When governments get scared that the debt Ponzi is about to implode due to inflation they always resort to one thing: price controls. Trump has been attacking any corporation that decides to move jobs offshore. It started with Carrier corporation. They needed to move jobs out of the US where lower wages would allow them to continue selling price competitive products here in the USA. By threatening, cajoling and ultimately bribing them to stay, Trump won early victories in "saving" US jobs. His increasingly nationalistic tone is, however, nothing new in the annals of history. The result is always the same: disaster.
Messing with the free markets is like messing with mother nature. You can get away with it for a little while but at the end of the day it will overwhelm you and spank you like no other can. What Trump is effectively doing is instituting wage controls which is just another form of price controls. By mandating US employment, Trump is telling US corporations that there is a minimum wage in effect. The effect is to put a floor on manufacturing costs. The normal reaction is to raise prices but what if the consumers wages are not rising fast enough to keep up? Well then, Carrier and others that Trump is targeting as "evil corporations" will take it on the chin in the form of falling profits and eventually massive losses.
Trump initially targeted Carrier because its parent company is the massive conglomerate United Technologies (ticker:UTX). He basically told UTX to take falling profits on their Carrier group since their stock was up so high and he needed the political win. So right now, these threats against corporations aren't really having much affect on product availability because things are still good. But UTX has $40 billion in debt and only $13.8bn in cash. That kind of leverage works for you when inflation is happening but sooner or later the deflation crash will occur and the likes of UTX will be facing bankruptcy.
As UTX and other debt laden US corporations peak and earnings begin to decline into the next recession, they will want to lower wages even more. But then we should expect Trump to punish them brutally. Effectively, working class people will have voted into office their "right" to remain employed. But corporations are not made of money and if truth be told, there is huge negative net value in any corporation with 4:1 debt to cash leverage or more. Even 1:1 could get downright scary for a corporation in the next recession/depression. So as these companies scramble to save themselves from BK feel a loss of sales in the market side and an inability to lower costs on the manufacturing side, they will have but one choice: close down businesses.
The aftermath of this will be for the US the same that it has always been for anyone who tried to do this: product shortages for everyone. Even well to do people will have an increasingly difficult time getting the stuff that they want. Price controls simply do not work because they eventually kill the goose that laid the golden egg which is people working to build things.
We ain't seen bad yet but now we got the telegram saying it will be arriving in the not too distant future.
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