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In Y 2016, the US economy was continuing its 8 year stagnation. The 2008-2009 Great Recession was over, but the expansion never happened, as the slow recovery was, well slow!
Donald J. Trump was elected President and things changed. He brought economic prosperity to America.
The Big Q: Can he bring that prosperity back?
The Big A: Yes he can, Yes he will!
When the economy is in recession, as it was in Y 2009, the administration sets economic growth as the primary policy.
Administrations then seek to use fiscal and/or monetary policy to stimulate growth, along with policies consistent with the goal of increasing growth to quickly end the recession, accelerate the recovery and move to expansion.
In Y 2009, The Hussein Obama Admin tried to use fiscal policy by passing a stimulus package which increased government spending by nearly $800-B. That action alone should have significantly increased growth, it did not.
The Big Q2: Why?
The Big A2: Simple, 33% of the package was for tax cuts. That action would stimulate growth, but the $288-B was not enough and did nothing to stimulate growth.
And another $224-B was used to extend unemployment benefits. That action actually slowed economic growth because the higher and longer unemployment benefits gave unemployed workers an incentive to stay unemployed, and go to work.
Another $275-B was spent creating jobs by offering federal contracts to companies with shovel ready jobs. Later the administration admitted that the shovel ready jobs were not as “shovel ready as we expected.”
The other problem was that Congress spread the spending over a 2 yr frame, so there was never enough spending in any yr to move the economy from recovery to expansion.
Hussein Obama’s cheerless stimulus package failed to stimulate the economy. Monetary policy was not effective either, although the Fed vastly increased the money supply through QE (quantitative easing).
Normally, printing money alone would lead to an expanding economy. An expansive monetary policy works to stimulate the economy as long as the initial increase in the money supply has a multiplying effect. The multiplying effect comes from the banks making loans so that more money is circulating in the economy.
But, in Y 2010 remember the Dodd/Frank bill was passed to eliminate what was referred to as, predatory lending. That cheerless bill reduced all lending. Thus eliminated any multiplying effect and negated the expansionary effects of Monetary Policy.
Then in Y 2010, Barack Obamacare, aka Affordable Care Act (ACA) was passed. That provided healthcare for an additional 20-M Americans. Plus, it forced American companies to pay for health insurance for all employees who worked more than 30 hrs per week, or pay a $3,000 annual fine. That cheerless action added to the cost of business and reduced economic growth.
Then in Y 2011, the Bush tax cuts passed in Y 2001 expired. amd Mr. Hussein Obama made them permanent for all taxpayers except the highest income earners. For those Americans, taxes were increased by 10%. Raising taxes on the highest income earners reduces capital formation and slowed economic growth.
The Hussein Obama Admin imposed 1000’s of new regulations designed to protect consumers. But the regulations added to the cost of business and further slowed economic growth.
Gold soared from about 800 oz in 2008 to 1900+ in 2011 on QEing
The Donald Trump entered the Oval Office in January 2017. He immediately eliminated hundreds of growth-stifling regulations. What happened?Economic growth increased, Unemployment fell. The new jobs created were good, higher paying jobs. The Hussein Obama jobs were largely part-time, low-paying jobs with people working less than 30 hrs per week, as companies sought to avoid the Barack Obamacare $3,000 penalty.
Smartly, President Trump eliminated that provision of the Act.
President Trump then cut taxes for all Americans and corporations which stimulated demand from the middle class and created new capital from corporations and the upper class. That then stimulated growth.
President Trump renegotiated the kinked trade deals. New trade deals were signed with Mexico, Canada, Japan, South Korea and China.
By Y 2020 the economy was on pace for high growth, likely seeing the best growth rate over 20 yrs.
All Americans, who had any skills, began to see new opportunities at higher wages.
Since core inflation was low there was a real increase in purchasing power, consumer confidence hit record highs and economic prosperity returned to America.
Then C-19 coronavirus hit and the US economy came to a screeching halt, fast unprecedented deep recession happened.
President Trump became a wartime President and moved quickly to overcome the medical malpractice chaos.
Now Americans are demanding a return to The Trump Prosperity, and that has begun to happen under his leadership.
Assuming the C-19 coronavirus will come under control later this year and a vaccine is developed by early next year, President Trump has again set the stage for prosperity. And the financial markets are ignoring the bad news moving North with a positive view 12+ months out.
Tax rates are low (going lower), interest rates are at Zero, growth stifling regulations have been eliminated, and foreign trade is coming into balance.
The Fed has vastly increased the money supply and the crippling parts of Dodd/Frank having been repealed there comes a multiplying effect.
When the US economy fully reopens, consumers will have money to spend since nearly every taxpayer got a $1,200 check from the government, a family of four received $3,400, and for those unemployed, an extra $600 was added to their weekly check. I believe if more is needed, more will come.
Small businesses have been given loans to pay the wages of their employees (PPP). As long as no employee is laid off, the loan turns to a grant, the money is free.
The US stage is set for a return to The Trump Prosperity
Wednesday, the major US stock market indexes finished at: DJIA -218.45 to 23664.64, NAS Comp +45.27 at 8854.41, S&P 500 -20.02 to 2848.42
Volume: Trade on the NYSE came in at 905-M/shares exchanged.
- NAS Comp -1.3% YTD
- S&P 500 -11.8% YTD
- DJIA -17.1% YTD
- Russell 2000 -24.3% YTD
HeffX-LTN’s overall outlook for the major US stock market indexes is Bullish with a Very Bullish bias in here.
Looking Ahead: Investors will receive the weekly Initial and Continuing Claims report, preliminary Q1 readings for Productivity and Unit Labor Costs, and the March Consumer Credit Report Thursday.
Making and Keeping America Great!
Have a healthy day, Keep the Faith!