Con dinero o sin dinero

 hago siempre lo que quiero

y mi palabra es la ley….[1]

Three decades ago, in the depths of the Latin American Debt Crisis, the CEO of a major New York bank was on a business trip to Santiago de Chile.  Debt restructuring talks led by the minister of finance were on a rational path, certainly a much better one for all parties than those in the rest of the region. 

The CEO asked his well connected local lawyer how to frame his forthcoming speech to a bi-national professional audience.

“Well” said the lawyer, “you tell them that the minister is a pain in the neck, that he doesn’t budge from his position, that he just drives you nuts!”

The CEO, a gentlemanly banker, thought such a discourse was both unfair and unbecoming.  Instead, he complimented the minister on being constructive and willing to negotiate for the good of his country. 

The result?  The local press soon ran articles scolding the minister for selling out to the Americans and letting Chile go down the drain.  Within months, he was out[2] of office.

Minds and attitudes have evolved, to a degree, since the 1980s, but the United States remain immensely more powerful than any of its Latin American neighbors, and the suspicion that the US will readily abuse such power still lies just below the surface.  Call it history, culture, or a bit of both.

When President Trump said that his Mexican counterpart shouldn’t bother coming unless he agreed to pay for the “Wall”, that Mexico should respect the US and (falsely) that both had agreed to call their meeting off, he revived all those deep seated feelings of mistrust and not being respected.

Just like the Chilean Finance Minister of yesteryear, President Peña Nieto was put under great stress and the presumption that, if he negotiated, he would be steamrolled by the Americans.  Whatever new Nafta deal is reached with the US (and there should be one), it will now be put under a microscope by the Mexican press, and there will be a sizable part of the population to believe that somehow their country had got taken advantage of, particularly since the US have openly stated that they wanted the Mexican bilateral trade balance to shift their way.

More ominously, there is now a risk that the main benefit of Mexico joining Nafta could be lost.

Since 1929, Mexico had been ruled as an authoritarian state by the Institutional Revolutionary Party (PRI)[3].  The PRI tolerated little political dissent, had a leftist bend yet let its luminaries get very rich[4].  The Latin American Debt Crisis of the 1980s and the Mexican Tequila Crisis of 1994 were major blows to a system which was coming undone at the seams[5].

President Carlos Salinas (1988-1994) started to reform and privatize the economy which allowed Mexico to join Nafta in 1994.  For the US, the key driver for inviting Mexico was to ensure lasting conditions for its political stability - meaning democracy - and also economic liberalization.  This accession did much to convince President Bill Clinton and Treasury Secretary Rubin to take decisive action to rescue Mexico from its financial crisis in 1995.

Now, key reactionary forces in Mexico, such as former presidential candidate Andres Manuel Lopez Obrador (AMLO), are clamoring for leaving Nafta and abandoning the open economy model.  In other words, there is a risk of undoing the basic raison d’ȇtre of Nafta. So far, the country is rallying behind its president, not splitting into different factions; but this could change unless the president is viewed as “winning” rather than simply holding his own against the US. 

President Trump, ever the showman, may at some point find it useful to take a cue from the above Chilean lawyer and bolster his counterpart's image.  He may also get somebody to translate the lyrics of El Rey:

..no tengo trono ni reina

ni nadie que me comprenda

pero siguo siendo el rey.

I don’t have a throne or a queen

nor anybody that understand me

but I remain the king.

---

[1]“ With or without money, I always do what I want, and my word is the law”.  Beginning lyrics of El Rey, the iconic ranchera written by Mexican legend Jose Alfredo Jimenez.

[2]  True story.

[3]  A political oxymoron if there ever was one.

[4]  As one famous Mexican politician and businessman famously said, “Un politico pobre es un pobre politico” – A politician who is poor is a poor politician.

[5]  Local elections started to go against PRI candidates in the early 1980s and the 1988 presidential election was widely viewed as having been manipulated to favor the official candidate. 

The Trump Prism

One cannot count the number of verbal bombs which Donald Trump threw during the 2016 presidential campaign.  Many were calculated provocations, baiting TV networks to put him front and center of the day’s evening news, others were fodder for his enthusiastic fan base. 

Trump’s campaign was brutal and divisive.  But it led him to victory, Pyrrhic as it could still turn out.

