Jul 30

Steve Wynn: Trump Vs Hillary Is A Distraction From The Real Problem, Which Ends With “Wheelbarrows Full Of Money”:

The traditionally outspoken Steve Wynn continued doing what he does best during the quarterly WYNN earnings call, which is rage against what he sees as the problem du jour in the US economy. Recall that last quarter he set his sight on the manipulated US stock market, and HFT traders in particular:

“The other day I was watching the stock open up, and it went up on share volumes of a few thousand shares. I mean, every trade was a tick up. That’s not the way it should operate in an honestly or intelligently run exchange.   But that’s the thing, all those guys sold their dark pools and their order flow and the positioning on the floors of the servers to the HFTs. And it’s made a couple of guys that I’m friendly with very rich because they are high-frequency traders. But I don’t respect the activity, and I’m severely critical of it. And don’t mind saying so, either.”

This time, during the July 28 Q2 earnings call, the 74 year old billionaire chimed in on the most important topic for the US economy over the next 4 months: the presidential election, and – in typical brutally frank fashion – he cuts right to the chase. Here is the key segment, with our highlights, responding to a question on what to expect from the US election.

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From the Q2 WYNN Conference call

The election in the United States. I think we’re all in the same position. It’s almost impossible to predict exactly what effect that will have without getting into an economics discussion.

Sooner or later, our political establishment is going to be forced, regardless of party affiliation, to deal with $19 trillion in debt that’s climbing by around $1.6 billion a day. That means that in the Treasury auction each month in Downtown Washington, we’re printing money at the rate of $40 billion or $50 billion a month which is of course increasing the money supply and directly impacting the living standard or the buying power of the U.S. dollar for people who are being paid like everybody on this call today.

Now, part of the frustration in America is the fact that the deficit is having an enormous impact on the living style and the living standard of Americans, but not all of this is well understood by the folks, to use Bill O’Reilly’s term. The folks are being – their living standard being clipped by the deficit and by the printing of money and the increase in the money supply.

How long can this go on? In the history of the Western world, inflating your way out of this kind of a problem taken to its extreme, to use the Weimar Republic as an example, people went grocery shopping with wheelbarrows full of currency. Now, before the recession, the euro was $0.85 on a dollar. During quantitative easing one, two and three, it went up to $1.48. That was a devaluation of American currency by 20%. Now, it’s $1.10, and to use that as a benchmark for a moment, it isn’t that the dollar got stronger. It’s that the euro got weaker because they started quantitative easing and printing money in the euro community.

So this deficit issue impacts the mental health, the frustration, the positive sense of tomorrow that working people feel in America. It doesn’t have anything to do with rich folks. It’s got to do with government, fiscal and monetary policy. We have $14 trillion in public debt and $5 trillion in intergovernmental debt. The coupon on that $19 trillion and climbing is around 2.3%, and that’s with short-term interest rates at zero, virtually. Now the Fed, the current Fed, the lady is going to keep interest rates where they are. That of course protects all of the credit card debt of $1 trillion that’s out there, and so we don’t have mass panic on the credit card interest. But I know that the government is in a quandary as to what to do about this.

Now, the issue about what’s going to happen with the election isn’t so much an issue of Trump versus Clinton at the moment. It’s a question of whether the House and the Senate and the executive branch can get together and make Americans feel safer and have a fiscal and monetary policy that isn’t self-destructive, which currently it is.

I know that in this time of year, everybody is making all kinds of promises and declarations that they can do things, or they will do things, but of course they cannot without exacerbating the problems that are currently plaguing the country. What is lamentable is that the public discourse today on both sides misses the point entirely. We’re in the chicken-for-every-pot season where everybody’s promising the moon.

I recall that one of the most popular themes this year is that we’ve got to get student loans and the burden of student loans off the back of the kids. Well, when the Affordable Care Act was passed, and it was going to have a negative impact on the deficit which it sponsors, it promised it wouldn’t. The sponsors went looking for a way to offset $8 billion or so in additional deficit, and they came up with a kind of a stunt that we did with Fannie Mae and Freddie Mac when we eliminated mortgage brokers and we just took the loans directly into Fannie Mae and Freddie Mac, and that led to the collapse at $5 trillion of the system.

Well, they did the same thing with the Department of Education. They gave the student loans directly from the Department of Education and eliminated any middle people. And then they charged 6.5 points or 650 basis points for student loans instead of passing the savings because the Department of Education doesn’t really have a cost of money. But they’re making the student loans direct since the Affordable Care Act. Bernie Sanders didn’t talk about that.

But that 650 basis points, that carry is being made by the government to offset what would have been an even greater impact on the deficit by the Affordable Care Act. Well, if you really were sincere about making a better life for the kids, you would have passed the loans from the Department of Education to the kids at cost, which would have been interest-free. But this kind of hypocrisy, which sort of is endemic to the whole system regardless of party, has got to come to a halt, because if it doesn’t, then it insinuates itself into economic demand for services and products. It certainly insinuates itself into the price of everything, from Walmart to shoes and sneakers. Those things haven’t been by themselves become more precious. The value of the dollar has declined.

I know that we talk about China, fooling with their currency. The United States has fooled with its currency even more aggressively than the People’s Republic of China. I’m not an apologist for China or anybody. I’m simply stating a fact. But you won’t see this in the conventions of either party. You won’t hear this sort of thing because it’s so uncomfortable to talk about it. But the election, the election could put America on a better track if all the senators and congressmen and the presidents and the cabinet members decide that they should, or it won’t. I don’t know about anybody on this call, but I’m not in a position to make that prediction, but it surely, surely impacts the life of every American. Tax policy and all the rest all roll into this. And businessmen across the country and people at work in businesses will be affected by this as sure as sunrise tomorrow. And there seems to be a fear to deal with it directly. So count me as one of those old white guys that’s frustrated.

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