To understand the trade war with China, you need to understand
that China at the moment is having a major slowdown economically. The stock
market is down 25%. Many banks are being bailed out by the government.
Everything and everyone in China is way over levered, and the economy is
therefore in a high risk position which the government was trying to fix.
The trade war got in the way, forcing the government to subsidize the smaller
banks. China is loaning tens of billions to countries like Pakistan to build
ports and railroads and infrastructure. Problem is, these countries have zero
possible way to ever repay these loans. So now they are faced with
stopping the projects or asking the IMF to bail them out.
Can 4% GDP growth continue? Maybe. But 3.5% would be
great. Remember the left, and the press saying in 2016 and early
2017, 2% was the new normal maximum, and the US was at its peak and we
faced stagflation, economic decline, etc. 2% was the accepted number as what
good growth would be. Larry Summers was right out there saying 4% was
impossible. Some in the mainstream media and Wall St said getting above
2% was pure fantasy, and Trump was dreaming.
So, as I have said often, ignore the talking heads, and the
mainstream media. They all have an agenda. Almost none are
objective. The tax bill and deregulation was a huge boost. The left
just can’t admit it. There are even stories now in the press that 4% is
really a bad thing??? 4% is great, it may not be 4% next quarter, but
3.5% would be terrific. If Trump really does a deal with the EU,
Mexico and Canada, and then Japan, 3.5%, or better, is very realistic.
Capital expenditures will ramp up further once the tariff issues
subside and that uncertainty goes away. They say exports were hyped due
to pending tariffs, but to do that, inventories were drawn down, so this
quarter inventories will be rebuilt, pushing up GDP growth upward. The
press does not want you to believe it because it means the Republicans win in
November, so they will try to convince you otherwise. Even my very
liberal economist friends admit privately to me that the economy is going to be
booming for at least 6 more quarters. The key is to reelect Republicans
to control Congress.
Keep in mind Maxine Waters is chair of the finance committee if
the Dems get control, and Nancy is speaker. Think about that combo, and
the ability to get budgets and more tax reform done. It should drive you
to the polls and to take all your friends with you to vote. What a trade:
Trump, and 4% GDP,
or Maxine Waters.
If you want to understand Russia, and the whole gas pipeline
issue--- gas and oil is 52% of Russia’s GDP. The GDP of Russia is
slightly smaller than NY State, around $1.5 trillion. GDP per capita is only
$8,748 in 2017. Far lower than in 2013. We heard this first hand
when I was in Russia, but now the stats show it to be true. The standard
of living in Russia is declining. 20% of the Russian budget goes to weapons and
the army.
So Trump is right - how can Germany build a new gas pipeline
with Russia which will fund more weapons spending, when they are supposedly
having sanctions because of weapons and Crimea. It is nuts. The gas
line will provide Russia billions of new cash flow for weapons which are aimed
at ----Germany. But Merkel also thought letting in over 1 million Muslims
was also a great idea until the voters rebelled, and the rest of the EU voted
right wing in response.
Reality is Russia is now in economic decline due to lower oil
prices and corruption. Defense spending was reduced this year. So
what does Merkel want to do – build the pipeline to pay them more badly needed
money. Trump is not out of line for his comments. The pipeline is
the same as Obama paying Iran $150 billion just as their economy was
tanking. Truth is Russia cannot afford to wage a real war in Europe now
that Trump has forced NATO to materially up spending and readiness.
If Obama was still in power Putin could take over Baltic states
and have only a few sanctions because under Obama NATO was militarily unable to
react. That was why Putin felt he could go into Crimea with no big
problem. Putin also knew he could continue his cyber war with no real
consequences under Obama. Don’t believe the crap about Trump favors
Putin, or they have something on him. It is more lefty nonsense.
The US pays 71% of NATO costs. Germany pays less than 1.2% of their GDP
for their own defense. We pay far more for Germany’s defense than Germany
does, and they can afford to pay.
Trump is right for making this a major issue. So in 2018,
NATO and the US are upping spending on defense and Russia cannot keep up.
Russia is forced to reduce spending because oil prices did not rise as much as
Putin needed.
Under Obama US defense spending went down from 2013 on, and
Russia went up a lot, and China even more. Obama left us in very bad and
weak shape vs our main adversaries. It was massive US defense spending by
Reagan vs Russia, that won the cold war. The story now is very similar vs
Russia and Iran. The best way to win a war is to far out spend the bad
guys until they fold with no shots being fired. A strong offensive
capability and willingness to use it (missiles fired at Syria) is the best
defense. Putin and Xi got the message. Putin blew it by favoring
Trump. The last thing he wanted was a much stronger US military and
stronger, capable NATO.
Iran’s GDP is $439 billion, less than that of 14 states.
And now it is tanking. Obama gave them $150 billion - 34% of their GDP.
Iran cannot compete with US and Israel. Israel is much smaller by
population and has a GDP of $320 billion. With sanctions Trump is
imposing, Iran is in real economic trouble, and cannot afford a war with us,
the Sunnis and Israel.
The Obama nuke deal just empowered Iran to go on an expansion
into Syria, Iraq, Yemen and Lebanon. Now Israel and the US are
pushing back with the help of the Sunnis. Reimposing sanctions will
severely cripple Iran and they will likely try to attack shipping in the
straits and the Red Sea. It will end very badly for them now that the
Sunnis, Israel and the US are teamed up, the US military is being rebuilt, Sadr
is pushing back on Iran trying to control Iraq, and the Iranian people are
protesting and ready to revolt.
The entire Mideast situation is going to change by year end when
sanctions go back into effect. Iran will run out of money to continue
their expansion. What is astonishing is Merkel and the EU prefer to try
to get around the US sanctions and trade with Iran instead of cooperating with
us and destroying the regime. And the press thinks Trump acts badly with
the EU??? The EU doesn’t pay for their own defense and they favor Iran.
The US economy is on a roll. It will be strong well into
2019 and maybe into 2020. The stock market will go up. Just be
patient. Bond prices will decline further. All equities will
continue to work. They will resolve trade in the next 90 days.
Before November. NAFTA will get revised. WTO will get revised. Putin is
in no economic shape to invade anyone, or do another Syria.
1 comment:
To read ths synopsis makes me feel so depressed. Trump is such a target by the dissilllusioned, disappointed, and disjointed Democrat party that all of his good news gets pushed under the rug by the "fake news" and it makes you wonder if he will ever be acnowledged by the "fake news" and receive his proper praise for what he is doing in such a positive way for our country at this time.
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