So what did we learn about Donald Trump that will likely shape his presidency?  What is he likely to focus on? 

From the campaign, we learned that:

·        He wants to “win” and that winning is everything,

·        To that end, he will fight to the last minute,

·        He sees himself as the leader of a movement, not a staid party,

·        He feels that middle class Americans want him to put them first.

Whether it is Hugo Chavez, Charles de Gaulle or Donald Trump, there is much to be learned from their earlier writings.  This is what the President wrote 30 years ago[1]:

“Most people are surprised by the way I work.  I play it very loose.  I don’t carry a briefcase... You can’t be imaginative or entrepreneurial if you got too much structure.  I prefer to come to work each day and just see what develops…I can be a screamer when I want to be.”

Running the Trump Organization is not the same as running the US government, but a 70 year old man will not drastically change his habits, particularly if he considers that they made him very successful.

Summing it all up, it is reasonable to conclude that for President Trump, ultimate success will mean winning (or believing he could win) a second mandate, that progress will be measured mostly by domestic milestones (“the economy, stupid”[2]), and that foreign policy will be a means to that end.

Priority #1 will be improving Americans’ disposable income.  This necessitates growing the economy faster.  Regulatory and tax reforms will be necessary but not sufficient.  As I see it, he and his advisors believe that China is the single biggest external obstacle to reach their goal. 

As this effort will consume vast amounts of political and financial resources, and these are to an extent limited, it will be imperative to reallocate some existing ones.  So, Europe will be asked to shoulder more of the security responsibilities which are regional (Eastern Europe) and near-regional (Middle East) in nature: hence the call for NATO members to meet the 2% of GDP defense threshold. The same will go for Japan and South Korea.

Finally, I believe that the talks of a “rapprochement” with Russia stem from the same rationale – freeing time and resources – rather than an infatuation with Putin.  It shouldn’t be difficult to improve on the current bilateral relationship, but by how much is an open question: Russia has its own priority objectives, some of them expansionary in nature; additionally, any effective accord will have to also involve Europe.

Let us look at the foreign trade issue into some details.  The table below depicts the US trade in goods and services with select partners in 2015:

Trading Partner	Trade volume	US deficit w/partner	Deficit as a %
China	$   659 billion	$336 billion	51 %
European Union	$1,063 billion	$  99 billion	9 %
Japan	$   290 billion	$  57 billion	19 %
Mexico	$   584 billion	$  49 billion	8 %
Canada	$   663 billion	$  12 billion	2 %
South Korea	$   129 billion	$    8 billion	6 %

      Source: US Trade Representative. Statistics are for goods and services. Korean data is for 2012.

It is clear that there is only one critical imbalance - with China which accounted for 2/3 of the overall US trade deficit - and a few important others.    

The US economy is perhaps the most efficient and advanced in the world, yet it has consistently produced trade deficits for four decades!  Either its currency has been overvalued, or the terms of trade have not been fair.  It is difficult to conceive of many other explanations.

Germany, with a 2015 US goods surplus with the US of $74 billion (42.6%) has benefitted from a very undervalued currency[3].  China has long managed its currency and tightly protected its domestic market[4].  So has Japan.

I have no doubt that rebalancing trade will be a bruising battle.  Trump has chosen a very experienced cadre of international trade specialists[5].  As for China, it has not succeeded in really boosting domestic consumption[6], its slowing economic growth has called for ever increasing credit creation and popular sentiment is uncertain (low wages, high pollution, no ready outlet to vent frustrations).  It is apparent that the new US administration believes it holds strong cards to force a change, while the Chinese leadership probably feels that it has little margin for error[7].

Mexico is a different situation.  Over the last 20 years, it has not had a single annual global trade surplus, but in 2015 it had a US surplus of $49 billion vs. a global deficit of $15 billion.  The surplus was mainly the result of its close integration with the American economy[8], favorable cost differentials and history.  Politically, it is an easier target than China, but a trade war would have immediate fallouts because its industrial integration with the US is often based on just-in-time supply chains and of its extensive shared border region.

Nafta will be amended/updated with a view to reducing the trade imbalance.  This will mainly be done by boosting US exports and taking advantage of the opening of the energy sector to foreign operators.  Mexico will not send a check for the “wall”, but president Trump will likely declare victory by pointing to the reduced trade deficit.  In the end, Mexico is a better place for US companies to invest (where they can operate freely and aren’t forced to share their technology) than China, and it is likely to benefit from any relocation away from Asia.

