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Article / 26 October 2016 at 10:00 GMT

US Election: Nothing to lose — #SaxoStrats

Chief Economist & CIO / Saxo Bank
  • US election less about Trump or Clinton policies, more about need for change
  • Obama administration has seen debt balloon, proliferation of low-value jobs
  • 'The real issue is how America will deal with the broken social contract'
  • Volatility, uncertainty to remain high into the 2017 German election

Donald Trump
Donald Trumps policies are not the answer, says Steen Jakobsen, but the establishment's full-court press against the candidate signals its fear of real change. Photo: iStock 

By Steen Jakobsen

My present macro speech is titled "Ugly: Don't fight with 'ugly' people as they have nothing to lose".

To me, this is the essence of the US presidential campaign. The ugly truth surrounding this ballot lies in the bigger picture, as whomever becomes president will go down in history as the "non-president" – the president who made us need, see, and demand something else.

For all of the colourful headlines, and the almost McCarthy-esque pursuit of Trump by mainstream media, this is not going to be about "Trump, the person" or his more or less moronic views; Trump merely represents the catalyst for change. He is the anti-establishment candidate, yes, but not our vision for the future.

Ultimately, Trump may still win despite (rather than because of) being... Trump.

That does not excuse mainstream media for not going after Clinton. If elected, she will be the least-liked president in US history, and I doubt any of her policies will do anything good for America.

More Barack Obama-type policy is not what the world needs. Obama may have created more jobs, but the average income for American has actually fallen during his presidency. What does this mean? It means he has presided over an economy that has created more jobs but less valuable ones, and growth during his tenure has been lower than during any other president, with the largest build-up in debt.

I am pretty sure that even this economist could create jobs with the amount of money Obama has spent!

Total US public debt:
US public debt

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Mind you I am 100% agnostic, politically-speaking. In fact, I don't even think this election really matters! No, this is not a new trend; no, Clinton is not the answer... but what this is a generational repositioning and renegotiation of the social contract.

The last time that this happened was in the 1960s, when the children of World War II went for peace, love, and a lot of drugs. Now we have the Berlin Wall generation coming of age, and this time the focus is anti-globalisation and anti establishment sentiment... and yes, again a lot of drugs.

The real election issue in America, but also in Europe. is how to deal with a broken social contract. Society has been pushed so far away from its natural equilibrium in terms of markets, social homogeneity, equality, and productivity that the move back to "normal" will bear both a political price and a penalty in terms of growth and outlook.

Put differently, when we look throughout history we know that part of the process of evaluation is to smell, feel, taste, and experience what we don't need in order to move towards what we do – a better version of society, but mainly a better one of ourselves. 

The next election cycle is about protest; it will be followed by crisis and then new beginnings.

I firmly believe, and have repeatedly focused on the fact, that we as human beings need to fail in order to create a mandate for change. With regards to this dynamic, the US presidential campaign comes up short in many categories except one: failure is almost guaranteed.

If Clinton wins, the probability of a recession increases immediately and big business with return to a '70s-like state under a Politburo-esque White House.

If Trump wins, we will have taken the fast track to massive political upheaval as the end of the Democratic/GOP monopoly on politics shifts towards a social agenda against globalisation, openness, and trade... the only good thing to come out of such a change would be the fact of change itself.

This US elections will not have any winners, only losers – but don't despair. The US and the world economy will come back, and with surprising strength, but the political timeline is now finally aligned with the economics malaise created by central bankers. By this I mean that the corresponding low points in politics, economics, interest rates, and inflation, and the high points in terms of financial asset valuation and inequality, are coming to an end.

Volatility and uncertainty will be high the next over the next nine months (through the German election) but in the end, talk must cease and reality must reassert itself.

This is the best news of all. By accepting that the social contract is in dire need of being corrected, we could see a strong V-shaped recovery as early as the US midterm elections of 2018.

Voters are the ones with nothing to lose, not the ugly. This time around, change is what they crave; understand this and you will navigate the next election cycle with confidence.

Election 2016
This is a protest election, and the US and the world likely have some choppy seas 
to navigate before things calm again. Photo: iStock 

— Edited by Michael McKenna

Steen Jakobsen is chief economist and CIO at Saxo Bank

joyninja joyninja
This election is about a lot more than economic discontent. I don't disagree with your premise that it's about renegotiating the social contract between rulers and rules. But it's about more than that too. Trump has elevated the alt right, our own homegrown white supremacist movement, to the national stage. He's normalized racism, misogyny, and violence against non-whites. How can you say it is "McCarthy-esque" to denounce this? What he says is not merely "moronic", it's abhorrent. Hillary is not just "business as usual". You may not agree with her economic policies and she is obviously an elite, but you are completely ignoring the difference between a woman with a large multi-ethnic base, and the (hopefully) last gasp of white male supremacy desperately fighting to maintain control. We're not just fighting for our economy here, we're fighting for the soul of our country. This election is about who we are as a country, our national identity.
Steen Jakobsen Steen Jakobsen
Well said! I think you know I agree except for Clinton offering alternatives... my whole point is your ending point + this is about the soul of America and the US will rediscover and redefine only after a lost four year cykle with either Clinton or Trump in the WH....

On McCarthy style my complaint is only that by doing it MSM makes Trump stronger.......and I think MSM should and could do better to educate a long the lines of your excellent response.. had that been the case earlier nektaren Clinton or Trump would be on the ballot Nov 8th!

Thank you for great infight and input

Steen Jakobsen Steen Jakobsen
Sorry for missing word, misspelling my Ipad cant decide whether to write danish or english....
johnnyw johnnyw
Great article Steen.

In reference to the comment, I like what Simon Black wrote on the media....

"The Huffington Post, for example, cannot even mention Donald Trump without adding an editor’s note at the end of the article saying:

“Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.”

Great. We all understand that you think he’s a bad guy.

But what’s sorely lacking is the anti-Hillary editor’s note, something that would read:

“Hillary Clinton is a pathological liar and sociopath who has spent decades engaging in criminal misconduct and abusing her power to enrich herself and her supporters.”

Of course, you’ll never see that."

I would also add, 'statist and advocate of increases in interventionist/socialist policies that will lead to further state control.'

Looks like failure is guaranteed!
joyninja joyninja
Thanks for the response! Many people here were blindsided and baffled by Trump's rise. I only understand it a little better because I was raised in a rural area. Many people in cities think reality ends at the city limits. People who live in the country are the butt of jokes, they are not seen as real people who are part of our country too & whose needs matter. Of course they are angry, & they have reason to be. The MSM is created by people in cities who genuinely do not get it, and they are terrified because all they see in Trump is the racism and misogyny. When they hear, "Make America Great Again", they think, you want to roll back civil rights, gay rights, etc? If the message is really "Make Our Communities Economically Viable Again", and stop leaving our needs out of the political process, that message does not get heard. Trump seems like a loose cannon. Since Hillary is the only viable alternative, the idea of undermining her feels dangerous, since she is already unpopular.
joyninja joyninja
In terms of education, I think that prior to this election the MSM have done their best, but they are in a bubble they don't realize they are in, so they lose credibility and are not listened to by a large segment of the population who turn to internet "news" sources instead, which is morass of conspiracy theories. You can't educate people who believe you are part of a conspiracy against them. I certainly hope we can all come together and learn from this, but right now people can't even agree on reality, so it seems like we have a long bumpy road ahead.


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