In an article posted last week, David Stockman predicted financial markets are heading for big trouble in 2017 due to excessive debt levels. He says the chances for success for Trump’s economic plan are slim and none because he is not willing to make the necessary spending cuts.
David Stockman served as Director of the Office of Management and Budget (OMB) under President Reagan and is known as the father of Reagonomics.
“Financial markets are heading straight into a perfect storm of central bank failure, bond market carnage, a worldwide recession and a spectacular fiscal bloodbath in Washington. Investors should be heading for the hills with all deliberate speed.
What is going to stop Trumponomics cold is debt — roughly $64 trillion of it. That’s what is crushing the American economy, and until the mechanics of its relentless growth are stopped and reversed, the odds of achieving and sustaining the 3–4% real economic growth that Trump’s economics team is yapping about is somewhere between slim and none.” (Source: Dailyreckoning.com)
Mr. Stockman then calls out the giant elephant in the room that the mainstream media refuses to acknowledge, the Fed.
“The key to recovery is firing the debt addicted money printers at the Fed, not passing the baton to fiscal stimulators on Capitol Hill.
Yet the latter is about all Trumponomics amounts to — at least as currently presented by the president-elect’s economic advisors. Indeed, notwithstanding all of the candidate’s raging about “draining the swamp,” the only Federal programs he talked about on the campaign trail were the ones he intends to increase or to protect from the budgetary sword.
Trump has already put $3.6 trillion of the fiscal year (FY) 2018 budget off limits for cuts, including Social Security, Medicare, veterans, defense and law/border enforcement. Including interest on the $20 trillion national debt, that’s 86% of the baseline total and it’s before he adds trillions more for defense, veterans, the Wall and border enforcement and his vaunted infrastructure program.
It’s the giant skunk in the woodpile which rebukes the whole fantastic notion currently animating the Wall Street casino that Trumponomics will unleash a powerful wave of fiscal stimulus via tax cuts and infrastructure/defense/veterans/border spending.
No it won’t. The GOP’s Tea Party/Freedom caucus wing will demand “payfors.” The newly aroused bond vigilantes will extract higher interest rates. Uncle Sam’s towering $20 trillion debt ceiling, which expires in March, will delay action for months.
There is no chance whatsoever of a clean, immediate fiscal shock to the moribund U.S. economy fantasized by the Wall Street bulls.
Likewise, there will be no clean and reliable hand-off of the fiscal baton to a new agent of stimulus on Capitol Hill. What that means, in turn, is that the U.S. economy will slip into recession sometime during 2017.” (Source: Dailyreckoning.com)
I believe David Stockman has it right. Excessive spending has brought our economy to the edge of disaster, but Trump’s economic plans fail to make the necessary cuts. Financial markets are truly heading into the perfect storm.
Author: James Bailey
James Bailey is a blogger, business owner, husband and father of two grown children. In 1982, he surrendered his life to the Lord Jesus Christ. In 2012, he founded Z3news.com to broadcast the message of salvation by reporting end time news before it happens.
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