Lenin spared no ridicule and contempt for the narodniks, the Russian populists. The same ridicule and contempt that the elites of Washington, Wall Street and Silicon Valley reserved for the deplorables who brought a semi-populist in the White House.
In reality, on the one hand it is not true that enlightened and disinterested elites are always such and on the other it is not true that populism is always and in any case catastrophic. The torrential revelations of Wikileaks are offering us a cross-section of the system of power and show how real American capitalism is also much more relational than the official narrative likes to tell us. The lack of periodic replacement of the ruling class creates nepotism, corruption, collusion and encrustations of all kinds.
Populisms, for their part, are not all the same. There are those on the right and those on the left. There are those in which the leader creates his people and those in which the people create their leader. There are those who are resentful, justicialist and based on social envy and those who maintain a certain content of idealism and levity. There are pure xenophobes and those who simply would not like to see a very human sense of self-identity violated. There are those with a pan-syndical and welfare background, such as Argentine Peronism (one of the most destructive forms) and those with a Jacksonian and libertarian background, based on the contrary on the self-sufficiency of the individual and hostility towards a big government that is falling from 'high its ready-made solutions and its taxes.
Sul macroeconomic plan populisms typically emerge after prolonged periods of stagnation or crisis and almost always have a reflationary component which can be expressed in a more or less intelligent way but which in any case, at least for some time, produces a re-acceleration of growth.
After all, didn't we crave a little inflation? We will have it. Didn't we wholeheartedly want more expansionary fiscal policies? We will have them. Didn't we want to get out of the suffocating grip of negative and ultra-low rates? We will get out of it.
American populism embodied by Trump it is a benign variant, we hope, of the global movement of revolt which not only involves the West but also touches China engaged in the campaign of moralization. Trump clinched the win last night when it became clear that Appalachian miners, whose jobs Obama had taken in his fight against coal, had overturned forecasts for Pennsylvania. Trump, however, has not proposed nationalizing or subsidizing coal, as a Peronist or Labor would do, but simply deregulating it and letting it compete freely with other energy sources, perhaps removing public subsidies for renewable sources. The miners probably won't get their jobs back in the mine, but at least they won't be criminalized anymore as white trash unworthy of social consideration. There is a lot of liberalism in this and there is nothing populist about it.
Even on the question of the explosion of the deficit, there has been an exaggeration. Trump loves opening his hotels, as he did recently, saying they were built under budget. Throughout the election campaign he promised to contribute 100 million dollars from his own pocket and in the end he won by putting in only 50. Mike Pence, one of the most economical governors in America, was then chosen as his deputy. This means that Trump will likely be able to strike a deal with the fiscal conservatives in Congress. There will be new infrastructure (on which Trump will be able to put a plaque with his name, he can't wait) that will be built with less waste than usual. The deficit will increase, but at least this time it will not be for current expenditure and welfare but for something lasting.
Inflation and rates they will increase, but not dramatically. The Fed will be left alone if it is cooperative, otherwise it will be unceremoniously renewed. Malpass, Kudlow and Taylor are preparing to take over from Yellen, in the event. The three call for a hike in December and four or five hikes next year, then that's it. It seems like a lot and it is, but you know how these things go. Eventually the hikes will be fewer and will simply accompany rising inflation and expansionary fiscal policy.
The rate hike will tend to strengthen the dollar. To balance this effect, Trump will impose selective tariffs, as indeed Obama has already done, and will hit Chinese dumping. He will certainly put a tariff on reimports from abroad made by American companies that relocate. There will be a certain punitive intention in this, which is not very different from what we have seen in action in recent months against American companies that have made the so-called tax inversion by domiciling abroad.
For the emerging countries the effects will be both positive and negative. Stock markets will remain attractive, but bonds and currencies will remain under pressure. On the other hand, having weaker currencies will boost their growth, once again favoring local stock exchanges. China will be induced to convert back to domestic consumption faster, which is a good thing. Mexico has already been punished too much by the markets. Russia will benefit greatly from the new geopolitical framework and is therefore a must in portfolios.
Even without being as optimistic as Marc Faber, some commodities linked to infrastructures, which are experiencing a great revival all over the world, will become interesting again. Steel will enjoy a better environment, also thanks to tariffs. Instead, energy sources will experience a supply shock. Deregulating production, transportation, processing and consumption in a country like America, so rich in every imaginable energy source, will mean lower prices along the entire supply chain. For American companies, the shock will be cushioned by lower regulatory costs and increased volumes. Best wishes to Middle Eastern producers.
THEEurope it will benefit from the strong dollar and higher US growth (a few decimals, nothing overwhelming, but it does everything). In December, the ECB will renew the quantitative easing for six or nine months, but in the background we can glimpse some form of tapering and the end of negative rates. On a political level, the Trump effect will not necessarily be the impetus for further disintegration of the Union.
The American stock market will see spectacular rotations that will penalize interest-rate bonds and reward cyclical stocks, infrastructure, steel and coal (what little is left). Pharmaceuticals will no longer be subjected to torture and abuse (sometimes deserved) by Congress and banks (including Europe) will find themselves oxygenated by the new interest rate climate. Medium and small American businesses, rather than large ones, will be the real beneficiaries of the reduction in the tax burden.
Bonds around the world have already started to adjust to the new framework. Long deadlines should be avoided for some time. Inflation-indexed bonds should be preferred, provided that they have a maturity of no more than 5-7 years.
The markets had come to the election hoping for the status quo to be maintained and they were served an earthquake. However, the status quo would have produced the persistence of a poisoned climate between the White House and Congress and an almost complete legislative paralysis. Monetary policy would look increasingly tired and withered and a gloomy mood would begin to spread. Now honors and burdens are all on one side and there will be no excuses for anyone. The climate, especially if Trump shows himself truly magnanimous towards Clinton and avoids inflicting violence against her through the courts, will loosen up.
Trump has made many promises and will not be able to keep them all. It is also possible that his negative character traits are really taking over, as he has been feared and continue to be feared in many quarters, and are leading America and the world down the wrong path. For the moment, however, rather than staying indoors and breathing in an air that was beginning to become stale, it is perhaps better to have the window open to let in the wind, dust, litter and leaves of all kinds, but also a little oxygen.
