Donald Trump and the siege of Washington
Will the system bring the president down or will he destroy it first?
by: Edward Luce
If something cannot go on forever, it will stop. The question is how long that will take with Donald Trump. It is little use speculating about the next four years. Just multiply Mr Trump’s first four weeks and ask how long America’s system can take the strain.
In his first month Mr Trump has declared war on the intelligence agencies and the media. It looks like the judicial branch is next on his list of enemies. There is no middle ground in Mr Trump’s Washington. Either the forces that are against the president will bring him down or he will destroy the system. My bet is on the first. But I would not stake my life on it.
Do not be reassured by Mr Trump’s cabinet. Many of them are experienced individuals. James Mattis, the secretary of defence, Rex Tillerson, secretary of state, and Steven Mnuchin, the nominee for Treasury secretary, are professionals. We may dispute their priorities but we have no basis to contest their hold on reality.
Even Kellyanne Conway, and Sean Spicer — Mr Trump’s controversial adviser and press secretary — would probably look fine if they were working for a different president. Mr Trump could populate his administration with America’s most diligent public servants and it would not change the most important thing. They would still be required to execute the orders of a man who divides the world into friends and enemies — and nothing in between.
Robert Harward, the ex-navy Seal who turned down the job to serve as Mr Trump’s national security adviser, is a harbinger of things to come. In any normal circumstance, someone of Mr Harward’s background would have leapt at the honour of such a high position. But Mr Harward could not stomach the prospect.
It would have meant serving a president who thinks he knows more than his generals about war, more than his spies do about intelligence and more than his diplomats do about the world. The only people with whom Mr Trump agrees are those who agree with him. It is an open question how long it will take for Mr Trump’s existing appointees to reach the same conclusion. There is a thin line between doing your duty and being humiliated.
The US intelligence agencies already appear to have crossed that line. No fewer than nine intelligence sources leaked details of Michael Flynn’s phone call with the Russian ambassador to the Washington Post. Some of this was surely revenge for the contempt Mr Flynn dealt out to intelligence agents, who coined the term “Flynn facts” when he was head of the Defense Intelligence Agency. But some of it was motivated by deep alarm about a president who is so cavalier with US national security.
Mr Trump has likened the Central Intelligence Agency to Nazi Germany and accused it of working for Hillary Clinton. In contrast, he has nothing but praise for James Comey, head of the Federal Bureau of Investigation, whose last minute intervention helped to tip the election Mr Trump’s way.
The message is clear: be like Mr Comey or be treated as the enemy. It is hard to imagine there are many public servants who see Mr Comey as a role model. Some of them risk their lives at relatively low pay to serve their country. Mr Trump is not their country.
Then there is the lying media — or the “Lügenpresse” as Mr Trump’s alt-right supporters say in echo of the Nazi slur. On Thursday Mr Trump subjected the media to an 80-minute diatribe disguised as a press conference in which he accused them of dishonesty, peddling “very fake news” and conspiracy to undermine his presidency.
His next logical step is to accuse the media of treason. In a tweet he later deleted Mr Trump called the media an “enemy of the American people”. This cannot end well. Anonymous death threats have become a normal way of life for many journalists in Washington. I fear it is only a matter of time before this results in violence. The same applies to the judiciary. The judges who shot down Mr Trump’s “Muslim ban” earlier this month are also receiving death threats.
Where does this end? Panglossian types cling to the hope that Mr Trump will make a course correction. In this happy development, he would clear the White House of firebrands, such as his close advisers Stephen Bannon and Stephen Miller, and replace them with seasoned operators.
Such a purge is possible at some point. It may even be likely. Few advisers can long survive proximity to the white heat of a demagogue. Unless Mr Trump replaced himself, the siege would go on.
Nor can we bank on a personality transplant. Mr Trump could spend 95 per cent of his time taking the advice of experts and 5 per cent going against it. That 5 per cent would still drive the agenda. But Mr Trump is not a reformable character. The more besieged he becomes, the more he lashes out. He is now vowing an investigation into leaks and an implied purge of disloyal officers.
It is hard to predict how long it would take to resolve the battle between Mr Trump and the so-called deep state. It is also hard to say how long a Republican Congress could stand the heat. As I say, multiply the past four weeks by three, or six, or nine. The neutral ground will vanish. At some point this will boil down to a choice between Mr Trump and the US constitution.
