Punched in the Face

Bill Bonner, writing today from Baltimore, Maryland

“That’s it. I’m voting for Trump.”

Such were the words of [a member of our own household] when she got back from the grocery store on Monday.

“I got a single bag of groceries. I’m sure it would have cost me about $50 a few years ago. Now, it’s $120. It’s no wonder Trump has so much support.”

With these thoughts the country veered away from ‘more of the same’… to… more of the same. And today, we celebrate the exquisite blockheadedness of our great democracy.

The stock market reacted yesterday… anticipating easier credit. The Dow rose more than 1,500 points. And the world’s 10 richest people ended the day $64 billion dollars richer.

During the four years of the Trump Team, 2016-2020, the US saw the greatest wingding of government spending in history. The federal budget went from $3.8 trillion in outlays during Obama’s last year, to $7.2 trillion in Trump’s last year. The nation had never seen anything like it… with trillions out the door and down the drains in stimmies, PPP loans, and the like.

And then, as if that weren’t enough, the Biden Team came into office and added another $1.2 trillion of boondoggles and giveaways.

What happens when you add that kind of money to the economy? Milton Friedman, recently channeled by Elon Musk, explained:

Inflation is made in Washington because only Washington can create money, and any other attribution to other groups of inflation is wrong. Consumers don’t produce it. Producers don’t produce it. The trade unions don’t produce it. Foreign sheiks don’t produce it. Oil imports don’t produce it. What produces it is too much government spending and too much government creation of money and nothing else.

Chad Champion adds empirical evidence:

A recent study out of MIT showed that “the overwhelming driver of that burst of inflation in 2022 was federal spending, not the supply chain.” Recall that there was about $7.5 trillion in additional spending from March 2020 when COVID hit, through December 2022.

Trump planted wicked seed. Biden (and Harris) fertilized it and reaped the bitter harvest. Price increases showed up the year after Trump left office, with inflation ramping up to a 7% annual rate in the first quarter. In June, 2022, inflation hit a 9% rate. And while the rate of inflation has come down since then, the effect of sustained inflation at relatively high rates has raised prices across the board.

During the Biden years, the cost of energy rose 34%. Car insurance went up 56%. Hotels 45%. Peanut butter, 41%. The price of the basic Ford F-150 went from $30,000 in 2019 to $39,000 today — up 30%. The price of a new house rose from $380,000 in 2019 to more than $500,000 today — a 25% increase.

More than any human being on the planet, Donald Trump was responsible for these price increases. He was where the buck should have stopped. Instead, he passed out trillions of bucks. These are the bucks that raised consumer prices… and turned people against the Biden Team, helping Donald Trump retake the White House.

And now, apart from the personal wackiness and unpredictability of the man himself, the Trump Team will stick with the Primary Political Trend... which is toward more spending, bigger deficits and more debt. Investment markets know what time it is. Barrons:

Treasury debt gets ‘punched in the face’

The Treasury market, arguably the world’s financial backbone, is seeing yields erupt higher as investors respond to the big shifts that could come from a second Donald Trump presidency. This isn’t a buying opportunity. The yield on the 10-year note, a metric that sets rates on mortgages and credit cards, leapt Wednesday to close at 4.425%, its highest end-of-day value since July, from 4.290% on Tuesday.

Bloomberg:

US Treasury yields surged — with the 30-year rising the most since the global flight to cash in March 2020 — as investors piled back into bets that Donald Trump’s return to the White House will boost inflation.

Donald Trump is, after all, a “low interest guy.” As a leveraged New York real estate speculator, he understands as well as anyone what artificially low interest rates can do for rich people with financial assets. But as we’ve seen, ultra-low rates have a wretched effect on the real economy and real people with real jobs.

That is the indiscreet charm of American democracy. The politicians do the wrong thing for the wrong reasons. And the public, bloodied and abused, then re-elects the scoundrels who did it to them.

Regards,

Bill Bonner

Bill Bonner, writing today from Baltimore, Maryland

“That’s it. I’m voting for Trump.”

Such were the words of [a member of our own household] when she got back from the grocery store on Monday.

