Modern Economics: Trumponomics, Politics and The Import Export Bank…

President Trump has expressed support for the continuation of the Import/Export bank. This has seemingly shocked a few people from conservative circles because the modern conservative doctrine has been to oppose the I/E bank.

However, Trump’s position hopefully does not come as a surprise to CTH readers because we identified a year ago how President Trump’s economic policies would seek to refocus the original intent of the Import Export Bank.

The key aspect is to return the IE to its “original intent“; not the bastardized Wall Street construct that exists today as a result of corrupt DC economic policies driven by the Wall Street’s legislative priorities purchased by multinational banks and corporations.

For more than three decades Wall Street has corrupted the economic policies emanating from DC.  The corrupted economic policy created the two economies previously discussed and the disconnected the engine of Main Street from Wall Street.  Yes, we originally shared this discussion in April of 2016, a year ago:

In 2009 the popular conservative opinion was to declare the Supreme Court’s Citizens United decision a win for “our side“. Of course, the decision ultimately opened the floodgates for unlimited corporate spending in elections via the new Super-PAC approach.

In 2016 90% of all American’s polled believe there is too much special interest money in politics, and both political parties no longer need the financial support of the electorate. Corporate lobbyists were always problematic, but now in a post CU world they control almost every aspect of electoral politics – including who wins elections. Citizens United wasn’t a win, its consequence was a major fail.

Within that reality you find one of the synergies between candidate Donald Trump and former candidate Bernie Sanders. The popular insurgencies supporting each candidate rail against the corrupting corporate financial influence. Party leadership? Meh, not-so-much.

Of course it would only take RNC and DNC rules changes, ie. self-regulation, to stop the problem of unlimited corporate funding; but when the political party leadership has that much access to money, well, they have no interest in regulating it away. Ergo, legislation becomes the only option and the legislators would be writing law against their own financial interests…. Yeah, FUBAR.

To wit, one of the shifts amid the “common sense” electorate is the general perception that Citizens United is no longer viewed as a win.

However, with all the discussions on bad Trade Deals there’s also another shift coming into focus, the Import/Export bank.

a17b2-hip-replacement-recall-briberyThe traditional “conservative” opinion has been the Import/Export bank is a crony capitalistic tool expending taxpayer money to fund corporate bottom lines. Indeed, there is still a good argument in that perspective.

However, with more and more manufacturing jobs being lost, and with both Sanders and Trump talking about the consequences of the trade deals, the I/E bank’s original purpose deserves a revisit.

If the Vietnamese government wants to increase its manufacturing base they can, and have, subsidized private infrastructure to achieve it.

Meaning the government of Vietnam has given companies free land to build their plants; subsidized the construction of those plants, provided cheap labor and even given free utility improvements (water, electricity) to run those plants. In some countries the companies pay almost nothing for energy use.

All these subsidies lead to a ridiculously low production cost for the goods they manufacture. These goods then hit the global market at a substantially lower cost.

South Korea, Tiawan, Indonesia, India, Japan and China all do the same thing.

In China, the government is so reliant upon GDP growth, they have essentially built entire industrial complexes targeting specific industry. Over time, the operating entities (semi-private companies) pay back the government for the up-front and often continual subsidy. The business model, albeit fraught with corruption and bribery, is a symbiotic relationship between government and business.

This level of government contribution is not even close to “free market” capitalism, but it’s also not socialism – it’s an entirely different type of nationalist economics intended to create a product cost so low a nation can compete, then control, the entire market.

This is what the U.S.A. is competing against. This is also the auspices underlying the argument that the U.S. needs to enter into trade deals like the TPP in order to have some kind of influence at the trade table.

Setting aside the Trade-Deal aspect for a moment, lets just look at the government subsidy part.

How can a U.S. “free market” manufacturer compete against a South Korean manufacturer on the same product if the subsidized Korean enterprise encounters little to no costs in their start-up operations? It would be impossible to compete.

That’s the basic reason for the U.S. to have an import/export bank. The I/E is essentially the offset for the U.S. manufacturer to try and level the playing field.

The U.S. I/E acting as a low interest loan subsidy for the U.S. manufacturer who needs capital (money) to build manufacturing infrastructure, and compete against a subsidized national company in the global market.