A word of caution:  There is little point in repatriating basic industries which generate low added value (and thus pay low wages) and cause the kind of pollution that chokes big Asian cities.  Furthermore, creating high paying jobs requires qualified labor.  There were 5.5 million unfilled job openings last November[9]; while employers’ expectations were often too high, it is clear that there is a skill gap, and so far there hasn’t been any broad initiative to help displaced or unskilled workers bridge that gap.  Upgrading the skills of millions will take time.

While Donald Trump has a track record of being a successful negotiator, all of the above reforms – if successful - will take time to bear fruit, months and more likely years.  It took over two years for Ronald Reagan’s policies to translate into tangible economic improvements.  In the meantime, a president needs to retain the support and confidence of the people.  In today’s divided society, it will be a quite a challenge.

The Trump agenda will also take place in the context of a more fluid global scene.  The world is no longer divided between two stable political and security blocks, Europe is economically weak and more politically frayed than ever, Islamic Jihad is a new threat, and the list goes on.  This will give the new president more room to move, but big mistakes will still be costly: they might just result in chaos rather than war.

My crystal ball has a faint green glow.

---

[1]  The Art of the Deal.

[2]  The famous slogan of James Carville who was Bill Clinton campaign strategist.

[3]  According to former Fed chairman Ben Bernanke, that undervaluation likely exceeded 20% in 2015.

[4]  Even if it is now struggling to keep its currency from depreciating too fast.

[5]   Wilbur Ross as Commerce Secretary Robert Lighthizer as US Trade Representative, among others.

[6]   The percentage increase in the share of GDP accounted by domestic consumption resulting mainly from a drop in capital investments.

[7]  Politically and socially.

[8]  The top US imports for Mexico were machinery (US$ 112 bn) and vehicles (US$ 74 bn).

[9]  US Bureau of Labor Statistics. 

Foundation revisited

The 2016 presidential elections reminded me of Isaac Asimov’s Foundation, the famous science fiction trilogy. 

The Galactic Empire had been on the decline for many years which only Hari Seldon, the preeminent sociologist, had realized.  He had mapped a way to both reduce and shorten the chaos that was bound to ensue.   Seldon’s insight and plan were made possible by psychohistory, a new social science combining sociology with statistics, which he had invented. Yet all of Seldon and his vast team’s efforts were nearly wrecked by the appearance of the Mule, a mutant endowed with extraordinary para-mental powers.

The US have never seen a candidate like Donald Trump, and while he doesn’t have the Mule’s mental powers, he has read the electorate like nobody else.  Reagan saw America’s longing for a change and infused it with his optimism and confidence.  Bill Clinton offered youth, moderation and the promise of “a new beginning”.  Trump sensed the people’s rising frustrations with a mediocre economy, a dysfunctional political establishment and widening social and cultural gaps.

All presidential campaigns have had their nasty moments, but where the Clintons had been insinuating, Trump was crude, in your face and openly aggressive.  Soon, TV ratings took off, with viewers smelling the blood-soaked sand of the Coliseum, cheering for the candidate’s political incorrectness, sneering at the embarrassed faces of prominent journalists and anchormen.

Facing Trump was Hillary Clinton, a long time establishment figure, backed by a very strong organization, extensive party support won over many years, but ill at ease with crowds and beset by too many skeletons in her closet.

In the end, against all odds, Trump pulled a surprise victory. What happened?  What of the future?

In my view, the crux of these elections was the dichotomy between message and messenger.

The most insightful commentary, attributed to financier Peter Thiel, a Trump supporter, is that the media [and the elites] always took Trump literally but never seriously, while a lot of voters took him seriously but not literally.  He went on to say that “when these voters hear things like the Muslim comment or the wall comment... what they hear is we’re going to have a saner, more sensible immigration policy”.

The preliminary results give Trump 306 electoral and 60.4 million (47.3%) popular votes to 232 and 61 million (47.8%) to Clinton. 

In appearance, this was a very close contest.  Our foremost political pollster Nate Silver calculated that, had 1% of the people who voted for Trump chosen Clinton instead, she would have won the contest 307 to 231. 

