Sunday, December 18, 2016

Trump stimulus? Fuhgeddaboudit. A super duper deficit hawk is now his Budget Director.

Trump has been choosing deficit hawk after deficit hawk, casting MAJOR doubt on his stimulus plans, except of course for rich people and corporations. Everyone else is likely to get screwed.

The Donald just chose super hardline deficit hawk, Mickey Mulvaney (R-SC) as his budget director.

Here's Mulvaney:

Mulvaney, 49, was elected to Congress in 2010 in the wave that brought a cohort of younger, staunchly conservative members into the House. Mulvaney quickly staked out ground as one of Congress’s most outspoken fiscal hawks — playing a key role in the 2011 showdown between President Obama and House Republicans that ended in the passage of strict budget caps.

He has been an advocate for spending cuts, often taking on his own party to push for more aggressive curbs to government spending.

And Trump seems to be 100% behind this. Check it out.

“We are going to do great things for the American people with Mick Mulvaney leading the Office of Management and Budget,” Trump said in a statement. “Right now we are nearly $20 trillion in debt, but Mick is a very high-energy leader with deep convictions for how to responsibly manage our nation’s finances and save our country from drowning in red ink.

Recession time, people. Recession time. I am shorting stocks.

50 comments:

Penguin pop said...

He's shown his true colors. I don't trust many people who have appeared on CNBC regularly and Trump is made out of the same cloth as much of that lot. We are heading towards a FUBAR situation if this is what he really wants to do. One-term president at this rate unless something changes.

Matt Franko said...

It looks like they think all they have to do is open things up for "investment!" and the "free market!" and all of a sudden the "money!" is going to magically start to show up ex nihilo...

SCARY!!!!!!

Bob said...

But he's high-energy... stimulus requires energy.

Matthew Franko said...

Unless somehow he can get the USD zombies to come up off their hoard of USDs... this would also increase intra-non-govt flow short term and probably end up lowering the deficit as the ROW USD dis-saves...

He would have to persuade the USD zombies to de-zombify.... might be even to much for the master persuader....

Auburn Parks said...

Ironic if you think about, the biggest bang for our taxpayer buck is to have the largest possible deficit with acceptable levels of moderate inflation.

IOW, the taxpayers in an economy thats generating 2% inflation with a 3% of GDP deficit are getting way less value back for each tax dollar collected then an economy generating 2% inflation with a 10% of GDP deficit.

Another way to put it.....if the private sector spends $3 trillion on tax payments, is it better to get $3.5 trillion back from the Govt or $5 trillion as long as you can maintain moderate inflation levels?

Andrew Anderson said...

Unless somehow he can get the USD zombies to come up off their hoard of USDs... Franko

How is that even possible unless the hoards are physical fiat, aka "cash", since only depository institutions in the private sector may have accounts at the Federal Reserve?

Auburn Parks said...

Aa

Its not complicated the Chinese buy more stuff from the US then they sell to the US that's what Matt means

Tom Hickey said...

Yes, but the US won't sell China what it wants. Maybe DJT could lift those restrictions.

If a country is not permitted to buy, they will just figure out how to access it anyway by theft if needed.

Matt Franko said...

It has to be product Tom not capex....

He could tell them they have 10 years to work it down to zero at 10% per year...

Iow Jan 1, 2017 they have $1T, so he says "if that isn't $900b by Dec 31 we are going to mark it down to 900b ourselves... suggest you look at our pollution control products for a start..."

Matt Franko said...

Then it's either World War Z or they figure it out...

Auburn Parks said...

thats interesting Tom, I'd like to see a list of American produced goods and services the Chinese would like to buy but are barred from accessing. I think that list says a lot about a nation's true priorities and opinions wrt a foreign country. What besides military stuff cant the chinese buy (excluding buying companies etc) that they want? Is medical equipment banned? Software? Industrial machinery? Are Govt restrictions the reason China has a large trade surplus with the US or is it that the Chinese dont want\cant afford our US G&S? A bit of both of course.

Auburn Parks said...

Thats fucking hilarious Franko.

Tom Hickey said...

"if that isn't $900b by Dec 31 we are going to mark it down to 900b ourselves

"Marking down" US debt is a US default.


