What a difference eleven months make.
Shortly after Donald Trump was inaugurated he fired Michael Flynn.
What’s become the conventional subtext is that the intelligence agencies have launched a “soft coup” against Trump, he has been significantly weakened, and the Deep State has scored a major victory.
“Plot Holes,” SLL, 2/26/17
Rejecting that subtext, SLL developed in “Plot Holes” and later articles a series of interrelated hypotheses. We posited that Trump was smarter and the Deep State weaker and more incompetent than generally reckoned. Also, that the Deep State’s animus towards Trump was based chiefly on fear of exposure and prosecution for its long history of corruption and criminality, not policy differences, notably concerning Russia. Finally, we suggested Trump is chiefly motivated by a drive for power. These hypotheses yielded testable predictions.
As predicted, the Russiagate investigation, based as it is on nothing, is now recognized as a monumental blunder. It forced the Deep State into the open and revealed its prosecutorial forbearance towards Hillary Clinton, its effort to help her and hinder Trump during the election, and its attempt to depose Trump afterwards. The FBI has been exposed as the antithesis of a concept implied by the word investigation: impartiality. Holdovers from the Obama Justice Department have been compromised.
The tables are turned. As the Russiagate investigation fades, Trump is left with investigatory gold mines: Uranium One, Fusion GPS, FBI and Department of Justice political meddling and obstruction of justice, Hillary Clinton’s emails, and the Clinton foundation. Trump could fire Robert Mueller with only a minor political uproar, but Mueller’s making a fool of himself to Trump’s political benefit. Why stop him?
As for those gold mines, Trump will decide if the threat of an investigation or an actual investigation best satisfies his leverage and power calculations and proceed accordingly. There has been no general swamp draining, nor will there be. Trump uses investigatory threats as a Machiavellian tactic to extract what he wants from compromised political actors in useful positions. The Clintons and James Comey, no longer in power and thus, no longer useful, are the most likely to be investigated and prosecuted.
In foreign policy, recognizing Jerusalem as the capital of Israel emphasizes Trump’s pronounced tilt toward Israel. Acquiescing to Saudi Arabia’s hapless war against Yemen and Mohammed Bin Salman’s recent purge confirms his support of that regime. In return, Israel and Saudi Arabia have sat still for Trump’s discontinuance of the US policy of supporting Islamic extremists to further regime changes (see “Powerball, Part Two”). This has meant accepting a de facto victory for the Russian-Shia alliance in Syria. US support for the Middle East’s Sunni bloc and Israel as Russian backs the Shiite bloc may lead to a standoff that brings a reduction in violence in that troubled region. It has already begun to reduce refugee flows from the area to Europe.
This is not to say that Trump’s rhetorical broadsides against Iran will stop, but the claims that the US is on the verge of war are overblown. Such a conflict would lead to a Middle East conflagration and the third officially recognized world war.
Trump’s blasts against North Korea are more problematic. His task there is more difficult than Iran; North Korea has nuclear weaponry purportedly able to strike most of the US. Trump has two options: a military strike designed to wipe out North Korea’s nuclear arsenal and Kim Jong-un’s regime, or negotiations that ratify the status quo, with Russia and China applying continuing pressure to enforce Kim’s compliance. At this point Trump may not know what he’s going to do, other than more verbal shots at North Korea and continuing displays of military strength in the region.
Trump has started no new wars. His administration has rolled back some regulations and he just won a legislative victory on tax reform. That may give him enough of a headwind to readdress Obamacare, which has neither been repealed nor replaced. He has his enemies on their back feet. Only fringe elements are still talking about impeachment. The government’s statistics indicate growth is running at above 3 percent, better than trend Obama growth, and the stock indexes keep making new records.
In 2017 SLL made contrarian, optimistic predictions for the president and pessimistic predictions for the economy and stock market (see “Hard Core Doom Porn”) We’ve been more right on the former than the latter…so far. For 2018, we’re with the minority who see clouds and thunderstorms, not silver linings. This is about as good as it gets for Trump.
Deft—by this analysis—as Trump has been, his biggest challenge lies ahead. The government is bankrupt, and demographics will push it ever-deeper in the hole. The global economy is struggling under monstrous and unsupportable debt. Fiat money something-for-nothing has a sell-by date, sooner or later the stock market and economy will head south. Historically, there’s been a tight correlation between stocks, the economy, and presidential popularity.
“Is Trump Winning?” SLL, 8/6/17
Debt has been Trump’s siren song his entire career, and more than once he’s crashed on the rocks. Big triumphs have been followed by big disasters, hubris undoubtedly playing a role.
