My Views on Financial and Property Markets and the Economy in the Age of Trump & the New Fed

I admit this may be wishful thinking because I don’t want to see another huge crash with credit freezing up all over the world.

“Your look ahead is for rates to rise gradually; my thought was more apocalyptic,” Max Keiser tells me on the Keiser Report. “But in your view, the responsible, the guy people go to for the responsible look at things — so your view is that rates will gradually move higher and that we’ll start to see asset prices reverse and maybe enter what we might call a secular bear market, so stocks and bonds and property are entering a five- to ten-year down turn. Your thoughts,” he asks me. So here we go:

And here is the first half of the interview: In this Era of Inflated Asset Prices, Can the Fed Raise Rates without Causing Financial Mayhem?

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  60 comments for “My Views on Financial and Property Markets and the Economy in the Age of Trump & the New Fed

  1. bev kennedy says:

    There are some very insightful academic studies pointing to issues of concern from alternative lenses
    One is. Financialization. And the other is how corporations became “persons” under the law. And how it has now come to the point where these “persons” like a jury have been given the authority to judge on breaches of consumer rights and protections by the financial industry…..this has enabled very lax oversight of predator banks and financial industry in Canada. But this rug tug of rights and agendas is not limited to the frozen north

    • raxadian says:

      If they are people then they can be fined, they can be arrested, and they can go to jail and they can suffer all negative legal consequences a person suffers while breaking the law.

      I can’t wait for corporations to be forced to do community service!

      • Mike G says:

        I’ll believe corporations are people when Texas executes one.

        • Michael Fiorillo says:

          True, Enron and Arthur Anderson, but that was a long time and one catastrophic financial crisis ago, in which all the perps walked away with their ill-gotten gains.

        • alex in san jose AKA digital Detroit says:

          That’s the benefit of corporations-as-people. A bunch of evil people can get together, form a corporation, do all kinds of evil stuff, then the “person” that’s the corporation takes the hit. The evil people walk away with no repercussions and millions of dollars.

      • HowNow says:

        And military service… If corporations have the privileges and rights of citizens, they should have the obligations (sacrifices). They don’t and shouldn’t have the status and “rights” that they’ve been granted.

        • If corporations are persons then robot (workers) should be emancipated (using AI to define their autonomy). The result of that would be new tax revenues, tax the robots.

    • Nick Kelly says:

      People who wonder ‘how’ corporations became persons apparently have no previous exposure to the history of civil law ( although they may well be geniuses and expert in another field)

      When did they become ‘persons’ at law. A long time ago and it has nothing to do with diminishing humans, or making corporations human, where they could sue for pain and suffering or have their feelings hurt.

      The corporation dates back centuries and arose for the need to extend the business efforts of a group, as distinct from a single owner or partnership. It comes after feudalism when all large projects were undertaken by the king. A lot of it has to do with private ship construction where dozens of partners would be needed and, very important, would have different amounts invested. The modern Torrens system of land registry derives from shares in ships. We take it for granted until we go to buy a house in Italy and find we have to hire someone to prove the owner’s title is good.

      At some point with hundreds of investors in an enterprise that ITSELF needs to contract with suppliers, receive credit, rent premises etc. etc. it becomes impossible to consult each investor. They have shares but in what?
      The simplest solution was to adapt the (relatively) well developed EXISTING law that governed all this stuff between humans.
      Humans were suing each for debt etc. long before corporations existed.

      So one answer is to pretend the ship project is a human.
      So if you lend the project money and don’t get paid you sue ‘Ship Inc’ that ‘person’, not hundreds of individuals.
      The corporation is a ‘legal’ person, it’s a person for business law.
      It doesn’t have human rights.

      I think a lot of the angst about this arises when human persons try to hide malfeasance behind the legal person. That should be addressed.
      But without the ability of hundreds of these LEGAL persons to sell shares, incur debt etc. it is impossible to see how the micro-computers we are all using come about.

