So, what is the magical recipe adopted by Trump to boost the US economy as mentioned in the last post? Don't hold your breath: there is no "secret". Trump did a pretty simple thing: he cut the taxes. If you cut taxes without cutting public expenditure, you can expect to give a boost to the economy, and that's what happened. Of course, I'm oversimplifying a lot, but this is it in a nutshell. It's not rocket science, even a child can get it, although IT IS smart compared to the approach of many European countries that keep raising taxes AND public expenditure, achieving only sluggish economic growth and unsustainable government debts. Maybe we should replace European politicians with children...
No doubt, even the American federal debt is piling up; it's another obvious thing that you get if you cut taxes without cutting the expenditure. Still, under Obama the federal debt was piling up at an even worse rate, so we can hardly accuse Trump of jeopardizing an otherwise idyllic situation. Even the threats of protectionist policies and trade wars, in the end, did little damage.
The question everybody is asking is: how much will it last? Will a brutal correction, at some point, wipe out three years of gains? The non-stop increase of the federal debt is only one possible source of problems, and probably not in the immediate future. Many people start to fear the stock market rally is actually a bubble ready to burst. And what will happen if the Fed raises the interest rates? These are questions hardly limited to the United States. Strong distortions are at work in the financial markets of many countries. I'll tell you more about this in another post.
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