Stockman: Trump Is a ‘Hopeless, Mercantilist Protectionist’

welcome back to cheddar business
everyone on Monday saw the Dow suffer
its worst one-day drop since January 3rd
while the SP and the Nasdaq hadn’t seen
a day like it since early December
joining us now is David Stockman he’s
the former director of the Office of
Management and Budget under President
Ronald Reagan he’s also the author of
peak Trump the under a noble swamp and
the fantasy of manga David it’s great to
have you on chatter happy to be here
look a huge sell-off yesterday right
what do you make of the escalation of
the trade war between the US and China
well I think yesterday was a wake-up
call I don’t think this trade war is
going to end anytime soon
you got two fundamentally incompatible
economies you have a policy being driven
by you know a guy who’s you know lost
his lunch I think Trump has no clue what
he’s doing he’s sliding by the seat of
his pants he’s a hopeless protectionist
he doesn’t really know what he wants and
he has no clue how this is going to
unfold so I think we have big trouble
ahead
so why do Republicans the party of
Reagan right why do they seem to be
going along with Trump I think they’re
going along with Trump because the GDP
was had a three in it last quarter and
because we’re at the end of a business
cycle where the whole economy looks good
my point in peak Trump is the peak is
behind us the market peaked last
September at 29 41 we’re now triple peak
I don’t think we’re going back the
economy’s in month 118 of the longest
weakest expansion in history we got
headwinds everywhere we got a federal
debt that’s out of control we have a Fed
that waited way too long to tighten and
now doesn’t know what to do
we have Europe which i think is rolling
over into another recession we have what
I call the red ponzi and China’s
struggling with 40 trillion of debt none
of these things suggest there’s smooth
sailing ahead I think they all suggest
that there’s a huge risk that some kind
of Black Swan or orange Swan is the case
maybe is likely to upset the whole apple
cart you have to assume that recessions
haven’t been outlawed
and what’s going to happen when we get a
recession and the markets way up in the
stratosphere and the federal budget is
already running 1.2 trillion of red ink
and then revenue falls and expenditures
soar we’re gonna have the biggest mess
you can ever imagine so given all these
headwinds that you listed out you said
recessions haven’t been outlawed do you
think this is do you think Trump is
aware of these factors do you think he
feels the pressure to get a trade deal
done with China do you think he’s
capable of getting a deal done that will
be beneficial for US markets no I think
he’s delusional he thinks he has far
more power that he’s far more skilled at
the art of the deal in negotiation that
than he really is and so I don’t think
any deal is going to get done at all and
I think he believes the economy is far
stronger than it actually is because
we’ve had some aberration in the numbers
which aren’t sustainable in other words
we’ve had some inventory build-up and
we’ve had all this turmoil and trade
that pulled imports forward if you
strain that out the economy is growing
at less than 2% a year it’s not a boom
if you actually look at Trump’s first 28
report cards on jobs 200 2,000 per month
Obama‘s last 28 report cards before the
election
220,000 per month there’s been no
acceleration there’s no boom what we
have is an aging business cycle this
company to the end of the road and we’ve
done nothing to get prepared for the
trouble that’s ahead what is the Fed
going to do the interest rate is only
two point four percent and Trump is
complaining its balance sheet is still
almost four trillion what is the fiscal
policy going to do when we’re already
locked in to a borrowing rate at the end
the tippy-top of a business cycle of 1.2
trillion a year we’ve never been in
these circumstances before and so
therefore I think we have to get over
this recency bias which says well last
couple quarters look pretty good so
what’s to worry there’s everything to
worry because the last 30 years have
been taking us to a point of
much speculation in so much debt now
remember we had the financial crisis
people don’t even remember that anymore
but we did have it in 208 and they said
it was a wake-up call we got too much
debt we need to deleverage right well
there was 53 trillion of debt on the US
economy then this is mid 208 public
private business households government
today it’s 72 trillion all right we went
from 53 trillion which was too high to
73 trillion we’ve added 20 trillion debt
that did give us the kind of you know
appearance of a recovery in prosperity
but really we only doubled down and now
we’re gonna face the music in a far
weaker position with a madman in the
Oval Office who’s home alone and what I
mean by that is who are his advisers
nowadays okay I mean Steve minuchin is
an 80-pound political weakling who gives
yes-men a bad name okay Larry Kudlow has
been snorting bullish ethers down on
Wall Street for so long that he’s not
even in the economist Peter Navarro
would rather have a real war with China
rather than a trade war and you know
Wilbur Ross may have a heartbeat or not
I don’t know but he’s he’s as bad in
terms of trade policy as Trump so it’s
all being run by Bob light Howser who I
know from way back when I was on Capitol
Hill and in the Reagan White House in
the early 80s he’s a lifelong swamp
creature who wants to make government
bigger and better and more intrusive and
that’s the kind of trade deal he wants
it’s really for a big business it’s not
for jobs in the economy what do you
think Reagan would think of President
Trump he would be horrified he would be
horrified because Ronald Reagan was a
small government guy he was a free trade
guy he was a free-market guy he believed
in fiscal
you know rectitude and he was not for
hectoring the Fed for easy money when
Volker put on the brakes and interest
rates went into you know double digits
Ronald Reagan said we have to do it we
got to bite the bullet we got to get rid
of this inflation and let the Fed
restore sound money
so everything that Reagan stood for
Trump is really against okay
he is a hopeless mercantilist
protectionist he is the worst big
spender we’ve ever had in the Oval
Office on the Republican side and you
know he’s he’s a bombastic yes I guess I
go back to my earlier question I just
have a trouble understanding why
Republicans are buying into this and why
Republicans Senators and Representatives
don’t stand up for the party and stand
up for the legacy of the Republican
Party against Trump I could give you an
anecdote from my own history in January
1973 I was a young guy on Capitol Hill
Nixon was riding high he had won the
election 44 million – twenty-eight
million wasn’t a squeaker squeaker like
Trump but swept the whole electoral
college he told his whole cabinet you
got to resign I’m so strong I don’t need
you and within 18 months they had him on
the helicopter and sending him out of
town because the economy went down in
the interim in other words as long as
the economy was showing decent numbers
the Republicans kept quiet and when the
economy and the stock market went down
38 percent they were gone we only have
10 seconds for this answer but is there
a challenger to trump you’re behind
right now probably not okay well come
back when there is okay a former
director of the Office of Management and
Budget under President Ronald Reagan
he’s also the author of peak Trump he
under a noble swamp and the fantasy of
Nagas thank you so much for joining us

