Trump, Russia and China
Thank god the noise and identity politics which reached a crescendo just prior to the election day but had refused to subside thereafter, with the usual blame game on the part of the losers and also the unusual rounds of fake news and Russian hacks accusations from mainstream media, is finally succumbing to the attention-deficit audience.
Barring any major surprises such as an assassination by a ‘lone gunman’, Trump will be president and a reshuffle of the deck as it relates to domestic and foreign policies is imminent.
Now that the rhetoric is starting to die down, more rational analyses are starting to emerge from the noise.
Take, for example, this recent post by Alasdair Macleod of Goldmoney (no, this post is not about gold) which offer a glimpse of the likely changes geopolitically and economically within the first year of the Trump’s presidency. The article is worth a read in its entirety but here are the highlights.
- A turn in US foreign policy as it relates to Russia and China will have far-reaching implications for world geopolitics.
- A sharp pullback from the war rhetoric and actions set by the neo-conservatives within the current US administration, the CIA, other deep state entities and NATO. Détente with Russia is likely.
- A course change in the US Middle East policy, especially as it relates to the Syrian insurgent war.
- Possible re-negotiated trade relationship with China.
- De-escalation of tension and détente with Russia would pave the way for Germany to start looking eastwards as it eyes forging closer ties with the Chinese New Silk Road initiatives – a Plan B to extricate itself from the failing Euro experiment.
- Added pressure to the Eurozone as Germany looks eastwards while the Eurozone faces existential crises next year.
The New Silk Road vision announced by China, even if half successful, would usher in a tectonic shift rocking the economic, geopolitical and monetary status quo, and will be the single most significant geopolitical development since the fall of the Soviet Union.
- Industrial raw material prices have been rising strongly throughout 2016, in no small part due to demand from the New Silk Road infrastructure projects China is building throughout Asia and Euroasia. If Trump follows through with his promise to overspend on infrastructure, the change from monetary to fiscal stimulus will make price inflation visibly reflected in consumer prices.
- More pressure to raise rates, which at this stage has already been signaled by the Fed.
- The Fed, which has signaled multiple rate hikes in the course of 2017, will be under tremendous pressure to follow through with the plan and then some, as prices rise sharply. However, the economy, with the immense amount of private and public sector debt overhang, is in no shape to absorb rate hikes in any significant amount without triggering widespread debt liquidation.