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No, what may happen is 4% growth in 2018, and then a crash in 2019.
I actually like parts of the tax reform, but it is done at the wrong time. The economy is already overheating, Dow Jones is 4 times higher than in 2009, Bitcoin has increased tenfold since last year, housing prices has doubled in urban areas since 2012, unemployment is already low and inflation is at the target level. We don't need stimilus right now.
I and LG (source) believe that inflation and growth is going to increase in 2018, and the Fed will respond by increasing the interest rates. Eventually the economy will run out of steam and crash in 2019 together with China and Europe who is riding the same bubble.
Once the Chinese debt bubble goes it'll be an interesting time.
The US will not achieve 5-6% sustained growth. Putting it simply, the economy is too big and mature for that. The tax package is merely another gleaming look into the crony capitalism in this country.
If a company saw growth opportunity in demand, they'd have spent the money to get that production going by now. I don't wait for a tax break to expand production just expecting people to be there to buy the stuff. When I see an uptick in demand, I'll meet demand regardless of taxes. Supply driven economics is garbage. Real world business owners rely on demand.
Why does anyone think this will change decades of stagnant/declining wages? It isn't going to, the money will be pocketed by the owners of capital, not labor.
This seems to be the norm for both Republicans, and Democrats. Paying down the debt isn't sexy, and doesn't get votes.
It's also not a particularly wise thing to do, given the role of US debt in the global financial system. Even the $363 billion over four years that Clinton was able to pay down with his budget surpluses was enough to have negative impacts on bond markets.
Once the Chinese debt bubble goes it'll be an interesting time.
The US will not achieve 5-6% sustained growth. Putting it simply, the economy is too big and mature for that. The tax package is merely another gleaming look into the crony capitalism in this country.
If a company saw growth opportunity in demand, they'd have spent the money to get that production going by now. I don't wait for a tax break to expand production just expecting people to be there to buy the stuff. When I see an uptick in demand, I'll meet demand regardless of taxes. Supply driven economics is garbage. Real world business owners rely on demand.
Why does anyone think this will change decades of stagnant/declining wages? It isn't going to, the money will be pocketed by the owners of capital, not labor.
This isn't really a conflict between supply driven economics and demand driven economics. If the government had taken the business tax reduction and spent it on business services/products then the effect would be exactly the same.
The main issue here is that you should save not spend during good times.
Unless wages actually increase where is this GDP growth going to come from? Can unemployment structurally go any lower? It seems that most businesses have indicated they plan to reward shareholders, not invest or raise wages.
Of course the windfall isn't going to be invested in domestic production. They have plenty of cash to invest now, but there is no reason due to poor demand, and the high US$ (exports too expensive). Median incomes have been falling again the last couple years. I wouldn't count on unemployment dropping.
The only upward drivers are a modest population increase, productivity increases (which may increase wages, but hasn't for 40 years), a reduction in trade deficits (unlikely), and a further escalation of debt (public and private). Hence the tax cut and bigger fiscal debt.
Interest rates are so low that service payments on the debt are not that bad, so it is difficult to tell how long the debt run-up can last.
The fiscal deficit should be self correcting, ie when it gets "too high" other countries' "faith" in the US$ will wain and the exchange value of it will drop, making exports cheaper and imports more expensive. We might even experience trade parity. And of course that would also spur domestic investment in production. Maybe we can actually get back to economic growth led by production and wages rather than debt. I doubt it, but it would be nice.
Of course the windfall isn't going to be invested in domestic production. They have plenty of cash to invest now, but there is no reason due to poor demand.
which is why i said at the end of each typical accumulation stage or retirement stage which run decades the returns all end up with in 1-2% of each other .
there is always a reversion back to the means . short term action means little and is totally un-predictable . but long term you can almost set your watch . by long term i mean the typical decades of time we utilize or invest in equities .
Yep!
Quote:
Originally Posted by 17thAndK
This isn't an example of stimulus. It's an example of pillaging. There is never a time when we need pillaging. Everyone should always be opposed to it.
No reason it cannot be both. Stimulus can come in many forms: government spending, tax cuts for individuals, tax cuts for corporations...
We agree that it is a transfer of wealth though. The funny part is that is that the GOP is adamantly against "wealth transfer" to the middle class or needy, but all about it when it is heading in the opposite direction.
As others have mentioned, this is what the people voted for. They may not have realized it, due to ignorance or may not have cared, due to some malperceived advantage. But, they have made their own beds.
When people vote against their own interests, despite warnings and create circumstances that fill my investment accounts with capital gains, all I can do is SMH and whistle a happy tune. The trick here is to set aside those gains into safer vehicles before the SHTF. Then after the smoke clears, go on a shopping spree for distressed assets. To my way of thinking, it is only a question of when and how long.
If I had to guess, I would be very concerned that the markets are not going up at this point when this tax reform bill is now nearly a done deal. Which implies sooner , rather than later. I am erring on the side of caution at this point and have the lowest allocation to equities I have ever had in my life.
Last edited by shaker281; 12-20-2017 at 10:38 PM..
This seems to be the norm for both Republicans, and Democrats. Paying down the debt isn't sexy, and doesn't get votes. It is ultimately the voters fault. Yet, a good portion of our budget goes to the interest on the debt. That money could go to something meaningful. However, if the economy continues to grow, more tax revenue should be realized, even with the "tax cuts", and the annual deficit should be less.
This is true if interest rate increases and additional government spending do not equal or surpass growth. Optimally, we get growth without increasing debt , but we know that is never the case and interest rates are set to rise. Inflation will ensure and exacerbate that
Quote:
Originally Posted by LordSquidworth
Once the Chinese debt bubble goes it'll be an interesting time.
The US will not achieve 5-6% sustained growth. Putting it simply, the economy is too big and mature for that. The tax package is merely another gleaming look into the crony capitalism in this country.
If a company saw growth opportunity in demand, they'd have spent the money to get that production going by now. I don't wait for a tax break to expand production just expecting people to be there to buy the stuff. When I see an uptick in demand, I'll meet demand regardless of taxes. Supply driven economics is garbage. Real world business owners rely on demand.
Why does anyone think this will change decades of stagnant/declining wages? It isn't going to, the money will be pocketed by the owners of capital, not labor.
Reality vs idealism!
Unfortunately, it is idealism that got us to this point and reality that will crash the party!
Quote:
Originally Posted by 17thAndK
It's also not a particularly wise thing to do, given the role of US debt in the global financial system. Even the $363 billion over four years that Clinton was able to pay down with his budget surpluses was enough to have negative impacts on bond markets.
Fair point, but balance is still the key. Bond prices/yields aside, too much debt can have a very real impact on growth. I.e., I'd buy the debt of a company with strong growth and 20% debt. Not so certain that I want the debt of a company with slow growth and 50% debt.
Quote:
Originally Posted by Camlon
This isn't really a conflict between supply driven economics and demand driven economics. If the government had taken the business tax reduction and spent it on business services/products then the effect would be exactly the same.
The main issue here is that you should save not spend during good times.
Not entirely certain about that. The impact on debt might be the same, however who reaps the rewards and how that impacts growth could be very different. If the results flow to people that hoard/save it may be less impactful than the results flowing to people that actually spend it all immediately.
Quote:
Originally Posted by rruff
Debt escalation. Not sustainable. Higher incomes would be sustainable.
Your graph also suggests that inflation could put a serious damper on demand. I also suspect that low energy costs across the board have led to a bit of "wealth effect". Definitely not wage growth.
Last edited by shaker281; 12-20-2017 at 10:56 PM..
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