81% of white evangelicals voted for trump. Trumpism is a cult. The more religious and devout a white person is, the more they support this lying, treacherous, lecherous, sexist, greedy, narcissistic person whose entire world view is anti-Christian. But 61% black evangelicals supported Hillary. Trumpism is therefore tribalism. Some 40% of Americans are Trumptards! Yes, white, uneducated, ignorant, Christians from the heartland! They are very different from Americans on the east or west coast.
So how did we get here?
There is a crisis in America. There are essentially two economies in America. Most of the prosperity in America has been seen on its two coasts, within narrow demographic bands. While the religious, heart of the nation, between the coasts is increasingly stressed financially.
In 81 percent of American counties, the median income, about $52,000, is less than it was 15 years ago. This is even though the U.S. economy has grown 83 percent in the past quarter-century and corporate profits have doubled. American workers produce twice the amount of goods and services in terms of value as 25 years ago, but get less of the pie. Most hard-core manufacturing in the U.S. has been shipped overseas, and most of that work was being done in the heartland.
The data is even more stark if you look at the details. Imagine 10 people in a bar. When Bill Gates (from Seattle) walks in, the average wealth in the bar increases unbelievably (as represented by national data) but that ‘average’ number doesn’t make the other 9 people in the bar richer. The actual median per adult number is only about $39,000, placing the U.S. about 27th among the world’s nations, behind Australia, most of Europe and even small countries like New Zealand, Ireland and Kuwait. Italians, Belgians and Japanese citizens are wealthier than most Americans.
Income distribution in the U.S. (and by the way in many industrial nations globally) is approaching the same level it was before the second world war. The 1% take home 20% of the income. The 2% own 60% of investment assets. These figures are the most since the 1920s. Inequality is now a worldwide problem. Even, socialist economies in Europe are seeing similar trends. (And, by the way, NO, I am not a socialist or a leftist, believe it or not, I am a businessman with a strong commitment to free enterprise. I am simply presenting facts. Facts by the way, that could lead to real problems for everyone … including the wealthy).
Americans are getting functionally poorer in the ‘heart of America’; and much of that wealth has gone overseas (to China). The poorest Americans do come out ahead in one statistic: the bottom 90% of America owns 73% of the debt. This situation is not sustainable from any vantage point.
Social mobility is disappearing. In 1946, a child born into poverty had about a 50 percent chance of scaling the income ladder into the middle class. In 1980, the chances were 40 percent. A child born today has about a 33 percent chance. In 1962, the 1% household median wealth was 125 times the average median wealth. In 2010 the divide was 288 times.
So long as prosperity continued to increase as it has since 1945, western electorates were willing to give élites a very considerable measure of discretion about what they did. Now, prosperity is being squeezed, wages are stagnant, and for many people unlikely to rise much in real terms.
It is going to be much more difficult to sustain the consent of Western electorates. The world has changed. Hence, the rise of Trump and the vote for Brexit, and the rise of Macron …
Dalio, one of my all-time favorite Hedge fund managers explains it this way. “It is not that “prosperity is being squeezed but that the economy has rather, been divaricated into the ‘squeezed 60%’ and the asset-holding, and enriched 40%”. Last month Dalio, the billionaire founder of top hedge fund, Bridgewater Associates, posted a new article, “The Two Economies: The Top 40% and the Bottom 60%”. He believes it is a serious mistake to think you can analyze or understand “the” economy because we now have two of them. The wealth and income levels are so skewed between top and bottom that “average” indicators no longer reflect the average person’s experience or living conditions.
Political ‘populism’ as expressed by Dalio – or, stated differently, the push to recover national (white) culture (code for ‘religious values’ in America) and sovereignty (code for Brexit) – is simply a gripe about inequity. It has been expressed this way since 2009, and in fact much more than that: it has become a matter of survival for a major segment of the American and European population (especially, as it coincides with a pensions crisis, which will leave many impoverished in their old age)
So here we are: there is a messy, and bitter, divorce taking place in our societies between the 60% and the 40% ‘tribes’. Asset valuations indeed have never been higher. Yet growth by contrast, has, on average, been ratcheting down, decade by decade – and for some, the situation has become truly existential.
“Prior to 2009, debt was able to support a rising standard of living…”, as one analyst pointed out, “but less than a decade later, [personal debt], can’t even maintain the status quo. That’s what you call a breaking point.”
To put that in numbers, there’s a current shortfall of $18,176 between the standard of living and real disposable incomes. In other words, no matter how much people are borrowing, their standard of living is in decline.
In comes Trump, with a better understanding of the situation than his rival Hillary. With the S&P touching records daily, he is immune from taunts of incompetence (regardless of whether not the highs have anything to do with the President). His base likes it too: their meagre retirement portfolios at least are rising in value. And in any event, it is not surprising if Trump is a low interest, plentiful liquidity, expanding balance sheet, man globally: It is how he made his billions, personally.