How Britain’s staid Conservative Party became a radical insurgency

The transformation of the Tory party leaves surviving MPs feeling uneasy

IMAGINE A CONSERVATIVE MP and your mind’s eye might conjure up Philip Hammond. The former chancellor is tall, grey and with a sense of humour that matches his fiscal policy: extra-dry. If not Mr Hammond, then perhaps a figure in the mould of Kenneth Clarke. The rotund, cigar-chomping jazz enthusiast has served in practically every senior government job bar prime minister in a 49-year stint as a Tory MP. Failing that, consider Sir Nicholas Soames, a former defence minister. He has a Churchillian manner, largely because Winston Churchill was his grandfather. The three embody the parliamentary Conservative Party in different ways. Yet they are no longer in it.

The trio were among 21 Conservative MPs to have the whip withdrawn and be barred from standing for the party again after they supported a plan to make Boris Johnson, the prime minister, seek a delay to Britain’s scheduled departure from the European Union on October 31st (see next story). The purge was only the most visible part of a revolution that is transforming the world’s oldest political party. Those who advocate

  • fiscal prudence,
  • social liberalism and an
  • orderly departure from the EU have been routed.

Those who demand free-spending authoritarianism and a “do-or-die” escape from the yoke of Brussels are ascendant. ConservativeHome, a blog for party activists, described this week as “the end of the Conservative Party as we have known it”.