There is a very good reason for continued support for the Import Export bank under this framework. However, as critics eloquently outline, some major U.S. manufacturers have become dependent on the I/E low interest loans merely to inflate their profit margins and increase their stock evaluations on Wall Street. Again, this is constructive criticism.

However, elimination of the I/E bank, or a decision to defund the I/E bank completely is a death knell to the original intent. Instead of eliminating the Import Export bank, it needs legislative reform to insure the beneficiaries of the loans which originate from it are being means tested to insure valid use.

The I/E bank should not be exclusively used by big corporations, but should instead be available to smaller start up manufacturing companies who are capable of providing fundamentally sound U.S. jobs while the current U.S. Trade Deals are renegotiated as both Sanders and Trump outlined.

As President Trump now resets the manufacturing base for U.S. industry to revitalize, there is an opportunity for ‘start-up’ manufacturing to increase with new facilities, new infrastructure and new components for a new-era of U.S. modern manufacturing.

Yes, venture capitalistic (VC) enterprise can often provide that funding mechanism for start up costs; however, at their core most VC’s are investment funds within Wall Street financial enterprises or their affiliates.  Main Street, in a modern era, needs a solid source of non-Wall Street financing that is more stable and not as subject to being yanked back during financial crisis situations.

Wall Street is inherently tied to global markets, therefore the money Wall Street might loan start-ups is tied to the activity of multinational banks and multinational corporations. This is a cord which needs to be cut in order to have safe, secure and stable financing for small and mid-sized manufacturing entrepreneurs on Main Street.

Just like the awakening with the Citizens United decision, the IE Bank position is where the corruption within the traditionally conservative sales pitch is again noticed.

Common Sense Conservatives (CSC), Trump supporters, are able to see the nuance and not fall into the trappings of a zero-sum game. It’s not either/or any more. It’s now 2016 when the wording “smart trade” replaces the older no longer relevant “free trade”.

International trade (1950-2000) is now global trade (2000 – forward), and with the rising of third-world economies the political economic approaches require paradigm shifts. Conservative political positions of the Reagan-era, need modification in the Trump-era.

Unfortunately, just like Citizens United, Wall Street NOW benefits from a political shift and welcomes the elimination of the U.S. Import Export bank because the global government-subsidized infrastructure is almost fully established.

The fulcrum of balance in U.S. Manufacturing is now is the process of full tilt toward overseas dependency. Through the use of derivative bets on third-world economies, Wall Street now benefits from more globalization, not less. Goldman Sachs is more than willing to replace the Bank of China (in the capital market within China) by loaning money to Chinese manufacturing companies.

Look closely and you’ll see almost all the hedge funds are leveraged (derivative market) against the U.S. positions. Meaning, those hedge funds will do better if the U.S. manufacturing base shrinks, and the global manufacturing (GDP) increases.

Simultaneously there’s a significant uptick in private bond-market defaults. Domestic private bond originators (borrowers) are having a tougher time paying back the bondholders (Wall Street Brokerage Houses / Banks) and many are requesting renegotiated agreements. [Within the private bond market these are the same basic elements that led to the housing crisis via CDO’s (collateralized debt obligations)].

When the best play is to bet against your own country, you can be assured a crisis of intense proportions is about to happen. This is the backdrop for the billionaire class battle playing out behind the scenes at the very highest level of industry and banking.

There are actually Wall Street economic nationalists like billionaire Carl Icahn who are willing to join forces with Main Street billionaires like Donald Trump to fight against the billionaire globalist investors who now dominate on Wall Street.

The globalist perspective is also the broader economic reason behind Wall Street’s opposition to Donald Trump.

[*Insert Little Note* Remember, Trump is Mr. real estate – yet Trump didn’t collapse with the housing market. Why? Because Trump doesn’t play the bond financing game.]

Bottom Line – We cannot afford to see the elimination of the Import Export bank, until we have reestablished our U.S. manufacturing base. Those “conservatives” politicians who would advocate for the elimination of the I/E Bank, are selling out the U.S. on behalf of their Wall Street banking donors.

This Trade and Economics reality is one of many examples why Donald Trump pulled-in almost all of the high-information economic Democrats and beat Hillary Clinton.

