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Monday, December 09, 2019 {{ new Date().getDay() }}

Reprinted with permission from Alternet

Economic analysts were spooked Monday as the Dow Jones Industrial Average dropped more than 800 points and other key stock indices plunged in the worst fall of 2019. The drop came amid the turmoil of President Donald Trump’s ramped-up trade war with China.

China’s currency dropped to the lowest point in a decade, the Associated Press reported, following Trump’s announcement last week that he would move forward with a new round of tariffs.

Bloomberg reported in a story headlined “Yield Curve Blares Loudest U.S. Recession Warning Since 2007″:

The latest eruption in the U.S.-China trade dispute pushed a widely watched Treasury-market recession indicator to the highest alert since 2007.

Rates on 10-year notes sank to 1.73% on Monday, close to completely erasing the surge that followed President Donald Trump’s 2016 election. At one point, they yielded 32 basis points less than three-month bills — that’s the most extreme yield-curve inversion since the lead-up to the 2008 crisis — though now that gap has since narrowed again slightly.

As I previously reported:

Basically, the yield curve reflects the relationship between the yield of Treasury bonds over different lengths of time. Usually, the yield on a bond — the interest that will be paid after the bond’s term — is larger the longer the term is. But in an inverted yield environment, as is beginning to emerge, the three-month yield can actually be higher than the 10-year.

It’s not that the inverted yield curve triggers a recession. The curve is just determined by the bond markets. What it does is give us a glimpse into the what investors are expecting for the future — and when the curve is inverted, it means investors are nervous.

Trump’s volatility and the deteriorating negotiations with China give investors good reason to be nervous. And just last week, Chair Jerome Powell announced that, due to signs of weakness in the U.S. business climate and the risks of the trade war, the Federal Reserve will be cutting interest rates for the first time since the 2008 recession.

Of course, the risk of a recession doesn’t really matter because it hurts investors. Recessions matter because they can be devastating for the economy as a whole.

Economist Paul Krugman noted that Trump wants to blame China for the stock market drop, but he has no one to blame for himself.

“Trump is already screaming ‘currency manipulation’ about the drop in the renminbi. But he just slapped a bunch of new tariffs on China. What did he expect to happen to the currency?” Krugman said on Twitter.

He even offered a troubling warning of his own: “Hope I’m wrong, but in retrospect Trump’s latest tariffs may look like the world trade equivalent of the assassination of Franz Ferdinand — the event that tripped an uneasy situation into all-out trade war.”

Economic analyst Catherine Rampell mockingly noted that Trump had claimed a trade war would be “easy to win”:

“Downside risks are increasing for the global and U.S. economy as the trade dispute between Washington and Beijing escalates with no resolution apparently in sight,” Mark Hamrick, senior economic analyst at Bankrate.com, told me. “As the July jobs report demonstrated, the U.S. economy is slowing. The next round of tariffs, if imposed as threatened by the president in September, begin to target the U.S. consumer. That puts the 11-year-old economic expansion at risk. Uncertainty has been primarily a concern for American business. Now, the risk is that uncertainty drifts from business and financial markets to infect individuals.”

He added: “Investors have been betting that the Federal Reserve will do what it can to provide a backstop to the U.S. economy by cutting interest rates. But there’s only so much benefit that monetary policy, or rate cuts, can provide in the face of these burgeoning trade issues.”

Trump speaking at Londonderry, NH rally

Screenshot from YouTube

Donald Trump once again baselessly claimed on Sunday that the COVID-19 pandemic was "going to be over" soon, just hours after his chief of staff suggested the administration was unable to get it under control.

"Now we have the best tests, and we are coming around, we're rounding the turn," Trump said at a campaign rally in Manchester, New Hampshire. "We have the vaccines, we have everything. We're rounding the turn. Even without the vaccines, we're rounding the turn, it's going to be over."

Trump has made similar claims on repeated occasions in the past, stating early on in the pandemic that the coronavirus would go away on its own, then with the return of warmer weather.

That has not happened: Over the past several weeks, multiple states have seen a surge in cases of COVID-19, with some places, including Utah, Texas, and Wisconsin, setting up overflow hospital units to accommodate the rapidly growing number of patients.

Hours earlier on Sunday, White House chief of staff Mark Meadows appeared to contradict Trump, telling CNN that there was no point in trying to curb the spread of the coronavirus because it was, for all intents and purposes, out of their control.

"We are not going to control the pandemic. We are going to control the fact that we get vaccines, therapeutics and other mitigation areas," he said. "Because it is a contagious virus, just like the flu."

Meadows doubled own on Monday, telling reporters, "We're going to defeat the virus; we're not going to control it."

"We will try to contain it as best we can, but if you look at the full context of what I was talking about, we need to make sure that we have therapeutics and vaccines, we may need to make sure that when people get sick, that, that they have the kind of therapies that the president of the United States had," he added.Public health experts, including those in Trump's own administration, have made it clear that there are two major things that could curb the pandemic's spread: mask wearing and social distancing.

But Trump has repeatedly undermined both, expressing doubt about the efficacy of masks and repeatedly ignoring social distancing and other safety rules — even when doing so violated local and state laws.

Trump, who recently recovered from COVID-19 himself, openly mocked a reporter on Friday for wearing a mask at the White House — which continues to be a hotspot for the virus and which was the location of a superspreader event late last month that led to dozens of cases. "He's got a mask on that's the largest mask I think I've ever seen. So I don't know if you can hear him," Trump said as his maskless staff laughed alongside him.

At the Manchester rally on Sunday, Trump also bragged of "unbelievable" crowd sizes at his mass campaign events. "There are thousands of people there," he claimed, before bashing former Vice President Joe Biden for holding socially distant campaign events that followed COVID safety protocols.

"They had 42 people," he said of a recent Biden campaign event featuring former President Barack Obama. "He drew flies, did you ever hear the expression?"

Last Monday, Rep. Francis Rooney (R-FL) endorsed Biden's approach to the pandemic as better than Trump's, without "any doubt."

"The more we go down the road resisting masks and distance and tracing and the things that the scientists are telling us, I think the more concerned I get about our management of the COVID situation," he told CNN.

In his final debate against Biden last Thursday, Trump was asked what his plan was to end the pandemic. His answer made it clear that, aside from waiting for a vaccine, he does not have one.

"There is a spike, there was a spike in Florida and it's now gone. There was a very big spike in Texas — it's now gone. There was a spike in Arizona, it is now gone. There are spikes and surges in other places — they will soon be gone," he boasted. "We have a vaccine that is ready and it will be announced within weeks and it's going to be delivered. We have Operation Warp Speed, which is the military is going to distribute the vaccine."

Experts have said a safe vaccine will likely not be ready until the end of the year at the earliest, and that most people will not be able to be vaccinated until next year.

Trump also bragged Sunday that he had been "congratulated by the heads of many countries on what we have been able to do," without laying out any other strategy for going forward.

Nationally, new cases set a single-day record this weekend, with roughly 84,000 people testing positive each day. More than 8.5 million Americans have now contracted the virus and about 225,000 have died.

Trump, by contrast, tweeted on Monday that he has "made tremendous progress" with the virus, while suggesting that it should be illegal for the media to report on it before the election.

Published with permission of The American Independent Foundation.