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Shares on a wild track, but the economy is strong – for now



For all rights, the coming year should be another good year for the economy. We are in the virtuous part of the business cycle. Unemployment is at a 50-year low, leading to stronger wage growth. High-profile job openings combined with higher paychecks are boosting consumer sentiment and spending. Robust sales are driving companies to expand and driving unemployment even lower.

The revaluation of this positive cycle is a massive jolt of fiscal stimulus. Deficit-tax cuts have boosted the economy over the past year, and as the benefits of tax cuts diminish, government spending, which is heavily deficit-financed, is in full swing. The stimulus given by this stimulus is temporary, but will contribute to growth for much of the coming year.

If the economy continues to grow until June 201

9, the current economic expansion will be 10 years old, marking the longest economic expansion in the nation's history. It's hard to imagine what might keep us from celebrating this birthday.

Ah yes, there is President Trump. Given its wrong economic policies and the political chaos that surrounds it, the possibility of a recession can not be ruled out. If not until this summer, the odds of being hit by the president's next term are unpleasantly high.

The President's trade war is the most immediate economic hurdle. Trump seems to be looking for a way out of the conflict with China as the damage to the stock market and the economy increases. The agreement he had with Europe last summer and the recent NAFTA agreement recently concluded with Canada and Mexico are probably prototypes. That is, the deal will not be too rebellious for nothing, as it will have no significant economic consequences.

US relations with China are difficult because Chinese are stealing our intellectual property and unduly restricting our access to their markets. But President Trump's Sturm und Drang do not change that. The more he and his trade advisers rage against China, the more they unsettle investors, make decisions on business investment and undermine the global economy.

Then there are the virulent views of the President against immigration. This is very bad for the business as most companies say their main problem is keeping existing employees and finding new ones. Workers are giving up their jobs at a record pace, which is astounding when you consider that the generation of the big baby boom generation in the 50s and 60s is when people do not like to change jobs. Labor shortages are acute in all skills and education sectors, in all sectors and in parts of the country.

For the foreseeable future, the only solution to this problem is to let more immigrants into the country, no less. Of course, that does not happen under the Trump administration. The President has been unable to change the immigration laws, and the courts are working hard to keep the books in law, but Trump's contempt for immigrants could not be clearer.

Also worrying, according to the Congress Budget Office, the impartial government agency that oversees the budget for the federal government, is the fiscal stimulus destroying the nation's fiscal situation. Unless we swiftly turn the current fiscal and public spending policies, the deficit will never again drop below $ 1 trillion, and even that forecast unrealistically assumes that there will be no further recession.

The fiscal red ink is all corrosive. It will not fuel the economy in the next year or ten years, but it will steadily weaken it. Since a large deficit means that the government must borrow to settle its bill, all borrowers must pay a higher interest rate than they would otherwise. Companies find it more expensive to finance their operations, which affects their attitude and investment.

President Trump's failed economic policies will severely limit the outlook for the economy next year, but it is the political chaos that he could create. In recent days, he has attacked the independence of the US Federal Reserve in parts of the federal government and led a number of senior officials and adjutants out of his administration. Then there are the emerging investigations, which seem to be escalating, to a long list of potential misdeeds of the president.

It is no wonder that the longest bull market in the country's history is now threatened with extinction. The stock market is not a foolproof leading indicator for a recession. Nobel laureate Paul Samuelson once joked that stock markets had predicted nine out of the last five recessions. This is probably one of the cases where the market signal is a dropout. Given the poor economic policies and political drama in Washington, which is sure to turn darker in the coming months, the next recession is coming.


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