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23 February, 2017

Making America broke again: Trump & the inevitable financial crisis

Trump can either ‘bite the bullet’ now if he really wants to improve the American economy or he can ‘kick the can down the road’ like his predecessors have, noted financial commentator Peter Schiff tells MintPress.

by Whitney Webb

Part 5 - No Easy Way Out: Trump’s role in the impending crash

With the roots of the next crisis established prior to Trump’s assumption of the presidency, combined with the ineffectiveness of post-2008 regulations, the Trump administration faces an uphill battle — especially if the next crisis takes place during the next four years. All of the news coverage and comments from prominent figures in the financial establishment once again seem to be shifting the blame from central bank policy to Trump’s review of banking regulations, suggesting that the financial elite’s scapegoat for the next crisis has already been selected.

Schiff said the financial establishment “will try to pretend that everything else was great under Obama and then act like Trump ruined it.

This isn’t to say that Trump’s potential removal of banking regulations won’t exacerbate or speed up the onset of the coming crisis. James Rickards told MarketWatch it’s likely that a crisis can only be prevented by reinstating the Glass-Steagall Act, which separated investment and commercial banking, breaking up the big banks, banning most derivatives, and enacting tougher law enforcement of bank wrongdoing. But considering the makeup of his Cabinet and team of economic advisors, Trump is unlikely to push for any of these changes.

Writing for the Libertarian Institute in November, Eric Schuler noted, “The next recession is likely to commence during Trump’s tenure. But while he may prove to be an unwitting catalyst of the next crisis, his policies will not be the primary cause.

Instead, Trump is more likely to focus on loosening existing banking regulations than imposing any new ones. Though they do not account for the root cause of the crisis, the president’s actions in this regard could potentially accelerate the bursting of the bubble. However, this is difficult to gauge due to the fact that this new, looming crisis is long overdue.

Trump is ultimately faced with no easy choices. He can either allow the Fed to further inflate the bubble or he can try to bring about a market correction by forcing interest rates to increase in order to establish the foundations for positive economic growth. Both possibilities promise to bring unemployment and economic difficulties for the average American – particularly in the short term. Regardless of how Trump proceeds, he is likely to encounter major conflicts in fulfilling his campaign promise to “Make America Great Again,” as any major economic downturn could potentially lead to widespread, popular unrest throughout the nation.

Trump can either “bite the bullet” now if he really wants to improve the American economy, Schiff said, or he can “kick the can down the road” like his predecessors have.

Even if Trump chooses to delay the inevitable, the next crisis, already long delayed, is increasingly likely to unfold regardless of any action the president may take. And that crisis is likely to define his presidency.

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