The Trouble With Trump-O-Nomics, Part 3

The American economy is a debt-entombed, speculation-ridden stagflationary mess, and you can fairly blame a goodly share of its perpetuation and its latest metastasis on Joe Biden. But the shaky foundation on which it rests has been long in the making—with the coup d’ grace coming during the misbegotten era of Trump-O-Nomics.

The fact is, the interval between 2016 and 2020 was the “last chance” opportunity to bring the fiscal proligacy and monetary apostasy of the prior 35 years to a decisive halt. That is, the US economy had recovered, albeit haltingly, from the Great Financial Crisis, which had been made in Washington and transmitted by Wall Street, and was self-evidently strong enough to tolerate a withdrawal of the Fed’s easy money elixir and a decisive, long-overdue shift to fiscal austerity.

These latter matters were the overwhelming policy imperative for Trump’s four years in the White House, but, as we have seen, the Donald was having none of it. He blew the last chance, setting the desperately needed fiscal consolidation aside in favor of pushing the public debt skyward by more than $6 trillion owing to a fiscal bacchanalia of both tax-cutting and Covid-relief spending; and also thwarted at every turn the Fed’s belated attempts to return to interest rate normalcy before the Covid arrived, while after February 2020 he literally waved-on the Fed printing presses at warp speed.

The result was unprecedented violent disruptions and erratic convolutions throughout the US economy. As we have shown elsewhere, under the double-whammy of lockdowns and stimmy spending, employment, production, inventory and savings activity swung violently from pillar-to-post in compact intervals that were wholly unlike normal cyclical movements.

Accordingly, the business sector was, and is still, flying blind. Firms can’t forecast what’s coming down the pike in the normal manner based on tried and true rules of cause and effect. In many cases, the normal market signals have gone kerflooey, as exemplified by the recent travails of the big box retailers.

The latter first lost customers and volumes in droves during the lockdowns; then had their warehouses swept clean by a collapse of their global supply chains and a flood-tide of e-Commerce orders and in-person purchases by returning shoppers; and finally, after scrambling to rebuild their depleted stocks, ended-up with way too much inventory and the need to take painful clearance discounts when customers shifted dramatically and on a dime from goods buying to re-opened services and experiences after the summer of 2021.

In the initial instance it is no wonder that consumers stocked up on apparel and durables when the Virus Patrol closed down the normal social congregation venues such as movies, restaurants, bars, gyms, air travel and the like. And this happened even as the the Donald’s malpracticing doctors spread hysteria about the Covid across the land, causing households to hunker-down in self-quarantines and the belief that the only safe consumption activity was to order merchandise goods through Amazon, which could be safely deposited on their front-doorstep without human interaction.

The Donald then added fuel to the fire by pilling on trillions of extra spending power derived from unemployment benefits that reached up to a $55,000 annual rate in some cases and the repeated disbursement of stimmie checks and tax credits that for larger families added up to $10,000 to $20,000.

Obviously, the 130 million US workers who were never laid-off—even during the worst of the Lockdown collapse in April-June 2020— didn’t need the Donald’s multiple $2,000 stimmie checks. Indeed, in its (dubious) “wisdom” the Virus Patrol had already significantly fattened their bank accounts via forced savings from social congregation activities that were shutdown.