During the social media boom of the late noughties, Donald Trump created his infamous Twitter account, but, back then, his tweets garnered only a few hundred views.
Within these tweets, he made constant reference to America’s dire economic situation, hoping one day to return the U.S economy to a sound monetary system. Although Trump didn’t unveil his solution you can assume by his tweets that he would tackle America’s massive trillion-dollar debt burden.
But from then until now, Trump realized, slowly but surely, that his vision was impossible to achieve. Unfortunately for him, by both becoming President and inheriting the biggest stock market bubble, housing bubble, and corporate debt bubble of all time, there was no turning back. A tweet on August 5th, 2018, marked the last time he would ever try to maintain a prudent, monetary policy stance.
After the late-2018 stock market rout, Trump had lost all hope. In response to positive market sentiment, the Federal Reserve hiked interest rates aggressively and continued to taper their balance sheet, testing how markets would react to tighter monetary conditions. But the Fed’s experiment led to a double-digit stock market selloff over Christmas.
The mini-crash made both Trump and the Fed realize that the debt burden was impossible to unwind without sacrificing the stock market — a key weapon in their political armories. If they were to prevent another crash, debt normalization was unachievable and debt monetization was unavoidable.
From then on, cheap money has been a central theme in the Trump economy: He and the Fed have engaged in a policy war: a feedback loop where the President calls for loose monetary conditions by applying pressure on Fed Chairman, Jerome Powell, who, because of external events, keeps giving in. And that’s while Trump has also increased government spending to unprecedented levels: the biggest in U.S history.
Subsequently, loose fiscal and monetary policy has saved Trump’s economy from collapse, but it’s the very thing he set out to avoid. Cheap money has defined 21st-century American economics by allowing politicians to circumvent the consequences of unwinding America’s debt. A way to temporarily support the economy, without fixing the underlying issues.
Filmmaker, Adam Curtis, describes this strange dynamic in his latest documentary, Hypernormalization, illustrating that politicians aren’t politicians any longer, but are managers whose purpose is to maintain stability in the current system instead of trying to improve or see beyond it. This exposes the farcical reality of debt-based economies where leaders are helpless; stuck in a broken system that is truly inescapable, as no one has a better alternative.
Ever since the New Economy rose to prominence, Presidents have had no choice but to give up their vision of a new America for a managerial role.
In the late 1990s, the credit markets drying up completely, causing then-President Clinton to surrender his goal of improving the world through politics. Instead, he took advice from then-Fed Chairman Alan Greenspan who recommended that Clinton let monetary policy both save and power the American economy. Clinton agreed and Greenspan lowered interest rates, producing a speculative mania in tech stocks leading to the Tech Bubble bursting in 2000.
But by the time the crash hit the economy, Bush was in office. Putting aside his conservative financial past, he issued the biggest fiscal stimulus package to date, stabilizing the economy, but also creating another speculative boom; this time in housing. The moral hazard of promising citizens guaranteed homeownership led, ultimately, to the Subprime Bubble bursting in 2008.
This time, though, it was Obama’s turn to inherit the bubble, picking up the pieces. In response to the Great Recession — and a potential depression — he issued another stimulus package saving most of the megabanks and major car companies from bankruptcy, but these bailouts meant increasing America’s debt to record levels.
Finally, Trump took office, and the rest is history.
In this process of ballooning America’s debt levels, each stimulus package was different in intention but identical in purpose. On the surface, it looked like a cure to a crisis, but the real motive was to kick the can down the round, passing the buck onto the next President in office.
Past presidents admitted to themselves that, no matter how big their ego, how big their vision, or how big their morals, no one had the willpower to allow America’s debt to unwind as taking the blame for, what would be, the greatest depression in human history is something anyone, even with the straightest of principles, would want to brush aside and hang on someone else’s shoulders — the ultimate political sacrifice.
Ultimately, the next President will face the same inconvenient dilemma: suffer the political consequences of causing an economic depression or feel the guilt of passing the bubble to the next POTUS.
It’s a presidential-level relay race gone wrong.