The Gong Show
By: Captain Hook
But you've got to take your hat off to Trump with all the abuse he's been taking; even if his real compulsions are more ego exercise oriented than anything else. Who else does 'the little guy' (public) - have fighting for them however? And for this, they love him. Unfortunately, in the end, even if Trump is somewhat successful, the party won't last long, not with the inflation signals Trumponomics has been triggering, yet to be reflected in an economy still very sick under the hood. Trump would of course argue 'it's too early to see the benefits', and this is true.
These are not normal times however, where if the economy does improve, and an 'inflationary tone' does return, because America, and the world, are now so heavily over-indebted, all such benefits would be eclipsed by the insolvencies as interest rates would need to continue rising.
To help things along in this regard, we have Janet Yellen, evidenced in her Humphrey-Hawkins testimony last week, where she stated although rate hikes will be gradual, they may come sooner rather than later. So if inflation keeps picking up, which has been the case, and she doesn't pull the trigger in March, the inflation trade, which includes just about anything not nailed down these days (and includes both stocks and precious metals), should benefit further. (i.e. as perception moves away from visions of stagflation towards accelerating inflation.) This could be the impetus that takes the S&P 500 (SPX) to the 2450 target (long-tem channel bottom) we have been discussing for some time. Traders should pretty much be out of their minds by then, likely sporting huge 'hedging losses', all in what will seem like 'light speed' at the time.
If she does tighten however, with the economy collapsing due to it's own weight (debt), increasingly stressed out, paralyzed, and exhausted traders could change things quickly - manifesting some degree of collapse in stocks. As you will read below in attachments, stocks have been rising because of the 'perpetual short squeeze', discussed on these pages many times previously. If you've been with us for some time then, one would know this situation will end abruptly at some point once indebted traders become exhausted (or broke) and are forced to leave the game. You will see big increases in suicide rates amongst traders (later this year?) once stocks begin to fall in earnest, leaving these ruined gamblers behind. It's too bad. I have always stated not to short the stock market blindly; unaware of what the consensus is doing.
There is of course good reason for this - so you don't get caught up in a manic move (squeeze) like the one we are in right now - like this guy.
Going the other way, what this means is once stocks actually start falling for real, disoriented traders will not believe it, where if they begin to act on such a belief, would mean open interest put / call ratios could fall with prices, which is of course 'the dynamic' that brought about both crashes in 2000 and 2007. Suspension of disbelief in perpetually rising prices can be a 'real bitch' once prices start falling impulsively with traders turned on their heads. This is just the opposite of what they are attempting to do right now, which is to pick the top, evidenced by rising key ETF / index open interest put / call ratios (see here), where you have traders attempting to 'buy the dips' on a sustained basis evidenced in falling open interest put / call ratios (with prices), offering little for the machines to grab onto to squeeze.
So if you think hedge funds did poorly last year, just wait until Christmas this year. Many casualties will abound by then in all likelihood, as most are completely unprepared for what is coming. The good news associated with this will of course far less money would be available for the funds to play in COMEX gold and silver, which, when combined with the money printing that will undoubtedly be coming (as a result of panicking central bankers), should set the bottom(s) for precious metals either later this year, or early next. (i.e. to complete the larger degree a - b - c corrective affair that began in 2011 - see below.) And who knows, maybe COMEX will even be unseated as global price setter for precious metals, which would play havoc in all other US (Western) markets as a result. (i.e. due to out of control rising prices.)
Initially the charts indicate precious metals should suffer with deteriorating general liquidity conditions (see gold chart below), where it's expected the dollar($) should rise as global debtors must buy in order to deleverage (think synthetic $ squeeze). Once this buying is complete however, accelerating decentralization trends will take over concerning the $'s fate, which should see it literally crash at some point once people begin to realize just how badly the American economy has been hollowed out by the bankers and bureaucrats. All the infrastructure spending in the world will not change this reality set against the deflationary forces that will grip macro-conditions once the impending deluge of debt related insolvencies begin to accelerate in the years to come. Trump is selling the idea America can have its cake (the debt binge of the last forty plus years) and eat it too, however such belief is fallacy. (See Figure 1)
What's more, while Trump will do his thing over the next four years, and this will have some impact on the economy (although it may not be measurable set against aggregate losses), decentralization, by definition, is in aggregate an ultimately contractionary process in terms of raw numbers, even though more people should be working. So it's important to understand what happens after the present global bubble economy is popped. It won't be replaced by another bubble blowing experiment - meaning although economies will be stabilized, they will be smaller. So while trump will fill the Fed with doves, thinking he can engineer a bubble blowing experiment for 'the people' (as opposed to just the oligarchs), because of rising market (interest) rates outside of central control, hinged off rising inflation expectations, such folly will not last long.
