Chancellor concludes that, “at heart, Olson was an optimist: ‘it takes an enormous amount of stupid policies or bad or unstable institutions to prevent economic development.’ If - and that’s a big IF - Trump were to succeed in assaulting the ‘growth-retarding’ forces within American society, he could well end up surprising his legions of right-thinking critics.”
I am far less optimistic because as Noah Smith of Bloomberg writes, Even Trump Is a Keynesian. Furthermore, the stock bulls believe that stocks will move up while bonds will continue to weaken. However, higher interest rates would have a negative impact on the auto and housing sector, on commercial real estate, as well as on corporate earnings. Hence higher rates could more than offset any potential benefit of expansionary fiscal policies.
In other words, stock market bulls and bond bears may overlook the fact that higher interest rates seem to be incompatible with a strengthening highly leveraged US economy.
