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How Political Brinkmanship Could Be Ruinous To The Economy, Stock Market And Your Job

Politics can hurt us.

There is a dangerous game going on between the two major political parties. The primary concern is that the heated disagreements and hatred between the two camps will push both parties onto an aggressive, reckless path in pursuit of their agenda, especially as we get closer to the election.

Some sources say Democrats would secretly like the stock market and economy to collapse—for a brief period of time. If this happens, according to their theory, President Donald Trump, whose crowning achievement is a hot stock market and record-high employment, will be embarrassingly discredited. After the stock market and employment craters, Trump will most likely lose in 2020.

Trump, on the other hand, desperately wants to pump up the stock market and economy to burnish his reputation as the only candidate that could deliver jobs, a robust economy and roaring stock market. Trump will tweet about all of his successes in the trade war with China, in an effort to push up the stock market to new highs. It is irrelevant to him as to whether the tweets are completely accurate or not. Trump’s goal is to create an aura of winning and confidence in the economy. This will encourage people to continue investing in the stock market and embolden companies to hire new employees.

Trump will keep bullying Federal Reserve Bank Chair Jerome Powell to lower interest rates. By doing this, it will reduce the amount of money that the U.S. government has to pay on servicing the debt. With the money saved, the government can use the funds for other revenue-producing endeavors. This will have a stimulative effect. Businesses can borrow money more cheaply and start new ventures. For instance, new homes will be built by developers, which will lead to consumers purchasing supplies at Home Depot and buying furniture. The cumulative effect will create more businesses and jobs that—in turn—will have people spending more money, which will create positive returns.

Lower interest rates, while benefiting some, will hurt certain groups. Senior citizens, who have based their retirement on living off of the interest earned on their savings, will be at a serious disadvantage. They hoped for 5% to 10% interest and now only get about 1%. That’s the difference between living a comfortable life versus a terrible retirement. Banks will also be harmed. Their business model is based upon a higher level of interest rates to be profitable.

There are concerns by some people that ultra-wealthy Democrats, especially those running hedge funds, will sell their stock investments as it gets closer to the election. As the stock prices fall in an environment in which we are already concerned about a possible recession, it will beget more selling from frightened investors. When stocks are at an all-time high, there’s always people with one foot out the door and needing little reason to sell and lock in profits. The frightening thing is that if the selling gets out of hand and it becomes a mini crash, it will be ruinous for everyone. The fear is that the brinkmanship by both groups could end badly.

The people who will pay the ultimate price will be us. Our 401(k)s, retirement plans and college funds for our children may crash. Unemployment will skyrocket. The economy will be awful. This deleterious chain reaction could take years to turn around.

We hope this won’t occur. However, these are the unpleasant things you will need to keep in mind to successfully navigate your finances and career—just in case it does indeed happen.
Source: Forbes

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