Stupid In, Stupid Out

The U.S. economy is going to start rolling over soon.

I can’t give you a date. I just know it’s going to happen.

It’s an easy prediction to make, because since January we have had stupid policy coming out of Washington. Jim Cramer doesn’t think Washington can crash the economy, but Roll 212. 

This is not just me talking. The International Monetary Fund has taken down its estimates on U.S. growth, citing Trumpian stupidity.  Tech funding is declining with more of the money going to mature companies, less to start-ups. That’s not what is happening in other countries – they’re flying.

The Obama economy was based on technology, on productivity, on turning full-time jobs into apps and thus creating room to tackle other pressing problems. During the Obama recovery clouds and apps eliminated friction in every field, meaning lower costs, more business, and no inflation.

Deflation is the hallmark of a decade that holds a funhouse mirror to the 1970s. (We’re now playing the 1977 Game.) An honest Administration, staffed by subject matter experts, bent the health care cost curve, made the U.S. hyper-competitive again, and delivered on its promises. In response, the American people were persuaded (with Russian help and an anti-democratic playing field) to hand power to the anti-Carter, an idiot who is all-Id, and whose acolytes are crooks, racists and traitors to America’s highest ideals.

So why shouldn’t it be easy to predict trouble ahead? Stupid policy always leads to stupid results.

What happens to the tech economy when it can no longer import the talent it needs? What happens to the farm economy when it can no longer get hands? What happens to the tourist economy when visitors are actively discouraged? What happens to the education economy when students from overseas are discouraged from applying? What happens to honest business when crooks are encouraged to run rampant?

Bad results are certain from bad policy. It’s just a question of timing the turn in the market.

What do you think happens to the rest of the economy when Trump launches a trade war over steel, as he’s doing now? What do you think happens in Houston when their fracking leads to lower prices, rather than higher profits, because solar and wind undercut them in fast-growing markets?

Here’s an easy prediction to make for the next decade. Houston is going to become Detroit. This is its last dance.

What do you think happens to the economy when you start pulling $800 billion out of health care, in the form of Medicaid cuts, and hand it to investors at a time when asset prices are already bubbly because there’s not enough worth investing in? This is one-sixth of the economy you’re talking about tanking. You take service to those who can’t afford a care plan off the market, throw them onto the mercy of emergency rooms, then take their grandmas out of nursing homes and throw their opiate-addicted grandsons into jails that cost more than treatment centers? You don’t think that’s going to have an economic impact? I’d say I have a bridge in Brooklyn to sell you, but you already bought it.

Money already has an inkling of what is going on. The Euro is at levels last seen in early 2015, with tons of room to run. All those stock and real estate gains you think you made? They disappear when your money becomes worth less.

The best moves for investors today are cash and overseas stocks. I already have half my money on that, and I’m going to move more. I can’t afford to get caught out as I was in 2000 and 2007 – I don’t have time to wait for the market to come back. If you have a long-term perspective, keep a respectable cash pile on hand, but don’t panic because things will change.

Money doesn’t like losses. Money reacts negatively to losses. Money hasn’t been losing, yet, but when it does Trump and the GOP will face the combined anger of Silicon Valley and New York City. No one can stand against that. New York fooled itself into thinking that Trump stupidity would benefit them, or wouldn’t matter, and the anger when that turns out not to be the case is going to be palpable. Jamie Dimon is already hitting the panic button. Silicon Valley is going to lose its bro culture in the panic, and control will go firmly to the adults in the room, to people like Jeff Bezos and Bill Gates who are going to start demanding their full measure of devotion from the political system, and will have the cash to get it, more than the Kochs ever dreamed of having.

Every political action, every economic action, has an equal and opposite reaction. The strains of seeing Wall Street and Silicon Valley move against them is going to cause panic in Republican ranks. Citizens United will fall to Silicon Valley united, and all the electoral gerrymandering and voter purging in the world won’t be able to stand against tech industry scrutiny and action against it. But, again, that will take time.

You think this economy is just going to watch Trump destroy it and not do anything? Are you crazy? They didn’t like the end of the dot-com boom, and they didn’t like the economic collapse of 2008. They didn’t even like the little recession after the Gulf War. As was true then, they’re going to demand change, and this time it will be structural change, a polity that moves naturally toward a center they have the power to manipulate. In other words, a democratic polity rather than an autocratic one.

A lot of people in Washington with vast experience covering Presidents and Congresses are freaking out right now, fearful that Trump represents an existential threat to the system, fearful of tanks in the street. But Trump is a clown. We’ve faced down much, much worse in our history. This is the country that beat Jim Crow, that beat Joe McCarthy, that beat Hitler and overcame slavery. The force that won all these battles was an economic force. The arsenal of democracy just needs a reason to be energized again.

Stupid is the reason.