But Democrats suffered a bigger defeat than the above numbers show.

First, many Republicans, who largely shared Trump’s views (bombast and hyperbole aside) but objected to his persona, didn’t vote for him but did vote for the rest of the Republican ticket.  This explains the Republican Party sweeping in the House and the Senate.

Second, voter turnout, while lower than in the most recent elections, was higher than the average of the last 40 years, and, importantly, was lower in traditionally Democratic states, about the same in Republican ones and higher in the swing states that Trump won.

Finally, these elections were a referendum on the last eight years.  While President Obama is liked personally, many voters didn't absolve him from the Washington gridlock, were unhappy with soaring Obamacare premiums and uneasy with his stance on terror.

All this means that, depending on what President Trump does, he could tap on an additional reservoir of support beyond the 60 millions who voted for him.

What of the future?

Americans want results, more and better jobs.  Hopefully, Trump will not make the single biggest mistake Obama made, which was not to give absolute priority to economic growth.  There should be room for consensus there.  But he will also have to deliver on many of the promises which propelled him to the White House.  Even if people understand that there was much hyperbole, it will be difficult.

Trump’s appointments will be the first test of his ability to build an effective cabinet without losing his popular support.  The presidential campaign has shown that he is driven more by a desire to win than by ideology.  His business career also shows that he has greatly reduced the level of risks he is willing to take.  I would say that it is premature to plan a move to Canada.

America is a country which gravitates to the center, which prefers reforms to revolution.  It is also one where federal powers have been distributed among three institutions, independent of each other.  It does best when it sticks to these fundamental tenets.

On the Cliffs of Marble

When I left France for the US in 1972, as it turned out never to come back, I packed a poster of the north wall of the Eiger and a copy of my favorite book of all times: Ernst Jünger “ Sur les Falaises de Marbre”[1].

This extraordinary book recalls the last days in an imaginary land before its invasion and destruction at the hands of the Great Forester, a cunning and ruthless tyrant who lived in the vast forests nearby.  Jünger started his book while staying in a small town on the shore of Lake Constance.  Years later while on a vacation, I visited picturesque Meersburg and Lindau, drove through the rolling hills behind Hagnau and watched the sun set over the snowy peaks of the Alps beyond the shimmering lake, and memories of the book and its magic rushed back to my mind.

Some have said it was a criticism of Stalinism, others of Nazism.  It certainly was a paean to freedom, to what makes life in harmony with friends, neighbors and nature so precious, and how quickly we can lose these and how painful it then is.

I don’t believe that we are living on the banks of Jünger’s vast Marina.  But I do feel that we are in danger of slipping into a period of greater tension, greater division and failure to address our most pressing problems.  Before too long, and unless we regain our senses, the time for a Great Forester could arrive.

For many reasons, we are left with four candidates to the presidency: a populist and demagogue and Forester apprentice, an aging career politician with truth telling issues, an ex pot entrepreneur, and an activist who spray-paints bulldozers of companies she disapproves of (sadly, the Democrat, Republican and Green VP candidates are probably better than the top of their tickets).

It is difficult to imagine how any of these candidates could unite the country.  Hillary Clinton is probably the one more likely to try and build consensus because she is the one who most lacks a committed base, but can she bridge the trust gap?

Meanwhile, Americans are more divided than they have been in decades.  It is both ironic and sad that they were most united when President Obama took office in 2008.  Responsibility for this can be spread wide, and because of that, redemption will be hard to reach: Tea Party extremists unwilling to compromise, main stream Republicans unable to deal with them and the opposition, Democrats in Congress and the White House enamored with diktat and income redistribution without GDP growth; most of all, politicians deaf to popular angst and aspirations.

Against this dreary political background, the economy and the financial markets have been operating with a high degree of wariness, where extreme monetary policies have attempted to offset the absence of fiscal reforms and pro-growth policies.  The fix has carried increasing risks: financial assets are overpriced, public pension funds are hugely under water, the insurance industry is at risk and even consumption is threatened by the need for households to save more when 10 year Treasurys yield a meager 1.7% p.a.  

So we have a divided political class, a divided nation, a subpar economy and stretched financial markets.  I might add that the same combination of slow growth and excessive indebtedness is pressuring governments and traditional parties and giving openings to populists of all kinds around the world.

