Forget impeachment. The plan for Trump is to boom his ass!

The press is lamenting the failed impeachment bid of Donald Trump today after the US senate failed to convict the president, though it certainly impugned his character. Lost in the bruhaha is that impeachment was never likely to succeed and a much more serious and large-scale plan is underway to kill off Mr Trump. It is to restore US growth to such levels of heat that it generates material low-income wage growth. This attacks the Trump phenomenon at its source by addressing inequality. Via Morgan Stanley:

After hunkering down for much of 2020, people are eager to make up for lost time. Much the same can be said of policy-makers, who are taking action to recoup lost economic output and return to maximum employment as quickly as possible. To get there, we think they are aiming for a high-pressure economy–an environment of stronger-than-average economic growth that helps to reduce unemployment. That’s exactly where we think the US economy is headed in the coming quarters. Based on the experience of the past cycle, policy-makers believe that a high-pressure economy can help them to achieve a broad-based and inclusive economic growth environment. With the low rates of headline unemployment during 2017-19 came better employment opportunities for lower-income households.

Even undershooting the estimated natural rate of unemployment failed to produce substantial inflationary pressures, and the natural rate of unemployment saw regular downward revisions. This belief has spawned a regime shift in both monetary and fiscal policy. The Fed has moved to a flexible average inflation targeting framework, making a temporary overshoot of the 2%Y inflation target an explicit policy goal. The Fed has also redefined its employment mandate from full to maximum employment, which Chair Powell called a more “broad-based and inclusive goal. “Similarly, fiscal policy is being deployed to address the pre-existing issue of inequality–witness the large-scale government transfers to low-and middle-income households. While any counter-cyclical policy response should be sizeable enough to fill the output hole, this time around, policy-makers have done much more. Cumulatively, the Covid-19 recession has cost US households US $400 billion in income, but they have already received more than US$1trillion in transfers (even before the late December and forthcoming rounds of stimulus). Households have already accumulated US$1.5trillion in excess saving, which is set to rise to US$2trillion (9.5%ofGDP) by early March once the additional fiscal package is enacted. These policy-making regime shifts also mean that policy-makers will tighten much later in the recovery than in the previous cycle .

In the last cycle, a common complaint was that while the monetary policy response was aggressive, it didn’t transmit to the real economy. Risk-aversion meant that the boost in liquidity didn’t spur credit growth, instead ending up as excess reserves. In this cycle, critics are making a similar argument that despite fiscal transfers boosting excess saving, households will ultimately hold onto these funds. In contrast, we have argued that the policy response has averted significant scarring effects. Moreover, the impact of the exogenous shock is likely to fade, and we foresee a surge in demand as the economy reopens this spring. Spending patterns indicate that households have been forced to accumulate excesssaving as restrictions on mobility have limited their opportunities to go out and spend. With warmer temperatures coming and vaccinations set to cover a large part of the vulnerable population, we are confident that the relaxation of restrictions, which has begun in the states with the tightest controls, will pick up speed as spring approaches.

Our Chief US Economist Ellen Zentner now projects USGDP to grow by 6.5%Y in 2021 (7.6%4Q/4Q) and 5%Y in 2022 (2.9%4Q/4Q).These estimates imply that USGDP will rise meaningfully above its pre-Covid-19 path after 3Q21 and will be higher in 2022 than what we would have expected in the absence of the pandemic. That’s a particularly remarkable outcome, especially when you consider that in the post-GFC period the US economy never really returned to its pre-recession path. But running a high-pressure economy is not without risks. The speed and strength of the demand recovery will put a strain on the supplyside, which has limited time to respond, and accelerated labour market restructuring will likely push the natural rate of unemployment higher in the near term. Against this backdrop, inflationary pressures will build up very quickly. In our base case, we expect core PCE inflation to overshoot 2%Y starting this year and into next, in line with the Fed’s stated policy goals. But the nature of the recovery–transfer-driven consumption–implies that inflation risks are to the upside. If underlying inflation momentum enters the acceleration phase after crossing the 2%Y mark in combination with low unemployment, it may precipitate a disruptive shift in Fed tightening expectations, raising the probability of a recession. In the end, whether the acceleration phase unfolds will depend on the extent and the pace at which households convert their savings into spending. The size of the prospective fiscal stimulus increases the chances that it will.

I am not concerned about inflation. Bring it on if you can.

This is an excellent plan. Donald Trump won power by swinging the rust bucket states of the mid-west to his cause. If the Democrats can produce a multi-year boom with good wage low-income inflation then many of the blue-collar workers that were drawn to Trumpian populism will simply be too busy enjoying rising living standards to bother with 8Chan.

The Dems only have to win the White House for a second term and Mr Trump is a goner given he will be 84 and probably dead by the following election.

This is the fantastic result that the big swing to a traditional left administration achieved in the US election (as opposed to the fake left Obama), a point missed amid all of the hand-wringing of the Capitol riot.

The real American left is back.

David Llewellyn-Smith
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Comments

  1. Big lot of IF’s. Democrats more likely to succeed at cultural Marxism than actually build the economy. We shall see.

  2. They’ll destroy Trump by solving the problems that led to his rise. Hmmm….I don’t reckon they will do that.

    • It’s already failing. Inequality will only increase because of MMT. Government policy is subservient to the Fed. It’s been this way for 12 years already. That’s why we had Trump.

