Now that Trump is president, what’s next?

Friday, November 11, 2016

By Farrokh Langdana, Director, Executive MBA Program & Professor of Finance and Economics 

Faculty Blog: business.rutgers.edu/langdanamacro

I wish my blog from April 2016, "Donald Trump and Angry Americans" was not as prescient as it turned out to be. Regarding the future, here are two possible scenarios.

Scenario 1:

Keep in mind that I have been saying that "every 7th comment by Trump actually makes sense – it's those other six that are poison." For example, every 7th comment would include diatribes against the high statutory (and effective) corporate taxes here relative to, say, Ireland, or the state of our infrastructure (Newark airport is an abomination – my word, actually, he called it "horrible"), or the overburden of excessive government regulation, and so on.

If the other six comments were just for "posturing" to his masses, and he really means to deliver just on those "7th" comments, then we may be OK. 

Scenario 2:

If, the other "six comments" are not for posturing, his disciples do not realize that, and they hold his feet to the fire. In that case we have a problem. 

For example, just distorting global trade will also shut down capital inflows and without these, we will be forced to go back to Quantitative Easing to fund our deficits. Very few politicians out there seem to understand the fact that trade and capital flows are inter-linked...in fact, this is why I signed the letter with 370 “Economists against Trump.” (In the list of economists, they switched my last name with my first.)  Long bonds are already flashing warning lights.

So, do we worry?

Not yet. This is yet another exogenous shock. Angry Americans want their country back. Many of the Angry Americans are angry for good reason, as I explained in my blog – they are not all unreasonable people. This is yet another Peasant's Revolt, a la Brexit [see blog: The Brexit Effect].  

Donald Trump's biggest challenge will not be the Democrats, or ISIS, or immigrants, or African Americans, or women – it will be his own supporters who now expect him to deliver on all his promises. 

If it's only every 7th promise that he delivers, this country will soar. But if he delivers on all of them, then we will indeed be in trouble.

If this happens, let's meet and have one grand reunion in that one place where nothing goes wrong, and all is good, and night never falls, and our Rosa is always Cruel but Fair, and the coffee is always hot and free....Welcome to the Powerhouse: Rutgers Executive MBA.

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