by Daniel Carter
There has been nonstop analysis of the republican tax reform bill since Trump took office in January. Now that the bill has passed, two distinctly separate narratives have emerged. On one hand, you have people on the right who believe the tax bill will give our economy a huge boost. On the other hand, leftists are acting like the sky is falling, which is a typical reaction to just about everything the Trump administration does. Unfortunately, the left is going to be correct, but for the wrong reasons.
In reality, the economy does not care who the president is or what minor adjustments he makes to the tax code. As you can see from the 500-year stock chart below, markets are constantly expanding and contracting without following a discernible pattern. If anything, central banking has the most influence on markets – not the three branches of government or presidents.
Human nature is the largest influencer of economics and markets however. When times are perceived as good, people have an optimistic view of the future and often borrow more because they are confident that they will be able to pay it back. This causes asset inflation to spike, which leads to even more confidence and borrowing. Eventually, reality sets in and the credit cycle begins to tighten. Once this occurs, people can no longer afford to take out loans, which often causes them to default on their already existing loans. This sets off a horrible cascading effect of debt liquidation that pummels the economy. To learn more about the credit/economic cycle, you can check out legendary investor, Ray Dalio, explain it in this video:
In case you need even more proof that the president’s actions don’t matter in long-run economic outcomes, check out the chart below. It shows stock market returns for every president’s terms since 1928. The median returns for democrats and republicans is virtually the same. Markets and the economic cycle do not discriminate based on political affiliation. The market-based capitalistic system in the US ensures that not one single person – including the POTUS – can prevent the economy from expanding or contracting.
Unfortunately for Trump and his supporters, we are much closer to an economic contraction than an expansion. The last economic crash occurred almost 10 years ago. Over the past 100+ years, there have been 18 recessions (gray lines). That means a recession occurs about every 6 years on average. We are way overdue for another large downturn.
All the tax cuts and deregulation in the world cannot stop the economic cycle from taking another downturn. With the heightened political unrest in the Western world, this collapse will almost certainly be ugly. The Deep State and their useful idiot leftists will be looking to blame the world’s problems on Trump, his supporters and the liberty movement. If you want to know more about how the Deep State is setting Trump up for a big fall, you can read one of my recent articles here.
Be above the propaganda on the left and the right. Understand that government cannot control the economic cycle, but be aware of how both sides use economic news to their advantage. Make no mistake about it, the Deep State is coming for our economic freedom, and they plan to throw Trump under the bus to accomplish their goals. I don’t care if you are a republican, classical liberal, libertarian or a centrist; the Deep State will use their useful idiots to kill our freedoms unless we can truly see how the economy works. We must stay informed to have a fighting chance.
by Daniel Carter