⚠️ Trump Has New Plan Currency Reset 👉Bankruptcy Collapse of The Money System - financialanalysis

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Tuesday, February 18, 2020

⚠️ Trump Has New Plan Currency Reset 👉Bankruptcy Collapse of The Money System

Trump Has New Plan To Drive Stocks Into Stratosphere (But You Have To Reelect Him)Having failed to convince Jerome Powell of the merits behind cutting rates into deeply negative territory, and finding little support for the idea of asking the Fed to commandeer the tape on days when the screens aren’t green, Donald Trump is going to try something else to propel the Dow into his second term target range of 100,000 to 500,000.
“The White House is considering ways to incentivize US households to invest in the stock market”, CNBC’s Kayla Tausche reported late Friday, with a little over an hour to go before the closing bell sounded ahead of a long weekend for US traders.
Apparently, the scheme involves a plan to let households earmark a portion of their income for investing in stocks outside of a traditional 401(k). That portion of household income would be tax-free.
Anecdotally, stock ownership among American households has yet to return to pre-crisis levels. CNBC uses a Gallup poll that asks Americans to self-report participation in the equity market.
“Stock ownership was more common from 2001 to 2008 when an average 62% of US adults said they own stock, but this fell toward the end of the 2007-2009 recession and has not fully rebounded”, Lydia Saad wrote last year, describing the following simple visual.
It’s also well-known that despite 2019’s massive equity market gains, bond funds were the money magnet, attracting huge inflows, while stock funds (in aggregate) lagged in terms of taking in new cash.
However, more nuanced approaches to measuring exposure to stocks suggest allocations are, in fact, elevated.
For example, in a note out last month, JPMorgan said a retail investor positioning proxy “stands at record high levels for funds domiciled worldwide and very close to record high levels for funds domiciled in the US”That metric does not capture stocks held directly (i.e., it measures equities held in funds). So, JPMorgan also used the Flow of Funds report to measure the stock allocation of US households.
That approach has its own problems. Most notably, it captures institutional money, hedge funds and some private equity – hardly “households”. But when considered in conjunction with the above, the two provide a useful snapshot. Here’s the bank’s Nikolaos Panigirtzoglou:
The last observation available is for Q3 2019. But our extrapolation based on equity and bond returns up until January 16th shown by the dot in Figure 5, suggests that US households are starting 2020 at a new cycle high in terms of their equity allocation. Their current equity allocation represents their most overweight equity position since the end of 2000, albeit some way from the historical peak of Q1 2000. The upshot of that analysis is that retail investors are too long to get any longer without stretching their allocation to historic extremes.
Even if that’s the case, Donald Trump is a man who loves the idea of “historic extremes”. In fact, one of the president’s favorite pastimes is trafficking in superlatives about his accomplishments relative to history.
Earlier, I noted that Larry Kudlow spent Friday talking up another round of tax cuts. Apparently, this new idea to incentivize stock ownership would be part of the same economic stimulus package.
“Under one scenario, a household earning up to $200,000 could invest $10,000 on a tax-free basis, although officials noted these numbers are fluid”, CNBC’s Tausche writes.
Apparently unable to rouse anyone credible late on a Friday afternoon, Tausche was forced to turn to Stephen Moore for comment. Not surprisingly, he loves the idea.
“[The plan] would represent a pretty substantial amount of money for people”, Moore mused, adding that this is “the type of thing that would expand ownership”.
Moore – who is not an economist and doesn’t even do a good job playing one on television – is also a supporter of a plan to index capital gains to inflation, a possibly illegal move (if not done with congressional permission) that would amount to a $100 billion handout to the wealthy, according to an analysis by Wharton.
“STOCK MARKET AT ALL-TIME HIGH!”, the president shrieked into the digital void last month, as US equities summited fresh peaks in a relief rally catalyzed by the abatement of tensions with Iran. He continued:
HOW ARE YOUR 409K’S DOING? 70%, 80%, 90% up? Only 50% up! What are you doing wrong?
It would have been an absurd tweet on its own without Trump conjuring a new class of retirement savings account. The president was immediately lampooned by millions of Twitter users. “My 409k” became a trending topic.
The president has, of course, reveled in the stock market’s performance since his election, and he leverages the fear of a collapse to marshal support for his 2020 campaign.
“If for some reason [I don’t win] the 2020 election, you’ll see this economy go down the tubes”, he warned in August, when the economy looked like it was, in fact, going “down the tubes” thanks to the trade war.
“You have no choice but to vote for me because your 401(k)s — down the tubes”, he continued, at a rally. “Everything’s gonna be down the tubes”.
Trump, more than any other president, views the Dow as something of a real-time job approval barometer and whenever stocks hit record highs, he starts asking “How’s your 401(k) doing?” at rallies and fundraisers.
The sad reality is that a good portion of Trump’s base likely doesn’t participate in a 401(k) or own any stocks at all, for that matter.He’ll claim tax breaks aimed at incentivizing stock ownership are a way to help level the playing field, but in reality, any such plan will almost surely exacerbate the situation, unless it’s carefully tailored to avoid allowing the rich to hoard an even larger percentage of financial assets, this time tax-free.
Of course, this new idea of Trump’s has no hope of passing Congress prior to the election, something one official who spoke to Tausche readily admitted.
“It’s sort of an idealistic document”, the person said. “If you reelect this administration, this is what you’re going to get”.
