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Summers – hope for best, plan for worst!

January 18, 2017

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Lawrence Summers, American economist/Keynesian, says that Trumponomics  is unlikely to deliver the results which people have implied via their emotions these past few weeks. Summers says in the Financial Times, January 17, that “the U.S. president will be operating on a very weak political foundation”. He ends his article with “If ever there was a time to hope for the best but plan for the worst it is now”. What does this economist think privately? I think I can discern his message.

To date our the Dow Industrial Average has advanced more than 8 percent since the November 8 election. Today’s Dow Index ended at 19804.72. The index appears to be waiting for a new tweet from the Donald which says that taxes may be lowered further or that a major revision in his philosophy on China is coming. He could say: There will be no new tariffs on Chinese exports and our current trade deficit is not a problem. He might also tweet that he will not build the wall with Mexico and jobs will emerge instantaneously by fiat immediately after he assumes office.

Will this type of hype come via a Trump tweet soon? Personally, I do not expect this to happen. The Donald’s key economic adviser is now Peter Navarro and this economist will provide advise which is basically non-Keynesian in substance IMO. Check out my prior missive on this economist and his views about China. This means that our hyped up stock markets will reverse direction in the very near future IMO. The 8% increase from the election date will turn into a 10% decline in a matter of hours (at some date not to distant from today). Watch the next 100 days!

What we need to recognize is that the Trump Doctrine is basically 100% the opposite of the Obama Doctrine when it comes to economics. Trump actually WANTS to solve some core financial problems (not cover them up with excessive financial gimmicks). Obama did not understand economics IMO and his proxies (the Central Banks) did all this pump priming for his eight year administration to help him with his agenda (the coming NWO or Agenda 2030). I don’t expect Trump to follow the trend line of Obama’s prior administration.

Now that the Obama agenda is on hold for the time being, waiting for confirmation or rejection from the Trump agenda, our markets have not responded with any conviction to date. The Dow has wandered UP a few points and then DOWN a few points. This is logical for now. But when the Trump philosophy becomes apparent, then is when we will witness some serious volatility within all our global cyber markets. How long will we need to wait? My sense is not long. This response from our Chinese markets may reveal the trend for our markets.

China still has some $3 trillion in dollar reserves within their computer reserve account. Our trade deficit with China is currently around $345 billion and our overall trade deficit is around $737 billion (goods). If I read Trump and his adviser, Peter Navarro, correctly this means that a new trade policy will be initiated with China rather soon. This could happen in early February 2017. This may also happen with Mexico and other countries which have substantial trade deficits with the USA. What does this mean in the short-term? The word in my mind is ‘volatility’.

We could witness some market disruptions starting in February, 2017, and continuing for the remainder of 2017. In March we revisit the DEBT ceiling debate and this debate could get heated this time. This will also create serious disruptions in all our index markets IMO. I don’t envision a smooth transition from our prior Keynesian economic model to the Trumponomics model. Lawrence Summers probably senses this reality also with his article in the Financial Times. His message was “prepare for the worst”.

The mood over at Davos is also rather somber. Joe Biden gave a speech at Davos which focused upon Putin and a possible reversal of the new world liberal order (implying that Trump is not onboard with the Western liberal philosophy which has been promoted by most of the West since the end of WW II). The slogan at Davos is “improving the state of the world” but the mood seems to be that ‘improvement’ is in serious danger. China’s Xi, however, is relishing in the opportunity which all this gives to China’s leaders. But is he reading the Trump philosophy correctly?

January 20, is right around the corner and we will find out within weeks what the general mood will be under the leadership of Trump and his clan of advisors. My sense is that serious change is planned and that our current markets have misread the consequences of all this change. Watch our index markets going forward, especially for the next 100 days. Whatever the Donald plans should be revealed within the next 100 days. Enjoy the ride! UP or DOWN is still uncertain! I am: https://kingdomecon.wordpress.com.

One Comment leave one →
  1. therooster permalink
    January 18, 2017 8:47 pm

    His policy carries “the stick” because gold can only be monetized safely from the grass roots, now that it has real-time pricing. That’s why God gave us goldmoney.

    Let’s all chip in, shall we, free market style ?

    Like

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