When it's the economy versus Trump - who wins?
Today, it seems as if Donald Trump has pulled off the most remarkable political comeback ever.
If he spent the summer sweating in court whist his sexual habits were splashed all over the news media, now the same journalists are meekly reporting his every word and respectfully discussing his policy initiatives. If once the Democrats thought Trump was unelectable, now it seems very much the other way around – at least at the presidential level where the Democrats, supposedly the party of the common man, spent billions of dollars warning American voters that Trump posed an existential threat to democracy, that his economic policies would benefit only his wealthy friends, that he was literally a fascist.
The result? Younger voters, Black voters, Hispanic voters and a substantial majority of those without a college degree voted for the billionaire and his equally rich cronies.
But there is one force that might yet prove able to stand up to Trump, Musk and the rest of the MAGA mob. Who is it? Ah, but it's not a person. "It's the economy, stupid", as Bill Clinton's strategist, James Carville famously put it in 1992 talking about the Democrat's successful campaign against Republican incumbent George W. Bush.
Part of the reason the Democrats lost against Trump was they seemed to forget this lesson. When inflation surged in the US, instead of controlling prices, Joe Biden allowed the cost of essentials to soar, causing the steepest food-price hike since the 1970s and leaving the poorest 20% of Americans spending nearly a third of their income on food. Too late, did Kamala Harris promise to enact the "first ever federal ban" on food-price gouging – if she won the election.
But back to today and Trumponomics. This revolves around tax cuts for the rich and deregulation. But we've been there before. Trump's last round of tax cuts did not trickle down and instead increased inequality. As for deregulation, the 2008 finance crash cost U.S. households over $16 trillion, the value of the stock market fell by half and unemployment reached 10% as the crisis turned into a new Great Recession.
And what was the key factor in the crash? Exactly what Trump (and his cronies) are pushing for now: deregulation. As Peter Grafton, Professor of Risk Management, has put it "The 2008 financial crisis resulted from a convergence of multiple factors, including a housing bubble, risky mortgage lending, complex financial products and inadequate regulation—not just subprime mortgages alone."
But Trump doesn't care about all that. He is not a detail man. He is not even a "facts" man. And so, his instinct is to allow self-interested economic populists such as Vivek Ramaswamy, Elon Musk and JD Vance a free hand. When experts warn that the rise of crypto-related economic risks could trigger widespread financial disruption, no one in the Trump administration will be listening.
After all, following Trump's victory, the cryptocurrency industry soared to more than $3 trillion. The Bloomberg Billionaires Index estimated that the world's 10 wealthiest people gained nearly $65bn on Wednesday, the largest daily increase since the index began in 2012. As well as Trump himself, Musk (whose cars spontaneously combust), Mark Zuckerberg, Jeff Bezos and Apple's Tim Cook (whose laptop screens break at the slightest touch) all benefited as share prices surged.
Curiously, the only member of the wealth elite to lose money on Wednesday was the French luxury goods tycoon Bernard Arnault, whose fortune decreased by nearly $3bn. Why did Arnault buck the trend? Simply because in the real world, his luxury products were selling less.
The same cold breath of economic reality can come at any moment to things like bitcoins - which have no inherent worth at all. Crypto's supporters acknowledge this - but say, well neither do conventional currencies or gold. But hold on, that's not quite right. Governments underwrite paper currencies and gold has many unique uses, quite apart from its aesthetic appeal.
Worse, crypto bets in general appear to be growing. According to one leading crypto analytics firm, new accounts for trading Bitcoin, the original cryptocurrency created by an anonymous person in 2008, rose 26% in the ten days after Trump won the election.
Start with Dogecoin. Its creators have admitted that the digital coin, whose mascot is a cartoon dog, was created as a joke, almost a parody of the crypto industry. Yet that didn't stop Musk calling it "an unstoppable financial vehicle that's going to take over the world". Nor, right after he said that, the coin's price plummeting 30%!
Or take Bitcoin. The first Bitcoin transaction took place in 2009 and it was sent from Satoshi Nakamoto to a computer engineer named Hal Finney. It started as a computer nerd thing. For a while, Bitcoin stayed in this cyberpunk community. A year after Hal got the first Bitcoin, a Florida man paid someone 10,000 bitcoins in exchange for two Papa John pizzas. At Bitcoins' current price, each pizza cost half a billion dollars!
Point is, financial experts fear that crypto speculation presents a financial stability risk.
Is Trump listening? Can pigs fly? No, Trump has just announced Paul Atkins as his nominee to lead the SEC, the US agency created after the 1929 Wall Street Crash to protect against a repeat disaster. Critics warn that Atkins is someone who helped "grease the skids" for the 2008 collapse.
The widespread use of loans to finance risky crypto transactions (just as people took out the famous subprime loans to finance house purchases), crypto's history of dramatic price swings and scams associated with the currencies' decentralised exchanges all point to a brutal shakeout sooner or later.
At the moment, Trump and his MAGA gang are laughing all the way to the bank. But they may not be laughing soon…