A few reminders.
The unemployment rate is 3.9%!
Absolutely true, but this is what the US Bureau of Labor Statistics calls "U3". This measure of unemployment only counts people who have been unemployed for three weeks or less. If you have been unemployed in the USA for 22 days, you are not included in official unemployment statistics.
Reality - there are 40 million Americans receiving food stamps. This has come down from 46 million in 2013, but this means one in eight Americans only survive because of this "last resort" social support system. It is impossible to have a real 3.9% unemployment rate when 12.5% of your population lives on food stamps.
US GDP growth is hitting 3% a year!
Absolutely true, but this is happening only after ten years of the greatest economic stimulus in human history. In the last decade, the USA borrowed over $10 Trillion, and the US Fed has kept rates lower than at any time in recorded human history. Interest rates have been lower than at any time in ancient Rome or China; lower than in the Middle Ages; lower than in Europe's heyday in the 19th century. No government has ever borrowed so much, and no humans have ever borrowed more cheaply. It is Keynes on steroids. This kind of stimulus has always caused asset bubbles, and those bubbles have always burst.
Bubbles?
The stock market is hitting new highs!
Absolutely true. With money almost free for a decade, companies have been borrowing tens of billions of dollars each quarter, and using this money for stock buy-backs. These buy-backs were averaging $60 - $100 Billion every three months on the S&P 500 since the last recession.
Trump's recent tax give-away to US corporations, which allows them to repatriate foreign earnings at a 10% tax rate as opposed to the 35% they would have faced on domestic earnings, has allow them access to a further $1.3 Trillion. At least half of this money is now going to pump the market with buy-backs so that the managers of these companies can blow out their options at higher profits.
Without the free money and tax gifts that US companies have benefited from in the last decade, the markets would be nowhere near their record heights. When the last of the free tax money has been used to pump the markets, they will fall - what is pumped up always come back to Earth.
The future?
Trump's fantasy economy cannot last. His corporate tax give-away, coupled with his promise to spend hundreds of billions on infrastructure (assuming he does this) will drive up the US deficit to alarming heights.
Look here...
http://www.usdebtclock.org/
The US deficit is back well above $750 Billion a year, and the US debt is now way above $21 Trillion.
Trump's changes will drive the deficit well above $1 Trillion a year again. Recall...interest rates are going up, so that this is a recipe for exploding interest payments on the US national debt. There is no plan in the USA, and there is no political will in that country to deal with this.
Welcome to the last days of the Keynes Disco...
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