This article above is from Bloomberg business news, yesterday, 6/2/2019. The article says we could face a looming global recession due to the trade wars in 9 months. We could face a global recession due to the trades wars in 9 days. That's really where we are right now. It'll probably be a couple more months or so, but I don't think our horribly manipulated economy can be propped much longer.
Before I left Richmond, nearly a month ago, I started thinking of the Big Picture of where things are headed as "The Unraveling." I've been writing about the looming recession for a couple of years now. I predicted that the stock markets would start dropping soon after the Corporate Welfare plan, aka the Trump Tax Cuts, were passed. The Tax bill was signed by President Trump on December 22, 2017, and went into effect January 1, 2018. The stock markets continued to rise early in Trumps presidency because major corporations knew that huge windfall was coming. The NYSE markets peaked on January 26, 2018, and began to drop. That's what I predicted, and that came true. The tech heavy Nasdaq went up a while longer.
Here's where I screwed up. I didn't realize just how much our economy was being rigged, I completely underestimated the corruption at the top levels in our world. A relatively small number of major investors soon began to buy a small number of key stocks, and the market averages climbed again, as the huge windfall major corporations got in the tax cuts were used mostly to buy back their own stocks. There was no much-needed infrastructure plan, that both parties promoted in the 2016 election. There was very little major capital investment. We didn't hear of dozens of new factories opening in the last year. The tax cuts did exactly what all major tax plans are designed to do, they made the super rich richer.
But even that focused investment to buoy up the stock averages, aided by a decade of super cheap money due to artificially low interest rates, couldn't raise the markets much past the January 26th high point. The Dow Jones Industrial Average peaked again on September 21st, then began dropping again when the Federal Reserve did exactly what the Fed should have been doing, they began to raise interest rates back to a reasonable level. Some of the markets dropped 20%, some individual stocks were down 40% or more, and that led to the huge market drop last Christmas Eve. The stock market, according to one analyst, was actually halted 40 times, that day, to try and negate the carnage.
Ultimately, Federal Reserve chairman Jay Powell completely flip-flopped, to such a degree that many people watching wondered just what he had been threatened with. So the Fed stopped doing its job, it cut plans to hike up interest rates further. And that bought the stock markets some more time, which was the whole point, to prop up the economy until after the 2020 election. Stupidity came back in vogue, and the markets climbed back near the two previous peaks. But stocks, by and large, are priced high right now. Even the best investor in the U.S., Warren Buffet, said he was sitting on $112 billion to invest, and had no good place to put it, in an interview this past spring.
So now our President Trump has stoked the Trade War fires, at the time when he's under threat of an impeachment, has been named a co-conspirator in the case that put his lawyer in Federal prison, and has about 16 major investigations into corruption, financial issues, and obstruction of justice, some of which could turn to be outright treason, if proven.
Things have gone off the rails. It's not going to get any better for the President and the establishment Republicans anytime soon. And now a potential trade war with Mexico, which we are completely intertwined with, business-wise and financially, is escalating. A trade war with Mexico would be taking a metaphorical baseball bat to the knees of many of our major corporations, they have operations on both sides of the border. A report last night said about a billion dollars in trade, A DAY, goes back and forth over the Mexican border. It's just a really bad idea. Even worse, it threatens our guacamole supply. We can't have that.
So this is what I kind of anticipated, we will see an unraveling in President Trump as he tries to cope with bad news from all sides. This will lead to some really bad decisions, like a trade war threat with Mexico, and many others. This will put the brakes on the wobbly stock markets, which we've seen happen over the last 5 weeks. I just don't see any other rabbits to be pulled out of this economic hat. I think we will finally slide, slowly at first, then increasingly faster, into the recession that's been held off for a couple of years now. That's hard, but not entirely bad. We NEED a recession, they sort out the well run businesses and weed out the poorly run ones.
I've only been talking about the stock markets so far, which are largely the wealth of the financial elites. The stock market over the last few years has basically detached itself from "Main Street" America. Most Americans are already struggling. Around 60% of workers struggle with low wage service jobs, and at least another 25%, that make good salaries in tech and other fields, are struggling with massive student loan debt. That student loan debt will be the thing to watch when things really head South in the stock markets. Because much of the $1.5 TRILLION in student loan debt, has been repackaged and resold, just like sub prime mortgages were in 2007-2008.
Maybe, someone, somewhere, behind the scenes, will find another form of manipulation to stave off the recession (actually, we're likely looking at a full blown, decade long, Great Depression at this point), for a few more months, but I really doubt it.
As I've said before, buckle up, it's going to be a bumpy ride. But for the three of you who read this far, there is hope. Remember, a recession is when the whole world goes on sale, but nobody wants to buy. There will be incredible opportunities in the next few years, whatever happens. but few people will take advantage of them. Hopefully you are one of them.
This outlook on the future, depressing as it seems, is why I believe that helping workers learn to become functional small business people, is a key to our future. The major corporations, like today's tech giants, don't hire tens of thousands of people like major manufacturing companies once did. Not until they get to an Amazon size, anyhow. Somebody needs to create lots of jobs, and tens of thousands of tiny businesses, aided by today's technology, is the best bet I see to do that.
Hey, it's Monday. I guess that's as good a time as any to hit you with the "bad news." Whatever happens, Friday's still on its way.
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