The Obama administration worked hard to turn the economy around after Trump inherited an economy that would have been a dream for any president. He immediately set out to sabotage it and, unfortunately, his policies are finally kicking in strongly enough to wreck everything that Obama did to right the economy Bush left him-- and us. But before we get into Trump's disastrous policies, one little note: his utter and complete lack of leadership abilities are working hand in hand with bad policy to bring down the economy. Take this insane tweet from yesterday announcing that the Treasury Department had slapped additional sanctions on North Korea and that just hours later Trump was countermanding them. How does something like that even happen? Was there a gnome working at Treasury and doing whatever he wanted to do with no supervision?Worse yet, Trump announced that he is nominating another entirely unfit ideologue to a position where he will undoubtably harm everything he touches. Trumponomics author Stephen Moore, like Trump, a harsh critic of Trump-appointed Fed chair Jerome Powell, will soon be serving on the Fed. "Moore’s primary area of pseudo-expertise-- he is not an economist-- is fiscal policy," wrote Jonathan Chait. "He is a dedicated advocate of supply-side economics, relentlessly promoting his fanatical hatred of redistribution and belief that lower taxes for the rich can and will unleash wondrous prosperity. Like nearly all supply-siders, he has clung to this dogma in the face of repeated, spectacular failures."OK, tuck all that away for a moment while we consider two dire reports from Bloomberg News Friday morning, on just after sunrise and one at 11AM. First was the announcement of a curve inversion, an event that usually signals a recession is on the horizon.
The Treasury yield curve inverted for the first time since the last crisis Friday, triggering the first reliable market signal of an impending recession and rate-cutting cycle.The gap between the three-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of recession in the U.S., within roughly the next 18 months.Demand for government bonds gained momentum Wednesday, when U.S. central bank policy makers lowered both their growth projections and their interest-rate outlook. The majority of officials now envisages no hikes this year, down from a median call of two at their December meeting. Traders took that dovish shift as their cue to dig into positions for a Fed easing cycle, pricing in a cut by the end of 2020 and a one-in-two chance of a reduction as soon as this year.“It looks like the global slowdown worries have been confirmed and the market is beginning to price in Fed easing, potential recession down the road,” said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. “It’s clearly a sign that the market is worried about growth and moving into Treasuries from riskier asset classes.”
Too abstract? How about U.S. Posts Largest-Ever Monthly Budget Deficit in February? Will Trump call a market crash "fake news?" Largest monthly budget deficit ever-- key word "ever"-- seem like a big deal, no? And that duet deficit is obviously a result, at least in part, of falling tax revenues because of the catastrophic GOP tax bill of last year, and increased spending as Trump attempts, entirely unsuccessfully, to buy his way into some kind of popularity.
The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier. That gap surpassed the previous monthly record of $231.7 billion set seven years ago, according to data compiled by Bloomberg.February’s shortfall helped push the deficit for the first five months of the government’s fiscal year to $544.2 billion, up almost 40 percent from the same period the previous year, the Treasury Department said in its monthly budget report Friday. The release was delayed a week by the government shutdown earlier this year.Receipts dipped less than 1 percent to $1.3 trillion in the October-February period from the previous year, while spending accelerated 9 percent to $1.8 trillion.The fiscal shortfall is widening following President Donald Trump’s $1.5 trillion tax-cuts package that’s weighing on receipts and raising concerns about the national debt load, which topped a record $22 trillion last month.Federal Reserve Chairman Jerome Powell reiterated his concern over the government deficit in a press conference Wednesday, saying that the nation’s growing debt pile needs to be addressed. At the same time, there’s a shift among some economists-- led by proponents of Modern Monetary Theory-- on the dangers of a growing deficit, with low inflation and cheap borrowing costs suggesting there’s room for additional spending.The Treasury data show tax receipts declined for both corporations and individuals in the five-month period, while revenue from customs duties almost doubled, boosted by income from tariffs imposed by the Trump administration.The 2017 tax law slashed the corporate tax rate from 35 percent to 21 percent.Corporations have so far this fiscal year paid $59.2 billion, compared to $73.5 billion in 2018, when the tax law was only partially in effect for some corporations. In 2017, however, the year before the law was enacted, corporations had paid $87.4 billion at this point in the year.Individual income tax receipts dropped slightly from this point last year, but have risen compared to some years before the tax law. Despite the law cutting tax rates for most people, rising wages and lower unemployment have spurred higher tax revenue.
Now think again about Trump's newest appointment to the Fed. "Stephen Moore’s career as an economic analyst has been a decades-long continuous procession of error and hackery. It is not despite but precisely because of these errors that Moore now finds himself in the astonishing position of having been offered a position on the Federal Reserve board by President Trump," was how Chait put it. "[F]or all their extravagant ignorance, Moore’s beliefs on fiscal policy are actually more sophisticated and well-developed than his views on monetary policy. It is the latter that he would be in a position to influence as a Federal Reserve governor... While the internal workings of his mind remain a matter of speculation, I doubt he is consciously venal enough to tailor his thinking explicitly to partisan goals. Rather, Moore has extremely strong partisan instincts and extremely limited analytical skills. The combination results inevitably in the latter giving way to the former. He should not be permitted any position of serious responsibility, in government or anything else."