Trump, Brexit - Democrazy
ElectionOracle / US Presidential Election 2016 Nov 11, 2016 - 05:27 PM GMTBy: David_Galland
Dear Parader,
I began writing this week’s musings on a small notepad while sitting in the Homeowners Association Meeting here in La Estancia de Cafayate.
For the record, I have a near phobic dislike of sitting in meetings that ranks right up there with filling in government forms.
To my way of thinking, business that could be handled efficiently by a couple of well-intentioned and reasonably intelligent individuals in 15 minutes takes a larger group several hours to reach either the same conclusion or something less efficacious.
In any event, sitting here with the soul-depressing and largely circular conversation humming in the background, certain thoughts come to mind about the nature of group decision-making.
Democrazy
When you think about it, the democratic form of government is basically group decision-making writ large. As I see it, there are two primary actors involved in the process.
One of these actors is typically called the “administration,” though you could replace the term with any of a dozen or so equally correct terms, including: government, the state, the powers-that-be, ruling elite, etc.
The other actor in the democratic decision-making process is the collection of people living within the political boundaries. These people are sometimes referred to as the masses, the citizenry, the constituents, or, when things go wrong, the mob.
The administration will typically have a rather straightforward agenda. In a democracy, that agenda will revolve around fulfilling the most pressing wishes of the masses while pursuing policies that the administration feels will produce a sufficiently positive outcome and lead to reelection.
Of course, those in the administration are only human. So, if they can lead things in a direction that benefits them personally, that will be on their agenda as well.
Both parties share the overarching goal of maintaining a functioning and civil society. Failing in that shared goal could lead to the administration being replaced by “mob rule,” followed by unpleasantness involving pitchforks, torches, and, in extreme cases, guillotines.
On the other side of the ledger in the group decision-making process are the aforementioned masses. This is where things get tricky. Here in La Estancia, we have about 300 owners from 33 different countries. Naturally, each has their own ideas, aspirations, prejudices, fears, and fantasies.
Add in different personality traits: Some are lazy while others are energetic. Some are trusting, others are paranoid. Some are honest and others of poor character. Some possess razor-sharp intellects, others just average intelligence, and a few will be simple as sticks. And this is just the beginning of the list.
Within the full suite of human attributes, we also find those who seek power and influence and those who simply want to go along to get along. Invariably, leaders will emerge and find followers who self-select into camps based on their philosophical leanings. The more followers a leader has, the greater their influence in the decision-making process.
In order for the administration to be successful in its leadership role, it must be sensitive to the key factions within its constituency, then adroitly calculate which subgroups within the masses must be appeased in order for social harmony to prevail.
Until it doesn’t.
Failed Societies and Divided Masses
Of course, history is replete with examples of failed societies. The list of reasons for these failures is long indeed, but invariably involves the administration losing the confidence of a significant percentage of the masses.
In Rwanda, the Hutu-dominated government lost the confidence of the sizable Tutsi minority who decided the only way to address their grievances was to take up arms. In short order, this led to a genocidal counterreaction by the Hutus with more than a million people slaughtered.
In Russia, circa 1917, Czar Nicholas II and his power elite failed to sufficiently read the mood of the peasantry. Cheered on by determined power-seekers—Vladimir Ilyich Ulyanov, later known as Lenin, foremost among them—a subset of the citizenry was motivated to take up arms. Despite concerted and brutal efforts to crush the Bolshevik uprising, in the end the czar was forced to resign and soon thereafter met an ignoble end.
Returning to the micro level, here in the far more pacific climes of Cafayate, Argentina, societal failure might be triggered if the administration in La Estancia completely ignored the wishes of the homeowners and, say, decided to open a large hog farm next to the Athletic Club and Spa.
While people would be unlikely to throw stones in response, you can bet they would do the next-best thing by calling up the lawyers, and in no time at all, the social balance would crumble.
Thankfully, the La Estancia community is mostly unified by a libertarian outlook and a shared desired to live life with minimal interference. Imagine, however, what the situation would be like if this small enclave was as philosophically divided as the masses in the United States.
For example, if half of the community consisted of raging socialists who believed the other half should pay their “fair share” by subsidizing the home and food expenses of those financially less well off.
I can assure you that, rather than being droll affairs, the Homeowners Association meetings would quickly devolve into angry shouting matches, or even scuffles like those occasionally breaking out in the Italian Parliament.
And that brings us to the just concluded election.
The Trump Administration
In the larger context of the US election, it appears that the silent majority, while older now, is still alive and kicking.
The signs that Trump could win were there for all to see. For instance, in a past edition of this weekly missive I pointed to the complete absence of bumper stickers and signs in support of Hillary. She inspired almost no one, leaving only those voters taught by the media to hate Trump to pull the lever on her behalf. It wasn’t enough.
