Charles’ Note: The more things change… the more they stay the same. The incoming Trump administration will be noticeably different than the regime it’s replacing. It’s friendlier to cryptocurrency… and has even proposed making Bitcoin a reserve asset. It’s not openly hostile to oil and gas. And it takes a far more light handed approach to regulation.
Great!
We’re positioned to profit from all of these trends.
But ultimately, when it comes to the big issues that will make or break the country for our children and grandchildren, it’s more of the same. Unsustainable deficits, a $36 trillion dollar debt load that gets bigger by the day, and a corrupt core of politicians enriching themselves and their donors while the country faces ruin.
That’s Freeport Society friend Bill Bonner’s take. And while I’d love to argue with him… frankly I can’t!
Take it from here, Bill!
A Sudden Reckoning
By Bill Bonner, Bonner Private Research
Today, we’re going to peel off some of the misleading labels we find on political and economic trends… and try to understand what is really going on.
Many readers think we are too “negative” or that we may be afflicted with Trump Derangement Syndrome, blinded to the good the man might do.
Maybe.
Our bartender tells us the Trump Derangement Syndrome is probably in remission. And, we’ll put in a special Suicide Prevention Hotline here in the office, just in case.
But there is nothing in Mr. Trump’s policy proposals… or his stray comments… to make us think he will do anything very different from the last time he was president.
Or that tariffs will work now, when they’ve failed so many times in the past.
Or that tax cuts will do anything except increase the deficit.
Or that – best case – we’ll end the next four years with more debt, more inflation, and an economy reeling from more chaos and dysfunction. That is the primary political trend, and it is unlikely to change anytime soon.
Investors’ Business Daily:
The 10-Year Treasury Yield Hit Another 16-Year High
The 10-year Treasury yield has rocketed out of its trading range dating back to the 2007 financial crisis…
As inflation and interest rates rise, the Fed has to switch from stimulating the economy to suppressing inflation. Stocks won’t like it.
Tempered Economic Data
Seeking Alpha:
U.S. stocks sold off on Tuesday, while bonds were dumped after stronger-than-expected economic data tempered expectations for further Federal Reserve interest rate cuts…The Institute for Supply Management said economic activity in the U.S. services sector expanded for a sixth straight month in December. But more notably, a key inflation measure in the prices paid by services organizations for materials and services increased to a nearly two-year high.
Much of the action on Wall Street is just gambling… guessing about Fed policy and how it will affect stock prices.
At a deeper level, policies that increase debt and inflation also reduce real sales and profits, making companies inherently less valuable.
The Financial Times, Wednesday:
At least 686 companies filed for bankruptcy last year as US corporate failures hit their highest level since the aftermath of the financial crisis...
Then, the gap between what people expect (creditors, investors, retirees) and what they are likely to actually get, widens… setting the stage for a sudden reckoning, in which actual asset prices are marked down to reasonable levels.
That’s the Big Loss that we are most eager to avoid.
Which brings us to the fraudulent labels.
Donald Trump is not to blame for the crises approaching the U.S. economy. He is more symptom than cause, more fool than knave.
Decades of policy decisions — by Democrats as well as Republicans — gave us our $36 trillion tower of debt. Trump only added to it.
The division of the US between “left” and “right” is no longer very helpful.
The leftists (democrats) are supposed to represent progress, the working classes, and the downtrodden.
The rightists (republicans) are supposed to favor more traditional, upper class conservative values.
But today, the elites of both parties represent the same group — themselves.
They squabble over cultural issues. But on matters of real importance, the two things that will ruin us… war and money… they both want the same thing: more.
Since the 1980s no major figure in either party opposed the empire agenda… with its deficits… money-printing… and more than 800 U.S. bases around the world housing U.S. garrisons.
Only one single member of Congress (out of 535) can be counted on to vote against deficits.
And neither party now champions free trade, free speech, balanced budgets, and modest military ambitions.
In other words…
The Crack Trump Pried Open Twice
The most important fault line in politics has shifted from between the two parties to a growing gap between the elites and the people they pretend to represent.
This was the crack that Donald J. Trump was able to pry open twice… by posing as a genuine champion of the “deplorables” and the “garbage.”
But this is not the rebirth of conservatism.
It is not an antidote to the elites’ fantasies of the last 30 years…
Nor a triumph for more responsible policies.
In short, it is not a change of direction… but an increase in speed… bearing down on the degenerate wreck that both Republicans and Democrats have been racing toward.
Regards,
Bill Bonner, Bonner Private Research