And Our Next President Is...

Who will win the next 'Presidential Reality Show'? Photo in public domain from Getty Images.

The question on everyone's lips and the topic of quite a long discussion in our house the other Sunday. I have now heard a few people such as James Rickards, predicting a Trump victory. Whilst other commentators, like Peter Schiff, have been forecasting a Democratic win for some time. In our house the vote was split - I am betting on Trump - the hubby on the Democrats. This is not about what we want, you understand, but what we predict.

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One thing we can agree on is that this will not be an easy election to call. Primarily because massive external events could change the character of an election campaign overnight. First among these is the economy. "It's the economy, stupid." Trump's claim to have made America great again, taking credit for job creation and a booming stock market , may all come crashing down around his ears. When this will be no-one can tell. If the US economy falls into recession that will probably be the decisive factor in determining the outcome of this election. All the signs are there that they are heading into recession - they can keep the markets buoyed up on cheap market and asset purchasing, but at some point the real underlying economic reality catches up. If this occurs before the election, this is not good news for Trump's re-election chances.

Big picture is that we would be in a worldwide slump if it was not for China. The Chinese authorities have pumped trillions into the Chinese (and the world) economy. Debt in China has ballooned, as has an enormous building and infrastructure boom . China has had an insatiable appetite for raw materials and high quality manufactured goods that have also helped grow the world economy since 2008. This had led to the massive expansion of ghost cities that could house up to 65 million people but are empty of inhabitants . Many of these have been so badly constructed that they are now falling apart and unsellable leaving millions of small investors in trouble. Does the same fate await the Chinese economic experiment? If China catches a cold what happens to the rest of the world?

Image from https://billingsgazette.com/news/opinion/editorial/columnists/robert_j_samuelson

The incumbent Trump has a huge advantage over his Democrat opponents. Already we have seen enormous tax breaks given out to the tune of $1.5 trillion. We know that Trump has openly called for a weaker dollar and has criticised the Federal Reserve. The Fed though have done a 180 and will now be lowering interest rates possibly twice this year, possibly more. For those of us who follow the markets this is no surprise, as economic data continues to worsen expect QE4 (or QE to infinity) and the much vaunted helicopter money may make its appearance in an election year. In other words Trump's policies can be all about currying favour with the electorate.

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Meanwhile, the Democrats are selecting their candidate. With 23 major candidates it is already proving to be an unpredictable and competitive race. There is no doubt that the Democrats shot themselves in the foot at the last election. Cheating her way to the top, many voters were alienated from Clinton. She represented the Establishment. The press colluded in suppressing the news story about the leaked emails, and the derailing of the investigation by her husband. Clinton believed that as the first female candidate she was a shoe-in. She was already envisioning herself in the Oval Office, whilst Trump was actually out campaigning.

Top of the current selection process according to the mainstream media is Joe Biden. Closely related to Obama (as former Vice President) and seen as an elder statesman, and therefore a complete contrast to the brash Trump. In the 2016 election Trump's lack of experience gave him that outsider edge. However, his tenure has been far from statesmanlike. From governing by tweets, making diplomatic blunders, to not knowing who is in charge in the revolving doors of the White House; Biden could be seen to be a return to stability. Another top ranked candidate and another white, male establishment figure who's proving to be good at hoovering up donations is Indiana Mayor Pete Buttigieg. If money talks we could hear a lot from this guy yet.

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There are some notable female candidates. Senator Elizabeth Warren is probably closest to Bernie Sanders and is seen as an alternative voice within the Democrats and certainly a more left leaning one. Then there is of course "The Squad". These are the four, female minority candidates who should basically "go back" to where they came from according to Trump. A blatant attempt to play the race card in this election. Senator Kamala Harris is also a name and could garner increased votes as the field narrows. The trouble that the Democrats find themselves in is that so far no clear contender has emerged that can challenge Trump at his own game. He is ultimately an anti-establishment populist figure who will most likely be facing an establishment Democrat.

At this point though nothing can be ruled out. No-one expected Congresswoman Tulsi Gabbard to perform as well as she has done. She does bring to the table a clear anti-war position and it may surprise the establishment how popular this may turn out to be. Needless to say, the Democrats were petrified at the prospect of a Bernie Sanders, what would they do at the prospect of a Tulsi Gabbard victory? Unfortunately, for the Democrats, they may find it's not quite so easy to rig this election.

Besides the economy, there is the potential for war (or rather a new theatre opening up). Trump was elected on a platform of non-intervention. As the wars in Afghanistan and Syria drag on. There is a war weariness in the American public after 18 years of continual warfare. Trump is clearly being prodded into war with Iran. However he has promised his electorate that he is to bring the troops home. One commentator, Gerald Celente, has said that Trump will try and bring some troops home in the election year. The US is currently in peace talks with the Taliban which has parallels with the Paris peace talks that brought the US out of the Vietnam War during 1972-3. Nixon called the peace deal 'Peace with Honour' but actually it represented an American defeat presented as a negotiated settlement to the conflict. Trump may try the same thing with the 18 year war in Afghanistan and present it as a victory for his diplomacy.

My source but presumably in the public domain

However, war is a wild card. The present conflict with Iran could lead to an oil price rise. Some sort of incident in the Straits of Hormuz could prove catastrophic to a world economy that is already teetering on the edge of recession. Another potential wild card is the environment. A Democratic vision of a New Green New Deal could find popularity amongst the youth of America, especially those who were unable to vote last time.

Whilst in office Trump has alienated many people with his policies. It was Trump that immediately ripped up the nuclear accord with Iran. The trade war with China, despite Trump's bragging, has hurt American consumers and farmers. The Wall and the ensuing immigration crisis has undoubtedly turned off previous supporters from the Latino community. Racist tweets have been met with outrage in the black community, and if Trump continues to play the race card he could find riots on his hands. There have been massive protests against Trump by many in minority groups such as the LGBTQ community. This may have had a galvanising effect on political activists which may translate into campaigning. This could translate into voters driven to the polls by an extreme dislike of Trump. He has certainly polarised people in the US.

Finally there is that black swan. What it is nobody knows, nobody will see it coming. It's the spark that will set the tinderbox alight. The world is in a deep, intractable crisis. Trump himself is a product of that. His message to make America great again resonated with a decisive majority. That he has failed to do so is a lesson learnt by an insightful few, the majority remain delusional. Trump is a populist, who says and presents himself as a man of the people. He is anything but - he represents the moneyed class, he represents the Wall Street bankers, he will (or already has?) embraced the military industrial complex. A large section of the establishment don't like Trump but they are on the same page. Delay this economic crisis as long as possible. For Trump it could make the difference between winning and losing. Place your bets in the comments below.