Exhibit 2 of The Great Revealing

From the initiating post, The Great Reveal.

I am mulling the idea that we are now in a time of The Great Reveal - a period when, nationally and internationally, what was thought to be known is turned on its head. A realigning of expectations.

From Has the Recession Been Cancelled? by James Freeman.

For context, here is an article from early (May 19, 2017) in Trump's presidency expressing a widely held sentiment amongst the Mandarin Class. If Trump thinks he can get more than 3% economic growth, he's dreaming by Michael Hiltzik.

With the political world deeply focused on the question of whether the Trump administration comprises a gang of Russian pawns, less attention has been devoted to more mundane questions, such as what ever happened to Trump's economic policy?

As it happens, economists are keeping their eye on that ball, and their conclusion is that it's in a bad way. More specifically, they recognize that Trump's policy is aimed heavily at achieving annual economic growth of more than 3%.

During the presidential campaign, Trump promised growth of 3.5% a year, and sometimes even 4%. There's no disagreement that a sustained growth rate of this magnitude would be a significant achievement. Over the past decade, the economy has grown at an average of about 2% a year. The Congressional Budget Office forecasts an annual average of about 1.9% well into the next decade.

The U.S. hasn't had sustained real annual growth (that is, over inflation) of better than 3% since the 1990s, with a brief spurt in 2004 and 2005. Making up the difference from 2% to more than 3% looks like a pipe dream.

This sentiment crosses ideological lines. It's shared by Jason Furman, formerly the chief economist for the Obama White House ("it would require everything to go right … in ways that are either historically unparalleled or toward the upper end of the historical range") and Edward Lazear, who served the same role for George W. Bush ("pray for luck," he advises).

Then there are the nonpolitical observers, such as bond guru Bill Gross, who says: "High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era." And academic economists such as Northwestern's Robert J. Gordon, who states bluntly in his pessimistic book "The Rise and Fall of American Growth" that U.S. GDP's best years are behind it.

Obviously, with this week's announcement of Q1 2019 growth of 3.2%, that did not age well. But Hiltzick is just a Pulitzer winning journalist for the LA Times. He's not an expert in economics. What about an Economics Nobel Prize winner? From Paul Krugman on election night, his whole world view upended.

It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.

Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.

It is worth remembering that Krugman and his ilk were at the center of government decision-making and influence in Europe and the US over the entire period leading up to and responding to the Great Recession of 2007. Those experts were the architects of a twenty or thirty year period when when everyone below the top quintile took in the neck in terms of job losses, low return on savings, higher uncertainty, more meager job prospects, static salary increases, etc.

Our Mandarin Class experts, the self-regarding best and brightest, were wrong about the economy and wrong about the markets. Why should we listen to them at all if they are so dramatically wrong?

To be fair, I have a softly skeptical view of the 3.2% number. It is preliminary. In a few months it will be refined but it might as easily move north as south. I am deeply concerned about the underlying national debt the deficit spending. On the other hand, during 2008-16 we had a lot of deficit spending, nearly comparable at the beginning but we had no economic recovery. We accrued the debt and saved no jobs and drove no growth.

If, because no one else cares about deficits, I can only choose between deficits with growth and deficits without growth, then I'll happily take deficits with growth.

I suspect Trump sees something protean which the Mandarin Class economists in all their educational refinement fail to grasp. GDP is a crude measure of national productivity and everything depends on productivity. No productivity growth, no good things (see 2008-2016). GDP is a crude gauge but the underlying system is so complex that there is no room for trifling refinement.

The Mandarin Class are always trying to fine tune the economic engine so that we have enough growth but not too much. They try and achieve healthy growth while reducing inequality. They try and get growth without that growth having disparate impact on anyone. They impose regulations to achieve that refinement. They trade-out American economic well-being for deals on climate change or Iran.

They fail to comprehend that at best the economy might be steered at the margins, it cannot be controlled and managed. You have to do all the hard things to fuel growth and then deal with the consequences rather than routinely starving the goose which lays the golden eggs. Starving through taxes and regulations and bad trade-offs.

The Great Reveal - Mandarin Class economists are often dreadfully, maybe even disproportionately, wrong in their forecasts and they overestimate their capacity to manage the economy. They are shocked when a crude businessman pursues Adam Smith's policies (low taxes, reduced regulation, good law and peace) and then sits back and watches the economy roar.