DAILY BASKET – NEWS COMMENTARY
A Negative Outlook Of The American Economy
MARSAL COMMENTS: It is unlikely that Trump will succeed in jump-starting the American economy by his stimulus package or tax reductions. So, thinks David Stockman, President Reagan’s Director of Budget and an ardent believer of Supply-Side economics.
He sees that the Fed has brain-washed the markets by printing and flooding the economy with money though its Quantitative Easing policies since the Great Crash in 2008/9, the bulk of which went to inflate the stock market, not real assets.
He is pessimistic of the American economy and considers it bankrupt, and regards the huge American public debt a noose that will eventually strangle it. In that respect, he feels that the recent raising of interest rates is not because the Fed is comfortable that the economic growth and inflation are picking up sustainably, but rather as a camouflage to have the rates at a level of 2-3%, from which to lower it to stimulate the economy, when it comes crashing down.
He doesn’t think that Trump or congress will be able to get their 2018 budget approved on time, nor be able to plan a realistically effective fiscal policy for the next years to lower the debt.
As for the Fed’s recent announcement that it will begin to invest in Bonds, he sees it as another wrong policy of flooding the market with liquidity, which will follow the previous one towards the stock market – until it comes crashing down.
NEGATIVE FOR: USA, the Dollar and the World
POSITIVE FOR: No one. But maybe for those who are invested in real assets as well as gold.
IMPACT POTENTIAL: High
TIME SCOPE: Medium Term