Blame, boasts & bogus economists - Ivo Vegter

Key topics:Trump blames Biden as markets plunge under his second termNavarro spins recession as “good news” with shaky mathFake economist "Ron Vara" resurfaces in trade policy defense.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Ivo Vegter*As the US economy craters, President Donald Trump blames former president Joe Biden, while his trade czar, who once channelled a non-existent economist, calls it good news.Trump is adept at taking credit for news that looks good to him, and casting blame on others – primarily Biden, who he calls the worst president in history – when the news is inarguably bad.For example, in January 2024, a year before he retook power from Biden, Trump commented on the then-thriving stock market.“This is the Trump stock market,” he declared in shouty all-capitals, “because my polls against Biden are so good that investors are projecting that I will win, and that will drive the market up…”Trump’s second presidency has just gone 100 days in, and the markets are not best pleased. In fact, Trump oversaw the worst 100-day stock market performance since the Nixon Shock of more than 50 years ago, and the second-worst in history. (Nixon imposed a 10% tariff on imports in August 1971, along with price controls to combat inflation.)“This is Biden’s Stock Market, not Trump’s,” he promptly announced. “I didn’t take over until January 20th. … Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ … BE PATIENT!!!”Real worldBack in the real world, the stock markets were flying at or near all-time-highs on 20 January. If you invested in any of the major American stock indices on Biden’s inauguration day in 2021 and sold on Trump’s inauguration day in January this year, you’d have made close to 50% on your capital.That’s a great market. No wonder Trump would like to take credit for it.By contrast, under Trump, the markets gave up almost 8% in value. No wonder Trump would like to blame Biden for it.It’s as if he didn’t notice that every time he tightened the tariff screws, the stock market nosedived, and every time he “paused” tariffs, the market recovered some of its losses.The market’s response was as predictable and instant as Pavlov’s dogs salivating whenever he rang the dinner bell, whether or not they were actually getting fed.Trump thinks we all have the memory of a goldfish. He will literally say one thing yesterday, and the opposite thing today, and expect that everyone will just accept the new reality that he created out of thin air.Like he’s God, commanding: “Fiat lux!”Trump can’t string a coherent thought together without drifting off-topic to end up talking about how truly great he is. His MAGA faithful are so emotionally invested that they will never acknowledge the contradictions and lies. And they think that anyone who questions his contradictions must be “deranged” for calling them out.Read more:.The Economist: Trump 2.0: Demolition, restoration, and the real deal revolution.Recession fearsHot on the heels of the 100-day stock market summary came the news that the US economy shrank 0.3% on an annualised basis in the first quarter of 2025. That’s down from 2.4% GDP growth in the last quarter of last year, and over 3% before that.But that’s good news, you see. Let me explain.Or rather, let me let Trump’s trade czar, Peter Navarro, explain: “We really like where we’re at now,” he told CNBC.Markets in the toilet, negative growth, fears of a recession, consumer confidence at pandemic-era lows, all trading partners hating America… Who wouldn’t like where the US is now?“The markets need to, like, look beneath the surface of that,” Navarro explained, meaning, “Don’t believe your own eyes, listen to me.”“We had a 22% increase in domestic investment,” he said. “That is off the charts. When you strip out inventories and the negative effects of the surge in imports because of the tariffs, you had 3% growth.”And voilà! Just like that, there was robust growth!The mathsJust to be rigorous, however, let’s do the maths.GDP is calculated by summing all private and public consumption, investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade – which means adding exports and subtracting imports.Higher imports, or rather, an increased trade deficit, therefore does reduce GDP, as Navarro implies.The US trade deficit – the excess of imports over exports – did grow, as people stocked up to front-run anticipated tariffs. (This suggests, once again, that importers pay tariffs and they’re not “taxes on other countries”, as Trump keeps claiming.)The monthly balance of trade went from (and I’m just eyeballing charts here) about negative $75 billion last year to negative $125 billion since Trump took office.The balance of trade on goods alone (ignoring services, as Trump routinely does) went to minus $162 billion in March from about $100 billion in the months up to November last year. (This confirms that the US runs a net trade surplus in services, by the way.)So in the first quarter, the excess net imports over the benchmark set last year adds up to $166 billion during the three months of the first quarter. That’s how much more importers have ordered in anticipation of Trump’s trade