    • The Traveling Wilbur

      Speaking of destroying Trump, as per the headline, if he really did get boomed, that would. Though I’d recommend Boom doubled-up on protection before doing so.

      DLS. Bad man. 😊

  3. McConnell’s speech also indicated that he is making his own plans to take down Trump.
    Pincer move hopefully kills him off for good.

    • I don’t think the GOP can get rid of Trump. After all, a Pyrrhic victory is a strategic disaster.

      Trump will take over the GOP as it hesitates and rebrand it as a new Trump party.

      McConnell and co can retire.

      • buttzilla team forever

        they only impeach a second time as pretext for amendment 14, which I believe has already begun. They’ll probably pass A14 on the 4th of March, to crush the Qanon / libertarian movements. expect much market turmoil in wsbets bro stonks, FAANG & bitcoin.

  4. The press and the Shumer, Pelosi, and Shiff’s will not stop on Trump.
    This is why he will be relevant next time. People will/have lost interest in Hiding Biden already.

  5. PlanetraderMEMBER

    I am sceptical about there being no inflation:

    a) Too many people are on the “no inflation” side of the boat so it is at risk of capsize;
    b) Grains are going much higher IMHO over the next year or 2 (and possibly very high) which could lead into much higher food costs
    c) Oil has the potential to do the same (triple digits)

    • You know the rule. Whatever item that has gone up in prices will be excluded from the basket of CPI. So, no inflation.

  6. In all likeliness, Dems will just waste their time with identity politics, GOP will take the senat in 2022, and a unpopular Harris will face Trump
    Good luck to the dems

  7. The real problem isn’t Trump: it’s the Nationalism that he tapped into that’s the problem; hence, the following problem is then a fascistic, populist Nationalist leader who’s not as stupid and arrogant as Trump, and can intelligently wordsmith the masses. Trump has just laid the groundwork.

    The issue for many isn’t even economics, though that is important – it’s the ‘Culture War’.

    • It is not “nationalism” that he has tapped into. It is “isolationism”. USA, with its many problems, is not a country that is 50% fascist.

      • USA, with its many problems, is not a country that is 50% fascist.

        No, but it’s a growing problem, and it might be the predominate Trump (as opposed to “GOP candidate”) voter.

        What percentage of voters are “Trump voters” vs “GOP candidate voters” ? I don’t know, but I like to believe it’s a minority.

    • Nope. The USA isn’t even as nationalistic at Australia. The public responded to Trump because they’ve been gaslighted by both sides of government and the Fed for decades. Inequality is high and growing with asset price inflation and the outsourcing of manufacturing.

      • “The USA isn’t even as nationalistic at Australia.”

        That is total BS kodiak … from military displays at public sporting events to cheering every time some 3rd world country gets bombed and its televised at the eatery/pub …

        • Sorry, skipper. You subscribe to the Aussie conventional wisdom and having left critical thought at the door. Cheering at third-world bombings. Curb your hyperbole. Strayans have an even more ridiculous strain of exceptionalism that we have – in addition to the fact that they are aware of ours. Strayans much more strongly identify with their nation-state than Americans do. I’m called a nationalist here when I dispel the garbage that Aussies learn about the US by having watched a few movies. I’m not a nationalist at all. You are an anti-nationalist. The flip side stupidity of the nationalist’s realm. Even the left wing in Australia is nationalistic.

          • I am American and can vouch for everything I just said as a witness, not to mention ex special ops. I came to Australia in the mid 90’s after falling in love with an Aussie gal on a 2 year work visa and then decided to start are family here. Closed up a lucrative established business in the U.S. based on that choice, all 4 kids are good sorts, 3 have good jobs with future potential and the last boy [year 12] just got a top apprenticeship with Volvo CE as a diesel mechanic.

            Please don’t use terms like ***critical thought*** like saying it gives gravitas to anything you say, it diminishes its meaning. You seem to forget the first gulf war was started on a bunch of lies, don’t forget Noonan and the Ukraine, same goes for Afghanistan.

            BTW you should be informed that a wide scope of Australians have been asking me for sometime now what the frick happened too it.

          • You’ve bored me with your story before. Your view of US politics is a few decades old. And I suspect that it was poorly thought out back where you left off in the 90s.

          • buttzilla team forever

            from what I’ve seen, Americans tend to find more problems with their own country than any other country I’ve seen. We too centrist (read apathetic) in Australia. I like the pragmatism and social progress of America, I mean we still have indigenous citizens in virtual apartheid and no person outside of a Celt from some old clan (one German guy pretended to be one) has held high office.

  8. Fingers fuqing crossed.
    In any event I can’t see Trump running again, come on, he’ll be 80 and he’s self indulgent in terms of food and health, and he’s got to weather the downer of not being king for four years. That’s gotta hurt a bit.
    Yep gotta watch out for the “embittered veteran riding on a movement’s coattails” syndrome as someone above me has just said.

  9. Boycott Beijing 2022

    The 70 million Trump voters are all on 8chan?

    Democrats wasted everyone’s time. Trump didn’t incite a riot.

  10. Jumping jack flash

    “I am not concerned about inflation. Bring it on if you can.”

    Agree.

    Everyone desperately needs some inflation right about now. The wages growth depends on it. If $2 trillion in COVID stimulus can’t raise it…

    they’ll have to go double or nothing!