Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Jim Rickards: Trump’s Stimulus Plan Not Happening

  by    0   1

Economist Jim Rickards appeared on CNBC’s “Squawk Box” outlining his 2017 predictions for rate hikes, Trump stimulus, and the coming US recession. Rickards believes the markets are unwittingly pricing in a stimulus plan that will never materialize.

“Trump wants to cut taxes. Steve Bannon is talking to his advisors about a trillion dollars of infrastructure spending, cutting regulations. All of these things are viewed to be highly stimulative. That’s why the market is going up. Pharmaceuticals are going up on the repeal of Obamacare, banks going up on the repeal of Dodd-Frank.”

The markets and the Fed have the perception that tax cuts and spending will continue despite the realities of a fiscally conservative congress, a $20 trillion of debt and a 104% debt-to-GDP ratio.

“But here’s the point,” Rickards states, “the stimulus is not going to come… Congress has already said tax cuts have to be revenue neutral. That’s going to take away the simulative effect. They’re going to balk at more spending.”

While a March rate hike is likely, according to Rickards, the Fed will backpedal when the market corrects or when the next recession hits. “Then the Fed will backpedal from there, starting with forward guidance and perhaps a rate cut later in the year.”

In such a situation, the scramble to move assets into wealth-preserving instruments like physical gold and silver will begin again. 2016 saw this movement many times by investors looking for safe havens. If Rickards is correct in his predictions, 2017 is likely to be a repeat of the same.

Highlights from the interview:

“I expect they will raise rates in March. I think that’s on track. But beyond that, we’re going to go into a recession or the stock market is going to have a very severe correction. Either one of those will cause the Fed to backpedal.”

“The Fed never turns on a dime. They take months to change policy. I think they’ll raise in March. Then something will hit the wall, either the economy or the stock market or both. Then the Fed will backpedal from there, starting with forward guidance and perhaps a rate cut later in the year.”

“There’s basically a head on collision coming between perception and reality. The markets are rising on the Trump reflation trade. Trump wants to cut taxes. Steve Bannon is talking to his advisors about a trillion dollars of infrastructure spending, cutting regulations. All of these things are viewed to be highly stimulative. That’s why the market is going up. Pharmaceuticals are going up on the repeal of Obamacare, banks going up on the repeal of Dodd-Frank.”

“Over at the Fed they’re thinking of two things. Number one, they believe in the Phillips Curve. I personally don’t, but they do… with unemployment at 4.6% and that kind of stimulus coming and they know monetary policy acts with a lag, they want to get out ahead of inflation, so they’re on track to raise rates. By the way, they want to raise them anyway independent of this because they’ve got to raise them so they can cut them in the next recession.”

“But here’s the point: the stimulus is not going to come… Congress has already said tax cuts have to be revenue neutral. That’s going to take away the stimulative effect. They’re going to balk at more spending. We have $20 trillion of debt. 104% debt-to-GDP ratio, so we’re not going to get this trillion dollars of spending.”

 

Get Peter Schiff’s latest gold market analysis ñ click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Day 35: Higher Interest Rates Threaten the Future of Trump’s Economy

The Trump 100: His first 100 days as presidentThis week, we saw predictions Trumponomics will indeed bring a spike of growth, but it will be a spike quickly destroyed by crippling interest rates. Could this be what’s causing the US Federal Chair Janet Yellen to suggest raising rates too fast would be “unwise”? As seats start opening up at the FOMC, Trump is […]

READ MORE →

Today We Celebrate the Birth of a Real Patriot

the face of irwin schiffToday, we celebrate the birthday of Irwin Schiff, one of our nation’s most influential activists for free markets and limited government. Irwin was a proud, freedom-loving American who died a political prisoner in a Texas federal prison. Neither the irony of his passing nor his convictions escaped the millions of people Irwin inspired to become […]

READ MORE →

3 Reasons Gold is Rising and the Dollar is Falling

man standing over large drain with his money falling down itThe price of gold is moving in contradiction to its economic purpose, which is to serve as an investor safe haven against inflation. Shortly after the election, the dollar index spiked as gold prices began a quick decline; however, recently the trend has reversed. Gold is now up around 7% since the Fed’s December rate […]

READ MORE →

CPI Numbers Show Inflation Already Beyond Fed’s Benchmark

dollar bills spread out with a single band-aid sitting on oneIn Peter Schiff’s latest podcast, Peter discussed the Consumer Price Index and retail sales reports released last week. Janet Yellen provided the data in a report to Congress. The chairwoman’s testimony brought on a new wave of optimism in the markets that interest rate hikes would be coming sooner than last year’s cycle of promise-then-disappoint. […]

READ MORE →

Day 28: Brazen Trump Inspires Murky Global Markets

The Trump 100: His first 100 days as presidentYellen spoke to congress this week, and her remarks about the new Commander in Chief could be foreshadowing an upcoming battle between the Fed’s goals and Trump’s plan to weaken the dollar. The President also made amends with China’s President Xi Jinping, but has new problems to deal with as other foreign governments shed their […]

READ MORE →

Comments are closed.