Stock market and cryptocurrency pyrotechnics have obscured an incipient bear trend in a much more important market, bonds, which in the US apparently topped out in July 2016. Falling bond prices mean rising interest rates. The world has never been more indebted; a global bear market in bonds would be toxic to equity markets and economies (and perhaps cryptocurrencies). Tellingly, high yield bond prices are diverging from rising stock prices, indicating increasing credit stress. According to David Stockman, tax reform will increase the government’s borrowing to $1.25 trillion in fiscal year 2019. Rising rates would add more to the government’s interest bill, and hit indebted businesses and individuals as well. They would offer relief to savers long abused by the Fed’s interest rate suppression tactics, but savers are a much smaller group than borrowers, and they spend less.
Rising debt and ever-expanding government are in large part responsible for a long-term decline in trend economic growth rates across the developed world. Much of what growth there has been was funded with debt. If you buy $100 dollars worth of good or services on credit you have not increased your income, your personal “gross domestic product.” If the government does the same, it registers as an increase in the gross domestic product. Back out such debt-funded “growth” and it’s unclear if there’s been any growth at all since 2009.
In the US, real incomes have stagnated since the turn of the century. Rising equity markets and falling growth rates mean that corporate valuations are in the stratosphere. Joined with off-the-chart measures of optimism and declining central bank support, equity markets are poised for a fall. That it hasn’t happened yet doesn’t mean it won’t. It’s never “different this time.” Given the leverage and speculation embedded in the market, the fall could be breathtaking, a quick drop of 50 percent or more.
As noted, falling stock markets and economies generally take the popularity of incumbent politicians with them. Trump, the most polarizing political figure since Franklin Roosevelt, is not all that popular to begin with. The Deep State that has ruled this country since World War II is down; it would be unwise to count it out. It will certainly capitalize on financial and economic turmoil to launch a counterattack against Trump.
Next year’s silver lining may be that it marks peak government. Governments have coopted much of the world’s resources and put a gigantic lien on its future production. In a severe economic contraction, the wherewithal from taxes and credit markets that would allow them to grow even bigger—and thus more intrusive and repressive—simply won’t be there.
A financial and political focal point will be pension and medical funds. Many such funds are visibly under stress. Widespread insolvency is inevitable, especially if equity and credit markets head south. The resultant fear and fury will be uncontrollable, obliterating today’s widespread, quasi-religious faith in government and its works. The upheaval would make present discord look like a picnic in the park.
It would be unwise to rely on anything but one’s own resources, family, and friends during the coming turmoil. It would be wise to shore up those defenses, and soon.
This will probably be my last article of the year. I will be on vacation December 26-30. Thank you to SLL’s great readers. 2017 was another year of increasing readership and exposure for SLL. Merry Christmas and Happy New Year. Looking forward to a great 2018.
Robert
A Great Christmas Present!
STRAIGHT LINE LOGIC 
“It would be unwise to rely on anything but one’s own resources, family, and friends during the coming turmoil. It would be wise to shore up those defenses, and soon”
Well balanced insight with the wisest close above I have read recently on the State of the Union and the inevitable.
I am wondering how you feel Secessions is going to play out as far as the palace intrigue?
– Useless & recused & self nurtured & sits down when he pisses
– Fired and replaced with an attack dog
– Is actually taking head fake direction and sucking in Deep State players into
sealed indictments
– Another possibility???
Merry Christmas Robert
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Mark,
On Sessions, I think it’s possibility number 3, but I don’t say it with complete assurance. He recused himself and Trump lambasted him at one point. I think that was the head fake, and it makes Sessions both squeaky clean and an object of some sympathy. People have no idea how slowly the wheels of justice grind, and those who thought he’d go in guns blazing have been disappointed. I’m willing to give Sessions the benefit of the doubt–Trump appointed him for a reason–and see what happens. And Merry Christmas to you.
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I have always considered it a possibility…I hope so!
If its not a head fake…I think Trump would have moved on him by now.
We will all know soon.
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“In a severe economic contraction, the wherewithal from taxes and credit markets that would allow them to grow even bigger—and thus more intrusive and repressive—simply won’t be there.”
I am wondering whether a $$s confiscation might occur at this point–e.g. confiscation of pension plans–>Social Security only for everyone. Or something else, analogous to the Saudia Arabia ongoing wealth confiscation scheme. Just thinkin’.
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Can you speak the repeated CR’s congress keeps putting forward? I never hear about budgets anymore. Is this a sign they’ve lost control and just don’t care? Every couple months it’s about shutting down the gov’t and then a CR (continuing resolution) gets passed. Is this a sign of a financially stable country? IMO, no. Want your take on that Robert if it has any bearing.