How to Survive the Trump Era
Joseph E. Stiglitz
NEW YORK – In barely a month, US President Donald Trump has managed to spread chaos and uncertainty – and a degree of fear that would make any terrorist proud – at a dizzying pace. Not surprisingly, citizens and leaders in business, civil society, and government are struggling to respond appropriately and effectively.
Cost Push Inflation
By: Captain Hook
That said, and in spite of the jobs Trump is destined to create (see here) from his admirable efforts, unfortunately the drag of an over-indebted economy is expected to produce stagflation at best, or if The Donald (and Fed) wants to pull all the stops, some degree of hyperinflation at worse. Therein, if Trump sees his efforts failing as time goes by, again, with the economy continuing to stagnate besides his efforts, America, and the rest of the world, could be looking at a great deal more cost-push inflation in the future if he assigns the Fed the job of fixing the problem. After all, The Donald is a delegator; so such thinking is not a stretch.
So the thing one needs to understand (and watch for) at this point, is how Trump, and the Fed, is going to react if the data continues to stagnate. If history is an indication, and my bet, is he will continue to push his agenda - recovery or bust. And if he is able to populate the Fed with a new list of doves by next February, or sooner, when Yellen will be leaving (he will not reappoint her), the dye could be cast, and off we go towards some degree of hyperinflation. What's more, we now have direct evidenced this is the case with Trump's rolling back of Dodd-Frank on Friday, which in his own words is a priority initiative for his administration.
Unbeknown to most, this directive is not necessarily another 'giveaway' for bankers/Wall Street, but is primarily aimed at freeing up credit for the American people. That's right; Trump is going to force the banks to slash lending standards and make credit available to just about anybody who wants it, potentially making the 2008 bubble look like child's play. And while his heart might be in the right place, the end result will be disastrous, first inviting shades of the Venezuelan experience (hyperinflation) to America, and then darker shades of the 'dirty thirties' as a result, making owning gold (and silver) a 'financial necessity'. (i.e. it already is.)
Such as it is then, please; don't be confused about what happened on Friday in the Oval Office.
This was not Trump licking the bankers' boots as usual these days for an American President, even though it might look that way. The letter Trump sent the Fed the same day proves this. No - this was The Donald telling the bankers they better get their act together and start lending money to the plebs - or they will be fired. I'm not kidding - that's what's happening here. So again, what this is telling you, is owning gold and silver are no longer 'optional diversification points' in one's portfolio, it's telling you precious metals are a 'necessity', and should form a meaningful role in wealth preservation. (i.e. because you are about to be assaulted.)
Right now, those that don't understand the above, view owning gold as a 'risky asset' that is 'foreign' to both themselves and their financial advisors. And silver, which is even 'stranger' than gold to most, if one were to own it, where would you store it - it's so bulky and heavy? So when it is bought, most opt for the paper, further fueling the Western derivatives derived intervention, with COMEX at center. And of course the price never goes up. It was $17 back in the 70's and it's still stuck there. What kind of an idiot would play in this game anyway? So it's not hard to understand why this nightmare has gone on for so long.
But this could be about to change (the possibility is real I can assure you), which would take the chart huggers by surprise. Yes, I am a chart hugger too, however I am also a trained economist, and I can tell you categorically that if Trump mobilizes the banks in the States to 'loosen up' credit standards in his attempt to 'make America great again' at any cost, cost-push inflation, and then hyperinflation, will begin to price the unprepared out of the economy in fairly short order. So the bears may not want to short the market just yet, because as was the case on Friday, stocks could continue to rise 'unexplainably' under such policies, even if the shorts have already been squeezed out.
How Many Euro Crises Will This Make? It’s Getting Hard To Keep Track
Every few years, it seems, one or another mismanaged eurozone country falls into one or another kind of crisis. This leads to speculation about the end of the common currency, which in turn spooks the global financial markets. Then the ECB conjures another trillion euros out of thin air, buys up and/or guarantees all the offending country’s bonds, and calm returns for a while.
