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Can Donald Trump really defy the laws of political and economic physics?

Public Policy / opinion
Can Donald Trump really defy the laws of political and economic physics?
Trump
Donald Trump.

By Chris Trotter*

“Hang tough”. President Donald Trump is cautioning his followers against allowing the world’s stockmarkets to spook them. One Republican congressman even backed his leader by folksily comparing what was happening to the early stages of renovating a bathroom. Sure, everything’s a chaotic mess at first, but then: “Oh, wow, that looks so much better!”

We wish!

The world’s stockmarkets are not tanking because investors are lacking in faith, they are tanking because those responsible for investing billions of dollars, looking ahead, can find nothing positive in the consequences of Trump’s “Liberation Day”.

Nothing.

Remember in the movie “Margin Call”? when CEO, John Tuld (played by Jeremy Irons) delivers this chilling line?

“I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. And standing here tonight, I’m afraid that I don’t hear - a - thing. Just ... silence.”

It would seem that Wall Street is only now coming to terms with the fact that Donald Trump is serious about “the most beautiful word in the English language” – tariffs. That his admiration for President William McKinley is sincere. That he really does believe in protectionism. That this is not just the opening gambit in what will turn out to be the most artistic deal of Donald Trump’s career. That the planet’s biggest investors weren’t hearing things – that really was the sound of the global economy being blown apart.

Just how serious things have got was revealed over the weekend when Elon Musk, Trump’s (former?) right-hand man, dismissed Peter Navarro, Senior White House Counsellor for Trade and Manufacturing (and the person generally credited with putting the flesh on Trump’s pro-tariff bones) with the contemptuous observation: “He ain’t bullshit!” 

Musk is also reported as telling a gathering of Italian politicians that:

“Both Europe and the United States should move, ideally, in my view, to a zero-tariff situation, effectively creating a free trade zone between Europe and North America.”

Which would seem to suggest that, faced with the choice of following the President, or following the commercial instincts that made him the world’s wealthiest man, Musk has opted for the latter.

As the screenwriter of “Margin Call” J.C. Chandor, shrewdly observed:

“You know, the feeling that people experience when they stand on the edge like this isn’t the fear of falling – it’s the fear that they might jump.”

Clearly, the world’s wealthiest man is not yet ready to defy economic gravity.

The planet’s most influential investors are no more willing than Musk to step off the edge. Even if it was possible to repatriate textile production instantaneously from South Asia to the United States, which it most emphatically is not, why would anyone with billions to invest do such a thing?

Remember the words of Bruce Springsteen’s poignant “My Home Town”:

They’re closing down the textile mill
Across the railroad tracks
Foreman says, “These jobs are going, boys
And they ain’t coming back

Lines which, though laced with bitterness, were nevertheless true – or should have been.

Why would anyone put money into building a new textile mill in anyone’s home town when there are already highly efficient textile mills in Vietnam and Cambodia with workforces willing to manufacture product for a fraction of the wage that an American worker, even a Trump-voting American worker, would get out of bed to earn?

The American economy is the most sophisticated, the most innovative, and the most lucrative on the face of the planet. The future of American manufacturing does not lie in textile mills on the Great High Plain, but in what UK Prime Minister, Harold Wilson, speaking more than 60 years ago, described as “the white heat of technology”. That means AI and robotics – not the power loom.

That’s why stockmarkets from Wall Street to London, Tokyo to Frankfurt, are screaming at Donald Trump in the only language which (against a mounting pile of evidence) they believe he still understands, to call this madness to a halt. To reaffirm the fundamental laws of the capitalist universe. To sever the self-fashioned rope binding him to the most catastrophic economic decision since the Smoot-Hawley Tariff Act of 1930, before it drags him – and the rest of us – into a totally unnecessary global recession.

Will he listen? Will the trillions of dollars wiped off the value of global stocks be enough to make him reverse direction?

In attempting to answer this question, it is worth recalling the answers Bill Clinton gave to workers threatened by the relentless unfolding of neoliberal capitalism back in the 1990s.

Speaking to an audience of factory workers during the 1992 New Hampshire primary, Clinton refused point-blank to lie to them. Like the foreman in Springsteen’s song, he told them that the jobs that were going, or had already gone, weren’t coming back. More importantly, from the point of view of political and economic physics, he explained how neither he, nor any American president, could bring them back. All he could promise – and did promise – was to help them adapt to the brave new world that was emerging from the ruins of the post-war economic order.

That Clinton’s crucial, and election-winning, promise was never kept, is what made Trump possible.