Of course, the flip side to continuing the monetary ‘easing’ paradigm is the ongoing hidden transfer of wealth from general taxpayers (the 60%) to the 40%: more populism; more unexpected election outcomes in Europe; more fake-ness; quicker dissolution of the glue holding society together; more political process, less outcome; less ability to address the needs of collective purpose, etcetera — rising rancor and push-back, in a word.
To make matters worse, there are cataclysmic technology revolutions in the works. Autonomous driving will mean something like 5 million ‘professional’ drivers will be out of work in the next decade or so. Artificial intelligence will migrate into labor intensive industries like agricultural work. The ‘return to national values and sovereignty’ will mean that there will be massive deportations of 12 million or so undocumented immigrants. Police will be arresting immigrants in droves, in these small towns in Indiana or North Carolina. The whole country will be running scared (from the enemies within: Immigrants and Muslim Terrorists), and therefore carrying guns. How else can the government deal with the impending huge levels of unemployment not seen in the world since the great depression? By the way, this process has already begun, with the deportation of 60,000 Haitians from America this month.
One possibility is even more spending on defense. (Note, this is squarely within Trump’s narrative). So, in parallel to these shifts, there will be an attempt to ‘save of appearances’ in geo-political terms by slamming down hard on any volatility (and in the EU, not least – i.e. Catalonia). People will want to believe it (Trump’s bravado and declarations of American power); and important sectors (military-Industrial complex) of the economy will want it, (or rather, need it).
Thus, there must be an appearance that America’s global standing must be preserved. Repressing North Korea, ‘slamming down’ on Iran, etc. will serve to save appearances (that America is strong), and justify more spending on defense that will somehow be targeted to companies or factories in poor mid-western states.
But, there is a flip-side, this will also increase the danger of war – whether inadvertently triggered, or by the US/West cornering themselves into it. Ebbing power is something that everyone in the world is smelling now: and his false bravura only heightens the odor of weakness. The U.S. has now lost sequentially … essentially kicked out of Iraq, and well, Afghanistan too (40% of the country has been taken back by the Taliban), let’s not forget who created and funded ISIS (losers), and we have a 32-year-old Prince in Saudi Arabia with magical links to Trump (and Kushner) behaving so desperately, like a dying praying mantis, eating up his fellow Princes and Yemenites!
Thus, the continuance of these paradigms (financial and geopolitical), and the continuance of ‘populist push-back’ (i.e. volatility) seem set to go on for now. Josh Feinman of Deutsche Bank says it all: “We’ve seen this movie before. The first great globalization wave, in the half-century or so before World War I, [it] sparked a populist backlash too, and ultimately came crashing down in the cataclysms of 1914 to 1945.” Is a financial crisis inevitable – ultimately? Is war – a confrontation with either Russia, China or N. Korea – unavoidable?
Who can say, for sure? But the repeating of history is not inevitable. Financial re-set at some point, has become inevitable, it would appear. It has taken time for the old meme to fade, and weaken its hold sufficiently. Hemingway famously said about bankruptcy (his), that it starts only very slowly, but ends like lightning – very fast. The political impulse for a change in the social and cultural paradigm however does seem to be unfolding at an accelerating pace.
‘Populism’ and ‘unexpected’ election results are acting as its accelerant. And the intellectual context for seismic economic policy shifts, is in place too: monetary policy is seen to be bust, and so far, economic ‘models’ have been seen to be plain wrong. “TINA” (there is no alternative) is wobbling on her pedestal, and seems poised to topple over. For now, there is every indication these Trumptards will be around for at least some time! You can count on it.
To end on a hopeful note, I do see totally different alternatives to this tragic outcome. The world can come out of this ‘funk’ if major global markets the size of China were to open to the West. And there is one: Central Asia. If Iran could be transformed, and combined with its surrounding countries (all the ‘stans’) it could become on engine for global economic growth of the same scale as china (these past three decades) posting 15% + GDP growth and sucking in Western imports for new airports, plants, roads etc. Another alternative would be to embrace renewable energy and artificial intelligence and completely re-tool the world with new cars, new appliances, new homes, etc. and create massive new markets to replace existing goods, for the world’s fast-growing middle-classes (which are slated to triple to about 4.5 Billion from today 1 Billion population).
The funk we are in, is a failure to ‘imagine’ funk. The political elite who supported Trumpism, have ‘creative’ shortcomings. While the problems they see are colossal, and scaring huge parts of America and the West, there are opportunities too, which can be exploited and ‘save’ mankind.
But to do so, we need completely new leadership in Washington, Whitehall and Brussels.
The problem is the Republicans have hijacked government in the U.S. like dictators. We have a president elected with a minority of votes (3 million less), who had his Russian buddies hack election machines. We have a senate where the majority party Senators were voted in with 7 Million less votes than the minority. There is Gerry-mandering, voting irregularity, and millions of disqualified U.S. born voters. Democracy in the West has been compromised. There is limited opportunity for change. The Republicans, with limited imaginations, have taken over government. Their recipe for the future is not too different to the Nazi’s in 1937 who also undermined democracy in Germany!