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Successful Trump Plan Will be Rude Awakening for Americans

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Speculations on the implications of Trump’s economic plans are intensifying after his inaugural address on Friday. Peter Schiff deconstructed Trump’s speech in his latest podcast, focusing on the new President’s pledges to “Make America Great Again” by bringing back manufacturing or “Putting America first” by renegotiating trade deals with foreign countries.

Peter explains what real change would look like and what steps would need to be taken to jumpstart manufacturing after decades of easy money, trade deficits, expanding entitlements, and a bloated government.

Forecasting Trump’s plans is like trying to solve a riddle wrapped in an enigma, but Peter views the possibilities from the perspective of what’s true: the US has been maintaining an artificial standard of living based trade imbalances with nations like China who exchange US bonds for cheap goods.

“Our trading partners are not really lending us money. A lot of the money that we’re borrowing is being loaned to us from foreigners. But it’s not really a loan if you have no capacity or intention to repay it, and we don’t.”

Cutting the American public off cold turkey from their addiction to fake living standards and easy loans won’t be simple. It will take an understanding of how we got into this situation and the short-term pains that will need to be endured to fix it. These are ideas that Trump’s optimistic and protectionist talking points aren’t addressing.

Severing America’s trading ties with other countries is fraught with problems that will inevitably only benefit those foreign countries.

“Trump doesn’t really understand, or underestimates the fact that, we have been riding on the global gravy train for decades. We get a free ride. The world is subsidizing America … They’re not taking advantage of us; we’re taking advantage of them. If we’re actually going to make America great again by basically severing these relationships … the biggest winners are going to be our trading partners.”

Highlights from the show:

“Yes, there were some people that benefited. People in Washington certainly benefited. Washington has been booming because they’ve been sucking all the wealth out of the rest of the country. So, the bureaucrats and certain segments of the population have benefited from central planning and central banking and the cheap money and the bubbles.”

“Donald Trump hit the nail on the head when he talked about all the factories ‘like tomb stones littering the landscape’ and how our wealth has been sucked out and the middle class has been hollowed out and that the country is hurting. All this is true.”

“What if what he means is kind of like a Trumpian New Deal? What if he’s talking about government proactively doing things to help the middle class like big spending on infrastructure where the government employees people directly and creates jobs like they did in the New Deal during the Great Depression?”

“What I want it to mean is taking the power away from government so that people have power in and of themselves. They’re freed up; they’re unshackled. We get rid of all the rules and regulations that have been inhibiting economic growth so that the economy can grow. Let’s get rid of all the other parasites that had been sucking us dry that have been in Washington living off the body of the rest of the country. They’ve been getting fat by sucking the wealth of everybody else.”

“Who knows what he has in mind for a replacement for Obamacare. He’s talking about everybody being covered, nobody losing coverage, insurance companies not being able to discriminate based on pre-existing conditions. I don’t know, it still sounds a lot like of Obamacare.”

“That’s the problem with power: it corrupts, and absolute power corrupts absolutely. Nobody wants to eliminate the agency that they control. The Republicans are great at criticizing government when they’re out of power, but the minute they’re in power and they wield the government power, they own it. All of a sudden, it’s their government and their agencies, and they can use it in ways that will benefit them.”

“We have all these businessmen coming to Washington, but are they really going to clean house? Are they really going to drain the swamp? Or do we simply have new creatures now living in the same swamp. We’ll see.”

“Trump doesn’t really understand, or underestimates the fact that, we have been riding on the global gravy train for decades. We get a free ride. The world is subsidizing America … They’re not taking advantage of us; we’re taking advantage of them. If we’re actually going to make America great again by basically severing these relationships … the biggest winners are going to be our trading partners.”

“Our trading partners are not really lending us money. A lot of the money that we’re borrowing is being loaned to us from foreigners. But it’s not really a loan if you have no capacity or intention to repay it, and we don’t. We expect our foreign creditors to indefinitely roll over these low-yielding IOU’s. In effect, they’re not loaning us money to buy their stuff; they’re giving us their stuff for free. So there’s a huge benefit. What’s the downside? The downside is it’s not going to go on forever.”

“The longer it takes foreigners to come to their senses, the worse the US economy gets; the bigger the hole we dig for ourselves, so it’s a good thing if Donald Trump doesn’t wait for foreigners to cut us off. We should cut ourselves off by saying no more. It stops now. We’re not going to do this anymore.”

“What that means in the short run is a huge reduction in the standard of living of Americans. We’ve been living artificially. We’ve been living beyond our means. We’ve been living on debt. We’ve been living on imports. If we have to start saving and producing, which we should do and I hope we do it, it does mean we have a rude awakening. We’re going to have to deal with all these problems, and nobody has been prepared for that.”

“If Trump is actually going to make America great again, things can’t get better right away. There is no shortcut. Things have to get worse first, and I just don’t know if anybody up there on Capitol Hill is prepared that. They’re trying to prepare for everything just getting better immediately, and there’s no way to do that if you’re going to do the right thing.”

“To the extent that we get some of these protectionist type measures, it’s going to be negative for the dollar. It’s not going to be a positive like some people think. The US stock market in the US bond market, I think, are very, very vulnerable.”

“If Trump did a better job of preparing people for the pain…then that would be okay. But if you make people think everything’s just going to be great right and there is no short-term pain… then it’s a problem because then you’re blamed for it. It’s like you caused it, and then you have to bear the consequences, which is why I don’t think they’re going to do the right thing. What they’re going to do is more of the same: more cheap money, more Keynesian stimulus, and Trump is going to hope that he can make it for another four years before the whole thing blows up.”

 

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