Classifieds 50% off, use promo code FBkpkPromo The Phuket News Kata Rocks The Phuket News Outrigger Koh Samui Beach Resort
The Phuket News Business News
The Phuket News Phuket | Thailand | World | Business | Q&A | Weird World XML, RSS, Feed
The Phuket News The Phuket News
The Phuket News

Phuket Expat Finance: Trump – the economic pros and cons

From the time Donald Trump announced his candidacy, no one in the media or the general public really took him seriously. After all, that speech on the escalator at Trump Tower insulted immigrants in general, and Mexican immigrants specifically. Surely, such a person could never get elected to the most powerful job in the world?

economics,


Phuket Expat Finance

Sunday 27 November 2016, 02:00PM


What the fallout will be from US President-elect Donald Trump’s economic policies is anyone’s guess. Photo: AFP
What the fallout will be from US President-elect Donald Trump’s economic policies is anyone’s guess. Photo: AFP

We all know the answer to that question, and the man known as “The Donald” now goes by the moniker “President-Elect Trump”.

Regardless of your political affiliation (or nationality), this regime change at the White House will affect you. Like it or not, major events in America tend to affect the global markets, as well as the world economy. So what are the possible economic ramifications of a Trump presidency?

TAXATION

Donald Trump (and most Republicans, for that matter) are proponents of Supply Side Economics – the theory that states when taxes on the wealthy are too high it curtails hiring, but if those taxes are cut the money magically trickles down to the rest of the economy.

In 1980, then candidate George H. W. Bush coined the phrase “Voodoo Economics” for this now fully discredited school of thought. When taxes are cut on the wealthy, the money simply never trickles down. This is not a political opinion, but an economic fact.

If the CEO of Wal-Mart or Apple were forced to pay a top personal tax rate of 50 per cent, or even 60%, would it impact the hiring decisions at those companies? No. In fact, during the period when America’s middle class was “born” (1930s-1960s) the top tax rate ranged between 74% and 91%… and the economy thrived.

The enduring legacy of those tax cuts is the $20-trillion US National Debt (which was less than US$1 trillion when Reagan took office in 1981). Donald Trump’s platform contains more tax cuts, so expect the debt to rise, but don’t expect any of that money to trickle down

SPENDING

Donald Trump has proposed massive infrastructure spending to repair America’s roads and bridges, the maintenance of which have largely been ignored for years.

If Trump is successful at passing some kind of infrastructure program, it would likely be a “big league” success. After all, the federal government has already claimed a number of similar success stories in its history.

Roosevelt’s New Deal included massive infrastructure spending in the 1930s; government spending on WWII in the 1940s was another shot in the arm to the economy; and Eisenhower’s federal highway system carried the policy of federal government-funded public works projects into the 1950s.

Back then, however, there was the aforementioned 91% top tax rates to help fund these endeavours. Infrastructure spending, combined with significant tax cuts, would further balloon the debt.

GLOBAL TRADE

It is common practice for presidential candidates to “talk tough on trade”, and Trump was no exception.

He vowed to build a wall on the border with Mexico (and make Mexico pay for it); bring China before the WTO for currency manipulation; renegotiate NAFTA; tear up the TPP; and improve relations with Vladimir Putin and Russia.

MY STORAGE - Secure, Clean and Cost Effective Self Storage at Jungceylon, Phuket, Thailand

Trade Wars have never ended well for either side, the most famous example being the Smoot-Hawley Tariffs, signed into law by Herbert Hoover in June, 1930. In the words of former Federal Reserve Chairman Ben Bernanke: “Economists still agree that Smoot-Hawley and the ensuing tariff wars were highly counterproductive and contributed to the depth and length of the global Depression.”

Tough talk by past candidates have come to naught once they took office; let us hope the same is true with Trump.

EQUITY MARKETS

Anyone who only looks at daily closing prices might think that equity markets responded well to his election, but as returns began pointing to a Trump victory, the S&P 500 Index futures were trading down as much as -5%, and Asian markets (open for business at the time) were in a tailspin.

Conciliatory words in his acceptance speech stabilized stock markets, but it was the uncertainty of what “President Trump” might bring which sent shares reeling.

There are many more speeches to come, but there will also be policies and actions. As he is not a conventional politician, what exactly a Trump Presidency might bring is still uncertain.

If there are no real surprises, then there is no reason to believe that the initial reaction of the futures markets will repeat itself. Any actions that “spook” the markets, however, will see investors punished.

COMMODITIES AND CURRENCIES

As much as equities dislike uncertainty, precious metals love chaos. As equity and futures markets around the world were plunging on November 8th, gold and silver were soaring.

