Still Faking It

The real cause of America’s shrinking manufacturing capacity is not the nation’s past trade policies (favoring free trade). It’s our monetary policies (favoring fake money!)

No financial analyst — no matter how bright his suspenders...and how gaudy his bow tie — should merit any attention unless he lived through the Reagan Revolution. There, he saw the clumsy interplay between politics and monetary policies.

Reagan’s promise to reduce the power of government was a flop; it grew larger than ever. But Reagan backed Volcker who succeeded in stopping the inflation that had plagued the country. A real boom followed.

Young analysts don’t know how lucky they are. The Trump Team is the most ambitious — in terms of new policies — since Franklin Roosevelt. Almost all of them will backfire...or simply fizzle out.

The press reports that the Trump Team is ‘disrupting’ things. It is introducing ‘game changer’ new policies, it says.

Hallelujah!

Things need to be disrupted – otherwise, the country is headed for crisis and chaos.

But on closer inspection, the game remains much the same. Fortune:

“This is going to lead to the construction of a lot of plants, in this case auto plants,” Trump said upon announcing the tariffs in March. “You’re going to see numbers like you haven’t seen... in terms of employment. You’re going to have a lot of people making a lot of cars.”...But the U.S. plan to strengthen blue collar work may be backfiring. President Donald Trump’s 25% tariff on imported cars could actually be sweeping away auto job opportunities for Americans, despite aiming to do the opposite.

The real cause of America’s shrinking manufacturing capacity is not the nation’s past trade policies (favoring free trade). It’s our monetary policies (favoring fake money!) No disruption of US monetary policy has been proposed. So, prepare for more floppy policies; don’t expect a real boom.

Trump’s ‘drill baby drill’ and trade war policies, for example, may not be boosting the US oil business, either. NBC News:

President Donald Trump wants the oil and gas industry to “drill, baby, drill” in pursuit of his energy dominance agenda, but the companies involved in the actual drilling and servicing of wells have instead taken a beating during his first 100 days in office. U.S. crude oil prices have fallen below $65 per barrel, down more than 20% since Trump’s second term began, making it unprofitable for many companies to boost production, according to a survey by the Federal Reserve Bank of Dallas.

The low-cost producers are in the Middle East and Russia, not in the US. And when prices go down, it’s the marginal producers — not the ‘core’ pumpers in the Saudi desert — who suffer. Trump’s energy policy was meant to boost US energy companies. Instead, it may be putting them out of business. Bloomberg:

Oil dropped after OPEC+ agreed to another large output increase, raising concern that additional supply could lead to a global glut just as the trade war threatens demand.

Activist policies always fail. Because they disrupt the natural, spontaneous arrangements that people make on their own. Left to their own devices, for example, businesses trade with whomever they want...however they choose. That’s what free trade is all about, not forcing other countries to follow your labor or currency commandments.

But along comes the Trump Team with a ‘trade policy.’ What happens? Trade declines...shippers and container ports are already slowing down. Bloomberg reports that a single ship, now arriving at Long Beach harbor, faces $417 million in new tariffs. Ultimately, that charge gets passed along to consumers and investors. People get less of what they want, pay more for it…and the administration claims victory.

Even when the feds aim to reverse previous policy mistakes...they generally fail to do it. In the latest employment numbers, for example, is a real petard. DOGE, as we all know, has been ‘disrupting’ the federal workforce. According to the press, hundreds of thousands of federal employees have been tossed out onto the streets...the whole federal establishment is supposed to be as quiet and gloomy as an empty morgue.

But wait. The employment numbers show total employment increasing, not falling. What happened to those disappeared federal workers? And then, looking closer, we find that the number of people currently employed by the federal government is almost exactly the same as it was a year ago when Joe Biden was president.

There were 2,378,000 federal employees a year ago. Guess how many there were last month? It was 2,379,000 (see Table B-1 in the link below). Total Federal employment IS down since January (and fell by 9,000 jobs in April). But it’s virtually the same this time last year. The Establishment Survey used by the BLS may not yet include terminated workers who are still receiving severance and therefore still counted as ‘employed.’ We’ll know more next month.

What about those manufacturing jobs? The tariffs have supposedly led to many businesses moving their factories to the US. If so, they haven’t begun hiring. The latest numbers show manufacturing jobs actually went down by 1,000.

In the last few days, America’s own Hannibal — Pete Hegseth — announced he would cut the number of high-ranking generals by 20%. Newsweek:

Trump Administration Slashing Four-Star Generals in Bid to Shrink Pentagon

But wait. Team Trump intends to propose increasing the Pentagon budget by 13% to $1 trillion, an increase of $113 billion.

Disruption?

Game changer?

Not exactly.