is no different.

My absolute favorite number in the article is the number of coal mining jobs created in the past three months. Spoiler alert! It’s a big, fat goose egg. That tells us a few things about U.S presidents and their ability to actually affect the economy. Trump has failed to create any coal mining jobs in an era of record low unemployment, despite making it a key campaign promise, despite easing the regulations around the coal mining industry, despite corporate tax cuts, and despite having a party majority in both houses of Congress.

No matter what the Trump administration does, they will never be able to fulfill that campaign promise. Why? Because no U.S president is directly in control of the economy. While they may be able to influence it with policy, market forces will always “trump” executive action. In other words, Trump’s policies run counter to market forces, forces which literally favor all other forms of energy production other than coal.

So the next time you hear a president take credit for the current state of the economy, or blame it on his or her predecessors, remember that it’s all more or less bullshit.

Bubble Boy Trump

Take a look at this article. It’s brief and only takes about 60 seconds of your time, 5 if you speed read.

One of the things that my non-existent readers may not know about me is that I’m all about investing. Being non-existent readers, not to mention a lack of candor in this arena on my part, are no doubt to blame. I stumbled upon the blog “The Big Picture” written by the guys over at Ritholtz Wealth Management a couple years ago, and they are usually pretty spot on. I don’t follow many financial advisors, especially professional advisors, and I certainly don’t pay for it. Fortunately these guys opine and occasionally give out sound advice for free, and are often talking heads on the various news networks where they speak competently about investing and economics in general.

Today they chose to highlight one of the things that may not be so obvious to you, the non-existent readers. The Trump’s are terrible at understanding the economy. I don’t know what education they have had collectively, or whether or not they can get out of their own way long enough to actually listen to those that are more knowledgable on the subject. Certainly old Donny Douchebag in Chief himself will tell you that he listens to his gut rather than the experts. Whatever way they came to understand our economy it’s flat out wrong, and that’s dangerous for anyone who takes them seriously.

This is of course giving Douchebag Jr. a very generous benefit of the doubt, and assuming he’s truly just that ignorant and not outright lying to our faces. This is a family after all that is all about shameless self-promotion. Hell, their very name is their fucking brand. The so-called real estate mogul hasn’t actually done any major real estate deals for decades, other than to sell the rights to slap his name on other people’s buildings.

When you see these guys woefully misunderstand economic indicators or tweet false information to promote the Trump administration’s absent economic policy, understand that they don’t have the first fucking clue what they are talking about. Again, that was a very generous benefit of the doubt because it’s more likely they are fully aware that they are spreading misinformed opinions, or otherwise are just plain full of shit.