| "There is no means of avoiding the final collapse of a boom brought about
by credit expansion. The alternative is only whether the crisis should
come sooner as the result of voluntary abandonment of further credit
expansion, or later as a final and total catastrophe of the currency
system involved." ~Ludwig von Mises
The Recession Reality.
Trump is no dumbell when it comes to understanding the whims of people with their money.
President Trump has caught a whiff of economic recession in the
air and is tweeting his head off about it, assuring everyone within
earshot that the present economy is in pretty good shape, thank you,
and privately hoping that a recession will not hit until after the
November, 2020, elections.
He understands perfectly well that consumer activity accounts for about
70 perent of the Gross Domestic Product (GDP) and that consumer
willingness to take on debt accounts for large measure of the
Michael Lebowitz and Jack Scott have tried to untangle general
understanding of the signals that portend recessions, but the general
public is most likely to take its cue from the daily media
"We can follow all the economic data and trends diligently, but consumption accounts for over 70% of U.S. economic growth. Therefore, recessions ultimately tend to be the effect of changes in consumer behavior. If the narrative du jour is enough to trouble even a small percentage of consumers, the likelihood of a recession increases. The evidence of such a change will eventually turn up in sentiment surveys, and when it does, the problem has already taken root. This is not a dire warning of recession but rather offers consideration of a legitimate second-order effect that potentially threatens this record-long economic expansion.
"While the media focuses on the inversion narrative, alerting the public to recession warnings and driving consumers to re-think their planned purchases, we care more about when the yield curve will steepen. The steepening curve caused by aggressive Fed action after a curve inversion is the tried and true recession warning. For more, please read Yesterday’s Perfect Recession Warning May Be Failing You." ~Michael Lebowitz & Jack Scott
Bottom line: The more talk you hear of lowering interest
rates, cutting payroll taxes, capital gains taxes, the more sure you
can be political leaders are trying to keep recession at
bay. They understand perfectly that when consumers feel more
dollars will come into their pockets the more willing they will be to
spend it. It's when the sense that money is in short supply they
tend to lay out less of it. When that happens the recession bells
American economists have been polled on the subject of
"the coming recession" and a majority say it will probably not happen
until 2021. A few believe it could land on the national doorstep in
2020 which would be calamitous for the Trump re-election campaign.
Democrats are still busy trying to annul the 2016 election results, but as the campaign heats up for the 2020 election don't be surprised to see them push liberal economists into the spotlight to explain that Trump has become Herbert Hoover and their candidate is FDR reincarnate with a plan to set everything back in order. 1932 - - "Déjà vu all over again!"
The Dollar: A Simple Definition
Everybody knows what a "dollar" is, but most of us are baffled about its troubling elasticity.
Why, in a logical world, would a unit of money not hold its value over time?
It's puzzling to learn that the U.S. dollar of today is worth about a nickel compared to the dollar of 1930. What use is a money unit that can't hold its purchasing power over long periods of time? The U.S. dollar held up very well during most of the 19th century but lost its store-of-value function in the 20th. The slide began in earnest in the early 1930s.
At the rate the dollar is losing ground it could one day be worth nothing. The destruction of the Zimbabwean dollar a few years ago was a good example of currency becoming worthless. The rotted currency of Zimbabwe was only one such episode in a long history of hundreds of such failures. In fact, the U.S. suffered a period of hyperinflation in the 18th century under the Continental Congress. The Continetal paper dollars became worthless, prompting the authors of the U.S. Constitution to demand a new money unit be made of a defined weight of silver.
The provision defining the dollar as a specific weight of precious metal has never been annulled or amended. Congress abandoned the U.S. Constitution on the matter of money by a series of steps over a long period of time. The dollar was officially defined as 22.32 grains of gold when Franklin Roosevelt won the presidential contest in 1932. It is no longer legally defined in any weight of any instrinsic thing. Until November, 1963, the Federal Reserve Note was redeemable in "Lawful Money." That promise was removed. Today the dollar, like most of the monies of the world, is a fiat (irredeemable) currency.
| < The dollar
was defined as 22.32
grains of gold?
