The Coming Economic Meltdown

Here’s a headline from the New York Times that ought to give us pause:

Frankly, this one scares me even more, from the Washington Post:

Trump is increasingly relying on himself — not his aides — in trade war with China

If it appears the Trump Administration is veering even more out of control, that’s probably because it is. Anyone in the administration with half a brain has been fired or forced to resign. We’re now down to the hard-core morons and the Moron in Chief, Trump himself.

This is from the Ready to Rumble article:

The swings in financial markets Monday are hard to justify in narrow terms. A slightly cheaper Chinese currency shouldn’t have huge consequences for the global economy. Rather, investors are coming to grips with the reality that the trade war is escalating and spreading into the global currency market.

While the drop in the stock market gets the attention — the S&P is down 5.8 percent in the last week — it is global bond markets that are flashing the most worrying signs about the outlook for growth in the United States and much of the world. Ten-year Treasury bonds yielded 1.72 percent at Monday’s close, down from 2.06 percent a week earlier — a sign that investors now believe that weaker growth and additional interest rate cuts by the Federal Reserve are on the way.

The “relying on himself” article basically says Trump is not listening to anybody any more. He decided he wanted to label China a “currency manipulator,” so that’s what he tweeted. Then his aides and Steve Mnuchin scrambled to make that official policy. Trump is convinced that China will be hurt much more than the U.S. in this game. I think he underestimates the degree to which China’s leaders, who aren’t worried about being voted out of office, are willing to inflict pain on their own people.

“We’re learning that maybe China has a higher pain threshold than we thought here,” said Stephen Moore, who was an economic adviser to Trump during the 2016 election and remains close to the White House. “They don’t seem to care that this is having extreme negative effects on their economy. It’s kind of a mutually assured destruction game right now.”

Do tell. Here’s another headline, from yesterday:

U.S. farmers suffer ‘body blow’ as China slams door on farm purchases

Chinese companies have stopped buying all U.S. agricultural products, China’s Commerce Ministry said yesterday. All of them. And we might remember that last year Vladimir Putin said Russia was ready to provide China with all the agricultural products it wanted. One wonders if it was Putin who put the trade war idea in Trump’s empty head.

Here’s another headline, from Steve Benen at MSNBC:

‘A body blow’: farmers grow frustrated with Trump’s trade failures

The president occasionally singles out parts of the country he doesn’t like, but he clearly sees farmers as being on Team Trump. In January 2018, he spoke at the American Farm Bureau’s annual convention, where the Republican strutted like a man who assumed he was among adoring fans.

“Oh, are you happy you voted for me,” Trump said, straying from the prepared text. “You are so lucky that I gave you that privilege.”

A year and a half later, many farmers are increasingly desperate – and openly skeptical that their president knows what he’s doing.

For his part, Trump has already approved a couple of bailouts for the industry – some of the money ended up going to foreign companies – and the Republican suggested this morning that he’s prepared to do a third.

The president added in his tweet that American farmers “know that China will not be able to hurt them,” which is plainly wrong, since Trump’s trade war has already hurt them.

Trump often praises farmers for being “patriotic,” which in his mind seems to mean they will stand by him no matter what. Farmers have stuck with him a lot longer than I thought they would, but there’s always a breaking point, and we might have reached it. From Yahoo Finance:

U.S. farmers are exasperated by latest trade war moves: ‘Another nail in the coffin’

“This is just another nail in the coffin,” Tyler Stafslien, a North Dakota-based soybean farmer, told Yahoo Finance. “To see this thing only seems to be getting worse rather than better is very concerning, and the American taxpayers may have to foot another round of funding if this keeps up — or we could see a ton of farmers’ loss throughout this nation.”

American Farm Bureau Federation President Zippy Duvall said that the pain extended across the country.

“China’s announcement that it will not buy any agricultural products from the United States is a body blow to thousands of farmers and ranchers who are already struggling to get by,” Duvall stated.

So, Trump’s trade war is causing extreme pain in large parts of the U.S., and Trump doesn’t understand this or doesn’t care. Chinese leaders probably do realize the pain they are causing but are sticking to their long game.

The stock market is up a bit today, and the financial press is bubbling with all kinds of feel-good stories about “corrections” and August often is a bad month for stocks anyway, etc. But they were bubbly and optimistic until the day Lehman Brothers failed, too. See also:

Economy may be weaker than generally recognized

Keep some money in a safe place, folks. Like maybe your sock drawer.