Trump is driving us toward a big recession: It will be ghastly — but is it deliberate?

A 2008-style crash may not be far away. It could even be worse — and once again, Republican delusions are to blame

Published August 13, 2019 8:00AM (EDT)


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Americans suffer from frustratingly short attention spans and even shorter memories. Case in point: Following the dark ride of the George W. Bush years, during which there were two wars, apocalyptic terrorist attacks in New York and Washington, torture as national security policy, warrantless eavesdropping and the most catastrophic economic crash since the Great Depression, I was foolish enough to believe Americans would banish the Republican Party to the hinterlands of our politics for a good long while.

I was horribly wrong. Eight years later, 62 million voters recklessly ignored the lessons of 2001 to 2009 by installing an even more incompetent, dangerous and unstable Republican administration in the White House. Donald Trump’s ascendancy isn’t so much a win for him as much as it’s a win for the propaganda efforts of Fox News, talk radio and Russian internet memes, collectively suckering "conservative" voters by bathing them in enough counterfactual nonsense to "neuralyze" all memories of what happened last time around.

That bottomless slagheap of propaganda convinced Trump’s base that the steadily improving economy of the Barack Obama administration was “American carnage,” requiring a return to the stewardship of Republicans who had been responsible for a $1.4 trillion deficit, the collapse of the stock market, more than 800,000 jobs lost in a single month and the near disintegration of both the housing market and America’s auto industry, to name two sectors. 

Sure, why not? Let’s do all that over again — you know, to own the libs.

Per the aggrieved insistence of these forgetful voters, Trump came along and deregulated everything, weakening the post-Great Recession laws meant to curb Wall Street abuses, and punctuated his Bush-era linkage by also authorizing a massive tax cut for the wealthiest Americans without paying for a goddamn cent of it. 

Worst of all, Trump has clumsily staggered beyond the ludicrous economic policies of the Bush years to further destabilize financial markets, including your 401k accounts and the future security of your employment. Specifically, the president’s trade war of choice against China has turned a steadily rising Dow Jones average, through 2017, into an unstable sawtooth pattern with massive single-day declines that are now tempting a full-on 2008-style collapse. 

If you don’t believe me, check out the markets from January to March of 2018, during the months immediately following Trump’s tax cut. Normally, a tax cut would drive the financial markets upward. But in March of 2018, just a few months after the bill was signed, Trump stupidly launched his trade war by announcing 25 percent tariffs on steel and 10 percent tariffs on aluminum, applied to all of our trading partners. From those months onward — including today, as I write this article — the Dow, S&P and Nasdaq have been unstable messes.

At risk of burying the lede, I have a theory that Trump and his cronies may be manipulating and shorting the markets, reaping vast profits off the declines. Every time Trump tweets or blurts new tariff threats or economic bellicosity aimed at China, the market takes a dump. As we all know, Trump hasn’t divested from his business interests. We also know that Trump has manipulated the markets before, based on a massive investigation in the New York Times indicating that Trump engaged in a scheme with his dad, Fred Trump, known as “greenmailing.” 

During the 1980s, Donald Trump became notorious for leaking word that he was taking positions in stocks, hinting of a possible takeover, and then either selling on the run-up or trying to extract lucrative concessions from the target company to make him go away. It was a form of stock manipulation with an unsavory label: “greenmailing.” The Times unearthed evidence that Mr. Trump enlisted his father as his greenmailing wingman.

Seriously, ask around. Even some of his supporters have to concede that Trump is entirely capable of exploiting the bully pulpit to enrich his family fortune, not to mention the fortunes of his buddies. If he wasn’t interested in all that, he would have divested from his business. He didn’t. Now his tweets move the entire market up or down on a predictable and routine basis, making Wall Street ripe for exploitation. 

For example: Just before he tweets something incendiary about China, it’s entirely possible he gives his boys a subtle heads up, triggering brokers to swing into action, betting against the market with short positions on whatever could take the most damage from his trade-war posturing. Not only does it drive down those stock prices, but the entire market, including your retirement savings, takes a colossal hit. 

