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b'St. Valentine\'s Day Rout
\\nI wouldn\'t really call what happened in the bond market and the U.S. dollar market as a St. Valentine\'s Day massacre, maybe it was a slaughter; even slaughter was too harsh a word.\\xa0 It was a rout.\\xa0 But this is nothing compared to what is going to come. The daughter is going to get slaughtered a lot more and the bond market is going to get slaughtered a lot more in the days ahead.\\xa0 Maybe not exactly tomorrow, but there will be days ahead that will be much worse than today. This is the tip of a huge iceberg.
\\nDoing the Impossible
\\nBefore I get into the tail of the tape today, and all the horrific economic numbers that came out today, I want to take a step back and talk about President Trump\'s budget, which was released on Monday.\\xa0 Basically, the Republicans succeeded in doing something that you would have thought was impossible. They are making the Democrats look like the fiscally responsible party.
\\nA Farce
\\nFirst of all, there are some cuts in this budget that are never going to happen.\\xa0 There are a lot of assumptions that are saving money, like they assume a total repeal and replace of ObamaCare, which isn\'t going to happen.\\xa0 In fact, if it didn\'t happen when Republicans controlled Congress, how is it going to happen when the Democrats control Congress in 2019?\\xa0 So this is all farcical.
\\nAssumptions...
\\nBut one of the biggest farces of the entire budget is the underlying economic assumptions.\\xa0 They\'re assuming that the very low unemployment rate gets even lower. But, the most farcical of all, is that they assume that the economy grows uninterrupted at an average of 3% for the next 10 years! This so-called expansion is already 9 years old. That makes it the second or third longest expansion in history, and if it continues this year, I think it will be the largest expansion in history. If it continued for another 10 years it would be almost twice as long as the next largest economic expansion in history.\\xa0 What are the odds that that is going to happen?\\xa0 But even if that happens, even if we get 10 years of 3% economic growth (we probably won\'t even get 1) but let\'s assume we get 10, even with that, the budget does not balance.
\\nNot Even Pretending the Budget will Balance
\\nThis is the first time the Republicans are presenting a budget that, even in 10 years, does not balance.\\xa0 Now, think about this: When they were presenting budgets that had a pretense of balancing in 10 years, and they were way off the mark, can you imagine how much further off they will be now when they are not even pretending the budget is going to balance?
\\nTrillion Dollar Deficits and no QE
\\nIn the first couple of years they are forecasting trillion dollar deficits.\\xa0 As I said on the podcast before, the last time we had trillion dollar deficits, the Fed was doing a trillion dollars a year in QE. Right now, the Fed is still posturing that it is not going to do any QE. In fact, it is posturing that it is going to do QT - it is going to shrink its balance sheet.
\\nBig Political Problem for the Republicans
\\nBut here is going to be the big political problem:\\xa0 Since the Democrats are now the fiscally responsible party, they will be able to hang these deficits around the necks of the Republican candidates like an Albatross.\\xa0 I know a lot of people are thinking, "Wait a minute, Peter! Obama doubled the deficit & the national debt - there are all kinds of deficits under Obama, so how can the Democrats say that the Republicans are the big spenders and they are the fiscal Conservatives?
\\nInevitable Keynesian Logic
\\nIt is very easy.\\xa0 It is basic Keynes.\\xa0 They are going to say is when Obama ran deficits, they were necessary to get us out of the recession that Bush caused by cutting taxes on the rich, and the corporations.\\xa0 So they were a necessary economic stimulus to get out of the ditch that Bush drove us into.\\xa0 After all, Clinton, a Democrat,\\n\\nOur Sponsors:\\n* Check out Rosetta Stone and use my code TODAY for a great deal: https://www.rosettastone.com/ \\n\\nPrivacy & Opt-Out: https://redcircle.com/privacy'