15 Mar Global Economic Stability; A Partial Scorecard of Trump-Promised Policies*

Global Economic Stability

The past 10 years, post the Great Recession, has been a period of surprisingly measured global economic growth. Although developing countries, primarily in Asia and Africa, have witnessed the strongest economic performance, developed countries also have participated. For example, Australia has had the longest uninterrupted period of GDP growth in modern history, and the United States has benefited with the second longest expansion in its history. Although GDP growth hasn’t soared to the levels of past recoveries, slow and steady nevertheless wins the race. Some have questioned the modest rate of growth, viewing the U.S. expansion as little better than economic stagnation – which is not a valid criticism. 2{29ea29b64b10057f61377b2c087cd5b7537a0cd24da4295a308b0bf589469f35} growth with rising stock markets and record low unemployment is nothing to sneer at. Volatility generally has been muted and although the naysayers – many of whom are followers of the Austrian School of Economics – predict that chaos is right around the corner, it’s hard to see where that chaotic ending is coming from. Today, at least, we appear to be in a period of relative calm.

One of several stabilizing forces for the global economy has been the stability of commodities. Commodity prices generally have been going sideways, albeit most recently with a bit of an uptrend. Some commentators have suggested that supply has become self-adaptable due to technological innovation: Shortages have become far more predictable and development and production apparently have had the ability to be ramped-up more quickly, flexibly and efficiently. Whether zinc or cobalt for batteries, or oil, natural gas, coal or rare earths for power generation, or coffee, soybeans, corn, wheat or meat to feed the world’s expanding population, shortages more often have been pre-empted, production has increased and in relatively short order supply has caught up with demand. Today, at least, we appear to be in a period of relatively balanced commodity prices. Some view this as salutary while others view it as a tightening spring.

Price stability also has been the rule for gold and silver. Although they are commodities, gold and silver also are currencies. As commodities, they naturally respond to supply and demand imbalances, silver more so than gold since silver has commercial uses while gold does not. However, as currencies, they also respond to economic instability. They are barometers of potential disruption, whether inflation or deflation, geopolitical tensions, or chaos of any kind. When such events occur, gold and silver provide a safe haven for wealth, their prices a harbinger of both actual and perceived risk. The recent price dollar stability of gold and silver therefore suggests not only that supply and demand for both are in balance, but also provides confirmation that the general public is comfortable with the state of the world, that there is no perception of an imminent risk. The price sensitivity of gold and silver to instability means that it is worthwhile to keep a close eye on both, perhaps now more so since the post-Great Recession economic expansion has continued for such a relatively long period.

A Partial Scorecard of Trump-Promised Policies

Cut Taxes – Succeeded

Appoint Conservative Supreme Court Justices – Succeeded

Appoint Conservative Federal Judges – Succeeded

Move American Embassy to Jerusalem – Succeeded

Withdraw from Iran Treaty – Succeeded

Reverse Cuba Policy – Mostly Successful

Defund Planned Parenthood – Partially Successful

Executive Appointments – Mixed successes and failures

Eliminate Obama Immigration Amnesties – Mixed failures and successes

Withdraw from Foreign Military engagements – Too soon to know

Have Allies Pay for Defense – Too soon to know

Reduce Regulatory Burdens – Not successful, although too soon to definitively know

Israeli-Palestinian Peace Agreement – Not successful

Denuclearize North Korea – Failed (but not a possible outcome)

Build a Wall and have Mexico pay for it – Failed

Eliminate Deficit – Failed

Repeal Obamacare – Failed

Overhaul NAFTA to America’s benefit – Failed

Eliminate U.S. trade imbalance – Failed

Cut Funding for Sanctuary Cities – Failed

End Birthright Citizenship – Failed

Invest in Infrastructure – Failed

The Lonely Realist’s Philosophy

The purpose of The Lonely Realist is to generate discussion, not advocate conclusions or remedies. I leave conclusions and remedies to the experts. To the extent perceived prejudices leak into these commentaries, please ignore them. Too many commentators already are promoting alleged solutions. What is needed first is discourse, to recognize problems. Only if there is agreement on the problems can they be worked out. Too often, advocates frame problems for the purpose of setting forth their own agendas.

With that said, allow me to editorialize a bit.

As a big-firm lawyer in the financial services and tax industries, my job focused on navigating a labyrinth of securities, commodities, tax and corporate laws so that my clients could operate their complex businesses without inadvertently stepping on a legal land mine. I was fortunate to have clients whose goal was simply to comply. None were Madoffs or Skillings or those similarly inclined. I very much enjoyed the task of carefully threading my way through a host of poorly coordinated legal mine-fields. But after doing so for many years, I regretfully came to the conclusion that those laws, rules and regulations were counterproductive. No one, Congress or otherwise, truly understood what had been wrought and no one had given thought to either (1) how those disparate laws interrelated and the effects of those interrelationships on the businesses in the targeted industries, or (2) the effect those laws were having on American competitiveness. Furthermore, those laws were not serving their purpose of protecting the public or preventing the bad guys from doing bad things (as witnessed, for example, by Madoff and Skilling and so many others). Those laws had grown to become incredibly complex (layer upon layer being added as new paying constituencies problems were discovered and addressed) that regulators had so much regulating to do with smaller and smaller budgets that they simply had no time to find, let alone prosecute, all the bad guys. The effect of those laws therefore was to impose an unproductive levy on financial services businesses. What we Americans have done is tried our very best to protect those who are in need of protection, though at great cost – and without truly helping them. Among other things, those costs include legal, accounting and administrative support that could better be applied to building businesses. What this has done is sapped the essence of our democracy and of capitalism itself.

I very much understand the need for consumer protection and appreciate that in order to do so complex laws are necessary. However, when those laws fail to serve the greater good of American productivity (and also fail to protect consumers), we need to take a step back and gain perspective. Financial services regulation should be sparing, thoroughly re-thought, and target actions on an economic cost-benefit basis.

Finally (from a good friend)

Be careful when you follow the Masses.

Sometimes the “M” is silent.

I speak my mind

Because…

It hurts to bite my tongue all the time.

*┬® Copyright 2019 by William Natbony. All rights reserved.