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State Of The Union: More Than 'Bipartisanship,' A New Paradigm Is Needed

January 30, 2018
President Trump addresses a joint session of Congress in February 2017. (Official White House Photo by Shealah Craighead)

President Donald Trump could not really have missed it at the Davos World Economic Forum. While he led cheers for investment in the newly low-tax, cheap-dollar United States, and pleased some multinational CEOs, the conference looked to China and its Belt and Road Initiative for the key to leading the world economy out of its crisis since the 2008 crash. Chinese President Xi Jinping's economic advisor Liu He was the speaker most closely listened to. China's policy of developing high-technology economic infrastructure as the leading edge to the goal of eradicating poverty — now with many national partners in Asia, Africa, and Latin America — was recognized as a new "win-win" paradigm to overcome both the causes and the lasting effects of the trans-Atlantic economic collapse a decade ago.

Even Bloomberg News, in an ostensible news article this morning, said, "With the addition of the Arctic and Latin America last week, Chinese President Xi Jinping's signature Belt and Road Initiative has become truly global. Only the U.S., its neighbor Canada and ally Japan have yet to be included in the plan, which seeks to build or upgrade a network of highways, railways, ports and pipelines." And later, it acknowledged that Japan is, in fact, collaborating in the Belt and Road Initiative, and that President Xi has repeatedly asked the United States to join it.

In his State of the Union Address Tuesday night, the only way the President can transform the prospect of his administration is to join that New Silk Road, at least in general commitment following on his recent visits to China, Japan, and other Asian economic leaders.

Even if he appeals for it, there is no "bipartisanship" waiting in the fractured, discredited Congress, more than 50 of whose Members have resigned in just one session.

The two-year-long push by British and U.S. intelligence agencies to destroy Trump's candidacy and Presidency has drawn in large numbers of Democratic opportunists. It must be defeated or leave the United States a New Cold War police state in which all Presidents are controlled by intelligence officials with secret scandals. Developments occurring over these 24 hours offer hope for its defeat, but if not crushed, these new McCarthyites will settle for nothing less than a fiercely anti-Russia, anti-China President Pence.

There isn't even "partisanship" to appeal to: If Trump presents his wholly inadequate infrastructure-building program, and bases the small Federal funding in it on an increased gasoline tax, the deluded Congressional Republicans in the Chamber will oppose it. The United States will continue deindustrializing; Americans will continue overdosing on opioids; their life expectancy will fall further. Cities and states ambitious for development will keep sending delegations to China.

There is a new paradigm to appeal to and join, which can involve the kind of economic rebuilding, space exploration, and technological progress Trump voters voted for. The President will have to think of the world's economy from the top down, and join the New Silk Road.

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Many Counterindications to Trump's Rosy Picture at Davos

The "booming America open for business" presentation President Donald Trump gave at the Davos World Economic Forum was being belied, at the time, by a number of indicators.

The Commerce Department reported Jan. 25 that fourth-quarter U.S. GDP rose at rate of 2.6%, meaning that the rate for 2017 as a whole was just 2.3% — better, at least, than Obama's 2016, but not such as to make the United States an engine of growth. Durable goods orders excluding aircraft and defense — the proxy datum for business capital investment in the economy — dropped by 0.3% in December, although it had grown the previous three months, which were revised downward. Sales of both new and existing homes fell substantially in December, after rising sharply in November (again, now revised downward). The Federal Reserve's report on fourth-quarter "employment dynamics," out Jan. 26, showed that employment grew by just about 500,000 in the quarter, the 2 million jobs/year pace which characterized 2017 as a whole, and was substantially lower than either 2015 or 2016.

The dollar is now down almost to $1.25/euro, having fallen a very substantial 18% in 18 months against an index of other major currencies. The decline has recently accelerated. This is what lowered the fourth-quarter GDP, by producing a very large U.S. trade deficit.

This decline has come despite the Federal Reserve, alone among the "big four" central banks, raising interest rates, even slowly and cautiously; and despite the U.S. growth rate, low as it is, still beating those of European nations or Japan. Global Times, in an op-ed Jan. 29, blamed "the Federal Reserve's policy of quantitative easing which was pursued for many years after the 2008-09 financial crisis; the extraordinary expansion in money supply made the U.S. dollar worth less. Some now claim that the U.S.' massive money-printing to flood the world market with dollars could be about to backfire." They mean that the Chinese and Japanese central banks have agreed to hold these trillions of dollars; if the Trump Administration pursues tariffs on Asian exports, that could end, and the dollar will really plunge.

Speculative investment is, indeed, pouring into the United States; the stock market rises at least 100 points every day. At Davos, the most experienced economists warned that this is about to end, in disaster. They included both OECD Board Member and former BIS chief economist William White; and also Prof. Kenneth Rogoff of Harvard Economics Department, co-author of the best-known history of financial crashes. Rogoff observed the incredible zooming of high-yield debt exposure (Citigroup and Barclays alone arranged $180 billion in new leveraged loans just in 2017), and said, "If interest rates go up even modestly, halfway to their normal level, you will see a collapse in the stock market."

It is estimated that the U.S. Treasury will issue $1.42 trillion net debt in 2018, nearly triple the $550 billion in 2017. That, and pressure from a falling dollar, could make interest rates rise rapidly, the most likely trigger for the crash. 


                                                                                                                                                                                                                                                                                        

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