WooHoo!

Everyone is cheering that the economy grew at 4.1% this past quarter.  I mean, that is good news.  It would be GREAT news if it were sustainable and not a fluke.  And, since I said that I am sure you realize that this was a fluke.

Not because American firms are withholding raises for their staff.  Not because American firms are buying back their stock instead of investing the cash to grow their businesses.

Nope.  (Those are all true, but not the reason for the GDP growth being a fluke.) The big increase in our GDP is due to a simple fact.  TheDonald’s Tariff Wars.

Once TheDonald announced that there would be a rise in tariffs, foreign entities realized that their countries would retaliate.  Places like China made it clear that the retaliation would be based on those businesses that thrive where TheDonald got the most votes.

Which meant that firms around the world stockpiled feeds (including soybeans- which sales this past quarter surged 9400% over 2017 comparable sales), beverages, finished goods, etc.  By placing large orders for immediate delivery to avoid the higher prices (which the GOP used to call taxes on goods, but now that they are imposing them, they want us to use different vernacular).   This should have raised the GDP spike to about 4.5%, even though the orders only transpired over the last 40 days (of the quarter) or so- but they didn’t because firms (and farms) let their inventory drop, instead of maintaining their same levels.

To be honest, that’s a smart move by American firms- not only to save money, but because this spike in orders that they filled means this quarter (what the Feds call Q42018, since the 2019 fiscal year begins in October) will have MUCH depressed sales.  So much so, that the GDP in the third calendar quarter will be greatly diminished or even be slightly negative.  Unless business decides to restock inventory this quarter, which would raise the GDP.

 

By the way, this tremendous purchase of American goods is also why our trade deficit took a big dive.  Because foreign firms were stocking up on American goods.  Yes, it does mean that the trade deficit will rise this quarter.

Note, however, that consumer spending was up this quarter, which is a good thing.  And, that is related to the tax program that was passed in 2017.  (Note that this tax cut is also rapidly escalating our fiscal deficit, as I’ve already reported.)

And, please don’t think I’m writing this to bad mouth TheDonald.  (Actually, he does so well all by himself, no one need help him.)  I really would love the economy to skyrocket.

But, I am panicked about what TheDonald will resort to comes late October- right before the midterm elections- when the GDP figures come out and they are depressed?

Let’s not forget how often TheDonald crowed about the booming stock market in 2017, for which he claimed total approbation. Only to forget to mention the dismal stock performances this year- because he would have to take the blame for that, since he took the sole credit when the stock market was booming.

And, TheDonald tried to convince you (I check facts, he couldn’t bluster me with his malarkey) that this increase was the largest increase.  And, that it never exceeded 2% under Obama.  Except the above chart has the facts in white, red, and blue.   (Yes, I chose the American colors on purpose!)

Now, if we can just stop bull-slinging and truly address the economy.  By investing in our infrastructure.  By pulling the plug on these trade wars.  You know- the things that really can make America great again.