Paranoid Americans may stymie some positive Trump policies

Donald Trump, assuming all is well, will receive the keys to the White House in a little under three weeks’ time and thereafter could change the face of US politics.  Some of his announced policies during the Presidential Election hustings, fill this distant observer with dread, and The Donald’s historical indiscretions and financial dealings may well come around to bite him in the bum and even put his likelihood of completing a full term in jeopardy, although if this is the case he would probably have to be forced out of office – his huge ego would likely prevent him from resigning.  What odds on a President Pence ahead?

However, among his proposals for revival of the US economy and in realigning some aspects of US foreign policy there are, in the writer’s opinion both positives and negatives, but what are the chances of some of what I see as positives being allowed to proceed by a Congress which may be opposed to some of them in principle – be they Democrat or Republican?

Principal among these Trump flagged intentions is a rapprochement with President Putin and Russia, whether or not there was Russian involvement in the hacking into Democratic National Committee emails.  Julian Assange, whose Wikileaks organisation publicised the emails, and certainly no fan of the US Administration, has denied Russian involvement and the President Obama accusation that President Putin may have been directly involved in authorising the alleged hacking smacks of opportunistic posturing by a Democratic President whose party had just lost the Presidential election to a candidate who was anathema to half the American population – and to much of the Western World as well.

Both Russia and the USA have a paranoid streak when it comes to the other stemming from many years of mutual distrust.  What might be considered as legitimate by the one may be seen as a major threat by the other and nowhere is this more apparent than in Eastern Europe.  Russia’s annexation of Crimea with its dominant ethnic Russian population is a case in point.  Given that Russia had, by agreement, based its Black Sea naval fleet there meant Crimea was of major strategic interest to Russia and the changes in the Ukraine Government resulting in the ousting of President Yanukovyc, which seemingly were orchestrated by the US, had put this at risk.  The threat of NATO expansion into the Ukraine will have contributed to Russian paranoia over the military threat this posed given NATO had already moved forces into other areas which had previously been part of the Former Soviet Union, contrary to what Russia believed were promises by NATO not to expand into these territories.

The Crimea move brought US and European sanctions against Russia into play, damaging the latter’s economy, although this has made something of a recovery as European trade has been partly, at least, replaced by building additional Asian trade ties.  Indeed the sanctions have probably been more economically damaging to Europe than to Russia.  But the sanctions are set to persist until Crimea is returned to Ukraine – a highly unlikely outcome given it would hugely undermine President Putin’s credibility.

The paranoia is not just one sided though.  The US population has a hugely paranoid streak when it comes to any individuals or regimes seen as acting in contrast to what are seen as the US’s best interests.  This is aided by national media which are largely little more than propaganda outlets for the Administration – not that this is any different in Russia, or in most other countries for that matter. This was brought home to me by US attitudes to Al Jazeera, which is a pretty independent Middle Eastern-based TV news station which is in general an accurate reporter of Middle Eastern and World Affairs.  Al Jazeera was demonised by the US Administration and media over its Gulf War reporting – not because it was inaccurate, but because it did not necessarily follow the US propaganda line over what was actually happening on the ground.  To this day the majority of Americans still seem to believe that Al Jazeera is totally anti-American.  Indeed, if asked, many Americans who have never watched Al Jazeera probably think of it as a propaganda outlet for Islamic State, which it patently is not.

And so it is with Russia, as it was with Communism with which Russia is still equated in the USA.  (This spills over into Cuba too – it will be interesting to see how Trump resolves all this – he seems to be pro-Russia and anti-Cuba).  The Russian/Communism paranoia probably has its roots in the McCarthyism era of the 1950s – described by Wikipedia as “the practice of making accusations of subversion or treason without proper regard for evidence” – in which many prominent Americans were unjustly branded as having Communist leanings and suffered loss of employment and/or destruction of their careers; some even suffered imprisonment. Most of these punishments came about through trial verdicts later overturned.

Thus Russia becomes a convenient scapegoat for perpetrating anything that might be considered anti-American – like hacking into the DNC emails – even though it is probably seen as perfectly legitimate for American agencies  to undertake similar practices and try to help promote regime change in countries where policies are seen as running counter to American interests.  We live in an era of government spin and as one gets older one becomes more and more sceptical about what our own governments and media are telling us.

But back to American paranoia.  Trump’s avowed policies of getting closer to President Putin – in a similar manner to President Reagan with President Gorbachev – in our view could go a long way towards defusing global tensions.  It could certainly help bring an end to the Syrian conflict, although that could also align the US with Iran and Hezbollah, as well as President Assad,  which would be a decidedly uncomfortable relationship.  However with many in the US Congress, on both sides of the political divide, having been imbued almost since birth with anti-Russian feelings, they may well seek to block any closer relationship with President Putin’s Russia.

What of Trump’s other flagged policies?  Some will undoubtedly fall by the wayside anyway.  Certainly getting Mexico to pay for the much vaunted border ‘wall’ seems unlikely to see the light of day.  The massive proposed infrastructure building programme cannot be an immediate fix and may be fraught with difficulties anyway and we suspect that delays in implementing this will have an adverse effect on equities markets.  Tax cuts would be popular, but again may be easier in theory than in practice as so often these are perceived to benefit the ‘already-haves’ more than the ‘have-nots’.

On other foreign policies a confrontation with China may well not be in American interests, although Trump seems determined to venture down this path.  A potential military confrontation in the South China Sea seems to run counter to suggestions that the US may refrain from intervention by force in the affairs of other nations – policies which have cost America dear and cost the countries in which it has been militarily involved even more dearly in terms of infrastructure destruction and huge losses of life.

Some kinds of economic moves against the Middle Kingdom and against US  companies which have set up manufacturing outlets there, and elsewhere to take advantage of lower wages, look to be on the cards.  These could be counter-productive in that China, in particular, may just use that as an excuse to take over these manufacturing plants and produce competitive products at even lower prices.

Trump’s policies on Taiwan could also have a major negative effect in terms of confrontation with China, but here again US Congress may prefer to retain the status quo, although Trump’s unpredictability will raise doubts as to whether he’d pay heed.

Unpredicatbility may well be the key take-away from a Trump Presidency.  In theory, altyhoughh not always in practice, safe haven assets thrive on unpredictabily.  The No.1 sahe haven asset has been the US dollar but this could well suffer if Trump’s policies don’t set the American economy back on the upwards track.  Indeed we believe the dollar could be heading for something of a fall as early as by the summer if Trump’s policies don’t have an immediate positive effect on equities and the US economy and a falling dollar will likely mean a rising gold price (in US dollar terms at least) and a rising gold price could well lead to an even more rapidly rising silver price, with the even better beneficiaries being gold stocks and silver stocks .  Our thoughts on this scenario are laid out in an article on Seeking Alpha- 2017 Predictions - Gold, Silver, PGMs, The Dollar,  Markets and Geopolitics.  Do read and draw your own conclusions!

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