The revolution has required ideological flexibility from those who wish to survive it. The cabinet is full of MPs who are historically small-state Conservatives. Four of the five authors of “Britannia Unchained”, a paean to small government published by ambitious young Tory MPs in 2012, when fiscal austerity was in fashion, now sit in a cabinet intent on opening the public-spending taps. A spending review on September 4th included measures that will increase the size of the state as a percentage of GDP for the first time since 2010. Sajid Javid, the chancellor, is a fan of Ayn Rand and hangs pictures of Margaret Thatcher in his office. Yet on Mr Johnson’s instructions he announced an extra £13.8bn ($16.9bn) in election-friendly giveaways, paid for with extra borrowing.

There is also new thinking on law and order. Another 20,000 police officers are to be hired, and a review of whether prison sentences are too soft is expected. Priti Patel, who has called for a clampdown on immigration and once supported the return of capital punishment, is home secretary. It is a far cry from what some in the party thought Mr Johnson had in store. “Expect a liberal centrist,” advised one MP, who now sits in the cabinet, before Mr Johnson became prime minister. Wags have dubbed the new Tory domestic agenda: “Fund the NHS, hang the paedos.”

But the hardest line is on Brexit. Conservative MPs appreciate that they must get Britain out of the EU if they are to keep their seats. Yet Mr Johnson’s approach, which seems most likely to end in no-deal, leaves a quiet majority of the parliamentary party uneasy. And it is not just former Remainers who fret. A member of the cabinet who enthusiastically campaigned for Brexit admits that no-deal would be a catastrophe. But MPs are willing to serve, partly because Mr Johnson seems determined to move things forward one way or another. “They may not agree, but they are happy for the direction,” says one cabinet minister.

Setting the route is Dominic Cummings, the prime minister’s chief adviser, who will not even say whether he is a member of the Conservatives. When running for office, Mr Johnson promised an inclusive, “one nation” style of government. Instead, he has set about shaking the country’s institutions, suspending Parliament for the longest period since 1945 in order to reduce the time MPs have to debate Brexit. Hitherto unimaginable tactics, such as asking the queen to veto anti-no-deal legislation, are now openly discussed. “This Conservative government…seems to not be very conservative, fiscally or institutionally,” noted Ryan Shorthouse of Bright Blue, a liberal Tory think-tank.

The strong-arm techniques are in stark contrast to the days when David Cameron ran the party, and rebels ran amok. Mr Cameron was unwilling to crack down on an increasingly daring Eurosceptic fringe, which eventually bullied him into holding the referendum. Under Mr Johnson, such sedition is not acceptable, as this week’s purge was intended to show. Figures from Vote Leave, the main campaigning group behind the Brexit vote, call the shots in Downing Street, causing long-serving Tory MPs to shake their jowls at the state of affairs. Sir Roger Gale, an MP since 1983, declared: “You have, at the heart of Number 10, as the prime minister’s senior adviser, an unelected, foul-mouthed oaf.” Mr Johnson was reportedly given a rough ride at a meeting of the 1922 Committee of Tory backbenchers on September 4th.

Yet for all the fury over the deselections, Mr Cummings’s strategy remains just about intact. The prime minister and his aides want an election in which Mr Johnson is portrayed as the champion of a people defied by wily politicians, with the promise of a cash tsunami about to break over Britain’s public services if people vote Tory. “He gets the election he wanted and the framing he wanted,” says one former Downing Street aide. Nor will the revolution necessarily be permanent. A socially conservative offer to voters tempted by Nigel Farage’s Brexit Party may last only until the next general election, says Tim Bale of Queen Mary University of London.

What this country needs is sensible, moderate, progressive Conservative government,” declared Mr Johnson during a stilted performance in prime minister’s questions on September 4th. Yet with the Tory party in its current state, Britain will have to wait.

What’s Wrong With the Global Economy?

