Several times a week, I see Trump supporters touting the rising stock market and “booming economy” as proof of his economic prowess. Sadly, they are being led down a primrose path to ruin.
I’m going to sum this up as simply as I can. The economy and the stock market are – to steal a phrase from the president – a big, fat, ugly bubble.
This has very little to do with the president and everything to do with the Federal Reserve. Here’s the quick and simple breakdown:
1. The U.S. economy is built on debt, fueled by easy money since the 2008 crash. Government debt is at record levels. Household debt is at record levels. Corporate debt is at record levels.
2. The Fed is in the process of “normalizing” interest rates. Simply put, interest rates are going up.
3. Rising interest rates mean no more cheap money. The punch bowl is being pulled away and the party is about to end.
4. There is no way the U.S. economy can continue to grow in a high interest rate environment. There is too much debt. The cost of servicing existing debt will rise and new borrowing will be more expensive.
5. The bubbles will start to burst. It’s already started in the emerging markets.
6. There isn’t thing one Trump (or any other president) can do about this.
7. Left-wingers will blame Trump and “capitalism” for the inevitable crash.
Tenth Amendment Center
The Tenth Amendment Center is a national think tank that works to preserve and protect the principles of strictly limited government through information, education, and activism. The center serves as a forum for the study and exploration of state and individual sovereignty issues, focusing primarily on the decentralization of federal government power as required by the Constitution. For more information visit the Tenth Amendment Center Blog.