A Short Word: The Drums of Trade War

“Economic warfare, the use of, or the threat to use, economic means against a country in order to weaken its economy and thereby reduce its political and military power.”
The Encyclopedia Britannica, “Economic Warfare”

Monday opened to the rumble of tumbling stock prices on Wall Street, and, much like they did before the economic downturn in 2008, the same talking heads are trying to convince Americans that this is just a passing hiccup and that everything will be fine. Meanwhile, the looming shadow of a hungry bear stalks the edges of the American economy as the drums of a trade war with China thunder from the horizon, and an increasingly isolated president rails impotently against a Congress controlled by his own party.

With China instituting 25% tariffs on over one hundred American made products, a trade war with China is no longer a mere hypothetical, and with Donald Trump being who he is, he is practically guaranteed to retaliate “ten times harder” (basically another way of saying he’ll grossly overreact to this threat to his manhood). This would virtually guarantees a recession hitting just in time for the 2018 mid-term elections, in an election year that already promises to be bruising for the Republican Party.

We could see the end of the Republican Party as a relevant political party for a generation, if not permanently, this year, but let’s talk more about this impending recession, because this has been on the horizon for a long time now, staved off for years by the Federal Reserve‘s lax money policy which just recently pulled its last cords from the market. As capital has tightened, prices have started to rise, and inflation has started to lumber out from where ever it’s been sleeping for the past decade.

The Federal Reserve Committee elected to raise the federal funds rate target to 1.5% to 1.75%, which has pumped on the brakes just in time to throw the market into a series of corrections as China fires the first shots in a trade war that will likely cause the president to pick a fight the American economy simply cannot win (as I predicted in 2016). It all depends on whether or not the men and women around the president can keep him from pulling a trigger that cannot be unpulled.

Good luck to them.

 


Liberty is For The Win!

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