Immoral Markets

Leaders and Policy

In the government quarter of Berlin during the course of 17 April, nobody really knew what to do except draft strong declarations combined with further threats of execution.

The Fall of Berlin 1945, Anthony Beevor, 2003

I don’t think we’re any different from an insurance policy. Why? Why are we doing this?

Donald Trump regarding US support for Taiwan, Bloomberg

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THIS IS NOT INVESTMENT ADVICE. INVESTING IS RISKY AND OFTEN PAINFUL. DO YOUR OWN RESEARCH.

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We know Biden isn’t well and may yet step aside, perhaps soon. We also know Trump is corrosive to institutions and a liar (30,000 and counting according to The Washington Post). This backdrop and then the terrifying, near assassination of Trump is filling this moment with a sense of unreality. Unreality, however, with real implications, economic and geopolitical.

There are hints of unease in financial markets. This week two of the most popular foreign stocks integral to chip manufacturing—the Dutch company ASML and Taiwan Semiconductors—swung wildly in price, whether due to Biden’s proposed additional tech sanctions on companies working closely with China (where each company sells) or because Trump backed away from protecting Taiwan (where Taiwan Semiconductor is headquartered), I don’t know.¹ It also appears the stock market is taking a step back.

Wall Street, corporate and venture capital heavyweights from Ken Griffin, Elon Musk, Marc Andreessen, and Ben Horowitz announced their support for Trump. Marc and Ben explained their logic.

If “a candidate supports an optimistic technology-enabled future, we are for them. If they want to choke off important technologies, we are against them.”

That is a narrow criterion by which to choose the leader of the biggest economy and military. What weight do they put on the one mechanism that makes Democracy work and authoritarian systems like Russia and China fail, the smooth transfer of power among competing interests? I weigh January 6 heavily, they don’t. A genuine mini-primary contest at the Democratic convention would electrify voters and possibly break the pall.

Policy

There is a gap between what any politician says and does, though that gap is particularly wide with Trump. That said, below are Trump’s potential policy paths, based on his or his team’s public statements:

• More tariffs

• Less Fed independence (based on a memo leaked to the WSJ).

• More oil/gas drilling

• Deporting millions of immigrants

• Tax cuts (renewing his 2017 tax cuts, which is estimated at a $4.6 trillion cost when the current deficit is around $2 trillion), and lowering the corporate tax rate to 15% from 21%

• Abandoning Ukraine and Taiwan

The policy implication is higher inflation, a bigger budget deficit, and the weakening if not destruction of democracies in Ukraine and Taiwan. A secondary consequence is more nuclear proliferation because the clear lesson from Ukraine is never give up your nukes, particularly if Europe and the US won’t protect you. The financial market implications I detail below.

Charismatic Leaders