Sunday, July 28, 2019

Calculated Strategy

It's another broken promise from Donald Trump. The candidate who promised  to "make America great again" told an audience in May in rural Pennsylvania "We have saved America. We’ve made America great again, and we are going to keep America great."

Evidently, San Francisco and Baltimore are not part of America.   Irritated by House Speaker Nancy Pelosi, in January Donald Russia tweeted in part "by the way, clean up the streets in San Francisco, they are disgusting!"  Before on Sunday he labeled Representative Elijah Cummings (D-Md) a "racist," he described the city of Baltimore on Saturday as "a disgusting, rat and rodent infested mess" and said "no human being would want to live there."

Two-and-a-half years in to his new job, Trump has by his own de facto admission failed to make America great again, or even good. However, despite the obviously bigoted nature of his remarks, the President may have had no choice- politically- but to go full racist. Slate's Jordan Weissman explains

On Friday, the Commerce Department reported that the country’s gross domestic product expanded at a middling 2.1 percent annual rate during the the second quarter, down from 3.1 percent over the first three months of 2019. This was only a preliminary estimate, a guesstimate really; the government will gather more data and revise that number in the coming months. But it was clearly worrisome to Donald Trump, who tried in vain to put a glass-half-full spin on the news while also placing blame for any weakness on his nemeses at the Federal Reserve.

Friday’s report also robbed the White House of a favorite talking point. Previously, the government believed that the economy grew by more than 3 percent in 2018, a mark it hadn’t hit in more than a decade. This milestone led Trump (or, really, his press shop) to boast that he had “accomplished an economic turnaround of historic proportions.” He was particularly jazzed that growth hit 4.1 percent for one quarter that year.

It turns out we didn’t reach 3 percent growth after all. In its annual data revisions, which also dropped Friday, the Commerce Department reported that the economy grew by just 2.5 percent or 2.9 percent in 2018, depending on exactly how you measure it. It also turns out that growth never actually hit 4 percent in the second quarter of 2018, which—despite being sort of meaningless—had been a point of pride for Trump. In short, goodbye, bragging rights....

In fact, it looks like we might even be heading into a bit of a bust. One major reason why growth slowed so much during the second quarter was that businesses actually cut back on overall investment for the first time since 2016.

Reducing investment can help cause a recession. Among signs of an upcoming recession are a drop in USA rail volumes and an inverted yield curve, in which

The returns on long-term bonds dip below returns on short-term ones. Again, there are many reasons that this could happen, but it’s generally interpreted as a sign that the market expects weak or nonexistent growth in the coming years, and very little inflation....

As of this week, the U.S. Treasury yield curve has now been inverted for a full quarter—an incredibly dull-sounding turn of events that happens to be an unusually reliable warning sign that an economic downturn is on the way. The yield curve has flipped prior to each of the last seven official recessions over the past 50 years, without a single false-alarm during that stretch. If securities could talk, in other words, they’d be screaming bloody murder about trouble ahead.

When finance types say that the yield curve is “inverted,” what they really mean is that the typical order of the debt markets that prevails when the economy is healthy has been turned on its head. Usually, long-term U.S. government bonds offer higher yields than short-term ones, because buyers demand higher interest rates in return for locking up their money for greater periods of time. There are a few reasons why this is the case, but a big one is that the longer it takes to get repaid, the more risk there is that inflation will eat up your investment.

When the yield curve is inverted, however, the opposite becomes true: The returns on long-term bonds dip below returns on short-term ones. Again, there are many reasons that this could happen, but it’s generally interpreted as a sign that the market expects weak or nonexistent growth in the coming years, and very little inflation.

So when President Trump plays his white supremacist card, there may be a very good reason.  Center-right Republicans and market conservatives have warned the President since last summer that he should drop cultural warfare in favor of touting a strong economy. However, the economy is unlikely to be as strong in November of 2020 as it has been thus far in the Trump presidency. Moreover, economics is something the President clearly struggles with while he is very familiar with bigotry, misogyny, and hate-mongering.

Donald Trump is dancing with the one that brung him because it got him where he is today and he's at a loss if he does otherwise.

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