But only at the huge moral and economic cost incurred when politicians promise to implement policies lacking even a tenuous attachment to reality. Confronted with the degradation and squalor of American deindustrialisation, and sensitive to the seething anger and resentment it had spawned in the hearts of Rustbelt voters, Trump declared his intention to Make America Great Again. Spurning the grim honesty of Springsteen and Clinton, Trump promised his desperate MAGA demographic that those jobs would be coming back – by Executive Order.

Why did Trump make such a promise? The answer is, almost certainly, psychological.

The most profound threat to the billionaire mind, and there are plenty of examples which confirm this, is the delusion that material reality is susceptible to the will of those indomitable spirits who refuse to take ‘No’ for an answer. How else could any reasonable person explain the uncountable wealth that they were able to amass?

Gripped by such megalomaniacal delusions, billionaires bitten by the political bug are utterly convinced that whatever they decide the nation needs, they can deliver. Experts who object that the policies they are proposing are impossible, and that any promises they have inspired are undeliverable, merely demonstrate the weakness of their wills and the paucity of their ambitions.

Little men achieve little, but great men are capable of great things. History’s body is covered with the terrible scars of such megalomaniacal arrogance.

There is, however, one very thin silver lining to emerge from Trump’s protectionist turn. The potentially fatal blow it has dealt to the delusions of the Left.

Driven much more by simple nostalgia than megalomania, leftists around the world have for many years railed and rallied against free-trade and globalisation. (Remember the massive street demonstrations against the Trans-Pacific Partnership?) This left-wing opposition was understandable. After all, the 35-year commitment to “managed” capitalism that lasted from 1945 until 1980 was probably as close to socialism as they were ever likely to get without gulags.

But, now, at last, the Left can see what the defeat of globalisation looks like, and will, hopefully, grasp the authoritarian nature of the politics required to achieve it. A classic vindication, surely, of the saying: “Be careful what you wish for.”

Assuming, of course, that Donald Trump’s wishes do come true. That he can, indeed, defy the laws of political and economic physics. That he can successfully impose, by executive fiat, one of the largest tax increases in American history, and not pay a very high price for his actions at the next mid-term congressional elections. That he will not, in the end, be reminded, forcefully, of the persistence of political gravity.

 

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33 Comments

Trotter's most ignorant comment yet. 

And perhaps he should learn some physics, instead of fudging the word (as economists do with the word 'ecosystem'.).

The US could not continue as it had. It had become the biggest hegemony - Empire - on the planet, and had subjugated both people and resource stocks, particularly over the last 70 years. Entropy is catching up with it now, just as the Limits to Growth are playing out at the global scale. 

Which makes Trotter - wrong. Globalisation was temporary, indeed was always going to be so. A finite planet was never going to support trading of ever-more parts (and the idea that you can shift to virtual trading - which is what he's suggesting - begs the question: Why? And what for? 

 

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However his is much more eloquently & comprehensively expounded than your original first sentence.

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So basically the only relevant discussion on here should be your pet interest.

The world has been globalised in one way or another for thousands of years. And it'll continue to be, assuming we don't turn it into a molten fireball.

But always in flux.

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Nothing to do with 'pet interest'. 

That's like dissing the Titanic designer for concentrating on the sinking - his most pressing concern, properly weighted. 

Trotter has made the primary mistake of believing the horsepoo that economists put out - infinite growth a given; always a substitute as some price-point; productivity (really energy efficiencies) can increase exponentially as per growth. 

It was bollocks - to repeat it is to regurgitate bollocks. 

And we only got to sailing ships and 1 billion people by 1800 - please don't linearise the exponential irruption since. 

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So does physics say Globalism is going to disappear from existence then, or biforcate and change?

You're only wanting to view this (or almost any subject) through a very binary lens. No room for aspects like nuance or context. 

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C'mon PDK you're better than that. And this also applies to KKNZ, and Pa1nter. CT is discussing politics not physics. Economic politics and government politics. His last paragraph does provide a slight opening for the intrusion of physics and the impact on the next set of elections.

But the real truth is as you and I have pointed out a number of times is that the current set of politics is mostly about denying the physical realities of the planets resources. And Trump thinks that he can change that reality through executive orders. Nature is a brutal realist that ignores egos, no matter how big they are. 

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PDK has based his whole philosophy on a misunderstanding of entropy.

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murray86,

Actually and rather sadly, pdk is NOT better than that, Only he knows the truth and no dissent is allowable. Anyone who disagrees is ignorant. The world will collapse by 2050-see Blip by Clugston-and earth's carryi9ng capacity is 1bn or less. If you don't agree, you don't understand physics/entropy. He is the only true prophet. If you want to understand pdk, then read the Intelligence trap by David Robson, why smart people do stupid things. I have quoted Benjamin Franklin on the folly of absolute certainty to no effect, so as pdk worships science, let me try Richard Feynman, a truly great scientist who said this; "I can live with doubt, and uncertainty and not knowing. I have approximate answers, and possible beliefs and different degrees of certainty about different things, but I'm not absolutely sure of anything". If only pdk had some of Franklin's and Feynman's humility.