Again, the moderate voice at the podium that night saw everything move in the other direction, but any trade war, international incident, economic crisis, stock market crash, etc. would be good news for metals.

Likewise, because uncertainty usually results in a “flight to safety” into US Treasuries, any of the above would normally be accompanied by a strengthening US dollar.

However things play out, the new President’s policies will have a profound impact on the economies of every country in the world.

 

For more information and expert advice about investing in stock markets, email Phuket Expat Finance at chatwithus@phuketexpatfinance.com

 

 

The Phuket News
The Phuket News
Comment on this story
* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.
Comments Here:
Username:
Password:
E-mail:
Security:
    Forget your password?

Be the first to comment.

The Phuket News
The Phuket News The Phuket News The Phuket News
The Phuket News
Share this
The Phuket News
Have a news tip-off? Click here
The Phuket News
Related stories
The Phuket News
Phuket community

Recent Comments


Phuket under pressure as tourism growth exposes flaws in hotel sector

Rorri_2 ... none of your business. When you figure out what neo colonialist means and that can be located within context, get back to me....(Read More)


German Papke reveals details of Phuket murder

Bigaresort...it's because it is murder ie when you kill someone unlawfully and with premeditation. It's more of a definition that is easily un...(Read More)


Phuket power chiefs told to speed up cable tangle clean-up

There is only one real and fast solution,cut them all and make new ones for those who complain! SIMPLE!!There will be only a few! Horst...(Read More)


German Papke reveals details of Phuket murder

Why is the polis always say murder when it comes to foreigner's?Just Killing would be enough!Could be manslaughter,Let the judge decide ! Horst...(Read More)


Phuket’s dangerous driving habits sees underpass traffic-flow barrier installed

No wonder As long there egoistic reckless traffic rules ignoring motorists on the road There will be chaos and traffic jams. ...(Read More)


German Papke reveals details of Phuket murder

Can't imagine how somebody could live a normal live day to day knowing what you'd done weeks, months, years before...(Read More)


Phuket under pressure as tourism growth exposes flaws in hotel sector

Jor12, you wouldn't, by chance, run hotels rooms. By the way, you continually use the term "neo colonialist" incorrectly. ...(Read More)


Phuket’s dangerous driving habits sees underpass traffic-flow barrier installed

Because getting the police out to fine dangerous drivers is too difficult...(Read More)


Aussie lifeguards ramp up Phuket lifesaving skills, awareness

Well done that guy, they should put him in charge of many posts, he realises that getting help from other countries is the way forward!...(Read More)


Phuket under pressure as tourism growth exposes flaws in hotel sector

The good old neo colonialist view again. Harsher this, harsher that. This is Asia man, where there is a different mindset. ...(Read More)

The Phuket News
Bangkok Hospital Phuket
PHUKET NEWS
Phuket
Thailand
World
Business
Q A
Weird World
ARCHIVE
POLL
CURRENCY
WEATHER
PHUKET TIDE TABLE
The Phuket News PHUKET LIFE
Phuket Arts
Phuket Community
Phuket Culture
Phuket Dining
Phuket Education
Phuket Entertainment
Phuket Environment
Phuket Health
Phuket People
Phuket Technology
Phuket Travel
Photo Galleries
COLOURING BOOK
The Phuket News PHUKET SPORT
Phuket
Thailand
World
SURF REPORT
PREDICTIONS
The Phuket News PHUKET CLASSIFIEDS
Phuket Buy and Sell
Phuket Jobs
Phuket Property
Phuket Cars and Boats
Phuket Community
Phuket Services
SEARCH CLASSIFIEDS
POST CLASSIFIED
The Phuket News The Phuket News PHUKET EVENTS
Phuket Event listings
Phuket Event calendar
Buy Tickets
POST EVENT
The Phuket News PHUKET DIRECTORY
Phuket Bars, pubs and clubs
Phuket Hotels and villas
Phuket Restaurants
Phuket Yellow Pages
POST LISTING
The Phuket News BARGAINS
The Phuket News ABOUT US
The Company
Distribution points
Subscribe
Advertise with us
Pay for advert
Contact us
CONTESTS
Content Google Map
Site map
Australian Visa Services
 
Currency - The Phuket News   Weather Report - The Phuket News   Surf Report - The Phuket News
LinkedIn - The Phuket News   Twitter - The Phuket News   YouTube - The Phuket News   Facebook - The Phuket News
Copyright © 2017 Class Act Media. All rights reserved. | Website usage terms and conditions | Privacy and Confidentiality Statement.