Thanks.
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ambiguous frog,
I think they lost control of spending years ago, so they put together the CRs, and occasionally a fairy tale masquerading as a budget, with bubble gum and baling wire. Ultimately the credit markets will shut the US government’s–and a lot of other governments’–game down. So I agree wholeheartedly with your assessment: this is not the sign of a financially stable country. Financial stability is impossible when the currency itself is nothing more than manufactured-from-thin-air fiat debt units.
Ribbit
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Outstanding summary view for your readers, and an excellent “footnote” to your recent visit!
Philosophically, while always in favor of tax cuts, the die has now been cast. Trump and the array of Republican House and Senatorial “supporters” lavishing praise on him, now OWN “The Economy.”
If the “Deep State” is as sinisterly-powerful as some believe it capable, we can look for a repeat of the 2007 crash to unfold prior to 2020. That will assure Trump and the Republican Party is discredited for a generation – or more.
On the other hand, should such an event fail to materialize, and “The Economy” performs as myopically-envisioned – i.e., “debt doesn’t matter,” 2020 will likely see Trump begin his second term.
Meanwhile, the Fed assures us it shall unwind the $4.5T “debt” that constitutes its balance sheet.
Either debt doesn’t matter or it does………
Merry Christmas to you and yours.
Dave
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Thank you Dave, and thanks for hosting my visit. I’m not sure the Deep State will even need to pull any levers to intiate a crash. Prechter’s social mood is clearly primed for it, and he is saying one is imminent. If it happens, however, many in the alternative media will point to the coordinated withdrawal of fiat liquidity by the world’s central banks as the “cause,” with further attribution to the Deep State, which supposedly pulls their strings (see Brandon Smith at alt-market.com). Either way, you’re right that Trump and the Republican Party will be discredited, among the least worrisome of consequences that would flow from the kind of nightmare possible in our over-leveraged, overly speculative financial system. Preparation and a bolt hole are wise in such a case.
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I think it is so fluid and so rotten that the crisis will come from the bottom upwards, as consumers lose any and all confidence in the currency they are addicted to, with resultant chaos. Then markets and retirement funds, state and county and city govts, all bond markets, then infrastructure and all the utilities, then darkness, for who knows how long. At its bottom, I believe all this mess is rooted in a worthless currency. That the entire world is in debt up to and over its ass is because of the currency problem. The world-wide corruption is easily seen in the light of this lens. If your currency is based on lies, then so is your nation. You cannot tell just one lie.
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I agree.
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Robert,
Would like your thoughts on this angle of the “Everything Bubble” popping. Trump knows its coming and if it pops on his watch he will be blamed. He knows what the IMF is preparing, he knows the Gold flow from west to east all these years, he knows everything Branden Smith has been writing etc.
What counter punches/moves do you think he is planning when the GREAT RESET hits?
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That’s a great question and one for which I do not have a complete answer. Trump is clever and smart, but presidents are bound up in the social mood and machinations that produce rising and falling stock markets and economies. I hypothesized in one article that he’d try to sidestep the blame by attributing the fall to the failures of Congress and the Washington establishment. That’s one strategy, and I don’t know what else he might dream up. He may use economic and financial catastrophe to try to further consolidate his power, blaming the Deep State and taking action against it. He may try to divert attention with foreign military forays and/or repression of domestic “terrorist” elements. Or the Deep State may successfully blame him and remove him from office (in line with the Branden Smith hypothesis). I claim no special knowledge of either the future or of the designs of powerful people I’ve never met. All I can do is advance plausible hypotheses–my own and others’–and see which ones end up best comporting with reality.
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Nothing will happen. At least not to the protected class. The roots of skull and bones grow too deep. The evil in government is all pervasive .No man, Not Trump ,and certainly no one else, can root it out, and the “common man” will never, barring a “black swan” event, revolt. As long as the TV, lights, running water, beer, and Mcburgers last. As long as they can get cheap surplus ammo for their pretend “assault weapons” . As long as they can still gas up that F-950 supercharged APC sized pickup. No matter what that gas costs. Nothing will happen. Everything else is a fantasy. I have been watching/listening/reading “preppers” rant about “the coming crash”, “the coming race war”, “CWII”, “WW3” and the “coming police state” since the early 1970’s when they were “survivalist’s”. For an impending disaster it is moving awfully slow. It is kind of like the second coming . Nothing happens until Jesus gets here, and 2000 years is a long wait.
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The Economy Is Going To Implode
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Section 31 U.S.C. 5103
Section 31 U.S.C. 3123
The U.S.G. can always pay its debts, it owns the currency.
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