After Signs Of A Recession, Trump Blames Anyone But Himself
After Trump inherited Obama’s booming economy, he waged a trade war and pushed policies that fueled income inequality. Now, there are fears of a recession.
Wall Street just had its worst day of the year and markets saw a fluctuation we haven’t seen since before the last recession. The Dow closed down 800 points after the price of 10-year treasury bonds were briefly valued lower than 2-year treasury bonds.
This is known as a yield curve inversion, and it has preceded every recession since 1955. The last time we saw this occur it was 2007, right before the 2008 Financial Crisis.
This is a signal that confidence in long-term yields is lower than short-term yields. This sentiment leads banks to issue higher short-term interest rates than long-term rates, which will lead to less borrowing by businesses and layoffs, leading to reduced consumer spending and contracting economic growth. In other words, a recession.
President Trump reacted to the news by blaming the Federal Reserve and Germany (whose economy is contracting).
..Spread is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve. Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back. We will Win!
— Donald J. Trump (@realDonaldTrump) August 14, 2019
But President Trump is far from blameless. Much of the volatility we’ve seen in the market over the last year has been a result of Trump’s reckless trade war with China, in which he has utilized tariffs that have harmed Americans – especially farmers. Even after Trump backed off from tariffs that were set to be put in place against China this fall and the Fed cut interest rates, the market has still signaled trouble ahead.
After inheriting President Barack Obama’s booming economy, President Trump didn’t double down on the policies that would further stimulate economic growth. Instead, Trump and the GOP passed a $1 trillion tax cut that ballooned the U.S. deficit and disproportionately helped the top 1% and corporations.
Rather than being invested into their employees, the tax cut surplus corporations received largely went straight to stock buybacks that only benefitted shareholders and perpetuated income inequality. In an economy like America’s in which economic growth has largely been tied to consumer spending, this was bad policy.
The U.S. Treasury Department is projecting a deficit this year of over $1 trillion. This all comes amid global trends of instability as protests rattle Russia and Hong Kong, China’s economy is slowing, and Germany and the United Kingdom are seeing contracting economies as well.
Today’s inverted yield curve doesn’t mean we’ll see a recession tomorrow, or even in the next few months, but it is a sign of slower growth ahead. The economy moves in cycles, and it appears we are set for another contraction. The question is, how intense will it be this time? One thing is for sure: since President Trump spent so much time taking credit for Obama’s recovery, he won’t be able to abdicate responsibility for his recession.
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