mises.org / Brendan Brown / November 23, 2016
Can Trump-economics prevent the asset price inflation now infecting the global economy — with its origins in the radical monetary experiment under the Obama Administration — from moving on to its late deadly phase?
Two Options: “Economic Miracle” or “More of the Same”
According to many popular narratives in the market-place since Election Day, the implicit answer is yes. Either an economic miracle (i.e., a period of renewed economic growth) or a dose of old-style monetary stimulus will do the trick, we are told.
Neither of these reprieves would likely be permanent. But, as the advocate told K in Kafka’s “The Trial,” full acquittal is not an option; the best outcome to be hoped for is indefinite postponement, the second best is provisional postponement.
An economic miracle would achieve the best outcome — at least until the Fed again inserted a monkey wrench into the machinery of the economy (as Alan Greenspan did in the late 1990s); further inflationary monetary easing could bring about the second best option (though this will make the final bust even worse in the end).
Judging by the market’s response to the election, it appears the idea of a reprieve (and an economic miracle) continues to be popular among those hoping for a “soft landing.” Fewer seem to be placing their trust in more monetary inflation (at least if we’re judging by the weakness of gold and the strength of the dollar found in the market right now).