Trumped! Why It Happened And What Comes Next, Part 2 (The Peace Deal)

When it comes to the economic future, a Trump presidency could bring either a shitstorm or salvation. Regrettably, the odds of the former are immensely the higher.

That’s because Trump is a welcome, but extremely unguided missile. On the one hand, his great virtue is that he is a superb salesman and showman who has captured the GOP nomination and has a serious shot at the White House with absolutely no help whatsoever from the Washington/Wall Street establishment.

So unlike any other candidate in recent memory, he owns his own talking points; is not saddled with a stable of credentialed advisors schooled in three decades of policy error and failure; and has the hutzpah to trust his own instincts——many of which, especially on foreign policy, are exactly the rebuke that Imperial Washington and its legions of parasites and racketeers so richly deserve.

On the other hand, the Donald’s policy thinking, if you can call it that, is thoroughly inchoate. His policy pronouncements amount to little more than spontaneous eruptions of sentiment, prejudice, hearsay, bile, applause lines, wishful thinking and disconnected non sequiturs. That’s where thoughtlets like Muslim bans, mass deportations, a Trump Wall on the Rio Grande, paying off the national debt, 40% tariff barriers, obliteration of ISIS and numerous other stray verbal hand grenades come from.

Yet occasional wild pitches are not really the problem, and the cynics are surely correct in predicting that Trump will excise most of them from his patter even before the GOP convention. The real problem is that Trump has no detectable economic philosophy or policy framework, and it is in that arena that he could go careening off into a cacophony of misfires, mistakes and statist mayhem.

To wit, Trump has already said that he likes the Fed’s low interest rates, is considering a minimum wage hike, thinks social security and medicare should remain untouched, will rebuild the military, intends to drastically increase spending for veterans, wants to slash income taxes on corporations and individuals, thinks a big infrastructure program is warranted, plans to spend tens of billions on border security and the Wall and will drastically hammer $2.2 trillion of imports in order to bring jobs back home.

Not only is most of that unaffordable, counter-productive and wrong. More importantly, Trump’s mish mash of economic policy utterances thus far fails to address why the Washington/Wall Street/Bicoastal/Bubble Finance status quo is failing main street so badly and causing 90% of Americans to realize that they are not winning economically anymore.

The heart of what went wrong is the lethal combination of free money and free trade that has been practiced ever since Greenspan panicked after Black Monday in October 1987. That is what has gutted the fly-over economy while gifting casino prosperity to Wall Street, Washington and the bicoastal elites, as I documented in Part 1. (click here for Part 1)

But as I indicated yesterday, there is a sliver of hope if Donald Trump does not capitulate to mainstream policies and is willing to set aside his potpourri  of shibboleths and panaceas in favor of a disciplined and coherent game plan that builds on his bedrock political insight that American families are losing the economic battle. To repeat, there is a way forward for the self-proclaimed world class deal maker to move the whole mess out of the hopeless paralysis of governance that now afflicts the nation.

A President Trump would need to make Six Great Deals.

A Peace Dealwith Putin for cooperation in the middle east, defeat of ISIS, withdrawal from NATO and a comprehensive worldwide disarmament agreement.

A Jobs Dealbased on slashing taxes on business and workers and replacing them with taxes on consumption and imports.

A Federalist Dealto turn back much of Washington’s domestic programs and meddling to the states and localities in return for a 4-year freeze on every single pending regulation and statue.

A Health Care Dealbased on the repeal of Obamacare and tax preferences for employer insurance plans and their replacement with wide-open provider competition, consumer choice and individual health tax credits.

A Fiscal Deal to slash post-disarmament spending for defense, devolve education and other domestic programs to the states and cities and to clawback unearned social security/medicare entitlement benefits from the affluent elderly.

And a Sound Money Deal to end the Fed’s war on savers and retirees, repeal Humphrey-Hawkins and limit the central bank’s remit to providing last resort liquidity at a penalty spread over market interest rates based on good commercial collateral.

