President Trump repeatedly uses the economy’s strong numbers on paper to his advantage. Many would consider it the only redeeming part of his presidency. However, there’s every indication that his one supposed ‘success’ is a ticking time bomb ready to explode.
The numbers released last month for Q1 2019 were said to be strong. With 196,000 jobs added in March, the New York Times reported on the findings as a ‘return to solid growth.’
Job creation estimates were exceeded and praised without anyone looking at which jobs were created. With most of it being part-time work and stagnant wages, the lived reality of Trump’s economy is much bleaker than the numbers reported by fawning media outlets.
However, there’s a price to pay for all of this lopsided success. President Trump has unchained the corporate forces and deregulated them, allowing for growth but at a severe cost which will soon be felt. The Trump economy, as William D. Cohan writes for Vanity Fair, is a ‘time bomb.’
The Red Flags
There are a few aspects of President Trump’s economic success which Cohan writes about as worrying.
1. The entire economy is over-leveraged.
According to one senior Wall Street banker, ‘the world is more leveraged than it has ever been before… at the corporate level, at the sovereign level, and collectively at the consumer level.’
2. Wall Street is making risky and bogus financial instruments again.
From loans without covenants to loans packaged as ‘securities’ to junk bonds with much lower-than-expected yields— there’s a lot of garbage floating around in the financial world.
Structured investments are also booming, generating some $60B every year. Generally, these structured investments are illiquid for up to a year and only promise returns if certain questionable stipulations are met — a house of cards waiting to collapse.
3. Risk Exposure Is Virtually Non-Existant
Many analysts are still talking as if the Great Recession was a far gone abnormality and could never happen again.
Risk is not being calculated properly which is intensified by the fact that President Trump always calls the economy the ‘greatest.’ There is little self-criticism or assessment of risk in financial markets currently, and that is the same reason it all imploded in 2007.
Although the economy remains strong currently on paper, most middle-class Americans are not feeling the gains. Consequently, we will likely see a tumultuous 2020 election since the numbers reported by the media have little in common with everyday realities.
As markets continue to slump, investors are looking for alternatives. Bitcoin (BTC) has just posted 18 percent returns on the weekly despite the trade war between the U.S. and China. Maybe investors might be more willing to put their money towards a commodity with clearly-defined scarcity as opposed to the dubious financial instruments currently being marketed.
Do you believe Trump’s economy is a ‘ticking time bomb?’ Let us know your thoughts in the comments below.