In the good old days of bimettalism people had a pretty good idea what money was. It jingled in the pocket and consisted of either silver or gold coins manufactured at the U.S. Mint. (Minor coins for change-making were made of copper or nickel.)
From 1792 until 1873 the dollar was defined as a specific weight of SILVER. In February, 1873, the mint became part of the U.S. Treasury and a weight of GOLD the definition of the dollar. The system became bi-metalic again in 1893.
Congress passed the Gold Standard Act March 14th, 1900. $1.00 gold coins were too tiny to be practicable, but by the Great Stock Market Crash of 1929 a dollar was lawfully defined at 23.23 grains.
Knowing there are 480 grains in a troy ounce one divided 480 by the defined number of grains in the dollar, 23.23. This resulted in $20.67 per troy ounce. The popular $20.00 gold double eagle contained just UNDER 480 grains of gold accounting for 67¢. The gold eagle coins gave rise to the payday excalmation "The eagle flies today!"
For more than one hundred years the Federal Reserve has been trying to smooth out those economic slowdowns that used to be called panics or depressions, but now are daintily called "slowdowns" or "recessions." So far the Fed has not found the key to perpetual prosperity. This fact may be gnawing at President Trump whose chances for re-election depend greatly on the condition of the domestic economy. If a recession is in the wings it needs to stay there until after the election of November, 2020.Professor Harvey says, "From the 1960s [the yield curve inversion] has been reliable in terms of foretelling a recession, and also it has not given any false signals yet."
No wonder trump is putting pressure on Fed
Jerome Powell. The last thing Trump wants is an economic slowdown
in the runup to the 2020 election. If such a slump occured he'd
be in the same spot Herbert Hoover was in 1932 - running for
re-election in an economic depression. That set the stage for the
overwhelming victory of Franklin Roosevelt and the advent of the New
Deal, which put the United States on the road to a quasi-socialist
scheme of governance.
Notice that the left wing of the
Party has swung even further toward Socialism and it appears to be
attracting a considerable number of voters.
to the Civil War the US got along with national debt of about $90
million (1862) By 1867 the federal government was almost $3
billion in debt. It stayed under $2 billion
from 1883 until 1917. By 1919 the debt had climbed to more than $25 billion! (War is costly.) These borrowed billions helped make the 192OS "roar." But the financial bubbles burst in the autumn of 1929 creating a wretched presidency for Herbert Hoover, who took office in March, 1929.
Franklin Roosevelt overwhelmed Hoover in the 1932 election , called in
the people's gold in 1933 and promptly devalued the U.S. dollar in
terms of gold - which Americans would not be allowed to possess again
for more than forty years. Borrowing continued to rise in the
1930s and the economic depression persisted. By the time the nation got
into World War Two its annual deficit was nearly $50 billion. But
the borrowing went into overdrive when war dragged on. The federal debt
had piled up to $259 billion by 1945...122.75
percent of GDP.
were a few years in which the national government ran budget surpluses,
but the debt pile grew until it reached $995 billion in 1981.
Converted into millions that's 995 thousand million. Still quite a lot
of money - - even today.
debt pile began to be measured in trillions in 1982. By 1995 the
accumulated debt was $4.9 trillion!
Politicians have chosen to
ignore the debt accumlation. The Treasury Department says it is
presently about $23 trillion,
but we must wait until after next year's election before our
Congressional representatives will admit it may be a Sword of Damocles
and something ought to be done about it. The main objective is to make
voters happy....and voters have no wish to cough up the thousands of
dollars per capita to
pay down the towering national debt.
So - what happens? Can't the debt be declared null and void and just disappear? No - not without wrecking the lives of all those investors in the US and around the world who have invested in all those IOUs in the belief government will make good on its word to redeem them.