war.Now, the US GDP in 2024 was $28 trillion. A swing from 3% growth to 0.3% decline on that basis would take $924 billion. Even leaving aside that higher investment should increase GDP, not depress it, higher imports account for less than a fifth of the swing between the 3% that Navarro claims, and the 0.3% decline that was reported.The math isn’t mathing. Navarro isn’t telling the whole truth here.Did he just make up this 3% number? I’m going to guess that yes, he did. And that’s because he has form inventing fictions to suit his narrative.Random authorWho is Peter Navarro? Well, that is quite the interesting story.Navarro is Trump’s senior counsellor for trade and manufacturing. He’s the guy that Elon Musk described as “truly a moron” and “dumber than a sack of bricks”. I don’t always agree with Musk, but who am I to argue with a billionaire rocketman?Back in 2016, when Trump first ran for president, he was in need of an economic advisor. That stands to reason, since Trump is clearly clueless about economics.So, having most of his family working for him one way or another, he asked his son-in-law, Jared Kushner, to find him one.Read more:.FT's Martin Wolf: Trump’s trade war - a losing battle in the new world order.Kushner, being a real-estate guy like his father-in-law, was also clueless about economics. He was also allergic to hard work, so he went to Amazon to browse economics books. Not to read them, mind you. Just to look at the pictures on the covers.There, he found one with a title he liked: Death by China: Confronting the Dragon – A Global Call to Action.That fit perfectly with Trump’s belief that foreign countries, and China in particular, have been “ripping America off” (even though, by selling goods to Americans for dollars, goods that increased America’s standard of living, and not making Americans work to earn those dollars back, US trading partners have actually been subsidising its prosperity and global financial hegemony).Kushner cold-called the lead author, whom he later described as an “eccentric former professor”, and offered him a job as the Trump campaign’s trade advisor.Went to prison for TrumpWhen Trump won the White House and gave Navarro a job, Navarro didn’t have it easy at first.He was almost sidelined by former Goldman Sachs president Gary Cohn, who became director of the National Economic Council, but he managed to carve himself out an influential niche as director of the newly created National Trade Council, which became the Office of Trade and Manufacturing Policy, reporting into Cohn’s National Economic Council.Cohn ended up being too much of a free trader for Trump’s liking, and didn’t last long. Unlike Navarro, Cohn opposed tariffs, which earned him the pejorative moniker “Globalist Gary”. After he was kicked out of the administration, Navarro described him as “one of the worst and most treacherous misfits of the entire Trump administration”.By contrast, Navarro was loyal. He was the mastermind behind the tariffs on steel and Chinese imports of the first administration. Later, he went to prison for Trump, having been convicted of contempt of Congress for refusing to testify at the investigation into the attempted insurrection of 6 January 2021.Navarro earned a pardon and his present position, which made him the de facto tariff czar under Trump 2.0.Navarro on ChinaNavarro has always had a bee in his bonnet about China, and in many respects, he was not wrong. He accused China of artificially keeping its currency weak, stealing intellectual property, and maintaining lower environmental and labour standards than its manufacturing rivals. All of that is true.The problem was with his proposed solution: aggressive trade war. Hardly any reputable economist on the planet agrees that trade tariffs are ever a net benefit to the country imposing them.Navarro knew one, though. In his several books and other informal works on the subject (none of which ever appeared in peer-reviewed economics journals), Navaroo supported his trade deficit hawkishness and trade war advocacy by citing a noted Harvard economist and investor, nicknamed the “Dark Prince of Disaster”.This expert became a fixture in Navarro’s writing. His name is Ron Vara.It turns out (and Navarro has admitted) that Ron Vara never existed. Ron Vara is an anagram of Navarro. It’s his alter-ego.In a normal world, this would irreparably tarnish an economist’s career. In Trump’s administration, that made him a “visionary economist”.That really is emblematic of Trump’s gallery of clowns: inventing a fake economist to justify a trade policy that perplexes real economists, torpedoes American growth, craters global stock markets, unnerves investors and consumers alike, and threatens to relinquish the dollar’s dominance as a reserve currency.If Navarro thinks that a shrinking economy is good news, he can be confident that there’s a lot more good news to come. His invisible economist friend would surely agree..*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets..This article was first published by the Dailyfriend and is republished with permission

Blame, boasts & bogus economists - Ivo Vegter

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