So far, the economy under President Donald Trump has done well. The stock market is up, unemployment is down, and businesses are reporting steady growth.
But like most good things, one day all of these sunny skies will turn to storms, and five noted American economists are now warning that the downturn is just around the corner.
Salon spoke with five economic forecasters, and three of them agree that sometime before the 2o2o election, we’ll start to see a significant economic collapse. Here’s why they think so:
Rising Interest Rates
In order to prevent inflation, Dean Baker says, the Federal Reserve will raise interest rates:
“There are two ways we get recessions. The first and more common is that the Fed raises interest rates too much (ostensibly because of concerns about inflation) and throws the economy into recession. The other is a bubble burst. The latter happened in 2001 with the stock bubble bursting and the 2008-09 recession with the housing bubble.”
The Trump Trade War
Trump’s restrictive trade tariffs on Canada, China, the European Union, and Mexico could well wreck the gains made since the last downturn in 2008, according to Dartmouth Labor Economist David Blanchflower:
“The other elephant in the room is the trade wars in places where we’re seeing tariffs being put on. That’s clearly an issue — in steel and commodities and elsewhere. But the places where you see tariffs being put on are going to have an impact. The obvious thing is: What is the Fed going to do as these commodity prices rise? We see Harley Davidson prices rise and we see car prices, tin cans, Coke, everything. What’s going to happen in these sectors? Sectors exposed to the tariffs look like the obvious place we’re going to see concern. Manufacturing is going to have an impact because of the rise in input prices.”
Trump’s Pathetic Economic Team
Steven Kyle is Associate Economics Professor at Cornell University, and he thinks the Trump economic team is not the least bit impressive, telling Salon:
“I have my doubts about the people in the White House now. Would they even recognize that something needed to be done? Would they know what it was? I’m not worried about the Fed. Jerome Powell is a smart guy and a steady person as far as anyone can tell. But [Secretary of Treasury] Steven Mnuchin? I don’t have confidence in that guy.
“And [Director of the National Economic Council] Larry Kudlow, he’s almost a cartoon of an economist. And Trump doesn’t know anything about anything as far as I can tell. So if quick action were needed, would they do it? I don’t have confidence. And I bet nobody else does either, including our various trading partners.”
Much like we saw in 2008 with the collapse of the housing market, Peter Schiff is most fearful of the bubbles in the economy which could burst at any second, leading to a recession even deeper than the one President Obama inherited:
“There are a lot of bubbles. The bond market is a bubble. The stock market, housing market. the whole U.S. economy, really, is one gigantic bubble. Ironically, the trigger could end up being our own actions. I mean, the trade war could end up doing it. One of the things that’s been keeping the bubble going is China’s willingness to supply us with consumer goods at a low cost and lend us the money to buy it.”
Trump inherited a growing economy from Obama. He has done nothing to strengthen it. The massive tax cuts for wealthy Americans have already added at least a trillion dollars to the deficit. Trade is in peril thanks to Trump’s tariffs. And perhaps worst of all, the man in the Oval Office filed for bankruptcy six times when he was in the private sector. None of this bodes well for what we will happen over the next two years.
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