This trade and economic reality, nationalist economics, is also why we see billionaire patriots like Wilbur Ross, Carl Ichan, Steve Mnuchin etc. willing to work on Trump’s America First agenda for free.

Patriotic nationalism is also Patriotic Economic Nationalism.

When you allow yourself to remain above the daily media flak and chaff you are able to see how focused the Trump economic policy is.  America First might seem complex, but it really isn’t – it’s common sense principles absent of special interest influence.

 

This entry was posted in Big Government, Big Stupid Government, Budget, China, Economy, Legislation, media bias, Mike pence, Predictions, President Trump, Secretary Tillerson, Trade Deal, Uncategorized. Bookmark the permalink.

55 Responses to Modern Economics: Trumponomics, Politics and The Import Export Bank…

  1. scott says:

    Well thought-out and written.

    Liked by 14 people

    • Donald says:

      Indeed! And some of us that thought we knew free market capitalism from A to Z forgot to add that all-important proviso pertaining to any learned principle: ALL THINGS BEING EQUAL! Of course, we know in life that all things are not always equal, and most of our real life strategies require serious adjustments in their implementation.
      But for the record, pure, free market capitalism would be the best outcome for the entire world. Maybe President Trump can at least create the circumstances worldwide that might bring us closer.

      Liked by 1 person

  2. Donna in Oregon says:

    Is this article talking about the Derivative bubble based on debt? (see Forbes, FEB 10, 2017 @ 04:30 PM 11,085 The Little Black Book of Billionaire Secrets “Bank For International Settlements Warns Of Looming Debt Bubble.”) Some economic articles say it is $555 Trillion Derivatives debt set to implode worldwide.

    Liked by 1 person

    • starfcker says:

      Derivatives can’t implode on their own. Somebody has to pull the pin. The lesson from 2008 was, there is no backstop. Absent a bailout, you’re not getting paid. So nobody will pull the pin, with Trump in office.

      Liked by 4 people

      • SharonKinDC says:

        Read up on the ‘bail in’ policies enacted by many Western nations…

        Like

      • Donna in Oregon says:

        Thank you for answering. I think you are right but I have difficulty understanding why the International banks and the US banks keep doing it. If Derivatives aren’t worth anything why do it?

        I know it is hedge against debt, and it has something to do with Corporate debt and possibly bond markets. Is this the other reason US banks avoid lending to businesses and US interest rates are artificially low? Corporations borrow money from the Fed and buy back their stock at a lower interest rate. So this is debt that pays off with higher stock prices? Shell game? Confusing. Is the I/E bank supposed to pick up the slack?

        I understand that Pres. Trump would like to jump start the economy with I/E and have reciprocal taxes with trade to even the playing field. But I believe Wall St. doesn’t do something for nothing. Maybe I am not smart enough to get this. Frustrating!

        Like

  3. SonFlower says:

    Uhmmm….we just used the MOAB on Afghanistan, Syria was bombed recently, Russia, Ryancare, China, taxes, prediction Trump will be impeached, and what is the MAJOR point and urgency of this post? I’m confused.

    Like

    • Lburg says:

      An hors d’oeuvres. Dinner will be served at the moment of President Trump’s choosing. (I’ll have the beef, please.)

      A lesson we will need within a short period of time to understand the next paradigm shift. (and so we won’t be spppooooked when the MSM says PDT is in collusion with Wall Street, the drum beats about Jared are renewed, we are told our best interests are not being served and a renewed Citizens United law suit makes it way through the courts….all the way up to ….. oh yeah….Judge Gorsuch and Ruth The Slumberer.)

      Liked by 4 people

      • Too Real says:

        Get a real clue…don’t just pipe off because you are a troll. Use real substance.

        Like

        • Lburg says:

          Love the substance and tone of your response. Thanks for the lesson.

          Liked by 1 person

          • Too Real says:

            It all started on election-night television. The Hillary Clinton victory party, which had begun so festively, was transformed by her defeat into a weep-fest – and, in some cases, a middle finger-fest.

            Up until that night, I had been pessimistic about Trump’s chances of winning, which is why I actually felt sorry for the anguished Hillary-bots. There but for the grace of God (yes, I believe that God saved the republic that day) went I. I had anticipated that it would be I mourning – not for a candidate, but literally for the nation. A Hillary victory would have crushed the Constitution, I have no doubt. I would have been devastated.

