In a recent interview Peter Navarro observed that President Trump was the was the “greatest jobs President in history.”  Navarro is a top economic and trade assistant to President Trump.  According the data from the Federal Reserve, the current unemployment rate at 11%, is higher than any time since World War II.  This is true even as unemployment has recovered almost 5% since April. 

Dishonesty in the face of publicly available data may be the least of the administration’s sins as debt and a lack of government cohesion have laid the groundwork for an economic meltdown.

Prices for securities and real estate have only been higher before prior to severe economic recessions as debt burdens have never been higher for households, corporations and the federal government.  As the debt bubble grows, interest payments become more difficult. 

In times of high unemployment government accounts are depleted as corporations and citizens pay less in taxes and governments spend more on programs like food stamps, Medicare and TANF.  As consumer spending declines corporations, with lower profits, pay less in taxes to the federal government and struggle to maintain debt payments.  With each sector of the economy taking in less in revenue, debt payments can become overwhelming.   

Corporations and financial companies, sensing this dilemma, are more likely to reduce credit to consumers, other corporations or governments.  Only government has to ability to extend its own credit.  But government can only extend its credit, or generate fiscal spending to stimulate the economy, if it can coordinate and work in a concreted fashion.  As election day approaches however, the government’s ability to effectively act seems less likely making another economic crash inevitable. 

In the contemporary economy, higher returns for asset prices and lower returns for labor promise to generate an endless series of debt-fueled boom and bust cycles.  Providing less credit to consumers could decrease the severity of the cycles, at the cost of decreased economic growth. 

In the long term only higher wages across the income spectrum can provide a true escape from the cycle.  A robust and sustainable rebound for incomes awaits the return of the “creation” function in the creative destruction cycle.  The promise of this creation is associated with the economist Joseph Schumpeter, while Karl Marx predicted only self-destruction.  Their debate rages on as the economy steams toward catastrophe.