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Accepted. There are disciples of many beliefs the world over, Trump seems to have more than a few who persist in their belief in the face of evidence to the contrary of what he is spouting.

Physics though will have the final say, just when is anyone's guess. I noted a report I saw a week or so ago that indicated a group somewhere had applied AI to the climate issue and one of the results was that CO2 is not as bad as has been believed. Didn't say climate change isn't happening or won't, just one part of it is not as bad as has been pushed. Too many variables to be certain......

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Physics though will have the final say, just when is anyone's guess

Everything going on is subject to the laws of nature.

But if Physics was the be all and end all for economic measure and projection, econo-physicists would rule the world and financial markets. PDK or anyone would be able to present us with experts who've displayed a high degree of previous forecasting efficacy. They would be gods amoung men.

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Well, that was lightweight series of comments

The longest-running true-to-forecast 'economic' posit, is the 1970/72 Limits to Growth, and its trail of sequels and peer-reviews. 

Seen them hereabouts lately? 

Nup.

But we still have folk who don't understand entropy. 

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You're invoking a god of the gaps line of reasoning across much of the sites articles, which is the antithesis of the scientific method.

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"You're invoking a god of the gaps line of reasoning"

Wonderful comment Pa1nter, that's why I'm very happy to have you back commenting.  

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Nope.

The inflections of the Limits to Growth graphic - and it was run six ways to Sunday - are happening now. But - both originally-blindly and chosenly-blindly - people have still continued to lay bets like Kiwisaver, on the future resembling the past, just exponentially bigger. 

The Left hoped they could go green/electric, and party-on. That has turned out to be untrue, as those of us who went there early, have reported. Yes, we will end up on solar-originated real-time energy (stored for no more than months in dams etc) but we won't be doing near as much as we are now. By some orders of magnitude. 

It may well be true that the B Deck carpets are getting wet. It is true that this has never happened before, and if you insist on asking the Purser why? chances are he won't know. But the big-picture physic problem backgrounds EVERY other topic. Just as if you had a 3-month cancer prognosis, it backgrounds you plans for next Christmas. 

People deflect out of fear - I'm used to that - but that is no reason to cease discussion. 

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Murray - fair comment. Others perhaps didn't read it unfettered-ly... :)

But the series of forward bets which have been made on the assumption that the planet was infinite - and they include Kiwisaver, etc. - are increasingly irredeemable, so some sort of correction had to happen. 

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so some sort of correction had to happen. 

And the chicken bones say this is the big one?

The physics mandated start of perma-decline.

No recovery.

No future winners and losers.

No shifting global power.

No room for entertaining ramifications of neo-liberalism, history, psychology, geopolitics or any other factors.

Just physics circling the drain. Might as well shut the site down then, we have the one true answer for every question.

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Self-justifying but flawed. 

There will always be inter-personal and intra-group dynamics - but modernity is on its way out. So those will be somewhat different; probably very local, probably with a longer focus time-wise, and of course usury will likely be found only in the history books. 

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Fox News headline “Globalisation is over” with a photo of President Trump having a cuppa. There it is.

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https://www.resilience.org/stories/2023-09-27/can-modernity-last/

Some of us have traversed this path already already - note the fellow's background. 

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"...should any good come out of the present trouble, it will be the introduction of a GST style (consumption) tax in the US, which they currently don't have."

https://www.downtoearth.kiwi/post/the-hypocrisy-of-leftist-economists-i…

 

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Our Labour Party - as well as the Democrat Party in the US - and similar more left-leaning parties around the world - are all for signing more free trade agreements - but at the same time lament that this means the poor in their countries will increasingly have their "wages set in Beijing"

Touche

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I see a clip at the “Left”.   But I don’t see any criticism of the Right?   Why not Chris?  
Arguably the stupidity of our current mob, the lack of skills and fundamental empathy by for example, our minister of school lunches, demonstrates that all politicians including ours believe they can defy gravity.  Us voters know that they can’t.  

So we disengage.  Makes the space for the orange ones.  No one wants to deal with the hard issues, in fact they lie and fudge. Just look at the response to abuse in state care.  

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The world’s stockmarkets are not tanking because investors are lacking in faith, they are tanking because those responsible for investing billions of dollars, looking ahead, can find nothing positive in the consequences of Trump’s “Liberation Day”

OK, but should Costco's share price really be 55x earnings? That's like Nvidia's. Yes, they're a great company and run a tight ship, but is Costco really that special? 