            With Donald Trump in the Oval Office, one might expect me to be dancing on the graves of our vanquished foes, but I am not gloating. Yes, it took me days to stop basking in the afterglow of unexpected rescue, but it has taken me weeks to reluctantly conclude that the Democratic Party, its leaders, and many of its followers are worse than deranged. They are evil.

            Since the election, Trump Derangement Syndrome has been exhibited in serial episodes of recounts, electoral college chicanery, and now a wall of obstruction at every turn by the Democratic Party in Congress – not to mention violent protest.

            Had the election been decided differently, however, would it not be we (or at least I) who would have sought every conceivable remedy to reverse or mitigate the disaster? Would I not be suffering from Hillary Derangement Syndrome? The answer is…no. There is no moral equivalency here.

            Liberals cannot fathom that there are better and more effective ways to solve social problems than by the use of government force. As conservatives, not only do we believe that the government should not solve every such problem, but we recognize that in many cases, it cannot solve them. It only makes them worse.

            As conservatives, we believe that every exercise of government power diminishes the powers and rights of the individual. Some of those exercises are necessary, but in recent decades, the exercises of government power have become abuses.

            I might have accepted that liberals are, after all, only mistaken in their quest to do what is good for America – except that it is becoming ever more clear that they hate America. They sincerely believe that America is evil and that they must destroy it.

            Accuse me of Liberal Derangement Syndrome if you will, but in the aftermath of the election, liberals have revealed their true colors. Their speeches are filled with hate and obscenities, on top of which they litter their venues, burn cars, break windows, and batter innocent people who disagree with them

            Liked by 2 people

            • Southern Son says:

              It took you Weeks, After the Election, to come to These Conclusions!?
              I hate inform you, but you are still Months, Behind!
              Good news, is that This is the Right Place, to Start to Catch Up.
              Nay, I say the Only Place!
              Sit back, and listen to the Tree.

              Like

          • Curry Worsham says:

            I think TR’s comment was directed at SonFlower’s confused comment.

            Like

    • CathyMAGA says:

      Trump is not going to be impeached. I don’t know who’s filling your head with that gobbledegook but they are wrong, and so are you for repeating it.

      Liked by 8 people

    • Random Comment says:

      If you listen to the WH Press Briefing from earlier today, there were a number of questions probing the EXIM Bank issue seeking to characterise it as being part of a series of platform reversals. Sundance provides here some detailed analysis against which you might consider any (misguided) criticism.

      Liked by 9 people

    • ALEX says:

      We actually hold more then one thought at a time…It’s a timely and excellent article that speaks to the well rounded discussion found on this site…Would you like a buttercup…

      Liked by 11 people

    • benifranlkin says:

      to educate peeps like u who are looking up their rectospectroscope

      Liked by 5 people

    • missmarple2 says:

      The urgency is because the hysterical right are ranting about Trump keeping the Export-Import Bank. Zerohedge was going on about it this morning, as well as the lefty news media.

      If you aren’t interested, just scroll n by or go to another site.

      Like

  4. bertdilbert says:

    Businesses in the USA are basically tax collectors. I assume they are in other countries as well. So why would government not help in building their tax collection system?

    Liked by 3 people

  5. ALEX says:

    Seems like Sundance and President Trump were channeling each other…..

    From President Trump WSJ interview Wednesday

    Trump denounced the Ex-Im Bank on the campaign trail, but he reversed his position during an interview with the Wall Street Journal on Wednesday.

    “I was very much opposed to Ex-Im Bank, because I said what do we need that for IBM and for General Electric and all these – it turns out that, first of all lots of small companies will really be helped, the vendor companies, but also maybe more importantly, other countries give it,” Trump told the newspaper.

    “And when other countries give it, we lose a tremendous amount of business. So instinctively you would say it’s a ridiculous thing, but actually it’s a very good thing and it actually makes money. You know, it actually could make a lot of money,” he continued.

    Liked by 6 people

    • ectrimm says:

      Yeah, FNMA and FHLMC made money too!! Look what that wrought.

      The only way to “drain the swamp” is to drain the swamp. Changing the “intent” on a government agency does nothing to drain the swamp because it will still be there when Trump leaves office. The next president/Congress will simply change the “intent” to something that suits them.