In other words, it’s a quid pro quo.
We’re very nearly back to the expansion peak on consumer sentiment in America.
The preliminary read on the University of Michigan’s gauge for February was 100.9, up from 99.8 in the prior month, and better than the 99.5 the market was expecting.
It was the highest print since March of 2018’s 101.4, the cycle high.The expectations Index hit 92.6. That’s also the second-highest level of what is the longest expansion in history, although it’s nowhere near the all-time record of 108.6.
“Net gains in household income and wealth were reported more frequently in early February than at any prior time since 1960”, economist Richard Curtin noted.Curtin described election jitters and uncertainty surrounding the coronavirus as “faint stirrings” among the populace.
“The coronavirus was mentioned by just 7% when asked to explain their economic expectations in early February”, he notes, adding that “the runup to the presidential election is likely to focus on the vast changes to taxes and spending programs”.
And yet, despite widely divergent views between Democrats and Republicans (and between Democratic presidential hopefuls) on the correct way to steward the world’s largest economy, Curtin says just 10% of all consumers “mentioned some aspect of the election as having a potential impact on their economic expectations”.
With the exception of a somewhat muted read on buying conditions for durables, this serves to underscore the contention that the US consumer can continue to carry the economy in an election year, although some flagged a disappointing read on the retail sales control group for January as incremental evidence that the workhorse of Trump’s economy is getting tired.
But perhaps more than anything else, record high consumer sentiment could simply reflect psychological buy-in from voters who are being bombarded daily with Trump’s grandiose pronouncements about America’s “newfound” economic prowess.
Larry Kudlow was on Fox Friday talking up more tax cuts, in an effort to ensure the propaganda knob stays cranked to a Spinal Tap-ish “11”.
Specifically, Kudlow told state television that the administration’s tax plan will “come out sometime in September”, and could include a 10% middle-income tax cut.
This is everywhere and always the same story. Trump has been dangling that middle-class tax cut in front of voters at least since the midterm elections.
Back in August, when the economy suddenly looked shaky, the president was said to be “rattled” and quite a bit of digital ink was spilled documenting the administration’s internal discussions around more tax breaks, whether in the form of a payroll tax cut aimed at helping middle-earners, or a move to index capital gains to inflation, a strategy that would ultimately hand some $100 billion to the wealthy.
I’m going to (briefly) rehash my usual commentary on this.
The notion of a tax break for working families presents a rather vexing PR quandary for Trump. First, tailoring a tax cut specifically to the middle-class is a tacit admission that the original tax cuts primarily benefited the wealthy and corporations. Second, discussing more fiscal stimulus suggests Trump’s characterization of the US economy as a kind of bulletproof locomotive may not be accurate. And third, under GOP orthodoxy, there is no room for more fiscal stimulus unless Trump wants to balloon the deficit even wider. (Of course, the GOP only cares about that orthodoxy when it’s a Democrat that wants to spend money, and both Democrats and Republicans steadfastly refuse to admit that, in reality, the US government cannot go “broke”, by virtue of the fact that it prints the world’s reserve currency.)
In November, the president teased the proposal again during an event convened to discuss healthcare pricing. “We’re gonna be doing a major middle-income tax cut, if we take back the House”, he promised. “And we’ll be talking about that sometime later”.
According to what Trump told the Journal late last month, “sometime later” will be sometime in the next 90 days. Kudlow’s comments on Friday suggest 90 days has morphed into at least six months.
Trump also used his address in Davos last month to tout what he called a “blue collar boom”. “[I’ve] created the most inclusive US economy ever”, he told the crowd.
In reality, over the last two years, the tax cuts have handed a total of $32.4 billion in savings to Wall Street’s largest banks.As Bloomberg wrote last month, loan growth for the banks mentioned in the chart fell to 1% last year from 3% in 2018, and their combined workforce shrank by a net 1,200 people over the period.
At the same time, those six banks declared their intention to return a total of $21.5 billion to stockholders. Thanks to the tax cuts, profits at the largest banks hit $120 billion in 2019. Prior to Trump, they had never risen above $100 billion.
How this convoluted, schizophrenic pandering to whichever constituency needs pacifying on a given day has ultimately translated into stratospheric consumer sentiment is beyond my ability to explain, other than by reference to Trump’s legendary ability to bullsh-t people.
There’s really nothing coherent about the administration’s economic policies. Trump-o-nomics is an incongruous mix of supply-side gimmickry, populist balderdash, MMT and, whenever it’s convenient, Keynes.
It makes virtually no sense, until you consider the source. Trump has no set beliefs about anything. Every, single decision he makes is based on self-interest and expediency, and because Americans are a myopic bunch whose attention spans are now measured in seconds, it continues to work for him.
Is it sustainable?
Honestly, I have no idea anymore. Nothing Trump does makes any sense other than by reference to Donald Trump. His every word and deed is just a reflection of his own aura.
That’s a somewhat tautological assessment that would be true for anyone, but it seems especially apt when applied to psychoanalyzing Trump.
Increasingly, American society as a whole is a reflection of that same orange glow. From our economy to our politics to our institutions to our social interactions, the country has become synonymous with Trump’s brand of nationalism – a strange hybrid of tacky glitz and truck stop, bumper sticker jingoism.

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