Look for a
decline in the U.S. economy very shortly after the triumphant inauguration of
Donald Trump!
by Charlie Leck
One of the
things I fear the most as Donald Trump puts together his administration, and
continues to talk to a Republican Congress, is that our economy is going to
tumble early on in Trump’s presidency. Warren Buffet is expressing concerns
about the state of the economy and so are many other well established and
reputable economists and market watchers.
Consider this:
The stock market has risen by significantly more than 200% since Obama took
over as President in 2009. That number is based on U.S. stocks that were traded
on the two most significant markets in the country (NASDAQ and the NY Stock
Exchange). The Standard and Poors 500 has risen more than 180%.
The morning
after the election, sensing a potential decline in the stock market, I wrote to
a number of the charitable organizations to which we have given quite
generously and warned them that we might not be able to be so generous in the
coming years. I couldn’t put numbers to my worry, but I do know that the market
doesn’t not like uncertainty and instability in American politics. In my
November 5 blog, when I predicted Trump’s victory, I also predicted a serious
shakiness in world-wide markets in the coming days.
Now I read that
such carefully watched investors such as Warren Buffett and George Soros are
carefully watching the markets. Several market watchers have reported over the
last few days that Berkshire Hathaway (Buffett’s holding company) has been
shedding American stocks that rely on consumer spending.
The Republican
Congress and Donald Trump are having conversations about a major shake-up in
the size of government. They’ve talked for years about seriously reducing the
number of government employees. Of course, such a reduction will have an impact
on over-all employment numbers and it will, at the same time, reduce the amount
of business the government will do with international suppliers. When the
government employs fewer people it has the natural and expected impact on the
general employment/unemployment in the rest of the nation.
A significant
rise in unemployment impacts shopping and spending – from entertainment to
automobiles and from dining-out to travel.
Under President
Obama the U.S. unemployment rate was reduced significantly and got under 6% in
the last year. It appears that major investing companies are expecting it to
readjust and rise significantly in the next couple of years. It’s quite common
for the rate to do that under a Republican dominated federal government.
The Washington
Post said this morning..
“President-elect Donald Trump and the Republican-controlled Congress are drawing up plans to take on government bureaucracy they have long railed against, by eroding job protections and grinding down benefits that federal workers have received for a generation.
“Hiring freezes, an end to automatic raises, a green light to fire poor performers, a ban on union business on the government’s dime and less generous pensions – these are the contours of the blueprint emerging under Republican control of Washington in January.”
This is a common
and frequent idea in the philosophy of Stephen K. Bannon (formerly of Breitbart
News) and now a senior adviser to President-elect Donald Trump.
Many of us will
not be able to spend at the rate we have for the last eight years. Nor will we
be able to be as generous as we have to American charitable organizations. If
thousands and thousands and thousands of individual household managers react
that way, the economy is going to suffer.
If the economy
tanks, hundreds and hundreds of generous foundations are going to take a hard
look at their budgeted giving. Major charitable organizations will find it necessary
to spend far less if the economy shrinks. The housing market will suffer.
School and education spending will be reduced. Non-essentials, such as
entertainment spending, will be examined carefully by each and every family in
the nation. Visitors to food shelves will rise while less money will be given
to these important organizations.
I think the
American voters who led the march to the polls on November 8 are about to get
what they asked for; that is, aid for the very wealthy and an enormous hike in
the unemployment of the lower classes. Oh, boy!
The American
voter has a short memory. He forgot amazingly quickly how damaged our economy
had become between 2000 and 2008. While most of us had far less money to spend,
the federal government was spending furiously on the Military-Industrial
Complex (against which an important and dependable Republican President –
Dwight David Eisenhower – warned us).
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