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Trump buys into the Krugman con
Leading economic indicators suggest that the Republicans are headed into the fall mid-term election season with the wind at their backs.
Real GDP growth hit 4.1% during the second quarter. The unemployment rate recently slipped to 3.9%, and the US Federal Reserve is finally starting to meet its inflation targets.
Things are so good that U.S. president Donald Trump calls it “the greatest economy in the history of America.”
Yet while all appears well on the surface, there are growing concerns among gold investors about the sustainability of the current pick-up.
Works well in practice… but does it work in theory?
Part of the problem relates to the old joke about French university professors. “It works well in practice,” they reportedly ask. “But does it work in theory?”
The same question underlies Trump’s economic practices. They are clearly generating short-term results. But they don’t appear to adhere to any underlying philosophy.
Republicans liken Trump’s tax cuts and his deregulation efforts with policies implemented by the Reagan Administration. However, the comparison is far from perfect.
For one, the Trump Administration’s growing tariffs on imported goods, which amount to hidden sales taxes, are gradually undoing the effects of his earlier tax cuts.
Worse, the Trump Administration’s practice of choosing which sectors will benefit from protective tariffs and which won’t amounts to a drastic increase in government intervention in the economy.
Making government great again
Taking a step back, Trump’s policies incorporate many of the “big government” themes advocated by mainstream economists from both major political parties during much of the past four decades.
Led by Paul Krugman, a Nobel Prize winner, New York Times columnist and professor at CUNY, the economics profession has consistently advocated growth in government spending, borrowing and credit creation in the hopes of spurring economic growth.
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Economic Crisis Goes Mainstream – What Happens Next?
Economic Crisis Goes Mainstream – What Happens Next?
Last year, when alternative economic analysts were warning that the commodities crush and oil crash just after the taper of QE3 were blaring signals for a downshift in all other financial indicators, the general response in the mainstream was that we were overreacting and paranoid and that the commodities jolt was temporary. Perhaps the fact needs repeating that it’s not paranoia if they are really out to get you.
Only a short time later, it is truly amazing how the rhetoric from the mainstream economic yes-men is changing. The blind analysts who were cheerleading for the nonexistent global recovery are now being carefully relegated to the janitor’s closet over at The New York Times, where Paul Krugman’s office should be. Media outlets are begrudgingly admitting to global instabilities like, for instance, a U.S. interest rate hike leading to a return to recession. (Special note to the mainstream media: Take away the fruitless manipulation of indicators through Fed stimulus, and we never left the recession.) They also are now forced to acknowledge that China’s market crash and yuan devaluation have far-reaching implications for global crisis, whereas a year ago the claim was that China’s problems would stay in China. Even China’s own media are now warning of the chain of fiscally interdependent economies and what the nation’s downturn means for everyone.
The MSM are finally entertaining the obvious notion that the vast financial problems of the EUhave little to do with the crisis in Greece and more to do with crushing debt obligations and employment problems in primary nations like France and Italy.
And suddenly, pundits are once again concerned with Japan’s epidemic of mini-recessions and the truth of fiscal contraction that is not just a way of life, but an exponential dynamic that is getting worse fast, rather than staying static.
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