      In the mean-time, the I/E bank under a Trump administration will simply be used by “small” manufacturers to create the same market distortion that it created when it was serving “large” manufacturers–pick your poison because it all leads to the same result.

      Yeah, history does not repeat, but it sure does rhyme (attributed to Twain). The power to subsidize is the power to destroy.

      Liked by 1 person

      • America has been severely damaged by NAFTA and globalist. Is it wise at this point to pull the rug (cheap capital) out from under America just to prove a point. Not in my opinion.

        When we have a stronger more stable recovery, when the manufacturing (synergy of 2 or more pieces) base is returning and producing jobs, then we can reasses the situation.

        I’m not for Boeing, GE and the like abusing the tax payer, but it is also a part of the ecosystem for MAGA.

        Liked by 2 people

    • Reality Wins says:

      ALEX!!! Now you’ve gone and done it!
      “Seems like Sundance and President Trump were channeling each other…..”
      Now everyone is going to know that Sundance is President Trump! You guys didn’t just think he was tweeting, did you?

      Like

  6. LibertyVibe says:

    I admit, I was having a tough time a week ago. But I see it now. Not worried anymore.

    Liked by 1 person

    • ALEX says:

      It’s actually a failure of our press and the fact so many news sources are just advocacy sites…If people didn’t read the WSJ article I quoted the President in just above, then how would anyone know why President Trump did this…

      Liked by 3 people

  7. Sedanka says:

    Very refreshing to read Sundance’s perspective on this after all the “true conservative principles” negativity from the pundit class.

    Liked by 4 people

  8. Bob says:

    I’m was against the IE before I was for it.

    Like

  9. Random Comment says:

    In a past life I utilised EXIM Bank support (usually via guarantee, sometimes debt) as part of financing packages used to fund the purchase of high value mining equipment manufactured in the USA and exported around the world. EXIM played a role in ensuring the customers of US manufacturers were able to secure finance for the purchase. Such transactions earn fees and lending margins for EXIM plus they work to promote US exports. In the absence of EXIM the competition would have an advantage.

    Liked by 5 people

  10. duchess01 says:

    “…it’s common sense principles absent of special interest influence.” Exactly! This article is golden – for those hard-pressed to understand what all of this means – re-read the article – it is why Wall Street has been winning – and Main Street has been losing – it is the global economy vs the national economy – it is what the globalists have been striving to attain over the last 30 years – or more –

    Candidate Trump said we would get tired of winning – President Trump said we would tell him we cannot take anymore winning – and now – we are about to see what Trumponomics does to reinvigorate our economy – granted there is much to learn and more to contemplate – however, Sundance has laid it our masterfully – how it all works to our disadvantage – and how President Trump can and will turn it around to the advantage of Main Street – this is one fight we MUST win!

    Liked by 5 people

  11. neilmdunn says:

    Food for thought; I was for getting rid of the Ex-Im back cuz of Boeing, et al . Thanks for your presentation and its clarity.
    .

    Liked by 1 person

    • Agree, Neil. But I feel a fit of sarcasm coming on and can’t stop it.

      Finally, WE get to pick winners! When a government agency charged with helping one or more businesses has a limited amount of money to lend, that’s when winners and losers get picked.

      The Bank made about $20 billion worth of loans and guarantees in 2015. Yes, Boeing was in there. But no more big boys need apply. All we have to do is use the magic words Main Street, jobs, and Level Playing Field, and OUR friends will be on their way. It appears that that $20 billion goes to … banks, who do the actual disbursement of the money that the Winners get.

      Things must have gotten pretty bad for a while, b/c Congress passed a bill in 2002 requiring an auditor to determine how much money was actually going out. The auditing mechanism was finalized in 2007. Whew! Just five years! Moving at the speed of Government!

      I stopped reading the audit, which was very repetitive, at about 20 pages. I did not look for an Annual Report, which would have told us who the 2015 winners were.

      The essay above mentions “nationalist economics” and doesn’t even notice the irony that this is a synonym for fascism. Government “help” for businesses, whether large or small, is every bit as good as welfare for the poor. Using other people’s money (taxes) starts out looking pretty good, but becomes a cesspool of corruption in short order.