Under what would in effect be a restoration of the original vision of Carter Glass, who was a storied financial statesman and author of the 1913 enabling legislation, the Fed’s authority to conduct open market operations and unlimited money printing would be eliminated. And its liquidity backstop would be limited to “narrow banks” which just take deposits and make loans, and have nothing to do with Wall Street trading, underwriting, hedging, derivatives and other forms of financial gambling.

Needless to say, this all sounds like radicalism relative to the prevailing system of Casino Capitalism and the Big Government status quo. But all of that is in for a rude awakening, and soon.

That’s because the Bubble Finance status quo as we know it is on its last legs. With each driblet of “incoming data” it is evident that a new recession is just around the corner. With each limpid trading session on Wall Street it is also evident that most carbon units have vacated the casino and that the robo-machines are running out of chart points to chase. That means a big market dive is coming soon.

In fact, a recession, a market crash, an explosion of deficit projections and, for good measure, double digit increases in next year’s health insurance premiums and copays will be hitting the headlines before the final Hillary/Donald debate duals of the fall campaign. It is this impending perfect storm that offers Trump the chance to hang 30-years of failed policy on Hillary Clinton as the insider totem, and to bombastically demand in the patented Trumpster style a clean sweep of the Washington/Wall Street/Federal Reserve policy mess.

I know from personal experience and long observation that it has to start with a Peace Deal. That’s the secret to unlocking the entire Washington policy gridlock and the resulting drift toward national bankruptcy, which otherwise will prove unstoppable. Indeed, nothing can change until at least $200 billion is whacked out of the defense budget, and under the circumstances ahead that could easily be done.

That propitious opportunity for peace is the emerging worldwide Great Deflation. It is taking down the Red Ponzi in China already and is administering the coup de grace to Russia’s third rate, New York SMSA-sized oil, mineral and wheat based economy. At the same time, the next US administration will be grappling with recessionary trillion dollar annual deficits while the socialist enclaves of European NATO will face fiscal burial in a renewed eruption of public debts that already average nearly 100% of GDP.

The key to a global Peace Deal is renunciation of Washington’s encroachment on Russia’s backyard in Ukraine and the former Warsaw Pact nations; and a Russian/Washington/Shiite alliance to encircle the Islamic state and enable Muslim fighters from Syria, Iran, Iraq and Hezbollah to finish off the butchers of the mutant Sunni Caliphate.

The NATO renunciation part of the deal is already in Trump’s wheelhouse because he thinks he can make a deal with Putin anyway, and has had the common sense to see that NATO is obsolete. What he needs to further understand is that Russia is incapable of threatening Europe and has no designs to do so.

Moreover, it is Washington, not the Europeans, who insisted on the pointless expansion of NATO. And it was Washington which betrayed George HW Bush’s sensible promise to Gorbachev in 1989 that in return for his acquiescence to the reunification of Germany NATO would “not be expanded by a single inch”.

There is even a bonus presidential debate point for the Donald on the latter matter. The betrayal of the elder Bush’s pledge was initiated by none other than Bill Clinton in the midst of his political crisis during the blue dress affair. Do not doubt the Donald’s capacity to put that one straight to Hillary.

Likewise, Trump is already half way there on the ISIS threat. Unlike the neocon adventurists of Washington, he has welcomed Putin’s bombing campaign against the jihadist radicals in Syria and recognizes that the enemy is headquartered in Raqqa, not Damascus.

God willing, it is to be hoped that he somehow comes to understand that the Iranians have a justified grudge against Washington for its historic support of the Shah’s plunder and savage repression; for CIA aid to Saddam’s brutal chemical warfare against Iran during the 1980s war; and for Washington’s subsequent demonization of the regime and false claims that it is hell-bent on nuclear weapons—–a charge that even the nation’s top 16 intelligence agencies debunked more than a decade ago.

To wit, the way out of the bloody mess in Iraq, Syria, Yemen and Libya—-all of which are projects bearing Hillary’s support and even inspiration—–is a rapprochement with Iran’s able and moderate statesman, President Hassan Rouhani, who has just received another wave of political reinforcement in the recent elections.