  2. Mvrk says:

    Wolf, that was truly an impressive interview. I especially appreciated your views on how this asset bubble we’re in might slowly deflate over time as oppose to popping in another huge credit crisis. The one point I’d argue is when you said the doubling of the standard deduction is a huge benefit, especially for renters. The standard deduction really didn’t double. The “effective standard deduction” increase ($1,600 for an individual), which is the net of the TY2018 standard deduction ($12,000) minus the sum of the TY2017 standard deduction ($6,350), plus the personal exemption ($4,050) that was repealed, is only 15.4%…hardly a doubling by any definition. Nonetheless, I suppose 15.4% is better than nothing.

    • Mvrk says:

      Just to put that all in perspective, the $1,600 effective standard deduction increase would result in a $160 annual tax cut for an individual at the 10% marginal tax rate. The president’s proposed $.25/gal gas tax to help fund infrastructure would increase taxes for the average motorist by about $150/yr (assuming 13,500 miles @ 22.5 mpg). Poof…there goes the tax cut from the standard deduction increase/personal exemption repeal if the gas tax becomes law.

      • JB says:

        MVRK :Good point and don’t forget the possible price increases from tariffs. Over the years ,individual federal taxes (e.g. income and social security) have contributed to a larger percent of total federal revenues while the corporate percent has declined . The shift is quite dramatic.

      • Also taxes UPS, Fedex, etc

    • Bobber says:

      Wait a minute. That can’t be true. Ryan talked about the tax plan on many occasions and never said anything about loss of personal exemptions.

      • Mvrk says:

        Yep Bobber, that was Paul Ryan and a host of other people pulling the wool over the eyes of the American people. They tried to make it sound like the standard deduction was increasing from $6,350 to $12,000, when in fact it was actually only increasing from $10,400 to $12,000 when you take into consideration the personal exemption repeal. Big difference. Big deception. But it worked.

      • Max Power says:

        Yep, Politicians. That was the great “bait-and-switch” move of the tax cut. They totally hyped up the doubling of the standard deduction, but did very little to “advertise” the fact that at the same time they took away the personal exemption – which nullified most of the benefit of the doubling of the standard deduction.

    • Wolf Richter says:


      Yes, I know, and as soon as I said it, I meant to get into the loss of the exemption, which reduces the tax benefit of the near-doubling of the standard deduction, but still leaves a big tax benefit, but time moves fast in an interview, and before you know it, you’re talking about something else. The benefits to renters are still significant, especially in expensive, high-income places like San Francisco — and we were talking about the high-income high-rent places in Cali and NY City.

      Median household income in SF was 90K in 2017. So a marginal tax rate of 22%. So for a married couple the net increase of the standard deduction minus the exemption = $3,200. At a marginal rate of 22% = $704 a year in federal tax savings, without doing anything else. Plus California state income tax savings. In total about $800, a nice gift.

      I discussed this in greater detail here:

      • CA piggybacks much of Federal tax law but I might expect them to break with that

      • MooMoo says:


        You are looking in the wrong place for ‘asset’ bubbles. Sure, property is going to get hammered… and probably over a 20-year time frame.

        But the real ‘asset’ bubble is the bubble in government debt… (yes I know its a ‘liability’… but its carried on pension funds as an ‘asset’.) When THAT pops – – the world of pensions goes with it… and those pensions evaporate.

    • KPL says:

      “I especially appreciated your views on how this asset bubble we’re in might slowly deflate over time as oppose to popping in another huge credit crisis.”

      Mish at often says the very same thing… like 10% down, 5% up, 15% down, 8% up, 18% down, 2 % up…. whereas Hussman feels it will be cut by 2/3rd.

      I plain dunno. I am conflicted between 2 things: I cannot understand how, given the huge debt overhang and with the markets blowing off the central banks, ALL the central banks can implement QE and raise rates without crashing the system (say 30% at least) – markets are presently thumbing their nose at this and the fact that the central banks WILL NOT ALLOW a crash (2/3rd) if they can help it as I am sure they will simply do QE4EVER and implement NIRP and keep the system afloat.

      Basically my thesis is at this late stage in the game, it can only be either a reset or central banksters-controlled economy.

  3. Suzie Alcatrez says:

    This trade war is going to get nasty and might just cause a recession all by itself.

    • Rates says:

      Really? China is not even in the top 10 of steel producers and the big guys like Canada/Mexico are exempted. What’s to stop the other guys from exporting to Canada/Mexico first?

