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Comment                                                                                8 February 2017

Locking horns    

by Cees Bruggemans                 words 530

Many cliches coming to mind. Locking horns, taking the eye off the ball. The American electorate has thrown a monkey wrench into the works, and its champion Trump is prepared to follow through. But at what cost, benefit?

In the process are we losing the plot, in America, but worldwide too? Or does it remain mainly noise, fog of a non-existing war? The ship will right itself as it comes out of its wrenching course correction?

 

There are the main issues. And there are the hamfisted ways in which certain things are being done, inviting deep resentment and revolt in places. Which of these will prevail, with markets the weather vain, spinning ever more dizzily?

Money remains fixed on what it likes – taxes, infrastructure, deregulation. But, boy, diplomacy and nice manners went out of the window, getting backs up in every possible direction. But what will count more eventually?

Trump is typically a new gruff sheriff who shoots first and perhaps asks the odd question afterwards. It is the often violent reaction and pushback he gets that needs to be managed. In this respect, his cabinet is a rubbish truck crew, cleaning up where he has led. Offering refinement where there didn't seem to be any.

What should worry Trump is whether Congressional Republicans solidly have his back, giving him his legislation in time, or whether cracks are opening up. And the wilder he lashes out (on migrants, Putin, Iran), the more energy is absorbed in fringe areas that won't be available in main areas.

The thing to recognise about America is that the old Wild West is back, and they did things did robustly, and got certain things done.

That it is all politically incorrect in modern times is just a view. Politics can be very rough. Short of war, structures are being changed, possibly wildly out of recognition.

Migration and trade rules will change, perhaps not in ways that we like. Tax cuts and infrastructure spending could see more deficit spending and debt growth, giving twists to markets. The interplay between risk and earnings giving us real rates and currencies.

Geopoliticals appear to be in growing chaos as the play rules are being changed. The main players here are America, China, Europe and Russia, with the Middle East remaining a battle field. One can see how the edges of all these relations are being frayed. The biggest migration sources are Latin America, Africa and the Middle East, with fewer takers in the bordering regions.

It seems unlikely that Trump will moderate his style. It will be up to his leading cabinet members to interpret and smooth ruffled feathers. Congressional Republicans have yet to show which way they will be tipping.

Expect much turbulence, much disorder, much heat as disagreements surface. But things will get done, though. Markets will ultimately try to seek this out and shape it. This will take longer than just a few months. It happens to coincide with the Zuma handover & fading.

We still know far too little to have certainty about how our run up to 2019 will shape, and how the SA economy will fare during this stormy interlude.

 

Cees Bruggemans

Bruggemans & Associates, Consulting Economists

 

Website www.bruggemans.co.za

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