…Depends on What Federal Reserve Does...
If it wasn’t for the USA consumer on a spending spree, we would already be in a recession. Businesses have lost confidence and have reduced investments. Oversea countries, threatened and belittled by Trump, have also reduced buying USA products and services.
Trump needs the USA consumer to keep spending until after the 2020 election, or it’s all over for him. He ordered the Federal Reserve to reduce interest rates to “juice” domestic consumer spending. This way Trump hopes he does not have to address the real problem facing the USA. Businesses have lost confidence in Trump’s policies. And other countries hate Trump and are “boycotting” the USA.
The Federal Reserve is helping Trump win in 2020 by cutting interest rates to juice up consumer spending. But this likely to cause a bigger problem than just letting the economy slow down now.
- Boycotts of USA goods and services by other countries are likely to accelerate. Foreign tourism and investments in the USA has also declined sharply. And we likely lost this business forever. Our old trading partners are not going to blow off their new trading partners once the trade war ends.
- Business confidence and business spending will continue to erode. Many companies are already seeing a decline in business from the boycotts by other countries of their goods and services. And Trump is unlikely to back off his attacks on Mexico, china, Europe and Canada.
- Consumer spending will burst. Many of us are running out of borrowing power, are behind on our monthly payments, or have already defaulted on our loans. For example, seven million people are ninety days or more behind on their auto loans.
Trump is hoping people follow his policy of “Borrow, borrow, spend and spend, then file bankruptcy in the end” at least until after the 2020 elections. And it appears Trump has the Federal Reserve on his side. They are pumping air into a bubble that is already about to burst rather than letting the air out slowly. And when this bubble bursts, the resulting recession will revel that of the Great Recession of 2008.