      I wouldn’t be surprised if there wasn’t a meeting where Trump, Xi, etc sat around discussing how to appear to be more populist without actually doing anything.

      Nothing will change. The deficit in both trade and monetary will continue.

    • interesting says:

      there already was a trade war…..the USA lost it.

      • Bobber says:

        The trade war isn’t between countries. I’s between people who make the products and the CEO/business owners. The CEO/business owners won, as they now own 95% of the wealth.

        The CEO/business owners love any distractions from that. US v. China, Russia meddling, Republican v Democrat, sexual harassment, etc. These issues are important too, but certainly less important than the oligarchy taking the fruits of your 10 hour working days, every day. They’ve become too big to fail, and the political and media discourse has become one big “yez master”.

  4. walter map says:

    With all due respect, I do not view financial considerations by themselves to be of particular importance, but largely as they are the drivers of other issues which are perfectly certain to be of truly dire importance, like severe political and economic injustice, cultural destruction, ecological catastrophe, nuclear holocaust, and so forth.

    To be sure, I haven’t met anyone in the Lofotens who puts much thought into these things at all, but be that as it may. In a manner of speaking, winter is here, and given the present state, spring may never come. I will not say au revoir, and instead will say adeiu. May your own paths be as pleasant.

    • Cynic says:

      T.S.I., Walter, or Total Species Insecurity.

      I believe they are studying it at the Pentagon, so all will be well…. :)

  5. Sporkfed says:

    The more leverage the harder the fall will be in asset prices.
    Were lending standards over the last 10 years adequate ?
    Are corporate and household balance sheets able to withstand
    a downturn without selling their seed corn ?

  6. Rates says:

    Credit crisis? I am pretty sure even in the depth of the last “crisis” if your score is 780 and above you’ll still be able to get a loan below 10%.

    A true crisis is when you get zero at rates as high as 20%.

  7. raxadian says:

    Is not a tax reduction is a tax redirection and they are not even doing it right. Budget cuts and highter interest rates won’t cover that hole. Some taxes need to be raised and they need to be raised yesterday. Just the import tariffs the US president wants to do won’t be enough.

    That’s why I think that certain advisor, know as the “voice of Wall Street in the White House” decided to quit.

    I honesty think he did not quit because the president wasn’t listening to him, I think he left because the measures needed to pay for the tax cuts and the subsides won’t be popular and he wants none of the blame.

    As usual everyone wants tax cuts, no one wants to pay the consequences.

    Tax cuts are paid getting the money from somewhere else, that’s why I call them “tax redirection”.

    The traditional way is a mix of cutting government expending, that never works because they always end expending more money each year anyway, raising rates, reducing money in circulation aka less printing money aka get rid of imaginary money (QE unwind). Raixing existing taxes and creating new taxes.

    Hence why there is a talk to speed up the unwind, because the hole left by the tax cuts and subsides needs to be covered now.

    Oh of course the debt is nothing new, but the infamous “0% Interest rates” from years ago made it balloon way beyond than what they expected.

    And these tax cuts and subsides have not helped.

    But don’t worry too much, I think is likely for a bubble to burt, or a crisis to happen, outside the US before a big one does inside the USA again.

    Or maybe I am wrong, c’est la vie.

  8. Grumpy Man says:

    I am the biggest fool ever. Being in 80% cash since 2014 waiting for a proper correction to go all in. Still waiting and looking for investments below fair price without avail. If in fact there will be 5 to 10 years correction, then I may just buy a Ferrari and crash myself into a tree without seatbelt. It’s the only thing I can see as money well spent at the moment, before inflation takes it away.

    • Agnostic says:

      Buy silver, it’s 90% off.

    • Bobber says:

      I’ve been all cash for a long time too. Nothing wrong with sitting back and watching things unfold as you earn a little interest.

      The Fed has automatic reverse QE in place, so there will likely be trigger point in the next year as things tighten. Stock could drop 30% from here and the Fed would do nothing. A 30% drop seems severe, but you have to consider that stocks gained that much in the past year or two. I don’t recall us being in a recession two years ago, when those gains didn’t exist, so why would a 30% drop have any meaningful impact on inflation or employment. A light recession may ensue, but the Fed wouldn’t go crazy over that. I think people are underestimating the Fed’s resolve to reduce financial instability at this point in time.