As an investor, I would think that prudence is in order.  Sure, stocks are not as expensive as bonds, but does that make them attractive, as a class?  Not really.  There is nothing wrong in keeping stocks of steady performing companies, or in buying into carefully chosen turnarounds.  But if one keeps a large exposure to equities, buying some protection seems advisable to me.

Alternatively, cash does look like a good temporary alternative.  Another one is real estate.

History shows that people and countries don’t change until they have to.  In America, I don’t think we have reached that point, nor do I see anyone able to mobilize the nation.  History has also shown that it takes time for a large country or economy to change direction.       

Caveat emptor!

---

[1] On the Marble Cliffs.

Sister Souljah, Brother Judas?

Last March, I wrote a post about Republican presidential candidates’ Sister Souljah opportunities and how they had flunked them: Mitt Romney failing to take a budget deal that would give him 90% of what he wanted, the 2016 candidates failing to push back against Donald Trump’s insults.

Well, Ted Cruz was given a second chance yesterday and he grabbed it.  Except that he was immediately cast as a Judas.

The original Sister Souljah moment was Bill Clinton speaking as a candidate to Jesse Jackson’s Rainbow Coalition and rejecting a well known black activist’s call for black on white violence.  In the immediate aftermath, he suffered a drop in support from some quarters, but eventually more than made up for that with moderate Americans.

Yesterday, Ted Cruz refused to endorse Donald Trump, calling instead for Republicans to stick to principles and vote their conscience.  Today, at a breakfast of Texas delegates, he added that he couldn’t endorse a candidate who insulted his family.  What took him so long?

The party reaction was telling and frankly shocking:  the New York delegation screamed and booed; on CNN, a Trump official could barely control himself calling for Cruz’ party exclusion, Governor Christie was likewise furious and the general audience didn’t fare much better.

Ted Cruz took major risks with that speech and the fallout was immediate. Most political commentators accused him of careerism.  The party was exposed as more divided than it wanted to appear.  Party grandees who had fallen in line behind Donald Trump realized that they could be dangerously exposed in case the Trump candidacy failed come November.

Accusing Cruz of weighing in career considerations in such a major decision seems disingenuous to me.  Likewise, denying that he may have principles seems unfair.  What is undeniable is that he showed great courage and that he will be, with Donald Trump, the most memorable Republican figure of 2016. 

Whether this will have been his Sister Souljah moment, time will tell.  I believe that it will eventually strengthen his influence within the Republican Party: he will have warned about the Republican nominee’s shortcomings, he will have name recognition, and he clearly showed more courage than his peers.  But unless he moderates his views I don’t see him in the White House in 2020.

The Prisoner of (Mar al) Zenda, an exercise in fiction

On a balmy Florida morning, the mansion staff were tidying up the veranda and cleaning after the guests had finished their breakfast.  The dinner and recital of the previous evening had gone rather well considering the palpable tension which had pervaded the relations between the host and some of his most prominent guests.

But the atmosphere had relaxed considerably come morning, and the Majority Leader, who had maintained his habitual reserve since he had arrived, was almost bubbly by the time he had finished his croissants.  The Speaker had returned from an early two hour run and was engaged in a lively discussion with a Silicon Valley investor.

As limousines started to pull up and attendants were loading the luggage, the Host was amiably chatting with departing guests before sending them on their way.  In all the buzz, one could easily be forgiven for failing to notice that the famous hair of their host had turned a shade redder, or that a small blue van was silently rolling towards the service exit.

The bombshell exploded a week later when the Host told Wolf Blitzer on CNN that he had decided to pick former General and CIA Director David Petraeus as his running mate to set up the first co-presidency in US history.

Wolf’s eyes literally bulged out of their sockets, and for a few seconds, he was at a loss for words.  The Host gently let him gather his wits and proceeded to explain why this was a win-win strategy for the country, the Republicans and him:

-“Wolf, to make America great again, we need to revitalize the economy, rebuild our military and recast our foreign policy which have been TERRIBLE in the last eight years.  I am a very successful businessman, my friend Carl Icahn will pitch me his best ideas, and I will choose a FANTASTIC Treasury Secretary!  But look, as smart as I am, I have no experience in foreign affairs or in defense, and David is the best out there, and so I am so grateful that he accepted to serve our great country as Vice President with primary authority in these two areas as well as domestic security.”

