The Hour Of The Donald

By David Stockman  |  August 15, 2019

Will future historians look at the eighth month of 2019 the way current ones do August 1914?

Well, that is one of the “big questions” we discussed during an in-house editorial meeting earlier today. Michael Coolbaugh raised some fascinating points of comparison between the critical month before the beginning of World War I and the present context.

What’s undeniable is that volatility is up, fear of recession is rising, and at no time during this century, at least, have we faced a set of circumstances as fraught as these.

To that end, another new member of our team, Chris Scott, is preparing a note on the status of U.S.-China relations and the prospects for a trade deal before November 2020. We’ll have that for you on Monday as a special briefing for Deep State Declassified readers.

Chris, incidentally, is just off a two-year stint as U.S. editor for the Hong Kong-based Asia Times. Before that, he was a foreign policy researcher on Capitol Hill. He also lived in East Asia for nearly a decade.

The Donald’s Bluffing

For now, suffice to say that Xi Jinping has called the Donald’s bluff.

Oh, the Tweeter-in-Chief will continue to huff and to puff. And he stands a better-than-even chance of blowing the whole house of cards down.

His short-fingered attempt to reverse Wall Street’s slide by appealing directly to China’s president just might make everything worse. And by “everything” I mean “everything.”

Do you think the quality, or lack thereof, of Trump’s economic team has escaped Beijing’s notice? This “brain trust,” mind you, includes “a guy who plays an economist on TV, a nutcase the entire (real) econ profession has disowned, & the producer of LegoBatman.”

The genuine downside risk is that if things go really, really wrong the Donald’s boys won’t have a plan. Worse, they lack competent personnel to craft one.

Meanwhile, the Federal Reserve, by appearing to bend from “normalization” because of noise from the Bully Pulpit, has pissed away whatever drips of credibility it had left.

Do any of Imperial Washington’s institutional players have the juice to lead an effective response to the downturn ahead?

The answer to that question explains why China feels confident enough to release a statement saying it “has no choice but to take necessary measures to retaliate” for new tariffs even though the Donald said he’d delay them until December 15.

As we discuss in the August issue of The Stockman Letter, he considers himself the world’s finest practitioner of the Art of the Deal.

Here’s The Reality

The Donald is a ham-fisted amateur with as much constancy as a weathervane in a cyclone.

And, contrary to simple-minded theories spread all over Bubblevision, the impact of his Trade War goes every which way from Sunday. He’s pushing all imaginable limits on supply and demand elasticity in thousands of discreet product markets all over the world.

In some cases, where there are no alternative sources of supply, prices are being passed right through to U.S. consumers. In other cases, supply-chain vendors – from U.S. retailers to importers to Chinese manufacturers – are eating some or all of the tariff. And some sourcing is rapidly moving out of China to the next lower-cost producers in Vietnam, India, Mexico, etc.

He’s kicking a nearly infinitely complex 21st century global economy already on the edge based on an utterly primitive grasp of 17th century mercantilism.

China Has Its Advantages

Xi Jinping has looked around the table, and he’s identified the mark.

China’s president has a lifetime appointment. He doesn’t care about November 2020 – in fact, he probably thinks he get a better, “saner” deal with whatever Democrat emerges from that 20-way panderfest and gets a shot at the Donald.

So, broken stuff is going to start cropping up all over the place, and that’ll be happening for a long time to come.

He also enjoys a high-tech apparatus of iron control over the economy and population of the Middle Kingdom that would have startled even George Orwell.

And, if it comes to it, there are endless deployable battalions of the Red Army trained to shoot first, identify enemies of the state later…

That’s despite the fact that Xi’s house is at least as flimsy as the Donald’s.

China’s recent currency devaluation raises a legitimate question about its global status. Is it a legitimate challenger to the United States of America’s “Sole Superpower” status? Or is it merely an old “Great Power” with its own set of domestic problems that have on the verge of collapse?

Well, the Donald has frittered away whatever leverage he/we might’ve exploited there when he made that “big, fat, ugly bubble” he called out from the campaign trail in 2015 and 2016 his very own once he got the keys to the White House in 2017.

Now, the only move he has left is to disrupt, disrupt, disrupt…

And things just might get historical because of it.

Triage Kit

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

Revealed: What Really Goes on Behind Closed Doors in D.C.

Former White House Budget Director, David Stockman is stepping forward in his new project, The Stockman Letter to warn everyone about the serious danger facing our country! Click here to find out the… Read More
David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR