Pledges for Trump

 

You boys know what makes this bird go up?  Funding makes this bird go up.  That’s right.  No bucks, no Buck Rogers.

– Gordon Cooper and Gus Grissom, The Right Stuff (film)

 

Things are looking up for the United States economy in 2017.  You can just feel it.  Something great is about to happen.

 

Sam Sheppard in “The Right Stuff” –  a 1983 docudrama about the Mercury 7 program and “the seats-of-the-pants approach of the people involved in the space program” (according to IMDB).

Photo credit: Ladd Company

 

Earlier this week, for example, after meeting with the incoming President, Bayer and Monsanto announced they will spend at least half of their agriculture research and development budget – approximately $8 billion – in the U.S. over the next six years.  It’s estimated the combined efforts of these two companies will add 3,000 new U.S. high-tech jobs.

Wal-Mart and General Motors also made job and investment pledges for Trump.  Wal-Mart said they’ll add 10,000 jobs this year.  General Motors announced $1 billion in investment, which would generate 1,500 U.S. jobs. Following these pledges, Trump tweeted:

 

“Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!”

 

In a separate tweet, Trump added:

 

“With all of the jobs I am bringing back into the U.S. (even before taking office), with all of the new auto plants coming back into our country… I believe the people are seeing ‘big stuff’.”

 

The new chief claims several more propaganda victories in the field of micro-management of the economy. He is sworn in as we write this and yours truly is looking forward to years of great entertainment. What more do we want really? It actually doesn’t matter what the Donald does – the fact that Hillary the war harpy has lost the election means we no longer have nightmares about mushroom clouds. That is probably the most important thing about the recent election – in our opinion, we really dodged a bullet, or rather, an ICBM or two.

Image via disclose.tv

 

Big Stuff”

No doubt, ‘big stuff’ is a sight to behold.  Before taking office, Trump’s already created new jobs, new growth, and new demand.  What a remarkable achievement.

Indeed, President Trump’s efforts are impressive on surface.  They’re noble too.  As an American working stiff, we can certainly appreciate Trump’s sentiments. But are Trump’s efforts to bring jobs back to the U.S. equally impressive below the surface?  To satisfy our insatiable curiosity, we scratched off the top layer of curd to see what we could find.

 

Trump’s real achievement is actually depicted above: small business optimism has soared in the wake of his election victory. We can absolutely guarantee that this would not have happened if Clinton had won. Her economic program was a pure mixture of socialism and big business cronyism – in many ways it would have been Barrack “You Didn’t Build That” Obama on steroids. Small businessmen would have faced rising taxes and a vast increase in onerous regulations  – many allegedly needed to “save the planet”, which is the most hubristic and absurd promotion authoritarian Western central planning elites have ever come up with (here is George Carlin’s classic take-down of this propaganda meme, which we encourage everyone to spread far and wide) – click to enlarge.

 

In the case of Bayer and Monsanto, we discover their pronouncement is more than simply an act benevolence.  In fact, the two companies are awaiting regulatory approval of their agreed $66 billion deal from Trump’s incoming administration.  What’s more, the $8 billion investment pledge is equal to what they’d already planned to spend.

The pledges made by Wal-Mart and General Motors are also less impressive below the surface.  Namely, the new jobs pledges ain’t new.  Reuters reports:

 

“Both Wal-Mart and GM’s new U.S. job plans are also part of previously announced investment plans.

“Wal-Mart said it would create 10,000 jobs, equal to less than 1 percent of its U.S. workforce, this year as part of a $6.8 billion capital spending plan announced in October.

“General Motors said it would invest an additional $1 billion in its U.S. factories and move some production from Mexico – moves that would create or retain 1,500 jobs.  As of December 2015, it employed 97,000 U.S. workers.”

 

Between bailouts and frequent recalls, GM is a good example for the phrase “hope springs eternal”. It seems rather unlikely that it will suddenly turn into the savior of the economy.

 

The Right Stuff

“Facts are stubborn things,” President John Adams once remarked.  Obviously, Adams was speaking in a different day and age.  Because these days no one cares about the facts.

Bayer, Monsanto, Wal-Mart, General Motors, and the like; these companies know what’s good for their businesses.  Specifically, they know that politics is good business.  Their pledges make great headlines.  Moreover, they allow Trump to tout all the ‘big stuff’ that is happening.

Here at the Economic Prism we are in full support of ‘big stuff,’ whatever it may be.  Go big or go homes, they say.  But what we really want to know is if Trump’s ‘big stuff’ is the right stuff?

Larry Summers – former Treasury Secretary, and all around know-it-all – doesn’t think so.  This week he told the rich and powerful at their annual hootenanny in Davos, Switzerland, that Trump’s policies will end up hurting his voters.  But what does Summers know anyway?

 

The result of a system of unsound money running wild for decades: a huge mountain of debt and very little to show for it in terms of economic output growth. In fact, the enormous growth in the supply of money and credit has lowered growth in economic output rather than increasing it.

 

When it comes down to it, mass credit creation by the Federal Reserve is what allowed the trade balance to get so out of whack in the first place.  This, in turn, accelerated globalization and offshoring of American jobs.

Attempting to reverse the flow of jobs while not correcting the fiat money problem is a losing proposition.  It’s the wrong stuff.  To the contrary, sound money, and the just discipline that comes with it, is the right stuff.

Unfortunately, a major collapse – or two – will be needed for people to seriously consider such outmoded ideals.

 

Charts by: SentimenTrader, St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

 

 

 

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One Response to “The Right Stuff”

  • wmbean:

    Yes, fiat currency is a problem but it is a relative one. What President Trump has seized upon as the problem is that the world’s economies are a zero sum game. There is no magic economic growth that make all of us rich or even middle class. The various economic schools have never address this fundamental fact. Economic growth does not appear out of thin air, it comes from the production of goods and services and none of those services are financial. The attention on fiat currency is attention on financial services but such services do not feed the population. I can’t eat my 401k and I cannot eat fiat currency.

    Now, is President Trump smarter than everyone else? No, but he does point towards the problems caused by fiat and financial services. Food and shelter are real consumables. Education is not, it is a luxury. Modern economic theory does not appear to recognize the difference.

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