Will President Obama Turn Out to be a Hero?

January 29, 2017
January 29, 2017 Greg Steinberg

Will President Obama Turn Out to be a Hero?

The stock market has been on a tear since president Trump was elected. In the campaign, he was quoted as saying that the stock market was in a bubble, and Obama would be to blame for a collapsing economy. Now, it seems like all that talk was forgotten, and Trump has been quoted as saying that he is “very proud” of the Dow’s great run.

Without a doubt, Trump has made great strides in making the economy more business friendly. However, the economy is still in trouble. American corporations have $2.5 Trillion offshore. If Trump succeeds in bringing that cash home, you will have the classic definition of inflation, which is too many dollars chasing too few goods. Also, if Trump succeeds with his agenda to bring more investment into the US, this will just bring more dollars ashore, creating even more inflation.

Interest rates are also climbing very quickly. In July, the ten year treasury (the benchmark interest rate), closed below 1.4%. Now, it closed above 2.5%. Since home mortgages are based off the 10 year, home sales have taken a hit. Existing home sales dropped 2.8%.

The US treasury will also need to pay more to service the debt. Since Trump is talking about lower taxes, and if the economy doesn’t grow as Trump wants, the Treasury is going to have to issue more debt to cover the lower taxes. However, Reagan doubled the revenue into the government by cutting taxes. But, during this time period, the US still had their manufacturing base. Now, all our factories are closed. So, I don’t now if Trump will be successful. Also, according to the USDebtClock.org, the US has 105% of debt to GDP. Economies usually get in trouble around 100%.

If the bubble bursts under Trump, he will know how to reorganize America into a great economy. However, if the bubble bursts, Americans may blame Trump due to his praise of a 20,000+ DOW. This could mean America will get a democrat in the White House, who is not friendly to business, and the country won’t have someone like Trump directing the economy.

At the very least, expect a lot more inflation, as all these dollars that were sitting idle durning the Obama admin, start moving.

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