Wednesday, October 7, 2020

"The Helicopters Are Standing By"

"The Helicopters Are Standing By"
By Bill Bonner

SAN MARTIN, ARGENTINA – "Our dear readers look into the future. Some see catastrophe if Donald Trump is re-elected. Others see disaster if Biden wins next month. Here at the Diary, denied the gift of prophecy, all we can do is extrapolate the trends of the present based on the experience of the past. We expect another big giveaway… soon.

No Deal: But yesterday, for a few hours, it looked like we were wrong. Donald J. Trump tweeted that he was calling off negotiations on another COVID bailout until after the election: "I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business."

This seemed unlikely. Mr. Trump has never shown any interest in budget control. He even urged Republican bailout negotiators last month to “go for the much higher numbers.” Besides, we figured he’d be desperate to keep the stock market bubbling and consumers spending. A sitting president doesn’t want to go to an election with the voters in a sour mood, especially those in key states that could decide the outcome.

Economist Richard Duncan spelled it out: "If Congress fails to pass a new economic rescue bill soon, the United States is likely to experience a new severe economic downturn that could bankrupt the US financial sector and destroy millions of additional jobs."

Unsustainable Path: Also on Tuesday, according to CNN: "[Fed Chairman Jerome] Powell “reiterated his calls for more fiscal stimulus aimed at supporting America’s most vulnerable.” Powell said Tuesday that the risks of Congress pouring too much stimulus into the economy are far lower than the risk of not doing enough. Although government spending is adding to an already sky-high federal budget, lawmakers should act, Powell argued. “The US federal budget is on an unsustainable path, has been for some time,” Powell said. But “this is not the time to give priority to those concerns.”

The complicating circumstance is that the federal government is already tapped out. It has no more money now to pay for a new rescue bill than it had for the $2.2 trillion rescue boondoggle it passed in March. The money will have to be borrowed. But there aren’t enough savers to furnish the kind of money the feds need – not at today’s artificially low rates. So, they will have to depend on the Federal Reserve; it will print more money. That is the “unsustainable path” of which Mr. Powell spoke. Ultimately, this will make the bankruptcies, the downturn, and the job losses worse. He and everyone with a brain knows it.

Inconvenient Detail: Once you begin living on “printing press” money, you soon become dependent on it. Then, you need to print more and more just to keep from slipping backwards. There’s no example in history where printing-press money has actually made an economy better off – none. Nor has it ever made people a penny richer. Instead, it always leads to poverty, chaos, inflation, social upheaval, and corruption.

But this inconvenient detail will stop neither Republicans nor Democrats, neither the Fed nor Congress, neither Trump nor Biden. Nor was it this detail on the president’s mind that caused him to forgo another giveaway before the election.

Magic Trick: So what is going on? A bold political move? An amateur’s mistake? Down in the polls… Mr. Trump needs to pull a rabbit out of a hat. Not only is he in danger of losing the White House, some pollsters say the Republicans could lose the Senate. But after the Dow had lost 375 points, politics and short-term self-interest triumphed over sound fiscal policy… and The Donald reached into his hat… NBC News reported: "Trump reverses course on coronavirus relief talks, dangles new $1,200 stimulus checks. President Donald Trump reversed course Tuesday night and urged Congress to approve a series of coronavirus relief measures that he would sign, including a new round of $1,200 stimulus checks for Americans."

If the latest polls are to be trusted, it looks as though the nation has had enough of Mr. Trump’s antics. This would normally be cause for good cheer. Mr. Trump has done more damage to the nation’s finances than any president in history.

Worse to Come: But come November – again, if the pollsters are right – we will likely find out that the “unsustainable” trends of Mr. Trump will become even more unsustainable under Mr. Biden. There will be an even bigger bailout boondoggle… along with a Green New Deal… and even nuttier lockdowns and “shutups”… And tax increases, too.

We don’t know, but their hour come round at last, the rough beasts now slinking towards the Potomac could turn out to be even worse. Either way, the printing presses are warming up… and the helicopters are standing by…"

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