-“Donald,---woah,…ah…this is so unexpected,.euh…

-“Wolf, you are a VERY sharp journalist, one of the very best in the business, as a matter of fact I think you may be the best, and surely you can see that this ticket is bringing the temperament and competence which I promised all along and which this great country deserves.  And we will win in November!”

Within seconds, somewhere in Kentucky, the Majority Leader clasped his hands, and, in a manner reminiscent of Dinah Lord’s at the end of The Philadelphia Story, simply uttered: “I did it!”  Somewhere in Chappaqua, NY, a blond woman sunk into her sofa, sobbing: “Not again!”  Five thousand miles away, in a small Amazonian forest clearing, a thin plume of smoke was twisting in the morning mist as a few women were grilling freshly caught fish from the Apaporis river.  The rest of the small Xurungawah tribe was sitting in rapt silence as a big fair skin man with a strange yellow-white mane was haranguing them:

-“Folks, this is one incredible place and you are an amazing people!  We will build here the most amazing ecological resort in the world!  I see you don’t quite grasp what I am telling you, but we will get it done folks, and by the way,..”

Unlike in the movie, we don’t know if Donald Trump has a perfect double.  But an opinion is starting to take hold: at his age, he is unlikely to change, and for a growing number of Americans (including me) he is unelectable to the presidency.

Republican Party leaders are realizing that, but they can’t ignore the votes of millions and nominate another candidate.  They can’t go to war with him although they can’t embrace his corrosive statements.  They openly worry that he doesn’t know enough about domestic or foreign policy to govern effectively.  Yet they are unwilling to leave the White House in the Democrats' hands without a fight.

Still, they hold two aces: one is money.  Effectively, they will control the bulk of the donor contributions and therefore how the campaign will be waged.  They also know that as a man with a large ego, Donald Trump will not want to face a humiliating defeat.

They could try and convince him to resign.  But while his poll ratings have weakened, they haven’t entered panic territory.  Until then, neither he nor his supporters will let go.

Or the party leadership could convince him to share a co-presidency with a respected professional heavyweight; somebody strong enough to make that project credible.  In 1976, Gerald Ford briefly offered a similar deal to Ronald Reagan.  It didn’t work because the two men were not complementary and believed that they could win on their own[1].

This is not 1976.  A co-presidency of the kind suggested above would have several key benefits for the Republicans: 1) it would wrong-foot a Democratic strategy focused so far on discrediting a personality, Trump, 2) it would prevent many Trump voters from bolting or abstaining, 3) it would force the Democrats to come up with a government program agreeable to both Clinton and Sanders factions, and 4) it would also force them  to do the same, giving them credibility.  Win or lose, the benefits for the country are obvious.

In truth, the options for the Republicans are very limited and risky, and they only have themselves to blame.  Our “Prisoner of Zenda option” is a long shot.  But hoping that Hillary Clinton is forced to retire would only bring in Joe Biden, and he would trounce Donald Trump (my opinion).  Allocating most of the money and efforts to the Congressional races at the cost of the presidential one is risky: it could divide the Party further and encourage Republican voters to stay home.

If only Ruritania were real!

---

[1]  Ronald Reagan believed he could win in 1980.

On the head of a pin

The Republican primaries are effectively over.  Donald Trump has won.  The Democratic ones continue, with Bernie Sanders hammering at the only Establishment figure left, Hillary Clinton.

2008 was the year Americans felt they had come together behind an historic candidate, Barak Obama.  Eight years later, they are angry, frustrated and more divided than ever since the Vietnam War.  So much so that they are betting on two outsiders who promise to bring the “corrupt” system down. 

Now what?  Reality is starting to dawn on Republican Party grandees that Donald Trump is not their candidate, rather that they are his supporting cast.  Who is the boss?  The question is being asked now and will be answered soon.

Republican mediators hope that Donald Trump will change his tone to unite the Party.  This is unlikely for several reasons.  Dumping a winning strategy has risks for Trump.  Besides, one of the most surprising sights of the primaries was to see prominent politicians taking little offense at being called corrupt, liars, weaklings or told to shut up on live tv.   

