The heartbeat of MAGAnomics is Main Street USA. Keeping in mind we have suffered through three decades of economic and financial policy that was specifically structured to the benefit of Wall Street (globalists) over Main Street (nationalism); back in 2015 and 2016 when Candidate Trump started to put specifics on his economic proposals we were able to map out some likely possibilities.
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All significant economic changes take years to fully mature. However, because it was easy to identify where nationalist economic policy would run into conflict with the prior globalist data-trends, we were able to predict a series of economic disconnects.
The primary disconnect is where Main Street inflation, wage growth and GDP growth, would be disconnected from the Federal reserve monetary policy. Any Fed action would impact Wall Street results (sad trombone); but the disconnect that was caused by 30-years of diminished Main Street value (U.S. investment went overseas), and would mean MAGAnomic policy would grow the internal U.S. economy regardless of the Fed action.
Because the Main Street economy was intentionally uncoupled from the paper economy; and because the investment class went global with their finances; once President Trump unleashed the nationalist blue collar economic engine, the economy would self-sustain.Because the domestic U.S. economy is then growing; and because Trump’s policies put the stronger rate of return domestically; the off-shore investments of Wall Street would begin to feel adverse impact. The wealth of the U.S. is no longer being spread globally; POTUS Trump focuses on Main Street; that brings the investment back to the U.S.
So naturally there was going to be a period where the off-shore (global) Wall Street investment products were going to lose value. Wall Street had to drop in value as asset equities were re-positioned. However, as investors chase the best rate of return; and as Main Street continues expanding; the investment money flows back into the U.S. This is the part of the economic growth timeline we are currently experiencing.
It’s only “unexpected” if you don’t accept the way MAGAnomics has fundamentally shifted, re-prioritized, the U.S. economy. Unfortunately, almost all modern economists have: (A) never been taught about Main Street economics; or (B) have totally bought into the false premise of a global economy, meaning a U.S. ‘service-driven-economy’, as the only option.
If you understand the basic elements behind the new dimension in American economics, you already understand how three decades of DC legislative and regulatory policy was structured to benefit Wall Street, Multinational corporate interests, and not Main Street USA. The intentional shift in economic policy is what created distance between two entirely divergent economic engines to the detriment of the American middle-class.
President Trump has reversed 30-years of trade and economic policy that was specifically structured to favor multinational corporations and multinational banks within Wall Street.
MAGAnomics puts the focus, the primary economic activity, back into Main Street corporations and smaller U.S. banks and credit unions. Real business growth happens at a street level, business-by-business, job-by-job, company-by-company. The paper economy, the investment class, follows the path of greatest return… that brings investment back to Main Street. Again, that’s our now; that’s what is happening around us.
U.S. companies who have actual connection to a growing U.S. economy can succeed; based on the advantages of the new economic environment and MAGA policy, specifically in the areas of manufacturing, trade and the ancillary benefactors.
Meanwhile U.S. investment assets (multinational investment portfolios) that are disconnected from the actual results of those benefiting U.S. companies, and as a consequence also disconnected from the U.S. economic expansion, can simultaneously drop in value even though the U.S. economy is thriving. (more)
Now, inside this massive Main Street machine, there are individual sectors and individual industries, almost like individual pistons, that are secondarily impacted by parallel policies focused directly on their sector. Consider the auto-sector…
The EU has attached themselves to the Paris climate treaty. Additionally, Canada has attached themselves to the Paris climate treaty. However, Mexico and the U.S. refused the sign-on to the agreement…. now we are seeing the impact.
Build a vehicle in the EU or Canada and the vehicle is subject to manufacturing standards as established by the Paris treaty. [Toyota is an example of risk exposure]
Now it must be emphasized the risk exposure is limited to production changes that are mandated by agreed upon compliance standards. However, an increasingly more demanding emissions standard means engineers may have to use smaller four cylinder or hybrid engines to stay compliant.
When those foreign companies are faced with American consumers who do not like little engines in their more preferred larger vehicles this presents a problem. The only way around the issue is to move production to avoid the regulation.
Two years ago BMW recognized they were exposed to the Paris accord, and moved to put a production facility inside Mexico. Additionally, due to pre-existing tariffs on SUV’s (and the restrictions within the Paris treaty), German automakers BMW, Mercedes and Volkswagen made the decision to manufacturer vehicles inside the U.S. and export (even to their own markets) the larger American autos.
[In a few more years German gear-heads will be demanding U.S. built engines in their autos; which is funny considering the exact reverse was true only two decades ago…]
Simultaneous to announcing we would not join the U.S. to the Paris climate treaty, President Trump announced his intent to remove the Corporate Average Fuel Economy (“CAFE”) standard that mandates a certain threshold of U.S. auto companies must make smaller fuel efficient cars that few Americans actually like. {Current Status}
In part, this no-longer enforced CAFE mandate, was the reason why GM scuttled their small vehicle facilities in Canada and the U.S. The fact that no-one liked the little sedans was the primary issue; but the vehicle was also being made to reach the fleet requirement within the CAFE regulation.
As a result of all these convergent policies, more and more auto companies are building their international assembly facilities inside the U.S. Building in the U.S. without all the various Paris regulations (and TPP mandates) means greater flexibility in the entire operation. Small engines, large engines, low emission or higher emission production is all possible within the U.S. Hence, EU auto companies are expanding their investments.
One of the reasons the professional political class hate Trump is simply because he applies common sense policy built upon the cornerstone of America-first. Decades of pontificating political economic policy are dispatched; and the American economic engine roars.
Lower tax rates, smart regulation, expanded U.S. investment opportunity, and larger Main Street economic growth is the policy assembly behind MAGAnomics…. and guess what, it’s working.
(Via CNBC) January’s super strong jobs report and a solid manufacturing survey on Friday showed that recession worries may be overblown and slowdown fears are not impacting corporate hiring or dampening manufacturers’ sentiment.
The economy added a surprising 304,000 new jobs in January, well above the 165,000 expected by economists. Wages grew by an annual 3.2 percent, and were even higher for nonmanagerial workers with a 0.4 percent monthly gain.
“The labor market is still scorching,” said Ward McCarthy, chief financial economist at Jefferies. “If you look at the payroll data, the economy continues to pound out job growth. Wage growth is for real.”
ISM manufacturing was 56.6, well above the consensus of 54.2, but the important new orders component rose even more to 58.2 from 51 in December. A number above 50 reflects expansion, and while off recent highs, economists had expected the number to slow down even more. Consumer sentiment was also reported Friday and was significantly lower at 91.2, but it too beat expectations. (read more)
