― Robert A. Heinlein, Stranger in a Strange Land
It was only two weeks ago that we explored the economic possibilities of a U.S. Treasury led by Steven Mnuchin. Though the former Goldman Sachs CIO had some opposition in the Senate, he was confirmed earlier this week.
President Chester Cheetah vowed to lead efforts to rein in Wall Street. Many critics noted that Mnuchin’s confirmation calls into question how tough this Wall Street insider would be on banks, lenders and anyone in the finance industry who has a hand in a stock market.
So… welcome to Mnuchin Land: Where the tide rolls in before the tsunami hits.
The Tide
It’s supposedly on the way, but as yet, there’s no concrete fiscal policy from the Trump administration. The Treasury Department often helps shape corporate and individual tax reform packages.
The Tsunami
If a wall goes up dividing us from Mexico and if certain taxes on imports are passed, a trade war may be on the horizon. So, theoretically, Mnuchin’s top priority will be preventing a trade war instead of establishing a tax reform plan that might be small business-friendly.
Just as the President felt there was an eroding trust with former NSA adviser Michael Flynn, the initial positive activity in the stock markets has eroded. Some banks are not confident in the administration’s tax plans or ideas because of this isolationist point of view, and it can affect your business.
The following example is from a recent dire note from Wells Fargo:
“Controversial policies and geopolitical events could impede the progress of U.S. and global economic recoveries. The potential for disruption is ever-present. The possibility of a near-term pullback in equity and commodity markets has us more conservatively positioned in most portfolios than in recent quarters.”
This means Wells Fargo – a major financial institution – is not as excited for new ventures in a “fascist carnival barker”-led America as we’d like it to be. Time will soon tell if other banks share the same sentiments, especially in late March when banks will show their quarterly earnings and projections.
What You Can Do
We’ve talked about the importance of globalism and globalization and how that can strengthen businesses and ultimately, the world economy. You as an owner or entrepreneur need to remember the motto of “making globalization great again,” because you might need to do some more convincing to secure loans or raise capital. Sadly, this is the calm before the storm. Prepare your pitches and get your books in order to ensure your business can survive the rough times that might be just a few months away.
The instability originating from Washington right now could lead to all sorts of corporate tax issues. Contact Brinen & Associates