Trump will be blamed for the stock market crash, but he’s not the real culprit
There are so few commentators and pundits who understand this. When the crash comes, we should be looking at the man behind the curtain. In fact, why not start now…
Here’s the scoop from Zero Hedge:
A stock market crash is coming, and the Democrats and the mainstream media are going to blame Donald Trump for it even though it won’t be his fault. The truth is that we were headed for a major financial crisis no matter who won the election. The Dow Jones Industrial Average is up a staggering 230 percent since the lows of 2009, and no stock market rally in our history has ever reached the 10 year mark without at least a 20 percent downturn. At this point stocks are about as overvalued as they have ever been, and every other time we have seen a bubble of this magnitude a historic stock market crash has always followed. Those that are hoping that this time will somehow be different are simply being delusional.
Since November 7th, the Dow is up by about 3,000 points. That is an extremely impressive rally, and President Trump has been taking a great deal of credit for it.
But perhaps he should not have been so eager to take credit, because what goes up must come down…
Trump is not responsible for the recent market boom, but he is claiming credit for it. This will make it extremely difficult for him to disavow the inevitable crash. But if Trump is not the true culprit, then who is?
This stock market bubble was not primarily created by Barack Obama, Donald Trump or any other politician. Rather, the Federal Reserve was primarily responsible for creating it by pushing interest rates all the way to the floor during the Obama era and by flooding the financial system with hot money during several stages of quantitative easing.
Ron Paul agrees:
“They’ll say, ah, it’s all Trump’s fault. No. It wasn’t. 08 and 09 wasn’t Obama’s fault. It was the fault of the Federal Reserve, it was the fault of the Keynesian economic model, the spending too much, the deficit. So, unfortunately, there’s nothing he can do — Trump can’t do it.”
The establishment does not agree with this assessment. They believe the Fed is here to save the economy, not wreck it. But at the heart of this debate lies unstated presuppositions by both camps.
The Keynesian establishment says that there is an inherent defect in the economy that makes it unstable. The Federal Reserve, and central banking in general, they say, is here to keep the economy between the rails. The Fed prevents it from going off a cliff, and taking us with it. When the economy “overheats,” it’s supposed to put on the breaks by lowering “rates.” When the economy slows down, it’s supposed to goose it by pressing down on the accelerator and lowering “rates.”
If this were true, then we shouldn’t have any recessions. But we still have recessions.
The other camp says that it’s not the economy that is unstable, but rather it is the Fed’s interference with the economy that causes recessions. This camp assumes the inherent stability of the economic order. When the Fed tampers with the money supply, which is how it manipulates interest “rates,” then that sets into motion a chain of events that will lead to recession.
This is called the Austrian school. It asserts that the Fed causes booms when it expands the money supply (“lowers rate”), and then it triggers recessions when it contracts it (“raises rates”). There is serious data to back this up. Murray Rothbard did an in-depth study of the Fed’s actions leading up to the Great Depression. He followed the money, and he looked at timing. He concluded in his great book, America’s Great Recession, that it was the Fed that triggered the Great Depression (and government regulation, first under Hoover, then under Roosevelt, that prolonged it).
Austrian economists correctly predicted the Great Recession. They warned their readers years in advance. Meanwhile, the head of the Federal Reserve, a Keynesian economist, didn’t see it coming even as late as July of 2007.
Which camp would you put your bet on? Which side’s advice would you trust more for whether to put your money in the stock market or not?
So, when the media begins blaming Trump for the market meltdown, don’t believe them. If his tax cuts are passed, then this may delay the crash for a while. But there’s no way to avoid it as long as the Fed maintains control over the central economic institution in the world: the US’s money supply.