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Agreed that Costco should not have a P/E of 55, but then again, should Nvidia have such pricing ?

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Of US Treasuries and to a lesser extent US stocks as the global reserve asset, since the US went off the gold standard in 1971, US treasury debt outstanding grew by 85x. The US had to create the credit dollars necessary for the growth in the world economy. Good for some Americans and Aotearoa, and bad for others. Trump was elected by some who believe they didn't share in this "prosperity" of the last 50 years.

If the US current account deficit is eliminated, then foreigners do not have dollars to buy bonds and stocks. If foreigners have to juice up their own nations' economies they will sell what they own, like US bonds and stocks, to fund their nation-first policies. And even if Trump backtracks on the severity of the tariffs, no leader can risk Trump changing his mind again - things cannot return to the way they were. You must do what is best for your country.

Can gold return as a neutral reserve asset? The dollar will still be the reserve currency, but some nations will hold reserves in gold to settle global trade. Remember the Trump admin hints that gold is tariff exempt. Gold must flow freely and cheaply in the new world monetary order.

A lot of those who had it good are in the denial stage, and share a delusion that somehow things will return to "normal". 

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"The dollar will still be the reserve currency" Why? The reserve currency is only the currency trading partners decide to cover their trade with, so why can't it be the Euro, or the Swiss Franc? It's consensus and a world post WW2 that led to it being the RC since then, but the world's economics have changed significantly and the case for the US$ to be the internationally recognised reserve currency could be argued to no longer stand.

It would certainly send a message to Trump, and the US that their power and influence is under threat if they don't behave themselves.

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Yes, this would be my pick. With the US$ potentially becoming very unstable, and trust in all things US being lost I'd speculate that the remaining global trade adopts the Euro as their base currency.

The nearest feasible alternative would be the Chinese Renminbi, but I can't imagine a communist currency ever getting the nod from Europe.

Keep in mind, if Trump continues down this path the US$ will also be the currency of a communist country.

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Only the US has capital markets capable of absorbing the flows of safe haven money.    no one in there right mind thinks Chinese bonds are safe, and ECB?

the USD is the least dirty shirt right now, this reserve currency stuff comes up every decent crash.

Dont be surprised if the market bounces 4% here...    the ranges have been cleared and there will be few orders to provide any resistance in a short squeeze.   IMHO the rot was well established, what credit spreads here for the next signal

 

 

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the USD is the least dirty shirt right now, this reserve currency stuff comes up every decent crash.

My reckon too. JPY is a 'safe haven' for the wrong reasons. BOJ is printing an historical amount of liquidity today to support the system and avoid the collapse of the JPY carry trade. The trade off for the short-term relief will be expensive globally in terms of future inflation.

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"...absorbing the flows of safe haven money" I suggest you're ignore the blatantly obvious at the moment and the driver for all this discussion. Trump is proving that the US including the $ can no longer be considered a 'safe haven'. 

What's wrong with the ECB that is not a problem with the US? 

Don't let your paradigms and assumptions blind you to what is the underlying problem.

What is true is that without the rest of the world the US will still be the largest economy, although China and perhaps India could challenge that in time (although their politics will limit that) simply on a population basis. If Trump is not stopped, cold, then the US economy will likely only be shadow of what it used to be. A big part of what makes it what it became was external demand, despite what Trump has said. Take that demand away and what is left?

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Really worth a read;

https://www.researchgate.net/publication/248966651_Ideologies_of_global…

If the history of all this is of interest.

As a starter, the ideology of globalization has six core claims:

1.Globalization is about the liberalization and global integration of markets.

2.Globalization is inevitable and irreversible.

3.Nobody is in charge of globalization.

4.Globalization benefits everyone (… in the long run).

5.Globalization furthers the spread of democracy in the world.

6.Globalization requires a global war on terror.

And Trump is what Steger refers to as a "challenger" of globalization on the "right" - National populism combined with Religious fundamentalism.

I think he might have done the world a favour.  A lot depends on China. They have the opportunity to emerge as the "challenger" on the "left" - Global social justice.  Go Xi. 

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The ideology of globalism depended on the ideology of an infinite planet (resource draw-down makes globalism a temporary arrangement). 

It was therefore going to peak, and reverse. 

Don't blame Trump. Or any politician - they are only as good as the bu--sh-t narrative being peddled to the masses - whose votes they need. 

 

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"That Clinton’s crucial, and election-winning, promise was never kept, is what made Trump possible."

Not 'possible'....inevitable.

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