This would never fly at the WTO. Not that the WTO shouldn't go, but that would be a whole new world order.

Tom Hickey said...

Then it's either World War Z or they figure it out.

Unfortunately war with China is the way it is headed with at least one US faction, and DJT seems to be aligned with it.

But US business doesn’t see it that way. China is where the action is. The US, UK and Europe are already developed and growing slowly. The growth is in the emerging world and especially China.

Tom Hickey said...

thats interesting Tom, I'd like to see a list of American produced goods and services the Chinese would like to buy but are barred from accessing.

What China wants to purchase is high tech. High tech that can have military use is off the table not only in the US but also with US allies.

The US blocked the sale of a company owned by a US ally.

Obama Blocks Chinese Takeover of Aixtron as U.S. Security Risk. Aixtron is a German company.

The other thing that China wants to buy is US companies and US resources (like farmland). Those sales have to be government approved and China is often turned down, apparently also for "security reasons," even when it appears farfetched.

Recall when a Chinese company was blocked from bidding on Unocal, a US oil company.

https://piie.com/publications/chapters_preview/3942/05iie3942.pdf

Then there were the hotels.

Chinese investments in U.S. hotel companies spur national security scrutiny

Here is a breakdown of China's imports from the US and other countries.

Top China Imports from the World

Chinese nationals also own over 1T in US RE.

Tom Hickey said...

Is medical equipment banned? Software? Industrial machinery?

China actually imports a lot of this not only from the US. See the link above on Chinese imports.

But now Chinese companies are producing a lot of this themselves and they will be further ramping it up as China converts from an export-driven economy to one that is consumption-driven.

There are restrictions on exporting software. As one may have noticed in reading the fine print, "This software is for sale only in the United States."

Adam1 said...

""Marking down" US debt is a US default."

I think Matt meant to say tax it. It's effectively the same even though the zombie masses see it differently.

Tom Hickey said...

I seriously doubt that the US could impose a "tax" China's holdings of US assets. That would be a penalty rather than a tax.

Other net exporters like Germany would resist that, obviously.

Not that penalizing net exporters is not a good idea.

I just don't see it happening in a liberal environment.

What we are talking here is abandoning liberalism and and globalism, and establishing a new world order based on nationalism.

That may be the future. We'll see.

Matthew Franko said...

Auburn,

Its like they got a bunch of Debit Cards from Dick's Sporting Goods and they wont spend them.... 2 eyelets missing off of all of their rods yet they wont go to Dick's to look at a couple of new Diawas even though they have a bunch of Dick's debit cards....

The whole place over there is a mess and everyone there is trying to get the hell out and they wont spend a penny to help increase their standard of living....

Now they are taking away the golden rice bowl or wtf and its going to get even worse... probably going to end up like Venezuela unless Trump can get them USD de-zombified....

MRW said...

What China wants to purchase is high tech. High tech that can have military use is off the table not only in the US but also with US allies.

What China REALLY wants now is to get their kids educated in our engineering and science schools and bring them back to improve their high tech area. They get info about military applications, the lot, names, applications. It is a distinct strategic decision to get their kids educated in our excellent engineering schools, learn English, the works, then go back and improve the educating of Chinese kids. Jack Lifton wrote about it.

If I was God, I wouldn't let them come to school here. Put a cap on them.

OR.

Force them to stay here for 10 years after they graduate. They get fucking scholarships to come to our schools. Wassup wit dat? They'll form relationships, get married, have kids, become part of the community. Not so anxious to go back and be kings in China as they are promised now with Chinese govt subsidies. You want a scholarship to an American school? Then you pay for it with a decade of service to this country. And the US federal government will pay to have your parents visit you here. You cannot go home for 10 years. Period.

MRW said...

The whole place over there is a mess and everyone there is trying to get the hell out and they wont spend a penny to help increase their standard of living....

Bullshit, Matt. The hell they are. Shanghai is more exciting and lively than Manhattan. They want to rape the best of the US and take it home. With a US engineering education, they are primo in China. This aint the 90s anymore. They can name their ticket. and this is how the kids think, not the old fucks.

Adam1 said...

"...That would be a penalty rather than a tax."

