All those economic elites around the world, and especially in Anglophone countries, who thought Donald Trump’s crass populism and fascist inclinations would be tolerable because he’d make life even easier for corporations and shareholders might have to think again. The increasingly ill-tempered president is proving a wrecking ball for shareholder value across the world.
Trump’s extraordinary attack on Federal Reserve chair, Jerome Powell in a tweet last Friday has sent tremors through central banking and global finance at the most senior levels. It has further undermined the shrinking level of confidence these policymakers have in Trump and his administration. Trump’s attack on his own appointee and escalation of the trade war with China set off a 3% slump in share market values on Wall Street. That slide will echo through markets today and tonight with Wall Street poised to fall another 240 points tonight according to futures trading on top of the 600 point plunge on Friday.
The attack on Powell came hours after the Fed chair made a major speech at the central bank’s annual Jackson Hole seminar in Wyoming (RBA Governor Phil Lowe was a panel member for the closing session of the conference, which is the most prestigious among central banks around the world).
In his speech Powell indicated — with typical central banker circumlocution — that the Fed would continue cutting rates to keep the US economy on an even keel as Trump hammers confidence. Data out last week showed a sharp 12.8% slump in new home sales in July, the largest monthly fall since mid-2013. The figures are prone to volatility — the June figures were revised upwards and new home sales were up 4.8% from July 2018 — but economists said the sharp July fall was a surprise. And US factory activity contracted for the first time in a decade, with new orders dropping by the largest amount in 10 years as well.
So far, thankfully, these are isolated examples of negative data. US job creation remains strong, and wages are growing. But Trump’s policy flip flops and trade wars with China, Europe (especially France) and his lashing out at Powell are quickly quickly wiping away what’s left of the optimism among business elites that the crass New York bankrupt would, no matter what else, be good for business. US business groups are now much more concerned about the impact of the trade wars on their business. On Friday, US Steel revealed it is closing a blast furnace at one of its steel plants in Michigan, with 200 people to be laid off, because of weak demand and “low priced imports”. That’s despite the imposition of 25% tariffs on steel imports in 2017. US Steel’s move came only days after Trump claimed his tariffs were creating jobs in steel.
Trump’s tantrum at Powell is motivated by his worry that his trade war really is risking a serious economic slowdown, and he’ll need someone to blame for it ahead of his re-election campaign next year. But political theatre aside, the slide in bond yields and the much talked about meaning of yield curve inversions (where long term bond yields fall below short term or official rates like the RBA’s cash rate) are the realisation of the rising level of fear investors large and small have about 2020 and the impact of a presidential election campaign even more unhinged than 2016. Business as usual seems a long, long way off.
One can only hope that one of his ill-tempered tantrums will bring on a fatal heart attack…whether the Republicans can then find someone better to replace is doubtful though.
Didn’t you know he is the fittest President in history? Just ask him.
I still treasure his claim to be a “very stable genius” which comes from Heinlein’s 1960 hymn to fascism “Star Troopers” when describing a genetically engineered neodog, “..almost a human moron level”.
I can’t do better than this quote:
“It would be easy to dismiss America’s president as a moron. But he’s much more than that.
Returning to the Dear Reader’s question: Trump is probably the most gifted natural politician we’ve ever seen – brazen, reckless, ruthless, blockheaded, megalomaniacal… with a real genius for how to work a crowd.
You can admire the skills and instincts that he displays. You can marvel at how so many people follow his tweets without laughing. And you can even genuinely like the guy… or, at least, the character he plays on TV.
What you can’t do – if you have any sense – is believe him. Or trust him. Or expect him to improve your life.
Because politics is essentially a win-lose game. And it is rigged.
The politician is the one who gets control of the strong arm of government and uses it to whack his enemies, reward his friends, and exploit the masses. Unless you are among the chosen ones, you are a loser.”
As greatly as that infarction may be desired, it would mean Prez Pence & hello, Gilead.
For anyone who is simply interested in behaviour, leaving the politics aside although it’s arguable that there is no ‘politics’ in any of this, the consistent pattern of appointing then attacking a ‘trusted ally’, supporter or ‘friend’ is fascinating. Supporters will hang on to the argument that ‘these failures’ are simply not up to it in respect of understanding and keeping faith with the genius of the ‘man’, a word that should be used advisedly in this case. From a less sycophantic perspective the behaviour is, to say the very least, weird but impressively consistent. One can only wonder how long it will be before Bolton does something that results in him being thrown under a bus or, worse for the rest of us, outdoes his president with a display of Trumpian brilliance.
Here in Australia we have a similar pattern with One Hanson where a long and ever lengthening list of men have failed and left the leader. Fortunately it’s constitutionally harder for such a person to become head of government here. Although we do get our share of duds.
Isn’t that one of the bog-standard characteristics/behaviours of abusers – chocolates and ‘I love you’ one day, smash you in the face the next. Works a treat to mess with the victim’s head.
Abusers usually progress through a cycle, commencing with loving behavior, followed by finding faults, then the escalation commences of minimizing, criticizing and diminishing self worth of the victim, followed by violence/ public humiliation of the victim, followed by the abuser privately expressing remorse, whilst at the same time, preparing for the next escalation by convincing the victim they were at fault and caused the abuser to do this for their own good.
Sounds familiar??
It is interesting that Bluescope Steel is going to expand operations in the US rather than Australia because of too high energy costs, yet US Steel is downsizing its operations there.
Bluescope Steel’s pay freeze for non-executives of 2015-18 supposedly to “save” the Port Kembla and Illawarra works demonstrates how it is workers who pay for saving a plant, while executives profit from them doing so.
Bluescope had no trouble finding $US720 million for a US steel mill two months after the freeze started. Bluescope recorded a FY17 after-tax profit of nearly $716 million, double FY16. Although the Illawarra and the Port Kembla works gave very strong results, no retrospective bonus. As the Executive Director and “lowest-paid” (ha ha) executive got $1,856,575 and $769,129 in cash respectively, their “fixed pay freeze” would have done them no damage. Nor, given their large shareholdings, from the tripling of the share price certain to occur from such a freeze.
Just as well our Fearless Leader has some leverage over him now (Iraq/Iran II) – ‘When he shows up at the Whitehouse (in a week or two?) he can wield that influence and talk some sense into this PotUS’ of asininity …….. according to much of our viewsmedia at any rate?
Either that or our Feckless, sorry I mean Fearless leader, darn predictive spelling, gets a serve that shows once and for all how much or little benefit there is in our obsequious camp-following and perhaps, perhaps learn the lesson that we need to get a foreign policy of our own as a Pacific/Indian Ocean fringe middle power in the presence of several much stronger regional powers. Or not.
I cannot believe markets didn’t see this coming. Trump is going the central bank’s and using China as the catalyst! Powell knows this! Its been planed for years. The death of fiat currency ….. and the central bank’s !!