Someone needs to tutor the Donald on the great General Eisenhower’s pledge to go to Korea and make peace immediately after the election in 1952, which is exactly what he did. Likewise, the presumptive GOP candidate should pledge to go to Tehran to “improve the deal”, and this time Trump even has the plane!

Yes, “improving” the deal might be positioned as somehow strengthening Obama’s “bad deal” on the nuclear accord, but that would be the diplomatic fig leaf for domestic political consumption. The far broader purpose would be to bury the hatchet on the general bilateral relationship between the US and Iran, and to secure Rouhani’s agreement to a leadership role in the above referenced Muslin-led ground campaign to extinguish ISIS and liberate the territories now controlled by the Islamic State.

An “I will go to Tehran” pledge by Trump could electrify the entire mideast policy morass and pave the way for early US extraction from its is counter-productive and wholly unaffordable military and political intrusion. The fact is, the Islamic State is on its last leg because of US and Russian bombings, $30s oil and its own barbaric brutality. These forces are rapidly drying up its financial resources, and without paychecks its “fighters” rapidly vanish.

Indeed, ISIS is now so financially desperate that its fighters are literally disappearing. That is, it is shooting its wounded and selling their organs on the black market.

Needless to say, no army of fighters has ever prevailed or even survived by harvesting its own flesh. And especially not when confronted by an opposing force of better trained, better equipped, air-power supported fighters motivated by an equal and opposite religious fanaticism.

Accordingly, a Trump-Putin-Rouhani alliance could very readily celebrate the liberation of Raqqa and Mosul by July 4th next year, along with an history-reversing partition agreement to cancel the destructive Sikes-Picot boundaries of 1916. The latter would be superseded by Shiite, Sunni and Kurdish states, respectively in their historic areas of Iraq and a shrunken state of Alawites, Christians and other non-Sunni minorities in Syria , with protectorates in the north and east for Kurds and Sunnis.

At that point, Trump could put on his own “mission accomplished” pageant by bringing home every last American military personnel now stationed in the middle east, either overtly or covertly and wearing boots on the ground or not. And he could do so from the deck of an aircraft carrier that had been withdrawn from the Persian Gulf as part of the comprehensive Peace Deal with Putin and Rouhani. The Persian Gulf would be an American Lake no more.

The Donald might even be positioned to collect his Nobel Peace Prize on the way home.

Before then, however, he would also be in a position to collect some giant domestic political plaudits that could be married with the defeat of ISIS and peace in the middle east and Europe. To wit, Trump should promise to sign legislation day one permitting families of the victims of 9/11 to suit the Saudis for their losses.

Nothing could better bring closure to the vastly exaggerated domestic terrorist threat than the simultaneous eradication of the Islamic State and mutli-hundred billion lawsuits against the alleged 9/11 puppeteers hitting the headlines day after day.

Also, nothing would do more to provide political cover and impetus for the balance of the Peace Deal.  That’s because the indigenous terrorist threat in Europe is not sponsored, supported or funded in any manner by the nations of the Shiite Crescent. Instead, it is an extension of the mutant jihadism of radical Sunni and Wahhabi clerics.

Needless to say, even the unspeakably corrupt and arrogant princes of the House of Saud would get the message when the 5th Fleet leaves the Persian Gulf and the Trump/Putin/Rouhani alliance takes out its proxies in Syria and the Islamic State itself. In short, the financial lifeblood of terrorism would dry up—-whether the Saudi royals remained in Riyadh or decamped to Switzerland.

The essence of the great Peace Deal required to save the American economy is an end to procurement and R&D spending by the Pentagon and a drastic demobilization of the 2.3 million troops in the regular armed forces and national guards. And that can happen under the auspices of a global military “build-down” agreement and freeze on all further weapons exports.

Bankrupt governments in a world where NATO has been decommissioned, the Jihadi terrorist threat quelled and the middle east stabilized will absolutely be interested in a defense “builddown” and global arms reduction agreement. And there is no one better qualified to lead a sweeping military cost “restructuring” deal among bankrupt nations than the well experienced Donald Trump.

Regards,

David Stockman
for The Daily Reckoning

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