from Bill Still
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Donald Trump gave a 90-minute interview on Thursday to two senior Washington Post reporters, telling them that the United States could face a massive recession, but implied that there was another path – one where the U.S. could pay off its national debt in 8 years.
We’ll deal first with the “massive recession” part in this report, and the “paying off the National Debt” part in or next report.
Trump said the U.S. faces a looming stock bubble — puffed up by years of unprecedented Quantative Easing – that could burst and send the economy into a “very massive recession.”
Therefore, he warned:
“It’s a terrible time [to invest in the stock market] right now.”
The interview was conducted by Bob Woodward and Robert Costa. The headline for that story was perfectly fair:
“Trump predicts a ‘massive recession’ but intends to eliminate the national debt in 8 years.”
However, in an entirely separate story reinterpreting the Woodward & Costa story, the Post story ridiculed Trump:
“The bizarre optimism in Donald Trump’s theory of the economy”
The bizarre version of the story, written by Jim Tankersley and published by the Post yesterday, leads off as follows:
“There is a theory on the fringes of economics and finance that the United States is riding another bubble, which is about to burst and plunge the economy into a deep recession. It is not a housing bubble, like the one that triggered the last recession, but a stock bubble, puffed up by years of monetary easing from the Federal Reserve. Few professional economic forecasters subscribe to that theory….”
Well, I’m here to tell you that – for the umptheenth time – Donald Trump was right on both points – the national debt, and the bubble.
Let’s start with the bubble.
Mr. Tankersley calls the stock market bubble theory a fringe theory that few professional economic forecasters believe, but offers not a single source to support this specious claim.
Mr. Tankersley doesn’t know enough about economic matters to have consulted with any sources, much less the leading source of all sources on this bubble worldwide – the BIS, the Bank for International Settlements in Basel, Switzerland – also known as the bank of central banks.
Three years ago, in 2013, in an attempt to get the Fed to stop with the QE nonsense, BIS General Manager Jaime Caruana sounded the alarm at a speech in Switzerland:
“… easy financial conditions can only do so much…. more stimulus cannot revive productivity growth…. Adding more debt will not strengthen the financial sector nor will it reallocate resources needed to return economies to … real growth.”
And here is the official graph of the M2 money supply from the Federal Reserve Bank of St Louis. In other words, the U.S. money hasn’t slowed down one bit since Mr. Caruana gave that speech. We’ll get to how this can happen later; suffice it to say that according to the Fed’s own numbers, it continues.
Why? Because our economy is just like a heroin junky. It is hooked on debt – and not only debt – but ever-growing debt.
And that’s the secret of the current economic system we have allowed ourselves to become ensnared in – the debt money system.
Now the bad guys in this scandal may be able to keep this debt growing for – who knows – a month – another year. I don’t know and they don’t know. We are well into uncharted economic territory here.
[insert World Debt-GDP]
Here’s a chart from the International Monetary Fund, known as the IMF, which illustrates which nations are in trouble with their national debts. The nations in dark red are the worst ones – the ones who have more national debt than their gross domestic product. In other words nations with a debt-to-GDP ration of 100% or more.
Notice, that among the handful of the worst debtor nations are, the U.S., Ireland, Portugal, Greece and Japan. Again, these are the nations with a GDP-to-debt ratio higher than 100%.
According to the IMF – the International Monetary Fund – a Debt-to-GDP ratio of over 80% is a drag on economies; over 90% is officially dubbed by the IMF as unsustainable.
So, the U.S. economy – on its present course – is on a hyper-unsustainable course.
Now, if you look down to Argentina, you would think, their economy is horrible; how can they have a low debt-to-GDP ratio. That’s because they recently declared national bankruptcy – same thing for Russia.What does that mean? It means that they were so choked by debt that they couldn’t even pay the interest on their debt. Who do they pay the interest to? Mostly to the big international banks.
In fact, the big banks don’t really care if nations ever repay the principle; they only want the interest. They just want to keep these nations enslaved in debt.