A word about Trump’s economic ideas.
As far as I can gather he will do a combination of Reaganomics and protectionism.
- Borrow money and finance tax cuts with it
- Hope that the tax cuts refinance themselves through the Laffer Curve effect; i.e. that a reinvigorated economy makes up for the shortfall
- This worked in part for Reagan but with a delay of about 4 years (it takes some time for the economy to react)
- Has been used successfully by USA since about Lincoln, Germany at the same time, Japan since about 1950 and China since about 1995 to build up their industries.
- As opposed to IWF globalism it has a proven track record of building up economies.
- As it increases prices of imported goods it temporarily reduces the buying power of the average Joe. After a delay of a few years, the wealth of the citizenry should grow again as now the supply of homegrown industry output should benefit the population.
- In my opinion tariffs are a perfectly legitimate way to finance a state – comparable to a VAT.
- You usally run into retaliatory tariffs when exporting but that does not stop the buildup of your own industry – it only resists it to an extent, dampening the speed.
So a re-industrialisation of the USA is perfectly possible. It will take time though. Let’s say 4 to 5 years.
During this period massive debt issuance will be necessary. Even if Trump cuts down on state bureaucracy expenditure – which I’d like to see; I love to see the culling of bureaucrats – the US will likely issue 1 trillion USD of debt a year until it can reduce its trade deficit.
Also notice the Triffin Dilemma: IF you have the reserve currency you NEED to export that currency to the world – which means, you HAVE to have a trade deficit – just so everyone around the world HAS your currency.
If the USA wants to stop issuing further debt she automatically stops exporting her currency; and the role of the USD as reserve currency ends.
Given Trump’s position and the role of the USD it is safe to say that the USA must spiral ever deeper into debt for at least the first term of his presidency. This would of course have happened under democrats as well – only that the money would have been squandered, not invested in a re-industrialization.
And if his protectionist agenda actually takes hold, the role of the USD as reserve currency will end. No nation that built itself up by protectionism was at the same time issuer of the world reserve currency – The USA under Lincoln and after him was an emerging economy, the world reserve currency was the UK’s Pound Sterling.
Losing reserve currency status in turn means: Other nations are not required to hold your treasury bills. And that would lead to a rapid drop in price for US treasuries – and dropping prices for treasuries are equivalent to a rising bond interest rate. This will lead to a crisis of US debt and enforce a devaluation of the currency and the debt, or an outright currency reform.
All these developments are already ongoing. You can see it in the dropping percentage of world trade denominated in USD. And, they are inevitable as the debt spirals out of control.
The same holds for the EU and the EURO of course, maybe to a bigger extent – as only the nordic countries in the EU actually work – and the ECB, led by an Italian, prints about 100 bn EUR a month. So, I’m not trying to show that Americans are more stupid than Europeans: Both parts of the Empire have been running on Keynesianism for the past 2 decades and it’s reached breaking point.
So how to survive all this on an individual level? Well, don’t keep all your assets in cash – don’t trust government paper. It’s unbacked promises, Trump or no Trump. Trump himself would openly tell you that. You can use it for daily business, for the time being, but it’s no store of value.
Stocks? Way overprized through leveraged buybacks. Government bonds? Ridiculously overprized through the buying programs of the Central Banks.
That leaves real assets. The only underprized real asset in the West are Silver and Gold – we have a bubble in housing and in farmland.
Closing words? I’m in XETRA-Gold since 2013. Which is a German Gold Bond redeemable in physical Gold; issued by a company owned by the Deutsche Börse; and it counts legally like Gold which means I don’t pay any taxes on profits I make when buying or selling it.