      Liked by 1 person

  12. The timing of this article maybe a precursor to what’s coming, a derivative debt bubble bust. This will make the housing crisis look small when comparing the two.

    It would also make sense because I remember an other Sundance article and comment section that talked about waiting to buy a house because the real estate market would most likely tank.

    I think this is what Jim Rogers and Marc Faber talked about when they said the worst is yet to come. I think I’m in fear mode so sorry for the gloom and doom😉

    Liked by 1 person

  13. quintrillion says:

    Can we mfg the incandescent bulb again now?

    Liked by 9 people

  14. freddiel says:

    Excellent article, SD. This is a topic that I know little about. Whenever I read one of your posts, I imagine the whole Trump team reading the same words. I appreciate your analysis and explanation.

    Like

  15. suteibu says:

    End the bank and create a better vehicle for small business. To think that this bank is not part of the corrupt DC swamp is fooling yourself. Do you really think that Boeing or GE can not raise capital at the cheapest market rates to finance operations?

    Much of the money is lent to foreign governments or entities on the agreement that they use the money to hire American businesses for projects or to directly purchase items. This is pay-for-play – buying access to developing market – straight up.

    Lower corporate taxes and reduce regulations to make Americans more competitive. Tax products from countries that buy access to markets instead of caving to the globalists. America is still the largest quality marketplace in the world. We should not have to use nor be subjected to global extortion.

    Liked by 1 person

  16. In August 2014, my father wrote a great blog piece in support of the Export-Import bank due to its assistance to U.S. exports. He began:

    “Conservatives oppose renewal by the Congress of the Ex-Im Bank whose guaranteed loans have facilitated exports and created and preserved American jobs while costing the government and taxpayers nothing at all. There are plenty of government programs that ought to be cut. Why should the one selected be one that costs taxpayers nothing and does create jobs. At the same time, conservatives are silent about the World Bank, a world socialist bank which the U.S. created and financed at a cost of hundreds of billions of dollars and continues to do so to this day. This is ideology being promoted at the expense of U.S. taxpayers and U.S. workers.”

    http://www.idealtaxes.com/post3802.shtml

    Liked by 4 people

  17. No snark necessary, SD! In my opinion, suteibu is entirely correct. If Marco Rubio stands for this, I’ll have to re-think my opposition to him!

    Like

    • cozette says:

      You trust empty suit lil Marco’s analysis over Trumps? Trump who got his business degree from the premier Ivy League school for business back in the day when education was rigorous? Trump who built a multi billion international business? Trump who has championed economics that benefit America and American workers for decades? Trump who along with Nader and Perot were the economic mavericks who predicted NAFTA would be a disaster while the elites in the GOP and DNC sneeringly mocked them? The fact that Marco is opposed to Trump shows what a bought and paid for shill he is. Sad.

      Like

  18. NJF says:

    Very informative SD, thank you.

    Like

  19. DHarvey says:

    Every morning,cup of steaming coffee by my side, I open my computer and start my day with CTH eagerly anticipating the chance to be schooled on a new topic. This article is typical of Sundance’s tutorials and I thank you from the bottom of my heart Sundance. It is so wonderful to get past the media BS and start to learn the ‘inside baseball’ angles on topics such as the Import/Export Bank.Thanks so very much. Well done.

    Like

  20. JoAnn Leichliter says:

    Hmmm… My impression was that the Ex/Im Bank had been restricted to loans below a certain amount– thus still helping startups, but avoiding being a welfare source for larger corporations (e.g., Boeing)–not abolished. Was I wrong? What, exactly, will we now see the Ex/Im doing? Sorry if I am a bit dense.
    Citizens United was, I think, a correct decision that has had consequences many of us do not like. These things happen. It is up to us, then, not the courts, to deal with those consequences that we do not like. No one said it would always be easy–or even possible.

    Like

  21. flawesttexas says:

    No fan of IE Bank…but can see why Trump wants to hang on to it

    Like

  22. F104 says:

    This is just another reversal from the campaign trail. Any unfair advantage a foreign manufacturer has can be negated by a tariff. Trump hasn’t talked anymore about that either. The import bank was always set up to do just what it is doing now. Welfare for the rich while the middle class pay for it.

    Like

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