Over the next four to eight years, there are two near-certainties in global economics and diplomacy: Donald Trump will spring surprises – not all of them pleasant – and the Europe we know today will all but disappear. If the EU has lost the plot, the signs already are that Trump has one.
I think most regular Sloggers know this blog well enough by now to accept that I remain a sceptic about most conspiracy theories. But the scepticism stops when it comes to banks, elections, government press releases, currency ‘valuations’ and the stock/commodity markets. Whether openly rigged by central banks and desperate politicians, or secretly manipulated by low-profile cabals, when Donald Trump earlier this year said “it’s all rigged and you all know it’s rigged”, he was merely confirming something close to common knowledge.
This does not, of course, stop neocon press, website and TV channels from refusing to notice a herd of Mammoth in the back parlour of globalism. Yesterday was hilarious yet again for a variety of completely spurious reasons why – and loopy narratives on – what exactly happened to the euro’s value after the Italian NO vote.
The general “line” taken was this: “Everyone knew Renzi was going to lose, so investors were prepared – and then as it became clear that Renzi wouldn’t resign straight away and elections would be delayed – the euro returned to the strength it has shown against Sterling since Brexit”.
It’s a tissue of lies from start to finish. One, almost nobody predicted that wide a margin for NO. Two, Renzi was ordered not to resign by the President, the latter having had a conversation with two central banks in Frankfurt. Three, elections will not be delayed: Renzi will resign in January and then there will be elections, followed by chaos. Four, the euro didn’t just carry on being strong: if fell off a cliff….and bank valuations went to same way. Five, the euro made a recovery that had all the hallmarks of massive covert support. And six, the euro being strong against Sterling is about as counter-intuitive as the Zimbabwean currency collapsing on the news that Mugabe is dead.
The spin-bollocks continued this morning, after Schäuble ridiculously suggested at first light that there would be “no contagion” from Italy. Not only is contagion a 100% solid gold certainty, it represents a huge political crisis waiting to happen in the Bundestag. The Italian media are casually referring to a Government bailout of Dei Paschi and Unicredit, but Brussels-am-Berlin insists it will be a bailin: they have to do that, because every private bailin candidate has now walked away from the radioactive fallout these banks represent.
However, there is no way even in 2016 to square the circle of out v in. Italian retail investors and business borrowers being asked to take the hit would result in pandemonium followed by riots – if not a near-total breakdown of law and order. Mutti Merkel may be an idiot on the subject of migratory violence and Erdogan’s Caliphate dreams, but she is not completely stupid. And on a broader canvas, her Grand Coalition partners and bankers will long ago have educated her on the subject of Italian truculence when it comes to having their money stolen.
Today and for much of the three weekdays to come, the spotlight on unreality will switch from the EU and Brexit (they must be hoping) to the US. There’s a payroll number to be delivered and then a Fed meeting which – everyone now agrees – will raise rates. Despite the “mistaken” election of Donald Trump and the ongoing European Union anarchy, the US markets continue to power ahead. Ironically, they’re doing so because the President-elect is looking more and more like a gung-ho reflationist with every tweet and appointment. Equally to the liking of the markets, he is vowing to cut taxes.
Seen now in the light of how it is developing, Trump’s economic strategy for Making America Great Again is a hugely simplified recipe for sending US debt through the ceiling and then the stratosphere. To my mind, these are the salient points:
- You employ a lot more workers on infrastructure projects and boosting research, with the Government footing most of the bill
- You cut the amount of migrant labour coming in
- You cut taxes
- You bring investment back from overseas in order to stimulate American employment
- You raise rates to more “normal” levels
- America becomes Great Again.
Respectively, these moves will increase the State’s outgoings, raise wage rates, decrease the State’s income, decrease liquidity and consumption power outside America while increasing global unemployment and making US exports more expensive, make both Washington and Third World borrowing more costly, and make money-printing on a colossal scale inevitable.
It all sounds disastrous. But perhaps not from Donald Trump’s viewpoint.
There are two aspects of Trump’s thinking I find fascinating every time I listen to him. First, he’s not a great believer in macro free trade deals; and second, he sees America as coming first, first and first in all things.
Both are, I sense, equally vital to an understanding of the man.
As to trade, he is smart enough to realise that the US is pretty well self-sufficient. With the exception of one or two specialist materials and skills, it doesn’t need to import anything; and given higher levels of employment than at present, it has all the consumption it needs. Why export all over the world and sign trade deals if that just keeps on growing the deficit?
But as a businessman, he also knows that the real problem is American debt, not deficit. If the rest of the World plunges deeper into recession, with falling demand circling down into deflation, he can sit quietly in Fortress America and – with a bit of additional jiggery-pokery applied here and there – be happy to see the Dollar get weaker and weaker….until one day, the US debt is every so gradually inflated away.
It almost certainly isn’t as easy as this sounds. But I’m beginning to wonder if he thinks American global hegemony can be retained and expanded purely by pauperising everyone else.