QUESTION:  Martin– Your models seem to predict a Trump win. Given Trump’s stated preference for low interest rates, how does that jive with rates needing to go up to normalize things and save pensions in the next year or two? Would the Fed have to give in to President Trump?

Thanks!

RK

ANSWER: Keep in mind two things. First, the President has no power over interest rates. Secondly, neither does the Fed. The Fed at best can control short-term rates, but the entire QE was to try to influence the long-end. Additionally, whatever people say when running for office has no real bearing.

Furthermore, keep in mind we published that projection before Trump even announced he was running. So this has nothing to do with Trump personally or what he says or not and it should not be taken as an endorsement. One person cannot change the direction of the world alone. The reason Trump may win is that the Democrats are still in denial. The Republicans have had to swallow their pride. Trump has brought in millions of new people. Hillary has not. The Democrats have not figured out that the grass-roots are fed up with career politicians regardless of party. This disconnect within the Democratic Party has some speculating that the FBI will charge Hillary to clear the way for Biden. That would be a problem because Bernie supporters would get really pissed off. But this is the clash between the rulers and the great unwashed as they see us.

Trump is flexible. He will bend to the problem of pensions and agree that higher rates are needed. So I do believe Trump would be better at the economy for he would make decisions based upon private sector experience rather than theory and dogma from career politicians. Let’s face that much. We have not had anyone in politics with private sector experience for at least 85 years.

We are in a period of deflation right now which means people are hoarding cash and not spending rashly. They do not have confidence in the future so they are holding back plain and simple; saving for that rainy day. Everything goes nuts when they realize government is incapable of controlling anything.

The latest poll now places Trump ahead of Hillary 45 to 42. The storm continues to brew in the Democratic Party and our models show there should be a Republican victory. The Democrats appear to be going with Hillary who has over a 50% rating as being dishonest. On top of that, she is simply seen as the establishment for Wall Street. Then, she thinks she is doing a great job saying she will appoint Bill to run the economy. Isn’t that an admission that she cannot? Trump said she just wants to keep an eye on him.

I wrote a piece for the Wall Street Journal on April 19, 1995 about Bill Clinton’s gimmick to reduce the deficit. What he did was replace long-term debt with short-term to reduce the interest expenditures. That trick will not work this time around. All the polls show that on the question of the economy, the people trust Trump more than Hillary and Bill. It’s just very curious that someone running for President admits that they cannot manage the economy so they will appoint their spouse. For a feminist, that really turns the apple cart upside down.

There is talk that Bernie might run 3rd party. That seems difficult for he would not have the time to get on the ballot in all the states. With over 30% of his supporters saying that they would vote for Trump rather than Hillary, we can can see the fall become interesting. That does not mean that the 70% of Bernie supporters would vote for Hillary. She is still everything they are not and the under 50 crowd are less likely to vote party line. There is a stronger likelihood they would not bother to vote at all. Trump’s supporters are charged and passionate. Hillary’s are not. She has brought in the old feminist supporters, but she is not bringing in the new generation.

It is still far too early to tell. Nonetheless, two of our 4 models project maximum percentages of the popular vote over 60% for Trump. That would be amazing since FDR, Johnson, and Nixon are the only president to exceed 60% since 1900. Still, the Republicans could lose the Senate. Even John McCain is claiming he may lose because Trump is at the head of the ticket. No, he is “establishment” and has not figured out he is the problem. Anyone who has ever encountered him in person will tell you he is a nasty overbearing guy that belittles a waitress. Anyone who does that lacks any style or class and is not qualified for public office anyway.