LOL!!! Tom what "tax" isn't a penalty. I do not believe there is a constitutional clause or amendment that forbids a tax on any type of wealth. Why would taxing US FED dollar reserve balances be any different than taxing property?

MRW said...

And Matt, if they try to leave this country and they got a scholarship? They can't get on that plane without paying the full freight for their education at our top schools. A quarter of a million right now. No exceptions.

It's about time we we put a real value on our intellectual property. I am telling you that subsidizing the brightest among their students is a Chinese national priority. And no one is paying attention to this over here.

MRW said...

Our engineering (applied science) schools here and in Canada are the best in the world. The advances in our engineering schools in the last four years are the most exciting in world history. Why are we giving it away?

Tom Hickey said...

What China REALLY wants now is to get their kids educated in our engineering and science schools and bring them back to improve their high tech area.

I would not say "China" here. This is pretty well disaggregated in what I have read. It's Chinese parents that can afford it who send their children to the US and buy property here. Of course, many Chinese grads would like to stay and seek employment in the US, but many can't when there student visas run out, unless they qualify for HB1, or marry a US citizen.

The Chinese government really needs to modernize the educational system, but it is going to take some time to build a top notch system competitive with the US.

Bob said...

Charging foreign students 250k for a STEM degree? They'll go elsewhere.

Tom Hickey said...

Shanghai is more exciting and lively than Manhattan.

The sister of a friend of mine lives and works in Shanghai, and has a condo in Chang Man, too (Thailand). She loves the life. Children of several of my friends went to work in China, got married there and are now established. One of them came to the US look at colleges for his daughter, who will be entering college next year.

The major cities of China and Russia are comparable to Western major cities and in some ways superior, but the rural areas of both are still much more primitive than rural US. The contrast is so great between major urban areas and the rest of the country, it is not possible to talk of Russia and China in the same way as the US, where the standard of living is more or less uniform.

Tom Hickey said...

Should be Chiang Mai

Tom Hickey said...

Tom what "tax" isn't a penalty.

The difference between tax, and fees, fines, and penalties is that taxes are levied generally, while fees, fines and penalties are imposed particularly for specific reasons.

MRW said...

Bob,

Charging foreign students 250k for a STEM degree? They'll go elsewhere.

Good. It's a penalty for getting a full scholarship here at our top schools and then beetle-assing it back to China.

Tom Hickey said...

Our engineering (applied science) schools here and in Canada are the best in the world. The advances in our engineering schools in the last four years are the most exciting in world history. Why are we giving it away?

We are not "giving it away." Now we are charging top dollar for it.

I live in a Big Ten university town. Twenty years ago Chinese students were getting scholarships. Now that is over and they are paying. The Chinese students now are dressed fashionably (expensively) and drive new top line cars. The five bedroom house with swimming pool across the street from us was bought by a Chinese student. His parents that is. And he drives new Buick. Chinese regard Buicks as luxury vehicles in China. It's a thing there.

MRW said...

Tom @ December 18, 2016 at 6:31 PM

Agree.

Tom Hickey said...

Charging foreign students 250k for a STEM degree? They'll go elsewhere.

Nah. Peanuts for well-to-do Chinese, not even "rich."

Tom Hickey said...

There are the rich ones.

The Chinese government does not like its country's ultra-rich to show off their wealth. But their reach doesn't seem to cover Southern California, where the children of China's elite get to show off. How? With Lamborghinis and Maseratis, of course.

Chinese elite send their children to study in the United States. When they do, their parents give them enough money to buy as nice a car as they want.

Inside The Secret Chinese Supercar Subculture Of Southern California

MRW said...

Yeah, most may be paying now, but not the very brightest. They still get full scholarships to Harvard, Stanford, Georgia Tech, etc. Those are the ones we want. It's part of China's latest Five-Year Plan.

Matt Franko said...

Yeah they have a lot of USD zombie munnie by running the slave factories with the trapeeze nets at the bottom of the slave dormitories so the workers cant suicide themselves...

You got a billion really screwed up people over there... its going to be interesting to see how they react if Trump is really able to cut them off...

Tom Hickey said...

