How Policy Can Dramatically Impact Economic Outlooks

Prior to this current quarter, I saw the U.S. economy going further into a recession, predicting the inevitable Fed reaction of another round of QE, the market progressing to a blow off top with a drop of about 40%, a dollar value decrease with reignited inflation, the government inflating away the debt. The prevailing wisdom was the government had few options given its massive debt: save the economy, save the currency, or war. I believe President Trump may just pull a hat trick and come up with a fourth option no one but he thought of.

It appears President Trump is single handedly resetting the world economic and geopolitical playbook. His tariff actions had two purposes. The obvious purposes were to raise national income and reset fairness in the trading system, but there was another objective; to realign national alliances through which to sustain national power and economic opportunities. President Trump used the tariff stick to get other leaders attention. Those who were willing to work with us got better and quicker treatment and adjustments. Those who were not became, for all practical purposes, non allied. Concurrently, he worked with those, some newly, allied to greatly expand their foreign direct investment into the United States. Although re-shoring manufacturing will take time, the initial investments will greatly increase jobs and money supply. Additionally, he has laser focused on the future technologies which hold the greatest promise for rapid productivity growth - AI and energy. He has cut taxes for the middle class, easing their long term slide in their ability to make ends meet. He is dramatically decreasing drug costs, a huge expense for our fixed income populous. He has dramatically eased the obstacles for new energy projects, obtaining a deal with the EU to purchase 750 billions dollars worth of energy per year from the United States. He has dramatically decreased the size of government, which had become too large a portion of our GDP. He has saved untold billions by deporting illegals who were being given government benefits. He has opened up huge markets overseas to the U.S. Lastly, he has ramped up fiscal stimulus to spark growth, in the face of massive debt. The gamble: stimulate economic growth to outgrow the debt, whittling down the debt to GDP ratio and instilling confidence, whilst increasing revenues, having the additional benefit of affordability of tax decreases.

I believe President Trump and his team, although not yet there, are pulling a hat trick, finding the pony in the pile of shit they were left by the last administration. When he said we were entering America’s golden age, he meant that both literally and figuratively. The figurative meaning is obvious, the literal perhaps not so much, but there are strong clues. He has been repatriating gold in massive quantities as well as, I believe, purchasing large quantities. He has negotiated side rails for participating in the BRICs bridge system, a means for buttressing the continued role of the dollar. He plans to issue long term government zero coupon bonds redeemable in gold. He is buttressing the short term U.S. debt market by backing and establishing a regulatory framework for stable coins. This will also perpetuate the dollar as the reserve currency as, if central banks may not want the dollar, their populations do. There is much talk that he will revalue gold to the inurement of the Treasury General Account. Additionally, he will monetize the huge land holdings,and the mineral rights therein, that the U.S. government holds. This alone will bring in very, very substantial sums. The CBO has not scored any of this. President Trump is, also, establishing peace throughout the world, having negotiated peace settlements between six conflict zones. What does peace mean? More trade. President Trump wants to trade with the world. That includes China and Russia, but the trade must be fair. Friday will tell if he has yet another rabbit in his hat in his negotiations with Russia.

The future economic outlook is uncertain because no one envisioned what President Trump was going to do. Nearly all economic pundits are uniformly predicting tough times ahead but, like the CBO, they are not adjusting for the Trump effect. I believe his policies and actions are going to result in continued and substantially higher real growth and, as hard as it is to believe with current valuations, a renewed bull market after a slight pullback. That is a quite contrarian view at this time, even contrarian to my own recent views, but the number and speed of changes the president is implementing simply are unprecedented and will have huge, and I believe quite positive, impacts on our economy. We may, indeed, be entering the golden age of America.