    • Mvrk says:

      Grumpy Man, think of it this way. Let’s say you’ve been forced to eat McDonald’s hamburgers all your life. If someone puts a five-course gourmet meal in front of you, are you going to feel lousy about all those burgers you ate? Probably not. You’ll quickly forget about all the burgers and think you died and went to heaven enjoying that delicious meal. That’s the same feeling you’ll have when the market corrects 50% and you’re totally in (hopefully) safe cash. ;-)

    • JZ says:

      In 2012 Warren Buffet said any cash more than 20 billion for Birkshire is excess. Around the same time, he said his elephant gun was loaded and his trigger finger was itchy. This year, he said Birkshire has 100billion in cash because the loose credit drives up merger and acquisition prices very high and he found NO good deals.
      By your standard, Warren is a fool.

    • andy says:

      That sucks. Choosing between ferrari and no ferrari can make anyone grumpy.

    • KPL says:

      Did you say you have been out of the markets since 2014?

      “Isn’t it funny (not) that the Fed did exactly the same thing with QE and the stock market from 2009 to 2014? When the Fed stopped that, then the ECB took the handoff and started its own QE program in 2014 with the added wrinkle of negative interest rates (NIRP).”

      But for ALL the central bankers going all in, you would have probably been proved right by now.

      Now that the same central bankers seem to be trying to clamber out of the bigger hole they have dug themselves (and us) into, I expect the price of ALL OF THEM BEING ALL IN will become evident. They however feel they have a magic wand which will make the price vanish.

      The question now is will the central banksters bite the bullet now when the market crashes (UNLIKELY) or dig a bigger hole!

      The other interesting question is if someone goes to cash now, will he be asking the same question 4 years hence?

  9. Nicko2 says:

    Wolf, you are a voice of calm and reason (just too bad about RT – part of Putin’s global propaganda machine).

    And big surprise, in the span of a few days, Trump’s ‘trade-war’ is fizzling out before it even begins; he’s the ultimate paper-tiger. Much ado about nothing.

    No crash. The Dems will win big at Midterms, and the global economy will power forward.

    • ZeroBrain says:

      Funny, I go to RT for my Russian agitprop as well, but will visit CNN/MSNBC/FOX when I’m hankering for USA/NATO propaganda. And Al Jazeera on occasions when I’m tired of both :P

    • M Bryson says:

      Dont under-estimate the power of stupidity at the polls in the mid terms. The man they idolize can do no wrong. His trade war is the punishment they demand for their jobs being sold over seas etc. The stupidity movement is powerful and blind to the economic reality facing them:
      AI/Robots and an economy they no longer are really part of. They are tossed aside by an upper class who has moved on from their problems.

      The ‘caring’ about the middle class ended after the Carrier photo op.

  10. Drango says:

    A credit freeze originating in the U.S. is unlikely. The Fed has seriously distorted the economy in favor of finance, but the Fed also has many weapons to protect the American financial industry in the event of a homegrown credit crisis. But China alone needs more dollars than even the Fed can print. Even the once staid Hong Kong dollar is bending under the weight of China’s dollar needs. And unlike Las Vegas, a credit crisis in Asia will not stay in Asia.

  11. Vern says:

    Why do you (Wolf) appear on “Russia Today”?

    • Wolf Richter says:

      I’ve been interviewed on the Keiser Report since 2012. The Keiser Report runs on RT. Max might like it to run on US channels, but that’s not happening. My connection is with Max and Stacy, not with RT. So if the Keiser Report runs on another channel, I would appear there.

      • raxadian says:

        The Keiser Report and some documentaries is basically all I can stomach from that channel. I found this site thanks to the Keiser Report, I might not agree on everything Max says, but the sites he mentions as news sources are usually worth a read or two, like this one.

        Of course no one owns the truth and one should be very careful to not believe everything they read or see.

        I find important to try to find the truth to not limit yourself to a single news source. But that doesn’t mean they can’t all be wrong.

        Apparently we haven’t learned anything from the days on the Internet bubble in some ways.