Of course, like many, I assumed Hillary would win—simply because it was beyond my ability to imagine how Trump could prevail with virtually all of the mainstream media… and the bulk of the minority and millennial voters... and all the entrenched political interests lined up against him.
Yet, in the end, it was the prototypical American concerned about their future, and not the transsexual bathroom activists, who carried the day and denied Hillary her long-held presidential aspirations. In probably her greatest mistake in the campaign, Hillary labeled Trump’s supporters “deplorables,” which, as it turned out, was akin to spitting in the eye of over half of the population.
If you look at the electoral map, it is apparent that, with few exceptions, the bulk of Hillary’s support came from the coasts, both hotbeds of the liberal elites.
Interestingly, this map looks quite similar to the map of the Brexit vote, with the “Leave” camp (in blue) dominating the geographic center.
Like the British decision to detach from the cultural Marxist overlords of the European Union, Trump’s victory underscores a desire by the majority of the population to be free from the statist quo.
However, as close to half of the people in the country view a Trump-led administration as an abomination, consequences are inevitable, including…
1. The millennials will feel disenfranchised.
With their champion, Bernie Sanders, outmaneuvered by Hillary’s hit squad, then forced to serve as a trained ape on the campaign circuit, the millennials had to cast around for an alternative candidate. I can assure you that Donald Trump—a white, male fat cat with bad hair—is the exact opposite of who they would want to head the country.
By the next election, the millennials will make up the single largest demographic voting bloc. Therefore, Trump has four years to prove that less, not more, government will produce the most satisfying result for American society.
The downside (and it is a very significant downside) will materialize if Trump—despite controlling both houses of Congress—is unable to make great, great things, really great things happen over his first term. Should his administration fail to impress the millennials over the next four years, come 2020 you can expect the socialists to surge back, with long-term consequences.
2. Racial minorities will feel thwarted.
Coming after the first black president, Trump’s victory shattered the dreams of large segments of the black and Hispanic communities, especially because the Clintons and the media callously played the race card over and over throughout the election. The strategy was effective, with 88% of the black vote and 65% of the Hispanic vote going to Hillary.
That the presidency has fallen back into the hands of a member of the white male demographic, a group the media had prematurely consigned to the trash bin of history, has shocked the racial minorities to their core. Can segregation and lynchings be far behind?
While we have yet to see how this particular scenario plays out, it won’t take much for articulate power-seekers within these communities to motivate some small segment into taking violent action at the next real or perceived offense.
3. Beware the enviro-cultists. Given how thoroughly brainwashed the environmental alarmists are, having a climate realist in the White House will be viewed in a similar light as a Jew would observe Hitler’s rise to power.
This group concerns me, as they believe in doing “whatever it takes” to save Mother Earth from being molested by Trump. Within this particular pocket of mass delusion, there will be hackers willing to unleash electronic mayhem and even those willing to use violence to “save the world.”
Triggering their worst fears, Trump has already announced he would appoint Myron Ebell to head up the transition team at the Environmental Protection Agency. Ebell is the director of the Center for Energy and Environment at the Competitive Enterprise Institute, a free-market think tank. More to the point, Ebell is a well-known skeptic of the the whole global-warming nonsense.
Can you imagine his first day on the job? It would not surprise me in the slightest if the entire EPA staff walked out in protest. The consequences of such a walkout could be catastrophic because, uh… err… well… the local Starbucks would go out of business!
The changing of the guard at the EPA will be repeated in government offices throughout the country. Of course, the transition from the status quo to whatever is next won’t come quickly or easily.
However, provided Trump isn’t a complete dolt—and we only need to look back in history as far as George W. Bush to know that it is possible for dolts to be elected president—there should be much to celebrate as the new administration takes control.
For example:
- Healthcare reboot. While the complexity of Obamacare makes the path to dismantling it unclear to me, that appears to be a top priority for Trump and the Republicans.
Speaking as an expat forced to pay ridiculous premiums for services I don’t want or need, and hearing horror stories of quickly degrading medical standards in the US, I think unraveling this ball of red tape would be a great start.
- A return to energy rationality. I find it very interesting that the US continues to meddle in the Middle East, even though it has achieved the formerly elusive goal of energy independence. Between the latest technological advances in fracking (which I have been told can now be used to profitably extract oil at just $35 a barrel), and nuclear, and cheap natural gas, and clean coal technologies—plus the growth in alternative energy sources—the US energy picture has never been brighter.
The ready availability of cheap energy is a prerequisite to a successful economy. With realists in charge, as opposed to populists who seek personal and political gains by promoting the ridiculous notion of a pending climate catastrophe, the benefits to society will be huge.
- A military stand-down. For reasons I have a hard time understanding, many people I know admire Putin, despite his well-earned reputation as a dangerous man willing to authorize “wet work” against opponents.
