For the ninth straight quarter in a row, this past quarter's gross domestic product grew by over 2%. At 2.1%, our Q2 GDP growth surpassed expert expectations, which ranged around the 1.8% mark, even as it fell from our first quarter growth of 3.1%.
Although no quarter of the Trump administration has reached the peaks of quarters or annualized GDP growth of Obama's presidency, it has avoided his pitfalls of quarters and annualized negative GDP growth. (However, today's Bureau of Economic Analysis report did make some major downward revisions to 2018 economic growth rates.) Somehow despite the president's bombastic trade policy and dovish badgering of the Federal Reserve, consumer confidence has remained apace and kept the economy afloat.
Most notable about the BEA's GDP report is the global backdrop it was launched against. China's GDP has sunk to its lowest in more than 25 years thanks to Trump's trade war, and yet another decade of low growth, low employment, and low inflation have pulled Europe back in reaching distance of yet another recession.
Naturally, the United States continues to stand out as the last great anchor of the global economy. Given Trump's capitalist instincts on domestic industry and regulation and his Luddite instincts on international trade, this makes sense. What doesn't is why he'd want to sabotage success partially of his own creation.
As the BEA notes, consumers, not investors, kept the economy growing this quarter, as inventory investment, exports, and nonresidential structures, equipment, and software investment all fell. Even personal saving, which translates into investment, slumped from $1.37 trillion to $1.32 trillion.
Last month's surprisingly good jobs report shows that employers aren't letting manufacturing fears get the best of them just yet, and the longest bull market in history continues to catapult the markets into record highs as investors await with baited breath for the Fed to slash the federal funds rate. Yet all of this raises the question as to why Trump, backed by the entire stock market, wishes to play poor politics with bad monetary policy and threaten the very raison d'etre of his presidency.
In the past half century, our federal funds rate has plummeted below 2% just twice, with the rate skyrocketing into the double digits during the monetary salvation of Paul Volcker after the stagflation of the Carter administration and the growth and recovery of the Reagan administration. The Fed's recent rate hikes have brought interest rates back within the (extreme) lower bounds of historic interest rates, not above them. If anything, the Fed has remained dangerously dovish. Their refusal to raise interest rates more during the stable economic growth and half-century record-low unemployment of the Trump administration robs America of its best tool to stabilize the economy in case of a recession — which, statistically speaking, we're years overdue for.
We've defied the global odds and temporal ones. If the leveraged loan bubble bursts and derails us into a recession, we're already screwed in our ability to cut historically low interest rates and infuse cash back into the economy. Given Japan and Europe's negative interest rates, we can't bet on anyone else on the planet to save us. Trump ought to take the victory and scale back his pressure on the Fed and keep this trade war focused and brief.
Our economy's been lucky this far. But we can't bet on consumers bailing us out forever.
https://www.washingtonexaminer.com/opinion/our-economy-continues-to-beat-the-odds-why-is-trump-threatening-it
2019-07-26 13:39:00Z
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