Trump v Clinton – How did it come to this?

The US presidential race has been seen as one of the dirtiest in living memory. Neither candidate is liked much by the American public, and Trump is hated almost universally by the UK media and political class.

Let’s be honest, they are both grotesque caricatures of the worst kind. Trump is the worst kind of tycoon, arrogant, cocky, misogynist, and not as successful as he makes out. He’s a braggart. Clinton is corrupt to her core, a machine politician who believes she’s above the law, and under investigation (not for the first time) by the FBI.

But neither should have made it this far, and most especially Hillary Clinton – who failed in 2008 to get the nomination from the Democratic Party when she was the favourite. As other candidates dropped out, not one of them endorsed Clinton in 2008 – every one of them endorsed Obama. And it’s not as if Obama had achieved much up until that point, a product of the Chicago system with plenty of doubts about his credibility.

So why Hillary?

Look at the candidates who stood against Hillary Clinton this time around.Not one of them apart from Bernie Sanders had actually won an election to Congress or Senate. Not one other elected politician of any experience stood against her. There could be multiple reasons for this.

The possibilities are not mutually exclusive either. The first is that I cannot imagineĀ  any Democrat thought that they would be facing Trump. In fact, I suspect that they thought they would be facing either Ted Cruz, or more likely Marco Rubio. That would have been a tougher race to win, even for a good Democratic Candidate with a clean record.

Secondly, they would have to follow Obama, and be responsible for his mess. Specifically that would mean somehow making the Affordable Care Act work in practice, which has proven almost impossible thus far. Syria has also been a disaster partly of America’s making with its foolishly indefensible ‘Red Line’, which has made it look weak. Putin has taken advantage of a weak President, and there’s no easy solution to that.

But I really think the main reason is much more important. For the last eight years, the UK media has been trumpeting the USA’s economic miracle, that the American recovery from 2008 has been much better than that made by the UK (and by Europe, but that doesn’t get mentioned much). The truth about the US economic miracle is that it’s an illusion. It’s just as much an illusion as the UK recovery.

The illusion of Recovery

The Troubled Assets Relief Program bailed out the Financial Sector in 2008, but it didn’t really do anything else but keep the plates spinning. Main Street America was still on the hook for its own borrowings, built up over a generation of encouragement by Fed policy. GDP has been pushed along by the continuance of loose monetary policy, making it appear as if main street has become less indebted in comparison (and it has a little)- but in plain figures personal debt is still very large. Policy has been to try anything to stimulate demand.

The link between share prices and company earnings has been stretched beyond normal bounds, something that is true of the UK market also. This suggests that eventually there will have to be a massive correction. The markets seem disconnected from the real economy. At the same time the USA is still running a nasty trade deficit which is only possible without serious short term risk because the Dollar is the world’s reserve currency and other countries still want to hold dollars.

Every time Janet Yellen previews the idea of raising the cost of borrowing, the market convulses, and from 2008 only a measly 25 points rise has been managed – hardly a return to normality. But it cannot go on forever with ZIRP, there has to be a moment when realistic pricing returns to the market, even if in eight years it hasn’t yet happened.

The Poisoned Chalice

So for all the best of intentions, Obama leaves an economic poisoned chalice. To be fair to Obama, Bush left him the worst possible legacy, but he has done absolutely nothing to address it except kick the can down the road with the help of the Fed. This could point out the reluctance of potential Democrat candidates to run in 2016, and to wait for a better time. But the Republican race was much more competitive, and yet Trump still won.

In the illusion of recovery, the same issues that gave us Clinton from a weak field gave us Trump from a much more competitive one. Middle America knows that the system doesn’t work for it any more, the illusion is not apparent for them. Mired in debt, with little real industrial growth, asset prices still growing, bankers still rich, they are just mad as hell and they weren’t in the mood for any more of the same. Trump was middle America’s revenge on the political class that has failed them with economic policy, social policy, and especially foreign policy, all designed in a detached enclave in Washington which no longer looks or sounds like them (if it ever really did).

The Next Time Around

I see this election as the indicator that the economic wheels are soon going to fall off. The next four years will probably be an absolute nightmare for whoever is in charge. If that’s a Republican they will get a little more slack because they can blame Obama, and Trump can especially claim that as an outsider he was not part of the problem or it’s originating class. (Of course, that’s not entirely true either, but politics often works that way).

Hillary has been part of the establishment for most of her life, if the shit hits the fan there will be no patience for her at all. She cannot pretend somehow to not be part of the problem, there is no distance. The Democrats can still purge themselves in 2020 if they win this time (which still seems likely) and then remove the last of their ‘Dynasties’ as the Republicans have done with the refutation of the Jeb Bush candidature.

A Clinton win will almost certainly put a Republican in the White House in 2020 – a Trump win will almost certainly do the reverse. Clinton won’t be impeached, if she wins her problems will dog her but they won’t be terminal, just as they weren’t for Bill. The office is protected by its nature in American politics. It’s going to be a rotten four years in the hot seat. Resolute better not just apply to the desk! Either candidate will most likely have a terrible time and probably won’t be returned to power.

Unless of course, they can manage the impossible, and keep the economic plates spinning for another four years. I wouldn’t bet on that.

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