John Rapley, a contributing columnist for The Globe and Mail, argues that Donald Trump’s “flood the zone” strategy is not only politically ingenious but also poses significant economic risks. Despite the stock market hovering near its all-time high, analysts are warning signs of future trouble multiplying.
The US economy may be brewing a potent mix of trouble, with investment and job creation slowing down due to stalled business investment and constrained labor supply. Wages are accelerating, yet productivity growth is expected to decline, leading to stagflation – a combination of a slowing economy and rising prices.
Investors are starting to hedge against this eventuality by moving their money elsewhere, with European stock markets outperforming US ones and the dollar weakening. The recent surge in gold prices also suggests investors are losing faith in the American economy.
Rapley warns that if Mr. Trump’s policies continue, it could lead to a crisis, impairing the state’s ability to respond quickly, and potentially triggering a recession. As businesses put investment plans on hold, private-equity exit activity slows, and job creation numbers point to an economy in trouble.
The article concludes by highlighting the potential consequences of Mr. Trump’s policies, which may not be immediately apparent but could have far-reaching effects on the US economy in the long run.
Source: https://www.theglobeandmail.com/business/commentary/article-how-to-stop-the-all-powerful-donald-trump-the-stock-market-our-last