        And the fact that the stock market s mostly run by bots nowadays used to worry me, until I remembered people can be very easily fooled too thanks to mere buzzwords.

        Blockchain Wolf Street! Buy the wolfstreet coin that doesn’t exist!

        • Nicko2 says:

          I actually saw Max on the BBC a few years back when he had a show called Oracle. He’s got a good shtick. —but he’s a bit of a perma-doomer, which probably gels nicely with RT and their view of the world.

  12. Michael says:

    Very good interview, I think you are right about the banks being protected to some degree. Except what about all the non bank lenders. I have heard numerous radio commercials specifically for real estate private party lending and entities like Network capital. It seems to me that these type of lenders could be rapidly affected by even a minor economic slow down. there would likely be collateral damage to the banks

    • Wolf Richter says:

      Yes, the non-bank lenders are becoming a big force in mortgages. Non-bank lenders were the first ones to collapse in the last housing crisis. Regulators are starting to publicly fret about them because they’re becoming so large. Note that they weren’t bailed out last time.

      • Gandalf says:

        I remember in the debates about Dodd-Franks when it was passed that lots of people said that it did not go far enough, that it was not as protective as Glass-Steagall had been, that it would not prevent another similar crisis from occurring, and that people were likely to forget the 2008-2009 crisis and another big financial crisis would happen again. We now see regulators easing off their regulation, and a big push to scale Dodd-Franks further back. I am also very skeptical that the Fed will stop their asset inflation by raising rates significantly and offloading QE completely. So a repeat big financial bust seems very much in the cards.

        Finally, going back to something I posted before – America’s ability to continue to sell its debt to the world is fundamentally underpinned by its military dominance, much like that of the Roman Empire. It’s in China’s long range plans to become a dominant military force by 2035, which means likely conflicts with the US. I rather expect well before that they will have stopped buying our debt load. The world will become a very different place when that happens.

  13. Anna says:

    The change to standard deduction/personal exemption helps some high income taxpayers. In 2017 high income earners are subject to personal exemption phase-out so the standard deduction does actually double for them since they don’t get personal exemptions. Most helpful for high income earners in states with no income tax (Florida, Texas, WA) who don’t have a large mortgage or super high property taxes.
    In 2017, taxpayers over age 65 qualify for a higher standard deduction which appears to have been eliminated in 2018 so they benefit the least.
    In 2018, many high income taxpayers can get a child tax credit, which is phased out starting at $400K (MFJ) compared to $110K in 2017.
    Many high income taxpayers who previously we’re subject to high AMT won’t pay AMT in 2018.
    And then there’s the large reduction in income taxes. So, overall big benefits for many high earners, hardly anything for lower income (except those claiming child tax credit).

    • GSX says:


      So NOT Great Again? Im confused…seriously lol! :)

    • Mvrk says:

      Good news if you’re over 65, Anna. That extra standard deduction for those over 65 or blind did in fact survive in the final tax bill that was passed. Married couples over 65 can deduct an extra $2,600 from their taxable income, and singles an extra $1,600.

  14. akiddy111 says:

    “The stock market climbs a wall of worry.” I first heard that term in 1992. I concur.

  15. Enquiring Mind says:

    Not sure where to add this question, so here goes.

    Is there some repository or report that would show how the repatriated earnings are being deployed?

    I’m curious about how much goes into new investment, special dividends, stock buybacks or other places. That could allow some rough look at any differences between professed reasons for the repatriation and the actual practice, to the extent determinable. The answers to those could provide some indications about future economic and financial policy trends and impacts on readers.
    Thank you for any considerations.

    • Wolf Richter says:

      There will be reports to that effect. There were last time, and they were published :-]

      We already have “estimates” of what this will look like. Actual reports will start showing up later this year, I would think. The more encompassing data will likely show up next year. Once I get some data, I’ll post it, for sure.

  16. Gandalf says:

    All that hot air about steel tariffs seems to me to have been mostly about boosting the hopes of Rick Saccone in his special election battle with Conor Lamb tomorrow. Saccone had voted for right to work laws, unlike his predecessor Murphy, so not sure how much that will help him in this unionized steel industry district, especially since Lamb also supported tariffs. We’ll see tomorrow.

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