Sabrina Passos, How international students are subsidizing U.S. universitiesHow international students are subsidizing U.S. universities

The situation has created a financial structure where foreign students — particularly those from China — are subsidizing financial aid for U.S. students by paying the full boat themselves, and sometimes at inflated prices, admissions experts say.

“Michigan State, for example, had over 1,000 students from China in the entering class. All of these students were full-payers. Only a very small group of schools in the U.S. provide need-based aid for international students,” says Parke Muth, former Dean of Admissions and Director of International Admission at the University of Virginia. “They reserve money for U.S. citizens first.”…

But as the cost of higher education continues to climb, there’s little doubt that wealthy international students — especially those from cash-flush Chinese families — are playing a greater role than ever before in U.S. universities.

Nearly one in three international students in the U.S. — more than 274,000 — is now from China, followed India and South Korea. Saudi Arabia is in fourth, followed by Canada and Taiwan, which are tied in fifth, according to Open Doors Report on International Educational Exchange, by Institute of International Education.…

Bob said...

If they could charge 250K and not jeopardize that cash cow, they would have. Banning international students will hurt American students in the current system.

Besides, Chinese schools aren't that bad.

Tom Hickey said...

It used to be that the US offered a lot of scholarships and aid to foreign students as a matter of increasing soft power through having US educated leaders in those countries.

But now that "we are broke and can no longer afford it," foreign students paying the full freight and more have become a cash cow, like athletic departments.

MRW said...

Bob, what does it cost now to go to Harvard? 60Gs a year?

MRW said...

The money is obscene.

Adam1 said...

"The difference between tax, and fees, fines, and penalties is that taxes are levied generally, while fees, fines and penalties are imposed particularly for specific reasons."

Semantics. I own a house and it is taxes at its assessed value. The tax is "levied" at it's assessed value (its assessed value is in monetary terms). It doesn't matter if the property is assessedd at $100 or $100B. But you're telling me, other than semantics, that a house is different than an other asset and therefore it's not a tax but a penalty or a fee or a fine. Hmmmm sounds suspicious to me.

Why not "levy" a tax on excess US bond holdings or whatever term the lawyer says is sufficient, because its just "legal" semantics.

Tom Hickey said...

Everyone that owns property is taxed on it. Everyone pays income tax, albeit according to different schedules based on level of earnings. Taxes are levied on categories rather than individually.

Fees are collected from users of services and only those users. Fines and penalties are also imposed individually.

In the US now, with the rush to lower taxes, e.g., property taxes, or forego tax increases, municipalities are making up the difference with fees, fines and penalties. It's a shift from the community in general to individuals through stricter enforcement.

Tom Hickey said...

Why not "levy" a tax on excess US bond holdings or whatever term the lawyer says is sufficient, because its just "legal" semantics.

Japan is the largest holder of US Treasuries. It's also a net exporter.

MRW said...

Isn't China the largest holder, Tom?

Tom Hickey said...

No. China just liquidated a substantial amount apparently to defend its peg.

Bob said...

You go to Harvard, you have to pay for the prestige. I think it's a waste of money, but that's just me.

Neil Wilson said...

"We are not "giving it away." Now we are charging top dollar for it. "

You are if anybody domestically is crowded out because of it.

Teaching is a scarce resource. I doubt there is a surplus in anything that matters. Exporting it is therefore very stupid if you want to maintain a differential.

Adam1 said...

"Japan is the largest holder of US Treasuries. It's also a net exporter."

I'm not sure why this matters. Yes, some would prefer to specifically target China, but you could entice dollar zombies to increase their spending by levying a tax on excess holdings. And Japan isn't very good for your argument because they want to rearm and what better way to do it than spend down their dollar asset holdings.

And if we didn't want our newly "levied" tax to impact someone we can always write loopholes into the law.

Tom Hickey said...

Trump doesn't want to go after countries hoarding USD. He is interested only in China's perceived currency manipulation. So he will not put a tax on those "excess" holding as US tsys that affects Japan. He would have to put a penalty on China's holdings of US tsys and China would just exchange them for gold, euro or some other assets. It would not force China to buy goods and services from the US.

About the only option that DJT has naming China a currency manipulator or imposing tariffs.