We are so busy at being busy these days that everything in life has now been reduced to 140 characters or less.
That means there’s no time to do any further exploration or argue anything with nuance.
As a result, there are some huge misconceptions about the world.
Far too many appear to simply react to headlines and not look deeper.
Heck, most don’t even read the article.
Trump’s Magic 3
Let’s take a moment and calmly break down Trump’s Magic 3 – you know those three things that are going to make America great again – infrastructure spending, the return of money held overseas and tax cuts.
Each deserves more than 140 characters’ worth of explanation.
1. Infrastructure Spending
Investors are giddy at the prospect of major infrastructure spending.
Trump’s plan calls for $100 billion in spending a year for ten years.
Even these days, a trillion dollars is a lot of money!
That all sounds well and good on the surface, but did you know the Yanks spend about $400 billion on infrastructure each year?
A 25% increase is not to be sneezed at, but Trump’s plan is not transformational; it’s incremental at best.
Besides, infrastructure investments take forever to get drawn up, approved and shovel ready.
Plus (and this isn’t a small point here), there apparently isn’t enough skilled labour in the United States to work on these projects.
Build a wall!
Ha, they might need to tear down the parts that already exist.
But in keeping with today’s world, my tweet would be, “Where’s the beef?”
2. Money Return
This is a good one.
Word on the street is that there’s over $2.5 trillion held by U.S. companies overseas.
If they just didn’t have to pay 35% in tax on that money, the money would boomerang back (they like us over there) and heaps of new jobs would be created; somehow, these new workers would get paid more; and more money in the pockets of workers would spur economic growth.
The problem with this theory is that it assumes the money is locked away in some safe box somewhere and cannot be accessed by the company.
In short, the money has already been spent.
So, trying to bring back this capital will do little to create jobs.
There simply isn’t that much to bring back.
If new tax breaks pass Congress, then, just like in the past, it will mostly be used for financial engineering and buying back stock.
Besides tax cuts won’t get companies to expand substantially any more than did free money that largely only led to stock buybacks and mergers and acquisitions – financial engineering – not real growth.
My tweet would be, “Capital no flow.”
3. Tax Cuts
Independent analysis of proposed tax cuts shows that nearly 50% of the tax relief will go to the top 1% of earners.
The top 1% didn’t get Donald Trump elected president.
The bottom 50% did.
By some accounts, Trump appears to have tremendous appeal to working-class voters, particularly in the Midwest.
Unfortunately, his tax plan won’t help them much.
Middle-income workers would take in an extra $1,000 – or about 1.5% of their income.
Meanwhile, the poorest 20% would get about $100 in annual tax relief.
Meanwhile, the top 1% will apparently benefit by more than $200,000.
Since wealthier people tend to be older (that additional time allows them more room to accumulate wealth), this group of people is now past their prime spending years.
That’s bad news for the economy.
That money isn’t going back into circulation.
It’s likely that additional personal tax savings will simply get saved and invested. So, while the benefits may really help the 1%, it might not do much for the overall economy.
My tweet? “Heaps to them, little to you, very fair.”
Pah-pa-rah
We all know that the U.S. stock market has been on a tear since the election.
Apparently, we are about to enter a world of ‘reflation’.
And everything will be good again, now that The Trumpette is here.
But I fear that most are only reacting to headlines.
Sadly, that’s the world we live in today.
Many may be sorely disappointed after the first 100 days of the next administration when very little really gets done and the benefits are not what they hoped they would be.
Yet, I think Trump could have as much as a six month grace period before reality sets in about his ability to get things passed and to achieve spruiked economic growth rates.
Now, this is just one view of the world.
By writing it, I am not excluding others.
This doesn’t mean that what I have written is right.
It’s just what I see at this point in time.
Things can change.
But…
And this is a big BUT, the biggest things really don’t change, and they are the ones that drive economies around the world and are very difficult to adjust – populations and productivity.
I have been building my business on how many people are at each stage of life and what they buy, especially when it comes to housing.
These are qualities that cannot be dialed up or toned down through economic policy or thought bubbles.
Supply exceeds demand across much of the globe; the west faces ageing demographics (including China) plus growing automation, computerisation and potential climatic change.
Plus, we have unprecedented debt levels and very risky-overpriced investments.
No government policy or program will change those things.
As long as individuals control their own economic destiny, demographics and productivity will drive growth.
…So in just one tweet
If I was to wrap the whole thing up in one tweet it would be, “Dead cat bounce.”
Keen to hear your thoughts.

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