“I got a single bag of groceries. I’m sure it would have cost me about $50 a few years ago. Now, it’s $120. It’s no wonder Trump has so much support.”

With these thoughts the country veered away from ‘more of the same’… to… more of the same. And today, we celebrate the exquisite blockheadedness of our great democracy.

The stock market reacted yesterday… anticipating easier credit. The Dow rose more than 1,500 points. And the world’s 10 richest people ended the day $64 billion dollars richer.

And then, as if that weren’t enough, the Biden Team came into office and added another $1.2 trillion of boondoggles and giveaways.

What happens when you add that kind of money to the economy? Milton Friedman, recently channeled by Elon Musk, explained:

Inflation is made in Washington because only Washington can create money, and any other attribution to other groups of inflation is wrong. Consumers don’t produce it. Producers don’t produce it. The trade unions don’t produce it. Foreign sheiks don’t produce it. Oil imports don’t produce it. What produces it is too much government spending and too much government creation of money and nothing else.

Chad Champion adds empirical evidence:

A recent study out of MIT showed that “the overwhelming driver of that burst of inflation in 2022 was federal spending, not the supply chain.” Recall that there was about $7.5 trillion in additional spending from March 2020 when COVID hit, through December 2022.

Treasury debt gets ‘punched in the face’

The Treasury market, arguably the world’s financial backbone, is seeing yields erupt higher as investors respond to the big shifts that could come from a second Donald Trump presidency. This isn’t a buying opportunity. The yield on the 10-year note, a metric that sets rates on mortgages and credit cards, leapt Wednesday to close at 4.425%, its highest end-of-day value since July, from 4.290% on Tuesday.

Bloomberg:

US Treasury yields surged — with the 30-year rising the most since the global flight to cash in March 2020 — as investors piled back into bets that Donald Trump’s return to the White House will boost inflation.

That is the indiscreet charm of American democracy. The politicians do the wrong thing for the wrong reasons. And the public, bloodied and abused, then re-elects the scoundrels who did it to them.

Regards,

Bill Bonner

If you’re from New York—or know anyone there—you’ll probably agree: most New Yorkers are fed up with crime, the outrageous cost of living, government incompetence and corruption—and, yes, the rats.

But the fact that a hard-core socialist like Mamdani is their favorite pick to solve those problems tells you that most voters have no idea why any of it is happening.

Their hatred of Donald Trump—and a steady diet of MSNBC—has made them blind to the obvious: it’s the Left’s policies creating these problems. You have rent control shrinking supply by forcing landlords to pull units from the market, union giveaways jacking up the cost of transportation, zero-bail laws putting criminals back on the streets, and so on and so forth.

Markets are having themselves a moody little week.

The Dow’s off 1%, the S&P 500’s down 2%, and the Nasdaq — where the AI darlings dance — has stumbled nearly 4%.

Even the refuge assets are catching cold: gold glitters less, and bitcoin, ever the high-strung teenager of finance, is down nearly 8%.

At the moment, traders aren’t sure what to make of it all.

Trump’s tariffs are under review at the Supreme Court, Zohran Mamdani’s socialist experiment is about to begin in New York City, and the AI trade — Wall Street’s favorite bedtime story — is between plot twists.

It isn’t hard to see why young people are looking for an alternative.

This cohort came of age through financial crises, inflation, a pandemic, trillion-dollar federal debts, chronic political deceit, a rough job market, predatory credit, expensive degrees with dubious ROI, and rents that make homeownership a punchline.

The status quo clearly isn’t working for the young. In that vacuum, socialism seems “cool,” so why not try it?

Decline will be felt by the economy on a lag and could be what ends up torpedoing his second term, along with his tariffs and the greatest bubble in history way overdue to burst in the next few years.

I objectively expect the music to stop while Trump is still in office, and no president gets re-elected in a bad economy (or his VP Vance), and this should be the worst since 1930-33.

If this decline had occurred right after he entered office, he wouldn’t have been blamed for it, or not as much. But after a full year+ and his tariffs appearing as a trigger, he will very much end up being blamed.