Albert Edwards On The Trump Recession: “Yields Will Fall To Minus 1% As Helicopter Money Funds The Deficit”
by Tyler Durden
ZeroHedge.com
Nov 18, 2016
In his interview with the Hollywood Reporter’s Michael Wolff, Donald Trump’s chief strategist, Steve Bannon made one particularly notable statement. When discussing his vision for the economy, he answered with the following explanation of how he views the interplay of monetary and fiscal policy under president Trump:
“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
There is just one problem with Bannon’s comprehensive vision to inject $1 trillion in the economy: absent a central bank backstop to soak up the soaring deficits, rates will explode uncontrollably as the furious bond vigilantes – awoken after nearly a decade of being frozen in carbonite – return and wreak havoc after years of impotent inactivity, sending yields soaring, in the process making any fiscal stimulus plan impossible, while the economy tumbles into a stagflationary recession.
Which brings us to the latest note by SocGen’s Albert Edwards, in which he rhetorically asks if “a continued US Treasury bond rout will mean Trump is in for a big surprise?”
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