Bill Maher wishing for recession to oust Trump – likely?

“Real Time” host Bill Maher doubled down recently on his desire for the U.S. economy to fall into recession in hopes of blocking a second term for President Trump – telling his panel of guests any hardship that results would be “very worth” it. The ever smirking Bill Maher stays true to his comedic style by speaking condescendingly at middle-class America. But we think Bill Maher is serious, he wishes harm to America, after all, he wouldn’t suffer much. I suppose he believes he knows what is best for America. Nevertheless, News Forecasters asks, what will the economy look like just prior to the 2020 U.S. Presidential election?

This is an important issue because most voters tend to vote pocketbook issues, and the economy has been one of Trump’s main signature accomplishments of his presidency. If the economy falters, it could kill any second term hopes for Trump. There have been several high profile people that have suggested just this. Bridgewater founder Ray Dalio says there’s a 40% chance of a U.S. recession before the 2020 election. He sites an ongoing fight between the U.S. and China that threatens global trading activity and pushes back investment decisions among businesses. The recent sharp decline in interest rates has typically been emblematic of a potential economic downturn.

Allianz Group chief economic advisor, Mohamed El-Erian, accurately describes what is happening in an era of deglobalization, brought on by Trump’s Trade War. Justification of a Trade War is another subject. El-Erian explains that the reason rates are falling in the U.S., is a result of them having fallen elsewhere globally. Money is pouring into the U.S. bond market to pick up the higher U.S. rates – this also is forcing up the Dollar which may hurt U.S. exports. Hence these declining rates are not necessarily indicating a recession, though for sure some contagion to the U.S. no doubt will occur.

Employment in the U.S. has remained strong, however recent PMIs (Producers Manufacturing Index), tell a tale of two economies. The U.S. and the rest of the world. PMIs tend to track the economy 6 to 12 months in advance. The PMIs in the U.S. are remaining relatively steady and strong, both in services and manufacturing. PMIs globally are heading down and more specifically in Europe. Central banks are combating this global downturn with easier money – lower rates specifically in the areas of concern, Asia and Europe. Again contagion to the U.S. no doubt will occur.

America is facing a critical decision in the 2020 Presidential election. Will Americans continue with support for free-market capitalism, though having a corporatocracy flavor. Or, socialism – similar to Europe with its behemoth social state. For sure a political divide. The latter being quite dubious for business. In the run-up to the election, some businesses will take a wait-and-see approach, potentially causing more negativity in the U.S. economy.

Will the economy crash like it did in 2008? News Forecasters argues no. One of the key aspects of the 2008 crash was counterparty risk. The return of capital rather than the return on capital. In 2008, counterparty risk caused many institutions to pull the plug quickly, exacerbating the plunge. Central banks have a pretty good handle on this today. The ink in central bank printing presses is always charged and ready to go to stop any counterparty risks. What it does to longer-term currency debasement is another subject.

What will the economy look like just prior to the 2020 Presidential elections? Well if you like the economy today, you will like it then. Some in the bottom half of the U.S. economy may argue that today’s economy is not good enough for them. In any case, the U.S. economy will be, positive though stagnant at near current levels, waiting for the outcome of the elections. Of course, a single unpredictable global event might cause a panic – geopolitical, natural disasters just to name a few. You can let your conspiracy theories run wild here. However, one cannot trade the markets waiting for that once in a lifetime event.

Sorry, Bill Maher, and thankfully for the U.S. middle-class, your wish for a recession most likely will not happen. You will have to win an election the old-fashioned way, have a better candidate, have better policies that the majority of the people want. What the people want is another issue. As said before, America is at a crossroads in 2020.

A video presentation of this subject:

 

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