The problem goes much deeper than Trump or tariffs.

Global markets were seized by fear last week that trade wars were slowing growth in Germany, China and the United States. But the story here is bigger than President Trump and his tariffs.

The postwar miracle is over. Since the financial crisis of 2008, the world economy has been struggling against four headwinds:

  1. deglobalization of trade,
  2. depopulation as labor forces shrink,
  3. declining productivity and a
  4. debt burden as high now as it was right before the crisis.

No major economy is growing as fast as it was before 2008. Not one is growing faster than 10 percent, the rate experienced by the Asian “miracle economies” before the crisis. In almost every country, the national discussion focuses on what must be done to revive growth and ignores the fact that the slowdown is driven by forces beyond any one government’s control. Instead of dooming ourselves to serial disappointment and fruitless stimulus campaigns, we need to redefine economic success and failure.

Germany is one of at least five major economies on the verge of a recession, which is typically defined as two consecutive quarters of negative growth. But the real issue is whether that definition still makes sense in a country with a shrinking labor force like Germany’s.

Its working population has been declining for years and is expected to fall to 47 million from 54 million by 2039. And it’s not alone in this. Forty-six countries around the world — including major powers like Japan, Russia and China — now have shrinking populations.

Demographics are usually the main driver of economic growth, so it is basically inevitable that these countries will now grow at a much slower pace. And we are not talking about minor population declines. Projections for 2040 show China’s working-age population falling by 114 million, Japan’s by 14 million. With a shrinking labor force, these economies will inevitably slow and, at times, contract. To keep calling two negative quarters in a row a “recession” implies that this outcome is somehow abnormal or unhealthy. That will no longer be the case.

To avoid overreacting, the discussion about economic health needs to shift to measures that better capture satisfaction and contentment, like per capita income growth. In countries with shrinking populations, per capita incomes can continue to grow so long as the economy is shrinking less rapidly than the population. This helps explain why, for example, Japan isn’t facing more social unrest. Its economy has grown much more slowly than that of the United States in this decade, but because the population is shrinking its per capita income has grown just as fast as America’s — around 1.5 percent per year.

Shrinking populations also help explain why unemployment is at or near multi-decade lows, even in countries with serious growth worries, like Germany and Japan. Gainfully employed Germans and Japanese won’t really feel as if their countries are in a slump until per capita G.D.P. growth turns negative — which may prove to be a more useful way to think about recessions in this new era.

The definition of success also needs to change. Many emerging countries still aspire to the double-digit growth rates experienced by what were known as the “Asian miracle economies” from the mid-1960s to the early 1990s, when populations and trade were booming. But no economy had grown so fast before then, and as population and trade surges recede, it’s unlikely any country can repeat those feats.

As growth downshifts, even little miracles are disappearing. Before the 2010s, it was common for one in every five economies to be growing at 7 percent or more annually. Now, among the world’s 200 economies, just eight, or one in 25, are on track to grow 7 percentthis year. Most of those are small economies in Africa.

When the news emerged that China’s economy had slowed to just 6 percent, a new low, many investors and analysts rang the alarm bells. But the reality is that economies rarely grow as fast as 6 percent if the population is not booming too. Not only did China’s working-age population growth turn negative in 2016, but it is one of the countries hardest hit by slumping trade, declining productivity and heavy debts. If the Chinese economy really were growing at 6 percent in this environment, it would be cause for celebration, not alarm.

The benchmark for rapid growth should come down to 5 percent for emerging countries, to between and 3 and 4 percent for middle-income countries like China, and to between 1 and 2 percent for developed economies like the United States, Germany and Japan. And that should just be the start to how economists and investors redefine economic success.

This rethink is overdue. The number of countries with shrinking populations is expected to rise to 67 from 46 by 2040, and the decline in productivity growth is in many ways reinforced by heavy debt burdens and rising trade barriers. Redefining the standard of economic success could help cure many countries of irrational anxieties about “slow” growth, and make the world a calmer place.