04:21 GMT +313 December 2019
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    Republican presidential candidate Donald Trump addresses the media following victory in the Florida state primary on March 15, 2016 in West Palm Beach, Florida.

    Structural Inefficiency: Trump Warns of ‘Very Massive Recession' Up Ahead

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    US presidential candidate billionaire Donald Trump criticized the current state of affairs in the US economy, suggesting a huge recession is coming as a result of the overheated financial sector coupled with a crumbling job market and underperforming real economy.

    Kristian Rouz — GOP frontrunner in the US presidential election Donald Trump spoke out on the state of the US economy in a recent interview, expressing concern of the dominance of the financial services sector and Wall Street, whilst the real economy is under pressure due to an inefficient job market structure and overall governmental mismanagement. Trump warned of the looming ‘very massive recession' up ahead as the overpriced stock market, combined with a significant share of workforce not involved in productive activity, bears hazards of a financial bubble worse than the 2008 meltdown.

    The real estate mogul, representing America's businesses involved in the non-financial sector of the US economy, claimed "it's a terrible time right now" in his 96 minute-long interview with Washington Post's Robert Costa and Bob Woodward, the latter known as the reporter who broke Watergate, spurring President Richard Milhous Nixon's downfall.

    "I think we're sitting on an economic bubble. A financial bubble," Trump said.

    Indeed, the US real sector is on the brink of underinvestment as lion's share of privately-owned capital funds have been withdrawn in favor of stocks and bond market over the course of the past four years. The US government has been steadily increasing their investment in non-financial sector during the same period, providing a very moderate acceleration of the US economy to an annualized 2.2% in 2015. Yet, the acceleration came at a price: while growth is still below historic average of 3.3%, the abundance of government-provided fixed investment, poorly managed more often than not, effectively pushed private incentive into the financial sector.

    Subsequently, Wall Street has started to overheat since at least Q2 2015. Domestically-driven appreciation of stocks coincided with an accelerated influx of foreign capital in US financial assets, spurred by the US Federal Reserve's monetary tightening policies. As a result, a massive expansion of Wall Street's financial businesses far outpaced the negligible gains in real economy.

    "I know the Wall Street people probably better than anybody knows them," Trump said. "I don't need them."

    In Trump's opinion, the true situation in the US labor market is way different than what the Labor Department data suggest. US unemployment and underemployment are far above the government-claimed 5% level, the billionaire said. That, in turn, is another massive drag on the real sector performance.

    "We're not at 5 percent unemployment," Trump noted. "We're at a number that's probably into the twenties if you look at the real number."

    Official job market data, in Trump's view, are only "statistically devised to make politicians — and in particular presidents — look good."

    US governmental debt, most of which is held by the Federal Reserve, is another issue, Trump said. The GOP candidate vowed to decrease the $19-trln national debt back to zero in a matter of eight years, should he be elected President.

    "I'm renegotiating all of our deals, the big trade deals that we're doing so badly on. With China, $505 billion this year in trade," Trump said. His first steps as President would be massive cuts in taxes, he said, allowing US enterprises boost their commercial performance and thus ending the losing streak of miserable decline in corporate revenues. US companies have indeed suffered net losses in Q3 and Q4 2015, and this trend is likely set to continue into this year.

    Eventually, Trump argued, as US enterprises do better, the private sector would generate more jobs at home and enhance their performance in international trade, eventually allowing the US to pay off their debt.

    Trump emphasized his dissatisfaction with recent trade deals concluded by the Obama administration, suggesting their conditions were rather unfavorable for the US.

    "It's precarious times. Part of the reason it's precarious is because we are being ripped so badly by other countries. We are being ripped so badly by China. It just never ends. Nobody's ever going to stop it. And the reason they're not going to stop it is one of two. They're either living in a world of the make-believe, or they're totally controlled by their lobbyists and their special interests," Trump said.

    The Trans-Pacific Partnership, in Trump's opinion, should be renegotiated as it would take a heavy toll on US jobs due to withdrawal of certain protectionist measures. He has a point: while the US dollar is strengthening, imports are more competitive in the US domestic market, meaning hard times for US companies and layoffs for their employees.

    "I'm pessimistic," Trump noted. "Unless changes are made. Changes could be made. I can fix it. I can fix it pretty quickly."

    Trump's proposed tax plans implies "very big tax cut," decreasing corporate tax to 15%, whilst hiking taxes on the "very rich."

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    unemployment, labor, financial market, economic decline, employment, Wall Street, Donald Trump, United States
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