In Part 1 we demonstrated that the Donald’s claim that the US economy is booming on his watch is superficial and wrong.
But it’s also exceedingly annoying. That’s because the Donald is claiming credit for the work of everyday American capitalism—even as it struggles against Washington’s headwinds—while utterly neglecting what should be his real job: Namely, to Drain-the-Swamp, shrink the bloated girth of government and, above all, get Uncle Sam’s fiscal house in order and stop fueling the massive debt burden being bequeathed to future generations.
In perhaps an unguarded moment a few weeks ago, however, the Donald told a group of fat cat contributors at a private reception what he really thinks about his actual job. It’s not pretty.
“Who the hell cares about the budget? We’re going to have a country,” Trump said, according to the Washington Post.
So we segue to a larger theme. The two institutions which are supposed to care about sound finances—the Republican Party and Wall Street—are now completely AWOL.
Indeed, they are not merely dissembling and making excuses for deficits on the Washington end of the Acela Corridor and egregious bubbles on the Wall Street end, they are now joining the Donald in a defiant, so what!
Yet that is exactly why it is so utterly foolish to think that today’s fantasy world can go on indefinitely, as embodied in Washington’s insouciant fiscal profligacy and Wall Street’s unhinged speculative manias.
The fact is, the passage of time on the cyclical clock in this octogenarian recovery is the enemy. That’s because with every passing month the underlying financial rot gets deeper and more fetid. And there is no better way to quantify it than in the chart below depicting the annualized growth of aggregate debt.
What we are saying is that 127 months into a record business cycle expansion, neither the government, household or business sectors need more debt. If they have not healed themselves and purged the excess that led to the 2008 financial crisis by now, more debt cannot help them, and is sure to make it worse.