From Western Journalism:
This insight is courtesy of our special contributor, Jim O’Brien. For more of Jim’s work, please check out baconbooksandbullets.com.
The Trump campaign has just announced its team of economic advisors, and it’s very indicative of the type of change that would come if the GOP nominee wins the presidency.
This team can best be described as one that would push for a hybrid between FDR’s infrastructure projects of the mid-1930s and Reagan’s easing of regulatory and financial conditions to stimulate mass production. In essence, be prepared for a country that manufacturers again.
Wall Street hotshots and even some of Trump’s fellow billionaires will despise what these guys do… even though many on Team Trump come from, or have ties to, Wall Street.
It is important to understand that the advisors whom Donald Trump tapped could be considered gadflies in the stock markets. They have made money accurately predicting the housing bubble and warning investors of the consequences of cheap-dollar policies. Consequently, although some of these guys have been tied to large investment firms, they have been simultaneously despised.
So what can we expect? Let me put on my MBA hat and explain.
In short, it is a huge bump for the American Blue Collar Worker at the expense of large investment companies.
It appears that Trump will lay out a holistic policy on Monday that will seek to achieve the following overarching goal: rebalancing our trade deficit and getting Americans exporting again.
His advisors advocate major infrastructure projects designed to expand export potential. This means (1) lowering the relative cost of shipping, (2) lowering the cost of production, and (3) lowering the cost of commodities relative to the U.S. Dollar. That last point is bigger than most people realize because it will have dramatic consequences.
Ronald Reagan was the last President to embrace what was called “King Dollar” policy. That was a policy by which the American dollar was strengthened through monetary policy, such as higher interest rates. This will help those folks who do not invest in stocks, but instead place their savings in traditional banks. It will also hurt those who try to use debt to become wealthy (such as hedge fund traders).
The biggest reason this is important, however, is that it can actually help exporters. For a long time, since George H. Bush, the federal government has sought to depress the dollar in order to – supposedly – make the cost of doing business in the U.S. cheaper than places such as Europe. They theorized that a weak dollar would mean that something like a car made in the U.S. would be cheaper than a car made in Germany.
But there was always a problem with that theory: global commodities are purchased in U.S. dollars.
Let me give an example. If you were to buy $100 dollars’ worth of steel and €100 of steel, the Euro buyer will get more steel. At present, he can buy the same amount of steel as the U.S. manufacturer for about 90% of the cost.
This is something Barack Obama and Hillary Clinton have never figured out.
They theorized that a weak dollar would create more export jobs. That never happened, because the overall cost of goods is no longer labor intensive due to automation. The bulk cost of the car is not labor, it is the cost of raw commodities. Thus, by strengthening the U.S. dollar, Trump and his team of economic advisors accurately project that the overall cost of manufacturing goods in the United States will actually drop.
But this does not end with just items like steel or rubber.
Oil is also dollar denominated. If the U.S. dollar is strengthened, the cost of shipping drops because the cost of fuel drops. Obama and Clinton hate oil as part of their overall environmental agenda including climate change, so they dislike the idea of cheap oil and gas. But the fact of the matter is simple: cars and trucks are not going anywhere, anytime soon.
The folks who will despise a strong dollar are Wall Street bankers. At present, they can borrow from European banks at low interest rates and buy American stocks on the cheap. This keeps Wall Street making a lot of money, but it hurts American workers.
Based on Trump’s economic plan as revealed so far, he will put an end to that.
On the other side of this coin is a conversion economy in which the Republican candidate appears poised to lay a lot of ground work on expanding port construction, reopening mines in places like West Virginia, and offering more oil and gas drilling permits. While drillers and miners begin working on getting back to business, it appears Trump’s economic advisors want to put road construction teams back to work… port crane operators… pipe-fitters… Teamsters… etc.
Again, all of this will be despised by Wall Street because they will no longer have the opportunity to purchase commodities at cheaper overseas locations, like those found in Africa (which is booming). Instead, by flooding the markets with U.S. manufactured commodities — driven by higher US dollar rates — the cost to workers to buy those goods (such as filling up your tank of gas) will drop, but Wall Street commodities brokers will need to pay more for the goods they trade, such as iron ore or coal.
In a nutshell, Trump’s is an economic team that combines FDR’s infrastructure pragmatism with Reagan’s strong dollar policy. That is why the vast majority of Wall Street investors — men like Warren Buffett — are gunning for Trump. It puts blue collar workers back to work at the expense of white collar pencil necks and profiteers.
My advice to the soft generation of teenagers who have never swung a hammer: it’s time to learn that mines have no “safe spaces.”
Trump will probably stop the Fed from printing $85 BILLION a month which gets pumped into Wall Street which in turn purchase treasury notes which props up the pension funds that go to union retirees. It’s a Ponzi scheme. This same $85 Billion also makes the Dollar weaker by the month and causes a soft inflation causing increases at every level. Note how our grocery bills have skyrocketed in recent years just as one indicator.
Small wonder why the Left and their supporters, including the country club R’s & D’s of the UniParty, are crapping razorblades over the prospects of a Trump presidency.