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| Saturday 9th November 2024
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| Hi Friend, A week can be a long time in politics said Harold Wilson, now so much has happened in just the past five days. Despite two impeachments, four indictments and his new status as a convicted felon, Trump is set to return to the White House as the 47th President of the United States with Republican control of Senate and the House.
Elected to a second term, the Republican has threatened to prosecute his political enemies, send the military into the streets of U.S. cities to target illegal immigrants, introduce mass deportation, impose 10% tariffs on U.S. imports, with a bonus 60% surcharge on imports from China.
Many of the agencies central to the federal government will be purged of never Trumpers and replaced with loyalists. Trump advisers believe they wasted early opportunities in his first term, because they were unfamiliar with how to maximize central government power. They're planning a very different outcome this time.
The Fed will be subject to Presidential influence on monetary policy, Fed Chair Jerome Powell may be sacked. In his first term, Trump called the Fed an "enemy" of the US and its officials "boneheads" and "pathetic". In August, he said of interest rate decisions: "I feel that the president should have at least a say in there. I feel that very strongly."
Internationally, Trump will end the war in Ukraine and the Middle East and accelerate plans to open a Trump hotel in the Kremlin. He will test the commitment to NATO and encourage other member states to "cough up their fair share of costs."
In the U.S. Musk and other millionaires and billionaires will ready for a feed fest of payback for election support. After pouring at least $130 million in a pro-Trump campaign effort, Tesla CEO Elon Musk is positioned to be paid back handsomely, it is claimed. More government contracts for Starlink. More support for Tesla in the fight back against Chinese EVs.
SpaceX has received more than $19 billion from contracts with the federal government since 2008, including from NASA, the U.S. Air Force and Space Force. EVs imported from China will see their tariffs more than quadrupled from 27.5% to 100%, boosting sales prospects for Tesla.
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| | No Nolan principles for the Trump regime.
Selflessness, integrity, honesty, accountability and the rest will be tossed into the Rose garden, just behind the compost heap of objectivity and openness.
Harris
and her fellow Democrats warned during the election, a 248-year-old democracy is on
the ballot, and the whole world is watching. The world readies for Trump
2.0.
Fed Chair Jerome Powell has said he will not resign. "No",
Powell said firmly on Thursday, when asked whether he would step aside,
if Trump asked for his resignation.
Powell has made it clear he's
ready to defend the US central bank from political pressure saying he
wouldn't resign if asked, insisting the president doesn't have the power
to fire him or other senior Fed leaders.
The governor of
America's most populous state, California, says he will convene a
special session of the legislature to protect state laws from Donald
Trump. Gavin Newsom, said Trump's victory threatened the heavily
Democrat state's values. "The freedoms we hold dear in California are
under attack. We won't sit idle," he said.
Other blue states are
moving quickly to prepare game plans. In New York, governor Kathy Hochul
said she, senior staffers and the attorney general plan to meet
regularly to discuss legal strategies to protect "reproductive rights,
civil rights, immigration, gun safety, labor rights, LGBTQ rights and
our environmental justice".
In the wider world, manufacturers in China are accelerating plans to relocate to Cambodia, Vietnam, Brazil and Mexico.
China
has warned there are no winners in trade wars, announcing a five-year
package totaling 10 trillion yuan ($1.4 trillion) to tackle local
government debt problems, signalling more economic support would come
next year, to boost domestic consumption.
British Foreign Secretary, David Lammy, has warned
Trump against "hurting" allies with his tariff plan. The Foreign
Secretary says "raising levies on foreign goods would not be in the
medium or long-term interests of the US." Excellent.
Sure to have
the ear of the President, (the one not shot at) Lammy has previously
described the President elect as "deluded, dishonest, xenophobic,
narcissisti and a neo-Nazi sympathising sociopath". Trump may not be so
ready to heed the Foreign Secretary's advice. |
| | The Bond Vigilantes Are Watching ...
Trump
in the end may be constrained by levels of debt and the bond
vigilantes. The level of debt in the US has risen to $36 trillion
dollars, tha's over 120% of GDP.
Trump says he will renew his
tax cuts, which are due to run out next year, at a cost of nearly $4
trillion for the next decade, as well as cutting taxes for companies
further. That could double the deficit from its current level of 6 per
cent to 12 per cent of GDP.
His plans to raise tariffs to protect
American industry and to kick out immigrants will push up prices
further and damage growth. Rising inflation will force the Federal
Reserve to raise interest rates, which will further increase the cost of
government borrowing, which will further increase the debt.
This
week, the FOMC cut interest rates by 25 basis points. Markets had
expected a further cut in December and more in 2025. Wall Street
economists now see Fed policymakers keeping interest rates higher than
they otherwise would have, given the likely inflationary effect of Trump
policies.
Nomura, for example, anticipate only one reduction in
2025, with monetary policy on hold until the inflation shock from
tariffs has passed.
Ten year bond yields have risen to 4.3%
compared to 3.8% at the end of September. We still consider 4.5% ten
year bond yields to be the benchmark in the new Trump expansionary era.
In a quasi dictatorship, banana republic, the stakes would be even higher. What price the dollar then ... |
| Have a great weekend ...
John
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© 2024 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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