You could call it a modern version of fiddling while Rome burns, but that would be too charitable. Never before has there been such abject complacency in the face of blackening storm clouds than is now prevalent on both ends of the Acela Corridor.
Yesterday was a striking case in point.
- The Donald was out on the hustings, boasting up a cloud of purple prose about his splendid MAGA moment in the Q2 growth figure—although that’s surely the best number he will ever see as long as he lasts in the Oval Office;
- Wall Street was slurping-up another round of dip buying caused by an optimistic leak about China trade negotiations—-although that was reversed by the end of the day when the White House indicated that the Red Ponzi will be slammed with a 25% (vs. 10%) tax on the next $200 billion tariff round;
- the courageous GOP majority in the House was out on a 30-day vacation in lieu of passing an FY 2018 budget—although the US Treasury is now bleeding red ink at a $1.3 trillion run rate and 10-year yields have once again crossed the 3.00% mark;
- and the Fed was wasting its time deliberating about nothing and fixing to leave rates unchanged—although the real money market yield (fed funds rate) is still in negative territory and has been for a preposterous 115 months running.
We cite this chamber of horrors because our delusional Great Disrupter stands at the very center of the gathering storm. Yet this boast may be his last because there was nothing sustainable in the Q2 headline number—even as a bone-jarring collision of monetary, trade and fiscal policies comes racing down the pike:
And I am thrilled to announce that, in the second quarter of this year, the United States economy grew at the amazing rate of 4.1 percent. We’re on track to hit the highest annual average growth rate in over 13 years. And I will say this right now, and I’ll say it strongly: As the trade deals come in one by one, we’re going to go a lot higher than these numbers. And these are great numbers.
We refer to the above as Peak Trump because we are quite sure that today’s boasting will turn into a ferocious attack on the Fed by October 1. With all his twitter guns blaring, the Donald will savagely blame the Fed for doing what is belatedly required to restore a semblance of monetary sanity—even as his own Fiscal Debauch and Trade Wars slam head-on into what remains of America’s faux prosperity.
Needless to say, the boy and girls of Wall Street, who now insouciantly dismiss the Donald’s trade bluster as either harmless red meat for his base or some grand feint in an Art of the Deal approach to global trade, are going to be in for a rude awakening.