The Dangerous Don

Donald Takes A Hammer To The Engine

Donald Trump has flip flopped on several key issues since becoming the presumptive nominee of what is left of the Republican party. However, his economic plans give cause for the greatest concern. Most people assume that Donald Trump knows everything about the economy because he is a successful business man. Most CEO’s can drive cars as well, but that does not mean they understand how the engine is put together, or the possible design flaws in that engine. “I would borrow, knowing that if the economy crashed, you could make a deal,” Trump said. “And if the economy was good, it was good. So therefore, you can’t lose.”(1) Can any respectable economist explain how the proposal of taking on more debt until the U.S. and world economy crashes is a rational idea? To be fair he did say it is a “fragile thing,” but apparently that won’t stop him from taking a hammer to the carburetor.

Tariffing Up The Economy

If taking a hammer to the engine of the economy wasn’t bad enough, Trump has also suggested that a 35% tariff on the import of goods is a swell idea. If one were to couple a tariff of that degree with the incredible amount of worthless paper cash the Federal Reserve has injected into the U.S. economy it would be an unprecedented disaster. Only the Great Depression would be comparable, and it could actually be worse. In fact, a cursory study of history shows that similar conditions were in play before the Great Depression.

“The spectacular crash of 1929 followed five years of reckless credit expansion by the Federal Reserve System under the Coolidge administration. In 1924, after a sharp decline in business, the Reserve banks suddenly created some $500 million in new credit, which led to a bank credit expansion of over $4 billion in less than one year. While the immediate effects of this new powerful expansion of the nation’s money and credit were seemingly beneficial, initiating a new economic boom and effacing the 1924 decline, the ultimate outcome was most disastrous. It was the beginning of a monetary policy that led to the stock-market crash in 1929 and the following depression. In fact, the expansion of Federal Reserve credit in 1924 constituted what Benjamin Anderson in his great treatise on recent economic history (Economics and the Public Welfare, D. Van Nostrand, 1949) called “the beginning of the New Deal.” (2)

After this expansion in credit the Hoover administration signed the Smoot-Hawley tariff into law in June of 1930. “When President Hoover announced he would sign the bill into law, industrial stocks broke 20 points in one day. The stock market correctly anticipated the depression. The protectionists have never learned that curtailment of imports inevitably hampers exports. Even if foreign countries do not immediately retaliate for trade restrictions injuring them, their foreign purchases are circumscribed by their ability to sell abroad. This is why the Smoot-Hawley Tariff Act which closed our borders to foreign products also closed foreign markets to our products. American exports fell from $5.5 billion in 1929 to $1.7 billion in 1932. American agriculture customarily had exported over 20 percent of its wheat, 55 percent of its cotton, 40 percent of its tobacco and lard, and many other products. When international trade and commerce were disrupted, American farming collapsed. In fact, the rapidly growing trade restrictions, including tariffs, quotas, foreign-exchange controls, and other devices were generating a worldwide depression.” (2)

Great Depression 2.0 And World War III

The same scenario will play out if Trump is elected and he goes through with his tariff plans on goods imported to the U.S. When we pick up almost any product in the market today it reads, “made in China.” The Treasury Department data released Friday showed that China owned $1.261 trillion worth of U.S. government securities. What incentive does China have to continue to buy U.S. debt if Dangerous Donny destroys trade with them? China is already nervous about investing in the U.S. brand, so to speak. China and Russia have both dropped the dollar as their currency for bilateral trading.The quote “When goods don’t cross borders, soldiers will” is often attributed to the 19th century French Liberal economist Frederic Bastiat. World War II did follow on the heels of the Great Depression. Is Trump really for starting an economic war that could lead not just to global market collapse, but also World War III? The proxy war in Syria already brings nations to the brink of world war III. If Donald is elected this could be the straw that breaks the camel’s back as Iran, Russia, and China square off against the U.S. and NATO forces. 

The Dangerous Don

Trump is dangerous for so many reasons. Let us not forget he suggested forcing the military to carry out war crimes against humanity, “But when asked how he would make the military carry out illegal orders to kill and torture people, Trump doubled down.“They won’t refuse. They’re not going to refuse me. Believe me,” Trump said.”(3)  The list of violent statements Mr. Trump has made are many, but this is the only one the public needs to remember even though he later back peddled. He has flip flopped on issue after issue. He has made numerous statements that beg the public to question his sanity. Topping it all off, his sense of economics isn’t that of a libertarian Nobel Prize winner like Dr. Friedrich A. von Hayek, and not even that of a typical Keynesian. No, Mr. Trump seems to have the economic sensibilities of a reckless gambler.

Sources:

Hans F. Sennholz. The Great Depression. Accessed May 2016. (2)

Sophia Yan. China Retakes Spot As Biggest Holder Of U.S. Debt. Accessed May 2016.

Michael McAuliff. Trump Reaffirms His Intention To Order War Crimes, Then Backs Down Update. Accessed May 2016. (3)

Matthew Yglesias. Donald Trump Just Threatened To Cause An Unprecedented Global Financial Crisis. Accessed May 2016. (1)

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