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Rex Column                                                                                 6 February 2017

The Blunderbuss Presidency    

by Cees Bruggemans          words 700

The blunderbuss is a muzzle-loading firearm with a short, large barrel flared at the muzzle. It also stands for doing things in a way lacking in subtlety and any precision.

Trump is certainly a large barrel. Whether flared or not, the mouthed effects are devastating in the true fashion of the blunderbuss, spraying little iron balls in all directions. One fails in finding subtlety of any kind in the many pronouncements following one another in rapid-fire fashion. More in the nature of a Gatling-gun.

 

There are many angles here, mostly all unsettling, fostering growing uncertainty. The praying is for the Trump cabinet to come into force as early as possible, so that they may start to calm their audiences and giving some guidance.

Whether the Trump subtlety is still to be revealed in terms of negotiating tactics remains to be seen. As things stand, there are these major deviations from accepted forms. Moulds are broken daily, with great determination, as much domestically where companies and investors need to scramble as to where they stand, as globally where more countries every day are told they are dead wrong in what they are doing.

This is being described as providing the broad outlines of things, with more precise details still to be forthcoming. Perhaps.

The noise factor, amplified through news and social media, is enormous. The bureaucratic ability to eventually delay and distort legendary. The cabinet members needed to smooth things over desperate. And the Republican Congress still to get in on the act.

And we are only starting the third Trumpian week.

The soothing voices, some wily in the extreme, advise taking things easy, wait to see what eventually will prevail and remain of all this bluster. But there are also those advising to think on one’s feet. Big changes are being forced on all of us, in not untypical American fashion, and existing structures at home and abroad need to adjust. But with little guidance so far as to how much.

Falling Dollar and fluttering equity prices suggest that the presidential sway is again losing strength. But then the real fireworks regarding deregulation and tax cuts still lie ahead later this year. The trade damages will take longer to play out, except that uncertainty is growing, with the impact immediate on investment.

Some data projections are upbeat (more growth, higher wage increases, higher inflation, less dependence on central banks to keep things supported). Other data projections are unsettling, especially regarding trade, depending on which oracle one is prepared to believe.

One thing becoming clear is just how complex this world has become in the presence of a firing blunderbuss presidency (indeed administration). The way global economic activity is organised (goods criss-crossing borders multiple times, going from conceptualisation to the final buyer) and the way geopolitics are organised today.

The shake-up is refreshing in some respects (everything been questioned) but shocking in many others. Irrespective of damage, in some cases apparently unaware of the damage being done. Or simply wanting to reward a part of the electorate, and showing little sympathy for the fallout.

SA isn't apparently in the direct line of fire. But that could always change. At a whim. But more important is China and commodity prices, global capital markets and yields & currencies. Any of these could floor us, even as talk remains of higher global growth and therefore in our favour.

New SA vehicle sales were nearly 4% up yoy in January, but mostly because rental companies and government bought more. Sales at private dealers were nearly 3% down yoy. The downward sales curve seems to be bottoming, but it isn't yet obvious what will support a lift.

Good interior rains and harvests will create higher farming income (except for pests intruding) and mining companies are doing better from higher commodity prices. But can it be sustained? The ABSA (BER) purchasing managers index for January jumped 4 points to top 50, suggesting a better start for manufacturing. But aside of exports, it is difficult to see where domestic strength is originating.

It remains to be seen whether Trump will dial back, or keep going, and how this will play for us.

 

Cees Bruggemans

Bruggemans & Associates, Consulting Economists

 

Website  www.bruggemans.co.za

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Twitter  @ceesbruggemans

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