It has in the past been “the financial crisis”, “the Euro crisis”, “Greek debt”, “Italian banks”, “the fiscal cliff”, “Brexit” and so on. Every one of those events an extension of Keynesianism and its debt-leveraged monetary magic tricks. But now the buzz phrase is “trade war”, a different kind of animal.
The brewing trade war with China is different. With every damn one of the events noted above we here in the anti-hype environs of nftrh.com (and before it, biiwii.com) have tried to maintain perspective about why it was occurring (Thing 1, which we had anticipated in essence if not in the exact way it played out) or why they would not prove long-term bearish or bring on the end of the world (Things 2-6).
Indeed, we often note that inflammatory market events prove most often to be sentiment resets and buying opportunities as the herd pukes up its asset holdings. Keynesianism after all has an elasticity to it despite its obvious and one-day terminal faults. The elastic keeps stretching to this day.
But the Trump-China trade war issue is a fundamental event taking place outside of Keynesianism and the all-controlling grip of US and global Central Banks. We in the US are now in the realm of fiscal policy produced by politicians with agendas, which replaces the Fed’s monetary policy produced by egghead economists with agendas.
The US Central Bank is (very) slowly but surely removing the beneficial tools that jimmied the system long after they were used to bail out the financial crisis damage that was instigated by previous Central Bank excesses (hello Greenspan). And now into the breach steps Trump, the man taking the US back to the good old days of my youth when America was still an industrial giant with thriving steel and coal industries and men cranking handles on manually operated machines.