Trump understands bankruptcy, strategic defaults and massive debt write-offs. But does he grasp the nature of debt in a large economy? Does he understand China’s private debt bubble is a powder keg?
Following the 2008 crisis, China stepped in to rebalance the West when America no longer could. China’s leaders created a bubble to give Europe and the US a chance to recover, but when the perfect storm hit in 2015 China had to crank up credit creation once more.
Trump’s plan seems to rely on threats of tariffs and quotas. But if he pushes the Chinese to revalue their currency he may well end up unleashing a deluge of nasty consequences that would overwhelm any domestic stimulus he manages to introduce. Thus, Trump’s infrastructure spending would morph into more corporate welfare that would set the stage for future austerity. If Trump’s strategy is to have any chance he must grasp that it is Chinese private debt, that needs to be restructured. Otherwise, US Treasury yields could go through the roof, severely weakening US debt sustainability.
If Trump truly wants to rebalance the US economy he should emulate Franklin D. Roosevelt and pursue a Keynesian makeover of Bretton Woods.
Deficit spending can take one of three forms: tax cuts, spending increases or a combination of the two. Republicans, from Ronald Reagan to George W. Bush, and now clearly Donald Trump, favor large-scale tax cuts while concentrating additional spending on defense procurement.
If the objective is to provide a flagging economy with necessary stimulus, Republican deficit spending is a most inefficient means. John Maynard Keynes objected to large-scale tax cuts for a simple, practical reason: the trickle-down effect is a myth.
The reason that “trickle down” is a myth is that the rich are most likely to save a large part of the tax relief they receive, thus blunting its stimulus potential, or use it to go skiing in Switzerland, rather than to spend it in their demand-deprived community. This is why targeted spending on the poor was [Keynes’s] recommendation: because it stimulates demand much more efficiently.
There is a tradition amongst Keynes’s detractors, especially in the United States, to present him as a sponsor of unconditional, the more-the-merrier, deficit spending.
Nothing could be further from the truth. Keynes advocated deficit spending only under conditions of low demand, low investment, high unemployment and next-to-zero interest rates—in other words, under the circumstances that prevailed in 2009, when Republican lawmakers were opposed tooth-and-nail to deficit spending.
Under all other circumstances (for example, when unemployment is low and interest rates on the rise) Keynes would have cautioned against deficit spending. Indeed, he believed that once the economy rebounds, governments should shift their budget into a surplus.
While it would be suicidal to try to balance the U.S. federal budget via austerity measures most likely to push the economy back into recession, it is clear that the room for using deficit spending to stabilize the economy is severely limited. And it has become so terribly limited because of Republican practices that have been confused, often intentionally, for Keynesian economics.
Yanis Varoufakis spoke of the need for a radical unionist campaign to counter the ubiquitous rise of xenophobic nationalism. And I dared suggest that this most DiEM25-like campaign should be kickstarted with the Speech of Hope for Europe. “Who should deliver it”, I asked. “Of all politicians that can pull it off”, I suggested “the only one standing is Angela Merkel. It is her last chance to leave behind a legacy of the European leader that saved the European project.”
On the same day that I addressed an audience of more than 1000 DiEM25 members in Hamburg, I was also kindly invited by Joachim and Renate Pawlik to address the Pawlik Group‘s Annual Conference. In my Keynote Address to the business representatives attending, I spoke of the need for a radical unionist campaign to counter the ubiquitous rise of xenophobic nationalism. And I dared suggest that this most DiEM25-like campaign should be kickstarted with the Speech of Hope for Europe. “Who should deliver it”, I asked. “Of all politicians that can pull it off”, I suggested “the only one standing is Angela Merkel. It is her last chance to leave behind a legacy of the European leader that saved the European project.”
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The problem as I see it is not “What’s wrong with Trump.” It is what went wrong so that we could end up with Donald J. Trump as our President? Even as a viable candidate for President!!! It is why did we could even end up with Donald J. Trump as our President? And, how did we could even end up with Donald J. Trump as our President?
While I have seen a veritable plethora of posts on why we shouldn’t have elected Trump, I have seen very little reflection on why and how did we, the United States, ended up with him as president. It seems everyone is focusing outward, on Donald J. Trump, instead of inward, on what we, as a nation and what the “supposed progressive” Democratic Party, did that helped create the conditions that allowed “A” Donald J. Trump to even vie for the highest office in the land.
It seems to me that everyone that can be touched by observations of what is wrong with Trump already knows, pretty well, what is wrong with Donald J. Trump and about how bad he is and has a good sense of how bad he will be.. If they don’t; they soon will. Every other person will only set their minds harder than they already are (and those people are pretty dense) as they will see these posts and comments simply as from “haters of America,” (as they see America.) Thus they can’t be touched by these observations.
To reiterate: The problem I see with these types of responses to Trump’s victory is that all this attention paid to what is wrong with Trump is preventing a reflective process about what made a Trump “Candidacy” possible in the first place. That’s right! His CANDIDACY. What was it that made it possible for such a degenerate as Trump to even become a serious candidate for the “most powerful office in the world?” That is what I would like to see more commentary on. That is, reflection on why it was possible for US to end up with Donald Trump as president-elect of our nation !!!
The American people and the people of the world deserve for US to figure out what we, as a nation have done to allow such as Donald J. Trump to even vie for the most powerful office in the entire world. WE have a very heavy and weighty responsibility in this to ourselves, our fellow humans, our children’s children and even to life on this planet. And playing the “blame game” will accomplish only one thing: The Maintenance of the Status Quo.
Please, don’t misunderstand me in this. NONE of this is to exonerate us from fighting the evils, yes evils, that will result as a consequence of Trump’s Presidency. We must organize and struggle and some of us will have to go to jail and maybe die because of the evils that will emanate from the collection of megalomaniacal minds that are coalescing around Trump. We must fight with the very fiber of our being to maintain what we can until we figure out what caused these conditions which allowed this to happen and to reverse the process so we can crawl out of this abyss we have dug for ourselves and the world over the past forty or so years now.
Roger W Mills II
The timing of this right after the election is over is curious and will be very telling as to why Hillary was unable to prevail. Far too many Americans saw through the rhetoric to the core of her pro-Wall Street, pro-Fossil Fuel, pro-War Profiteers policies.
…we are at a crossroads… change is inevitable… to ensure it is not… [as] in the 1930s, we need movements to spring out and forge a Progressive International… into the service of humanism.
Trump’s… presidency [is] a defeat for liberal democrats…
 was our generation’s 1929… Central Banks [could not] resolve the crisis… The result [is] Deflation… this environment results in xenophobia, racist populism… Trump [is a] reflection of a Nationalist International… [not] seen since the 1930s.
A Progressive International [is needed] that… promotes inclusive humanist internationalism…the Democracy in Europe Movement… is encouraging progressives… [in the US], Canada and Latin America to band together into a Democracy in the Americas Movement.
The election of Donald Trump symbolises the demise of a remarkable era. It was a time when we saw the curious spectacle of a superpower, the US, growing stronger because of – rather than despite – its burgeoning deficits. It was also remarkable because of the sudden influx of two billion workers – from China and Eastern Europe – into capitalism’s international supply chain. This combination gave global capitalism a historic boost, while at the same time suppressing Western labour’s share of income and prospects.
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