Regardless, there’s no question the US and NATO have been belling the Russian goat pretty much consistently since the Soviet Union’s dissolution. If Trump is true to his word, he’ll sit with Putin and restart the relationship based on something other than the bellicose rhetoric regularly trotted out by Clinton and the neocons.
Due to its reliance on oil revenues, Russia is still in trouble, and because of the abundance of cheap energy just mentioned, it will remain under pressure. However, without the sanctions and constant threat of war, there’s hope the country can find alternative ways to move forward economically. As far as I’m concerned, the key point is that a Trump administration means a step back from the precipice of war.
Elsewhere, I would hope and expect Trump would begin pulling troops out of countries where the US has no important strategic interests and begin cutting back the insane level of military spending.
The Economy and Investment Markets
A quick comment on the general economy seems in order.
If Trump delivers on his promise to “drain the swamp” and cut back on the level of bureaucracy, the US economy should be able to begin the process of recovering, which would be reflected in the investment markets.
That said, the size of the US debt bubble—including government, corporate, and private debt—caused by the Fed’s persistent low interest rate policies will make the Trump administration’s job in this regard extraordinarily challenging.
There are a couple of approaches the new administration might take:
- Go slow. Allow the Fed to continue to act independently, slowly raising interest rates only as growth in the economy provides enough strength to offset the deleterious impact of higher rates.
- Go fast. Move to disband the Fed or try to force their hand in normalizing rates, triggering a crash and an economic reset. Of course, Obama would get the blame for the mess, then Trump would look to get the glory as the economy began to rebuild.
If I had to guess, I’d say Trump and his advisors will hope to grow the economy out of the debt trap, but one can never know how these things turn out. That’s why it’s so important to focus on finding undervalued stocks for your portfolio as they will always be the first to rebound, even if a serious correction occurs.
I think the lack of a stock market sell-off following Trump’s surprise victory is a clear signal that traders are waking up to the reality that having a businessman in the White House is preferential to yet another statist with strong socialist leanings.
I expect the stock market will do well under Trump, though the number of economic booby traps left by prior administrations make this no sure thing.
Concluding Thoughts
With the group decision to elect Donald Trump to head the new administration now behind us, the constituencies that comprise “We the people” will begin the process of adapting.
Per my opening comments, most will go along to get along, but others will line up behind opposition leaders skilled at tapping into their emotions, prejudices, opinions, etc., and continue to view Trump and his new administration as an existential threat and engage in widespread civil disobedience.
During the campaign, many Trump voters were harassed and even assaulted as they attempted to exercise their constitutional rights to peacefully gather and engage in free speech. Now that Trump has prevailed, I suspect that sort of harassment will be far less likely to be tolerated, setting the stage for direct confrontations as the social schism widens.
In short, I don’t see how the rollback of political correctness and socialism could take place without substantial friction between the administration and a significant percentage of the constituency who has lost all faith in the democratic form of government.
The jury is out as to whether the Trump administration will be able to lead the country back toward the principles that made the US the economic powerhouse and shining beacon to the rest of the world it was for almost two centuries.
However, for the first time in a very long time, there’s hope.
Here Come the Clowns
Yale professor makes midterm optional for students distraught over Trump win. Liberal students across the nation watched in shock as Donald Trump clinched victory from Hillary Clinton to become the 45th president of the United States.
But some wiped their tears, and pulled themselves together enough to ask their professors to cancel their exams because they were so upset by the results.
And one Yale economics professor heard the cry, and decided to protect his snowflake charges by making the test optional. Read the rest here.
Canadian immigration website crashes. Apparently, so many Hillary supporters are thinking about heading north to avoid living under a Trump administration that shortly after Trump was declared the winner, the Canadian immigration website crashed due to volume. Dear Canada, good luck with your new neighbors. Here’s the story.
Dialing it in. The editorial staff of one German newspaper decided to put the edition on the press and head to bed. Whoops.
Stumbling on the path to a cashless society. Using the excuse of fighting corruption, Indian Prime Minister Modi made the two most common currency units illegal, setting off a run on gold. It’s an interesting story, told well by my friend Jayant Bhandari, and it may provide some useful insights into the spreading trend toward banning cash. Here’s the story.
And with that, and congratulations to the United States of America for taking a chance on real change, I will sign off for the week by thanking you for reading and, should you feel the mood, passing along The Passing Parade to others you think might enjoy it.
David Galland
Managing Editor, The Passing Parade
Garret/Galland Research provides private investors and financial service professionals with original research on compelling investments uncovered by our team. Sign up for one or both of our free weekly e-letters. The Passing Parade offers fast-paced, entertaining, and always interesting observations on the global economy, markets, and more. Sign up now… it’s free!
© 2016 David Galland - All Rights Reserved
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