Only Trump’s “stupid” economy can destroy him

The tech bubble looks ready to pop

Photo by Bermix Studio on Unsplash

The indifference of electorates to democracy is the most frightening feature of our world. A candidate can be a convicted felon with a record of seeking to overturn elections. Yet voters will still support him if they believe he will put thirty pieces of silver in their pockets.

“It’s the economy, stupid,” said Bill Clinton’s strategist James Carville, as he explained that the cost of living was the electorate’s main concern back in the 1990s. You can read his assertion another way: the economy is all that matters to people too stupid to see the dangers around them.

Chief among the reasons for today’s threat to Western democracy is the conviction held by a slender plurality of American voters that Donald Trump will enrich them.

It follows that any economic downturn – let alone a market crash or severe recession – will weaken his power.

Even more so because, in his bottomless greed and hubris, Trump personally tied himself to the crypto scams that have flooded the US’s bubble market.

Just before he took office, Trump offered gullible punters a meme coin called $TRUMP. It was a classic pump-and-dump scheme. Trump launched it on January 17. The coin surged, reaching a peak of over $14.5 billion in overall market value by January 19, and then lost two-thirds of its value – leaving the suckers who were stupid enough to believe in him nursing losses, and Trump $100 million better off.

Legend has it that during the South Sea Bubble whose crash tore apart Georgian England in 1720, scam artists persuaded investors to buy shares in “a company for carrying out an undertaking of great advantage, but nobody to know what it is”. They might have been describing the crypto racket that has so enriched Trump.

There is no retribution at present because Trump has brought with him the impunity of a mafia state. He pardons the criminals who stormed Congress on his behalf. He allows friends on the far right, the alleged human traffickers, Andrew and Tristan Tate, to fly to America for sanctuary. Going back to the bubble market, his administration halted the fraud prosecution of Chinese crypto magnate Justin Sun, who bought into Trump’s meme coin operation.

The Americans who voted for Trump proved that they care no more about corruption than they care about democracy. But it is a matter of historical record that few care about corruption in good times. As long as most people are making money and the markets are rising, investors are the very picture of tolerance.

When markets sour, however, the corrupt culture politicians have presided over can come back to destroy them.[i]

At the moment the US economy appears delightful rather than sour. America is caught up in a roaring bull market: one of those riotous speculative frenzies that pepper the history of capitalism. As long as the market keeps rising it seems that all fantasies can come true.

Think about it. If you had put $100,000 into an S&P 500 tracker two years ago it would have shot up to $150,000 today – all by itself, as if it were powered by Jack’s magic beans. If you had invested in Nvidia your money would have increased seven-fold. And all you would have had to do is nothing at all. You would have grown rich in your sleep.

Before I go any further, I should say that forecasting stock market crashes is a fool’s game. The old joke about the economist who predicted ten of the last three recessions still holds good.[ii]

But if Wall Street is deafened by the sound of markets crashing, no one would have the right to be surprised.

In every bust from the South Sea bubble through the railway manias of the 19^th century, the great crash of 1929, the dot-com crash of the late 1990s to the 2007/08 financial crisis – there comes a moment when people look around and notice that the markets and the rest of the world are out of joint.

If you can remember the early 2000s, you will recall that optimism was draining away from society at large even though financial capitalism was still charging to ever-greater heights. Real wages in the UK, for example, started to stagnate before the financial crisis hit in 2007.

You can sense that same disconnect between raging markets and the rest of the US economy today. After Trump’s election in November, US stocks climbed on hopes the new administration would enact pro-business economic policies. Indeed, the S&P 500 hit a record high as recently as last Wednesday.

Something has changed in the past few days.