Trump’s financial disclosures don’t provide enough detail to know what’s really going on, obviously. The documents show that he owns a long list of mutual funds and ETFs, many of which happen to include short positions. While Trump always makes things worse for Trump, it’s unlikely he’d reveal any breadcrumbs in those disclosure forms, and it’s possible that his manipulations and short sales are made through trusted third parties. A serious investigation by the FTC or the House of Representatives might be in order, especially given that Trump could be betting against the American economy. Why else would he so gratuitously destabilize the markets with his trade war?

Bottom line: Trump’s tweets and pronouncements do, in fact, trigger market movement. The open questions are: Is it intentional, and does he profit from it? Perhaps the House Financial Services Committee, chaired by Rep. Maxine Waters, D-Calif., should take a look.

Meanwhile, while Trump brags about the strength of the economy, grabbing up credit for the wins while blaming everyone else for the losses, all the familiar signs we observed before the Great Recession are boiling back to the surface. 

  • Bloomberg, last week, published an alarming story featuring this lede: “The latest eruption in the U.S.-China trade dispute pushed a widely watched Treasury-market recession indicator to the highest alert since 2007.” Experts are directly linking Trump’s trade war with the threat of another recession. Yields on 10-year bonds fell by the largest amount “since the lead-up to the 2008 crisis.” Indeed, it was a drop in yields, nearing an all-time low, that led to Monday’s 400-point stock market decline.
  • Bank of America forecasted that the chance of recession within the next 12 months has risen to around 30 percent. This week, Morgan Stanley forecasted a recession in early 2020, due to the trade war. Goldman Sachs is saying the same. That’d be all Trump.
  • The Wall Street Journal reported this week that middle-class debt is skyrocketing again. “Unsecured loans are back in vogue,” according to the report. Student debt, auto debt and housing debt are on the rise, too. In fact, in the first quarter of 2019, 5.7 percent of personal income was used to finance debt — the same level as 2009, when unemployment was nearly 10 percent.
  • Elsewhere, GDP remains roughly where it was under Obama. Returning to Trump’s inaugural framing of the Obama economy as “American carnage,” it’s worth noting that average GDP growth in 2018 was 2.9 percent, the exact same number as the 2015 average under Obama. If that was carnage, what the hell’s this?
  • Germane to the aftermath of a forthcoming recession is the fact that Trump and the congressional Republican majorities have presided over a spike in the federal budget deficit from $585 billion to a projected $1.1 trillion by the end of 2020. For the sake of contrast, the last Bush-era deficit, for fiscal 2009, was $1.2 trillion. During the Obama stewardship of the economy, the deficit dropped by nearly a trillion dollars. Trump’s 2020 shortfall, however, will essentially return the deficit to where it was during the worst part of the Great Recession, making it nearly impossible to pass any kind of economy-rescuing stimulus should we end up back in a recessionary hole.

Again, 62 million Americans apparently blanked out on which gang was in power the last time the economy tanked, not to mention which gang is in power now — in other words, which gang rescued the economy, and which gang is driving it into the ground again. Are Trump’s tariffs helping American consumers? Nope. We’re paying the price. And we’ll pay an even heavier price when the economy grinds to a metal-on-metal halt, possibly next year.

And before any Trumpers rappel down into the comments to accuse me of cheerleading for a recession, here's some full disclosure: The 2008-9 recession destroyed me financially. Losing my house to foreclosure was perhaps the least stressful of the downsides I experienced. 

Nevertheless, I and many others who also suffered haven’t forgotten was what going on during the latter half of the 2000s. The events of the past couple of years look awfully familiar, thanks in part to Trump, the Republican Party and millions of apparent amnesiacs whose glitchy memories and nearsightedness appear to be driving us into another brick wall.

If there’s any upside to this impending catastrophe, it could this: Maybe enough Americans will snap out of their collective torpor in time to vote accordingly next year.

By Bob Cesca

Bob Cesca is a regular contributor to Salon. He's also the host of "The Bob Cesca Show" podcast, and a weekly guest on both the "Stephanie Miller Show" and "Tell Me Everything with John Fugelsang." Follow him on Facebook and Twitter. Contribute through LaterPay to support Bob's Salon articles -- all money donated goes directly to the writer.