Saturday, September 22nd, 2018 MST

David Stockman on NAFTA and the Fed’s normalization of interest rates

David Stockman, Budget Director (1977-1981) under Ronald Reagan, offers unique analyses on today’s economic and political developments. Unlike a lot of analysts, Stockman has a grasp of the economic situation and political developments.  He is a bear on stocks and on the economy.  Below are links to recent Bloomberg interviews with him.

In the first video, two minutes long, Stockman criticizes President Trump’s view of NAFTA and critiques the new trade deal with Mexico.  Stockman is not a fan of most of Trump’s political moves.  He considers the President’s ratcheting up of tariffs detrimental to the economy.  Yet when he thinks the President makes good moves, he praises him.  On the political scene, Stockman is not a fan of Robert Mueller, whom he considers dangerous.

Stockman on NAFTA and the new Mexican trade deal

In the second video, which runs five minutes, Stockman is asked if the central banks “can reduce the liquidity without cratering the stock markets.”  He replies that if near zero interest rates for nine years gave us this economic recovery, then removing the liquidity will sink the economy.

He notes that current household debt is $15.2 trillion and that an increase in interest rates of only 1.7% (170 basis points) as the Fed “normalizes interest rates” will add $250 billion to the interest expense on household debt, the equivalent of what is spent annually on gasoline and motor fuel in the US.  In other words, a huge hit to household budgets.

Stockman also says that the much celebrated tax cut becomes a tax increase in the mid-2000s and that the recently posted 2nd quarter increase of 4.2% was due much to “one-off” events, the tax increase (which is being funded by borrowing not a reduction in spending) and a rush of soy bean orders by the Chinese to get ahead of the tariffs.

Stockman comments on the Fed’s normalization of interest rates and their impact on household budgets.

Both video are worth watching and are reassuring to gold and silver investors that they are making the right decision.

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