Look to the stock market and you’d assume Wall Street was doing just fine. The S&P 500 has come back to March highs, the Dow is back to positive for 2018, and the Nasdaq is at fresh records.
It’s all built on shaky foundations, said longtime market bear and former Republican Congressman Ron Paul.
This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now”.
“I see trouble ahead, and it originates with too much debt, too much spending,” Paul said.
This isn’t the first time Paul has made such dire warnings. During a “Futures Now” appearance in August 2017, he predicted a 50 percent drop in the market, a call he has doubled down on a number of times since. Since that appearance, the S&P 500 has rallied 15 percent.
Paul belongs to the Libertarian Party, a faction that emphasizes constrained government spending. He sees federal spending and monetary policy as dual forces inflating a market bubble.
“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.
Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.
The Congressional Budget Office estimates that federal deficits will average $1.2 trillion a year from 2019 to 2028, according to its April economic outlook. Its 2018 deficit estimates rose by $242 billion over previous forecasts made in June 2017. The federal agency said the revision was mainly owing to lower projected revenues tied to tax reform.
“We have a president who likes to spend. He is not concerned about the deficit,” said Paul.
To Paul the decision-making arm of the Fed is equally at fault in creating a market bubble.
“The Fed will keep inflating, and that distorts things,” Paul continued. “Now they’re trying to unwind their balance sheet. I don’t think they’re going to get real far on that.”
The Fed is more than two years into its rate-hiking cycle. In conjunction with rate hikes, the Fed is also unloading assets from its balance sheet, which expanded to $4.5 trillion during its post-financial crisis quantitative-easing program.
Paul is not confident much will change to divert from the disaster he predicts.
“The government will keep spending, and the Fed will keep inflating, and that distorts things,” said Paul. “When you get into a situation like this, the debt has to be eliminated. You have to liquidate the debt and the malinvestment.”
Paul reiterated his call on Thursday for a potential 50 percent sell-off on the stock market.
Meanwhile, a headline reading “REPORT: Economic Growth Exceeds Expectations, Happy Days & Booming Economy En Route”
The U.S. economy slowed in the first quarter as consumer spending grew at its weakest pace in nearly five years, but the setback is likely temporary against the backdrop of a tightening labor market and large fiscal stimulus.
Gross domestic product increased at a 2.3 percent annual rate, the Commerce Department said in its snapshot of first-quarter GDP on Friday, also held back by a moderation in business spending on equipment and investment in home building.
In a very recent report, manufacturing jobs in America have climbed to levels not seen since before Obama was elected.
More American manufacturing workers are employed today than at any time in the last ten years as President Trump’s ‘America First’ economy seeks to protect U.S. industry and jobs with tariffs, less immigration, and tax relief.
In June 2018, Trump’s booming economy delivered an additional 36,000 manufacturing jobs for American workers, many of whom have had their livelihoods destroyed by job-killing free trade deals like NAFTA and KORUS.
Specifically, in the metals manufacturing industry, Trump’s tariffs on imported steel, aluminum, and Chinese electronics seems to have boosted U.S. job growth — with 7,000 new jobs in manufacturing fabricated metal products, 5,000 new jobs in manufacturing computer and electronic products, and 3,000 new jobs in manufacturing primary metals.
Additionally, 12,000 car and vehicle parts manufacturing jobs were created in June. In the past year, there have been 285,000 new manufacturing jobs added to the U.S. economy as Trump encourages and incentivizes companies to move production back to the country.
There are now 12.8 million Americans working in the U.S. manufacturing industry, a ten year high for the economy. The last time that many Americans were working in manufacturing was back in December 2008. At that time, 12.8 million Americans had jobs in the industry.
Compare Trump’s economy to the Obama economy when it comes to the manufacturing industry. At the end of Obama’s last term in office, the former president was pushing — along with the Republican establishment and Democrats — the Trans-Pacific Partnership (TPP) free trade deal.
TPP, if it had been implemented, would have wiped out not only millions of U.S. working and middle-class jobs but also would have driven down wages for remaining American workers. The free trade deal would have readily opened up additional foreign markets in underdeveloped nations, allowing multinational corporations to further outsource and offshore American jobs.
Keeping his campaign promise, Trump killed off TPP, saying in 2016 that the free trade deal “would be the death blow for American manufacturing.”
Obama, though, was pushing for TPP when U.S. manufacturing jobs had remained stagnant at around 12.3 to 12.4 million workers in the industry throughout nearly all of 2015 and most of 2016.
With another sign that Obama was utterly clueless, and Trump knows capitalism, jobless claims in early April dropped by over 9,000 applications to just over 230,000; reaching levels not seen in the United States since the mid 1970s.
The new data shows America’s unemployment claims are at a 45-year low as the labor market continues to roar to life under President Trump and the Republican-controlled Congress.
According to Market Watch, the strong report shows companies across the country complaining about a “shortage of labor” as more and more Americans go back to work.
“Layoffs are near a 45-year low and show no sign of rising. Companies increasingly complain about a shortage of skilled labor with the unemployment rate at a 17-year low of 4.1%, making it harder for them to fill a record number of job openings,” writes Market Watch.
“With labor so hard to find, the bar for letting people go is very high, so layoffs will remain a close to their current levels for some time yet,” said a chief economist.
Mr Americana, Overpasses News Desk
July 16th, 2018