My view is that Donald Trump calculates that the Republican Party leaders lack courage and vision and that they will ultimately back him up in order to save their sinecures: better being tame courtiers than proud exiles.

A Trump president would likely go over the heads of Congress and the Senate to appeal directly to voters, make extensive use of executive decrees, and go for big targets: big infrastructure programs, NATO shake-up, big budget and spending battles.  He obviously believes that he would win most of these; he would enjoy the negotiating game;  but the US is not the NY real estate market, or even France, Germany or Russia:  Gamesmanship at the US level has far greater potential destabilizing effects.  Unpredictability may be a good negotiating tactic but it is not a strategy for the world leader[1].  Likewise, loading the US with debt – because if the economy rebounds it is easy to pay it off, and if it fails you just restructure – can’t be the best way to sell  hundreds of billions of US treasuries every year.

The Trump candidacy will have had some positive effects, such as exposing the dysfunctionality of the Republican Party, imbalances within NATO contributions and the not so hard nose negotiating abilities of the Obama administration.  But the negatives of a Trump presidency are difficult to fathom and potentially huge.

What about the Democrats?

Hillary Clinton is unloved and polarizing, but is the safe pair of hands among the last three remaining candidates.  Yet she has been pulled further to the left by Bernie Sanders than she wanted or expected (and her miseries are not over yet).  That Senator Elizabeth Warren is talked as a possible running mate makes that very clear.

She also has hanging over her head, as the Sword of Damocles, the inquiry into her use of a private server and the sharing of “classified” emails.  It is possible but unlikely that the Department of Justice pursue a criminal indictment against her; but if this decision were a close call, some disgruntled FBI or DOJ staff could leak embarrassing related documents; then, we would have a new ball game.

To succeed in the general elections, she would need to retain the support of Sanders’ voters while attracting independents and non-Trump Republicans: no small task.   

If she succeeds, and unlike the other two candidates, she is more likely to seek consensus because she won’t have a solid base of believers.  She would need a good communicator to help get her message through that, as Talleyrand once said, governing is the art of the possible. Would this be her Vice President, her Secretary of the Treasury or her Secretary of Labor?  I don’t know.  Would she succeed?  Way too soon to tell.  Besides, if she didn’t heed Sanders’ entreaties, over time his supporters could set up the Democratic equivalent of the Tea Party.

In summary, and as of today, this presidential election looks like the most frustrating in years.  The two most likely candidates are viewed more negatively than positively.  The two with the greatest fan bases are party outsiders who promise the moon and howl that the political parties whose banner their carry are rigging the primaries against them and their voters.  The cooler headed one enjoys stronger support from party officials than from party members.

Fasten your seat belt but don’t get off the plane!  

Because if you think this political season can't hold any more surprises, THINK AGAIN.

---

[1]   But it has been for North Korea.

Sister Souljah moments

It seems that all major political campaigns have their Sister Souljah moment, when the candidate(s) face a high risk question or situation which opens or closes their path to success.

The original one of course was when candidate Bill Clinton, speaking to Jesse Jackson’s Rainbow Coalition, chose to publicly rebuke a well known black activist’s justification of black on white violence.  Clinton did endure harsh criticism from some quarters, but he gained the broader support of moderate Democrats who had had their doubts about him.

In 2012, Mitt Romney and the rest of the Republican presidential candidates had their own Sister Souljah moment, and they blew it.  When a debate moderator asked them if they would accept a hypothetical deal to increase taxes by $1 for every $9 in spending cuts offered by the Democrats, they hesitated, looked at each other, and demured.  How could getting 90% of what you want be unacceptable to those “conservatives” when their idol, Ronald Reagan, famously said he would settle for 80% and fight for the rest another day?  They were so afraid of losing fringe support that they ended losing the support of the majority.

This year, we have seen Republican presidential candidates being called liars and other names in front of millions of TV viewers and hundreds of spectators by Donald Trump, and not responding.  Is their sense of value so distorted that they didn’t think such attack on their honor deserved the most vigorous response?  Or were they afraid of Donald Trump?  Either way, they let their Sister Souljah moment pass and will live to regret it.  So will we.

Yet another such moment came in yesterday's debate: after arguing, sometimes literally, that Donald Trump was unfit to be president, his three opponents pledged to support him if he was nominated.  I am glad they do not work as check captains at my favorite airline.