At least, that’s how it’s gone in the past.
The latest crisis has more than the usual number of flash-points and could, therefore, be something new and different. Currently:
Greece. This charming but apparently ungovernable country only got into the eurozone in the first place because its corrupt leaders conspired with Goldman Sachs to hide the true condition of the government’s finances. It quickly blew up and has been on intensive care ever since. Now the latest bailout has become deal-breakingly messy:
The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.
Amid the uncertainty, volatility has returned to the markets. So, too, has fear, with an estimated €2.2bn being withdrawn from banks by panic-stricken depositors since the beginning of the year. With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest.
This is the irony of Syriza, the leftwing party catapulted to power on a ticket to “tear up” the hated bailout accords widely blamed for extraordinary levels of Greek unemployment, poverty and emigration. Two years into office it has instead overseen the most punishing austerity measures to date, slashing public-sector salaries and pensions, cutting services, agreeing to the biggest privatisation programme in European history and raising taxes on everything from cars to beer – all of which has been the price of the loans that have kept default at bay and Greece in the euro.
The arc of crisis that has swept the country – coursing like a cancer through its body politic, devastating its public health system, shattering lives – has been an exercise in the absurd. The feat of pulling off the greatest fiscal adjustment in modern times has spawned a slump longer and deeper than the Great Depression, with the Greek economy shrinking more than 25% since the crisis began.
Even if the latest impasse is broken and a deal is reached with creditors soon, few believe that in a country of weak governance and institutions it will be easy to enforce. Political turbulence will almost certainly beckon; the prospect of “Grexit” will grow.Italy. A few months ago the centrist president, Matteo Renzi, resigned after losing a referendum (don’t bother with the details, they were never very interesting and in any event have been overtaken by events), making a new election necessary. There was a chance that Renzi would be returned to office, which would reset the clock on Italy’s inevitable descent into Greek-style chaos. But yesterday he resigned, throwing the upcoming elections into disarray and opening the door to eurosceptic populists. Combine political turmoil with a moribund banking system and Italy becomes a prime candidate for Big European Crisis of 2017.
Former Prime Minister Matteo Renzi, who resigned as premier after losing a referendum vote on constitutional changes in December, formally stepped down as leader of the party after facing sharp criticism for his inability to stem the mounting popularity of the rival 5 Star Movement, a euroskeptic party that wants Italians to have a national vote on whether to leave the eurozone.
5 Star, which opposed Renzi’s proposals in the plebiscite, and the Democrats are running neck-and-neck in public-opinion polls. Both parties have pushed for fresh parliamentary elections this year. The country is now being run by a caretaker administration.France. Each new immigration horror story adds a bit to the popularity of the anti-immigration National Front, and increases the odds that party leader Marine Le Pen makes a strong showing in upcoming elections. The odds are still against her actually winning, but as the polls tighten, French bonds are sold off by nervous traders, widening the spread between French and German yields. A widening yield is a sign of approaching trouble:
As a result, the French-German 10Y govt spread has jumped to 85 bps, following an accelerated selloff, to the widest level since July 2012.
And those are just the front-burner problems. The Dutch are also holding general elections next month in which their version of Donald Trump will likely be the leading vote-getter.
Germany has two elections this year, and opposition parties are gaining on Chancellor Angela Merkel. So there will be no shortage of scary headlines from the Continent going forward.
Why should non-Europeans care about any of this? Because the EU is the biggest economic entity on the planet and the euro is the second most widely-held currency. Turmoil there means turmoil everywhere else, though the form is hard to predict. A euro crisis might send terrified capital into US stocks and bonds, extending the bull market in domestic financial assets – and making the current US administration look like a bunch of geniuses. Or it could spook capital out of financial assets altogether, crashing stocks and bonds while boosting the price of real things like farmland, solar farms and precious metals. Or it could buoy all US assets, with “anywhere but Europe” becoming the dominant investment theme for a while.
OR the ECB could try to paper over the mess by devaluing the euro even further, setting off a trade war with the US, Japan and China, all of whom need weaker not stronger currencies to hide their own financial mismanagement.
The Evolving NATO Alliance
By George Friedman and Jacob L. Shapiro
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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