David McWilliams expects Donald Trump to rack up huge amounts of debt during his presidency as he attempts to 'Make America Great Again', comparing him to former US president Ronald Reagan.
Speaking on The Pat Kenny Show, the Irish economist noted that "he will not care a jot about the deficit", citing June quotes from the man himself – who has taken bank bankruptcies six times – in which he bragged about "simply" renegotiating debt.
McWilliams said:
"I think that Trump will be like Reagan on steroids, economically. What that means is that the United States' economy will actually expand but it will expand on the basis of robbing from tomorrow to pay for today.
"It will be a very strange and changed America because, if he is to be believed on expanding the investment in infrastructure, this is exactly what America needs. One of the big problems with the Clinton worldview has always been that public investment under the Obamas or the Clintons has not necessarily been a priority. They've been much more obsessed with genuflection to Wall Street and Wall Street's obsession with deficit.
"Now what our friend Mr Trump is saying is that 'I don't care about Wall Street, we can eminently finance everything'. So I think we could see quite a substantial difference."
Asked for an explanation behind his prediction that Trump would win, the Kilkenomics co-founder said:
"You cannot consistently undermine the middle classes by signing trade agreements... and expect them, on a lower income, to vote the same way."
McWilliams then turned to the "interesting question" of how the US Federal Reserve would respond to the election. It was widely expected that the Fed would increase interest rates in December if Clinton made it to the White House.
"Remember the day after Brexit, everybody said that it would be a total disaster for the British economy?" McWilliams said. "The financial markets fell 15% or 12%. And then they rallied. And then the UK economy has actually done better in the four months after Brexit than in the four months before Brexit. One of the reasons was because the central bank in the UK just decided 'listen, we're just going to make sure there isn't a crisis here.
"Now maybe the Fed will do something similar...
"You might find the Fed might sit on its hands for a while and reinstitutionalise QE [quantitative easing], which they were giving up on. What you might go back to is a monetary policy which is much more accommodative because the Fed does not want to see a recession in the States prompted by a fall in financial markets.
With US citizens generally more exposed to the stock market than their cousins over here, McWilliams believes that, despite the fact many of the key Fed figures are likely Democrats, they will be inclined to go along with Trump to prevent a short-term crisis.
"It doesn't want to be the Federal Reserve that presides over a deep, deep recession. So you could see the Fed responding in a way that supports Trump in the initial few months."
On the bright side?
"The expectations for Trump are so low now, that maybe he will surprise in the upside... Obama's expectations were so high that he actually surprised in the downside."
