President Trump, walk the walk

Posted: January 28, 2017 in Uncategorized

The first week of President Trump has passed and the first conclusion we can draft is that he means what he says more than any US President.

On this basis a few points we need to keep an eye on.

He is rebuilding the armed forces. In this period of Middle Eastern Wars the US Forces went sideways. Confronted with a sneaky, but not powerful enemy – the US is very battle hardened, but lost the edge in confronting a serious enemy like China or Russia.

He will probably ally itself with Russia in “deleting” Islamic State with a brutality usually seen only from the Russians. Also if this “war on terrorism” will really be brought to the pointy end he will have to confront Saudi Arabia – the main exporter of the Salafist jihadism which at the end is the basis of all Muslim terror. Maybe he will do it directly or , more probably a proxy (Turkey or a pseudo terrorist state run, under the radar, by a friendly like Turkey).

He will have to confront Germany and Merkel. This is an interesting one. He already praised the UK to have left the EU dead experiment and kind of accused Germany to weaken on purpose the Euro to make it more competitive. While this is true, it also is hard to prove as the EU, theoretically, is not under German dominion. However it will play it, this will further weaken the EU and bring it more to the brink of collapse. Specially if then the UK-USA trade agreement is good and of fast implementation.

China is the big one – definitely there will be a re think of the relationship between US and China. A trade war is possible, but could damage seriously both countries as the relationship export/import are very deep ( practically there are more imports in US – but they are mostly low price imports (toys, clothing, base electronics) which will hit more the middle -low income US population). A conflict is more possible, also for error. China army focus a lot on “face saving” and could radar paint aggressively US warships (it already happened, but the US response was always soft). President Trump could order a real retaliation.

The last one are trade wars. There are multiple examples in history that trade wars  do not work…even if since at  least 2015 world trade is actually decreasing (also to structural forces as China driving its consumption inwards). The main issue that a lot of items are manufactured in multiple country (even the Mexican imports have on average a 40% Made in US components). In a sense it feels like one of the populist candidates typical of South America.

But a world of warning about all the above from political economy (game theory applied to socioeconomics):

A president can accelerate or decelerate the economic path…but the path is already established.

A few examples.

As I said world trade is decreasing since 2014 (data IMF).

Europe is disintegrating since 2011.

Deflation is set by the fact that the developing nation population is growing older.Yes this year there will be spike…but a spike is not a trend.

Oil is becoming less and less efficient as an energy source compared with other advancing technologies.

Western societies are becoming less and less democratic (eg Europe is not governed by the unelected commissioners as the anti Europe party say (the commissioners have a lot of power and are not elected, but they do not govern Europe), but clearly Germany steers the inner workings of the EU as it is the major wealth contributor and does what it wants – as it invited 1 million migrants to Germany…in reality it invited a million refugees to Europe since there are no borders).

A US/China confrontation is inevitable as nowhere in history of mankind an old empire left the baton to the new empire (and it is not said that the new empire will be China/US. The 2 World War was the old empire Britain against the new one Germany…and the US won).
So Trump walking the walk merely accelerate what is going to happen anyway. Just tighten your seat belts.

 

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