by Frank Ryan | January 09, 2019

The Pelosi Economy?

There is a paradox brewing in the United States that will impact all of us for this year and perhaps decades to come. The more liberals are successful with hurting President Trump’s agenda the more they damage themselves, the recovery, and our Nation’s health.

On November 8, 2016, Donald Trump was elected president of the United States. It was an overwhelming upset which has yet to be accepted in so many quarters in the nation.

Beneath the drama playing out in the far left is an economic conundrum that has yet gone unnoticed.

On election night 2016 stock market futures plummeted in reaction to the shocking election of Donald Trump.  The next day however the stock market gained over 250 points and hit a record high during the day.

Since that historic day in 2016 the stock markets have risen extensively by almost every conceivable measure be it the Dow Jones industrial average, NASDAQ index, or the S&P 500.

Almost every commentator and financial expert note that markets hate uncertainty. They believe that the market was reacting to that uncertainty and the removal of the uncertainty caused the markets to rise after Trump’s election in 2016.

What the commentators failed to mention was that markets hate interference as much as they hate uncertainty. The election of Donald Trump marked the end of that uncertainty as well as the beginnings of the unraveling of excessive intervention in free markets.

During the first two years of the Trump administration, the regulatory burden on the US economy and renegotiating trade deals has had a very favorable effect on the creation of wealth as measured by the stock market, employment statistics and income growth.

The Dow Jones industrial average climbed to almost 27,000 in Pres. Trump’s first two years.

Now the conundrum! Since the loss of the US House of Representatives to Nancy Pelosi the stock market has become incredibly erratic and has dropped by almost 3000 points. The volatility has exploded.

The market is reacting to the uncertainty of the working relationship with the new leadership in the House with the President.   The concern centers on how the US economy is viewed by our government. If there is an increase in the regulatory burden, distraction on interfering with the president’s agenda, and uncertainty as relates to the Federal Reserve’s actions on interest rates the economic boom will be over.

The consequences of this increase in uncertainty as well as the re-regulation of the US economy in unhealthy ways will undermined the very economic boom that have benefited liberals significantly.

Bubbles and panics happen in markets.  Intervention in markets by government happens occasionally.  The long term effects of those interventions are not always so obvious particularly when the legislative branch does not understand how markets work to begin with.

Until the Pelosi and socialists understand that its own policies in the past (no document loans, cheap money, no down payments on home loans, etc) led to an overheated real estate market, more efforts to remove the pain of economic contractions will be made with the effect of setting the stage for the next bubble.  Pelosi’s election as Speaker may have done just that.

All of us should be concerned that failing to allow the economy to stabilize through rational market forces will likely lead to an even more disastrous bubble bursting than in 2008.

If this economy becomes unraveled and it is in a precarious position, then Nancy Pelosi will have single-handedly led to one of the greatest economic debacles in recent history.

Make no mistake, the economy is still recovering from failed economic policies in this nation for the past 40 years. It is precarious while strong. It would not take much to derail this economic success.

The Federal Reserve’s actions of increasing interest rates is one thing. The reregulation of the US economy after decades of massive interference from Washington DC is another.

The Northeast and the West Coast states, particularly New York, New Jersey, Pennsylvania, Massachusetts, California, and Washington, which are all blue states, have benefited the most from the policies they hate the most. They will suffer the greatest by undoing the very policies they hate. That’s the conundrum.

The day of reckoning is coming.

What I do know for certain is that markets hate uncertainty and interference.  Having spent time in Poland in 1991 and Romania and Bulgaria in 1996, the feelings of euphoria of the masses when they swore off the leg irons of socialism and communism were electric.   I pray that we, as a Nation, never have to experience the full wrath of a government controlled economy.

Nancy Pelosi – you have been warned.

Frank Ryan, CPA, USMCR (Ret) represents the 101st District in the PA House of Representatives.  He is a retired Marine Reserve Colonel, a CPA and specializes in corporate restructuring.  He has served on numerous boards of publicly traded and non-profit organizations.  He can be reached at [email protected]