Trump's Inheritence

Obama inherited an economic disaster from Bush.  What kind of economy did Trump inherit from Obama?

Real Unemployment - counting long term discouraged workers who were defined out of "unemployment" in 1994, plus all short term discouraged and underemployed, the rate is 21%, not 4.6%.

Velocity of Money - moves faster in a growing economy, and slower in a slowing economy - it is now moving at a slower pace than during the Great Depression. The Keynesian pump hasn't worked.

Food Stamps - declined from a high of about 46 million in 2013 to just over 43 million today - one in seven Americans.  The 3 million decline is about 50% attributable to stricter qualification requirements. It was 28 million in the last year under Bush.

Labor Market Participation (LMP) - declined from 70.1% in 2000, to 62.9% today. With 155 million people in the US workforce, that is a proportional decline of about 10 million jobs. But aren't these just retiring Boomers?...

Labor Market Constitution - ...no, there is a thesis that LMP is dropping and should be dropping as Boomers are retiring.  In fact, the only section of the workforce that is seeing a proportional increase in employment - more people per 100 people working - are those over 55. All other sections - under 21; from 21- 35; and from 35 - 55 are seeing proportional declines - fewer people working per 100 people in these sections. This implies that many Boomers are not actually retiring, but are going back to work as they do not have enough to live on, and employment growth lags for all other sections of the work force. This is a disaster within a disaster.

Obama's record - claims 15 million new jobs. True, if you start counting after the millions of job losses in his first few years in office, but stats show 15 million more people on food stamps as well (see above). The total  is likely closer to 12 million - 90% are part-time or self-employment.

The Pump - US Government borrowing was $10 trillion under Obama + QE of $4 Trillion + probably an effective $6 Trillion from 1% interest rates policy = $20 trillion in stimulus in the last 8 years to stimulate the US economy. Even with 12 million jobs, this is $1.667 Million per job. A disaster. Keynes is dead.

US Debt - will reach $20 Trillion this year, with a $590 Billion deficit this year, and paying $432 Billion in interest this year at a 2.02% rate of interest. This is the lowest rate ever, and will definitely go up. Every 0.25% rise in interest rates costs the US Treasury another $50 Billion a year. Trump’s extra $1 Trillion in borrowing to build infrastructure, plus a 1% interest rate hike, means the US Government will need another $250 Billion a year just to finance debt.

Productivity - this has always been the American ticket to ride - increasing productivity is one prime reason why the USA is the USA. Non-farm productivity has only increased by 3.5% in the last 7 years - about 0.5% a year. Non-farm productivity growth from 2007 - 2015 is almost as low as the growth from 1973 - 1979, which was the slowest growth in modern memory. Slow productivity growth = slow economic growth.

Q-Ratio - value of Stock Market divided by Book Value of all Companies in Stock Market.  Should be 0.68 historically.  It is now at about same level it was at in Oct, 1929.

Shiller P/E - Stock Prices divided by Inflation-Adjusted Earnings of the past 10 years for S&P 500. The Shiller P/E was just shy of 30 in October, 1929...it is 28.02 today. The mean over 135 years is 16.71.This measure is 100% predictive of a serious Stock Market pull-back, but it cannot say when this will happen. The only thing that will put it off is central banks deciding to print money in order to buy equities.

Housing Vacancy - there are 135 million housing dwellings in the USA.18 million are vacant. Prices are about where they were in 2007, when there was a massive housing bubble.

Banking System - about 500 small banks collapsed since January, 2008. Usually the USA sees about 100 small banks open each year - up to 2008 that is. Since that time, only THREE new small banks have opened in America. Of the $4.05 Trillion handed to the large banks via QE 1 - 3, about $2.5 Trillion is still on deposit with the US Fed. They are holding this money rather than lend it because they know they will need it when this high-leverage house of cards implodes.

Stock Buybacks - from March 31, 2015 - March 31, 2016, stock buybacks for S&P 500 companies were $570 Billion! These buy-backs create no new products; they represent no new capital investments; they resulted in no new hiring. They are being perpetrated by company managers who are directing their companies to borrow hundreds of billions of dollars to finance stock buybacks, which they then use to blow out their options at elevated prices, reaping massive financial gains. It is about 100% greed. It is obvious that stock buybacks at a rate of $150 Billion a quarter in just one exchange is now pumping the price of stocks way above what they would normally be - in fact, pumping prices is the whole point of the buy-back phenomena. When it ends, prices will pull-back very sharply.

The US economy has grown under Obama, but at the slowest rate for any recovery in US history, and this with more stimulus than at any time outside of a major war. Obama left Trump a bigger mess than Bush left him.  

The driving economic factor going forward will not be Trump’s policies, but the carry-on effects of the failed stimulus - debts so huge that they will severely constrain future policy choices; rates left so low, for so long that they make deleveraging from this stimulus virtually impossible; and a legacy of mass unemployment and dependency on entitlements - both by individuals and American corporations - that may remake not only the American economy, but American politics and culture as well.