BALTIMORE – The Financial Times is wrong about most everything.
The Davos consensus, too, errs regularly. So does former U.S. treasury secretary Larry Summers.
And when former Democratic senator William Proxmire revealed Alan Greenspan’s economic forecasting record in the latter’s confirmation hearings, it was a long list uninterrupted by success.
And now, all are agreed: “Trumpismo” won’t deliver the goods.
These usually unreliable sources may be on to something.
But Greenspan’s views – expressed in a private meeting with us in our office here in Baltimore on Tuesday – are closest to our own: Donald Trump won’t even get the truck started.
The Financial Times quotes industry leaders in Davos calling the immediate effects of Trumpismo a “sugar rush.”
In the same paper, Summers predicts a “bitter comedown from Trump’s sugar high” and that “disappointment and disapproval will set in within a year.”
You know our thoughts already: It’s not Trump’s fault. This is an economy that has been corrupted by the fake dollar and the Fed’s EZ money policies.
Like a hothouse flower, it can’t survive outside the strange environment of artificially low interest rates, market backstops, and bailouts.
Take these away – which would happen in a real boom – and the whole thing dies, like a poinsettia suddenly taken outside into the winter snow.
At our meeting, Greenspan seemed eager to talk about it. “Aren’t you going to ask me about the last 10 weeks?” he prompted.
Amid all the mumbly-fumbly from the former Fed chief (he hasn’t lost his famous talent for obfuscation) was this clear and unequivocal insight: “It won’t happen.”
Greenspan was referring to investors’ fondest hope and their most impossible dream: that the president-elect will reverse three decades of declining GDP growth, falling productivity, and drooping middle-class wages by sheer willpower.
Trump, if you believe the press, is supposed to cut taxes and boost spending, thus touching off a Reagan Redux… the morning after the “Morning in America.”
“I spent a lot of years in D.C.,” Greenspan explained to us.
At 90, he still lives there… still consults and socializes with the swamp critters… and still keeps his ears open.
Once the Trump team confronts the reality of the federal budget, he says – with $1 trillion-per-year deficits as far as the eye can see – and it gets into the bitter infighting in Congress, it will realize that it may never pass the legislation it promises. Not quickly. Not easily.
“It will be another Congressional food fight,” President Reagan’s budget director David Stockman replied.
David, who now writes the Contra Corner newsletter, is an old friend of Greenspan’s from back in the early days of the Reagan administration.
The memory of these “Congressional food fights” was so vivid in David’s mind, it was as though he still had gravy stains on his lapels and Jell-O in his hair.
“There is no way the Tea Party caucus is going to rubber-stamp a series of debt-ceiling increases,” he argued. (David was the one who briefed Reagan on budget issues before and after his victory over Jimmy Carter.)
“It just won’t happen.”
“This is a non-sustainable outlook. Trump may have some magic formula he hasn’t divulged to anybody. But I don’t see where we go from here,” added Greenspan gravely.
By Nick Giambruno, Editor, Crisis Investing
On August 15, 1971, President Nixon killed the last remnants of the gold standard.
Removing the US dollar’s last link to gold eliminated the main motivation for foreign countries to use dollars.
At this point, demand for dollars was set to fall… along with the dollar’s purchasing power. So the US government concocted a new arrangement.
The new arrangement, called the petrodollar system, preserved the dollar’s special status.
In short, Saudi Arabia would use its dominant position in OPEC to ensure that all oil transactions would only happen in US dollars. And the US would guarantee the House of Saud’s survival.
So far, the petrodollar has lasted over 40 years. However, the glue is losing its stick.
I think we’re on the cusp of another paradigm shift in the international financial system.
The relationship between Saudi Arabia and the US is at historic lows. I only expect it to get worse. Trump is the first president to be openly hostile toward the Saudis.
It raises the question: What will fill the void when the petrodollar inevitably dies?
When that happens – and it may be imminent – something has to replace it. I think there are only two options.
The IMF issues a type of international currency called the “Special Drawing Right,” or SDR.
The SDR is simply a basket of other fiat currencies – the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound.
The SDR is not based on sound economics or the interests of the common man. It’s just another cockamamie invention of the economic witch doctors in academia and government.
The SDR is dangerous. It gives the government – in this case, a global government – more power.
Most decent people would consider this a bad thing. That’s why the global elite cloud their scheme with dull and opaque names like “Special Drawing Right.”
The second option is to simply return to gold as the premier international money. Here’s how it could happen…
Trump might play along with the globalists’ schemes, but I doubt it. He’s the first president who’s openly and sincerely hostile toward globalism.
Trump recently said, “We will no longer surrender this country, or its people, to the false song of globalism.”
In my view, there’s only one way Trump could fight the global elites and their SDR plan: return the dollar to some sort of gold backing.
Trump has said favorable things about gold in the past. So have some of his advisers.
It wouldn’t be easy. He’d face a huge struggle. And winning would be far from certain.
All this is why what happens after Trump’s inauguration could change everything… in sudden, unexpected ways.
This is exactly why Doug Casey and I put together a time-sensitive video explaining how it could all go down.
You absolutely must see this urgent video before Trump’s inauguration TOMORROW. Click here to watch it now.
– Nick Giambruno
What Trump Means for Your Personal Finances
Gold guru Doug Casey explains what President-elect Donald Trump could mean for your personal finances, specifically bonds, real estate, stocks, and commodities like gold.
ECB Holds Bond Buying Steady
Speaking at a news conference, European Central Bank President Mario Draghi said the bank will hold steady on its quantitative-easing program while waiting to see a sustained increase in inflation.
Russia Fears Trump Won’t Be Such a Great Deal After All
Citing fallout over the hacking scandal and doubts that Trump is serious about lifting sanctions, some Russian officials are concerned that Moscow-Washington relations will stay frosty.
In your Trump rant, you missed comparing the biggest narcissist of all time. President Barack OBAMA used the “I” pronoun 79 times in his latest “farewell” address during his waning convention in Chicago and used “I” thousands of times during the last eight years in his media bully pulpit.
Thank goodness for the “we” folks on November 8, 2016, or we would all be facing life on the U.S. Plantation. So I can stand a few Trumpisms, compared to what would have happened with Queen HRC taking the oath on January 20, 2017. Keep ’em coming!
– Don C.
Bill Bonner writes: “Today, we’re looking at Perón as a model for a Trump presidency.” What?
For example, is Mr. Bonner implying that Donald Trump is going to threaten Americans’ civil liberties? That Donald Trump is fascinated with fascism?
I realize there is a chance Trump and Bannon could make the Peronist mistake of leading the U.S. into a dangerous overdependence on infrastructure spending. This will likely be the big battle among conservatives this year, depending on how Bannon structures it, explains it, and stretches the spending out.
Trying to pick winners and losers with hundreds of billions of dollars is something the federal government shouldn’t be involved in. But fascism and undermining civil liberties? More explanation, please.
– Frank W.
In response to readers concerned we elected an out-and-out crook, I would ask one question. What president in the 20th or 21st century hasn’t been one, not to mention an out-an-out psychopath, killing untold numbers in wars of foreign aggression?
Give me JFK and you can have the rest.
Trump may be a crook, but at least he’ll come by it as honestly as the others.
– John K.
Bill’s longtime friend and colleague Doug Casey put together a must-watch video explaining how a Trump presidency could be a boom or a bust. More importantly, it shows what you need to do to position your finances for either scenario. But you must act before Trump takes office tomorrow.