We having been dealing with a “new world order” for the best part of the past 30 years, one nominated by President George H W Bush in 1989: the belief that politics would be driven by economics. For better or for worse, this is now over.
We parochial Westerners are obsessed with the “populist” uprising in the Brexit referendum, Donald Trump’s election and the fear of what will happen next week in the Netherlands or in France in May.
The Netherlands goes to the polls on March 15. The rise of Geert Wilders perplexes many, not least of all because of the possibility that he may end up leading the largest single party in the Dutch parliament while still finding himself locked out of government.
The great cry at the moment is of a crisis in democracy but the crisis is in the electoral systems and in the way they determine the distribution of seats within national parliaments or, in the case of the US and France, the way the president is elected.
Power, corruption and lies
In the period immediately after the outbreak of the global financial crisis, democratic government proved itself incapable of dealing with the fallout and in a display of supreme cowardice, moral authority and the responsibility for leadership and decision-making was ceded to the central banks. Politicians, in their fervour to promise and deliver more for less, had become obsessed with the growth at all costs, which the rapid expansion of both public and private leverage was generating. In doing so they lost control and now, 10 years on, they are beginning to pay the price.
Now the rise in populism is being described as a reaction against globalisation. I believe this to be wrong; it is not globalisation that is in the dock but mismanaged globalisation.
With power having been ceded to the central banks and with the political elite in disarray, the prospects for Europe might look grim - but they don’t. The risk has to be to be that what we regard as democratic forces, weakened by years of political correctness, will retreat to their “safe spaces” rather than confront the causes for the disintegration of their authority.
A Dutch government without Wilders and a French presidency without Marine Le Pen will not signal a defeat of populism but at best Pyrrhic victory for the establishment. Whatever these elections end up giving us, it will not be better or worse, just different. Unless we find a way to accommodate the changes rather than behaving as though they’ll all go away again, then Brexit truly will be no more than just the first brick in the wall.
Substance
Oil is now stable in the US$50-$55 per barrel range and the persistent failure of WTI to break above that level should have the sellers back in fairly soon. If asked to place a bet on whether US$55 or US$50 breaks first, I think I’d have to plump for the latter even though it goes against instinct. Analysts are pointing towards the chronic lack of investment in the sector and the risk that production capacity will fall, thus pushing prices sharply higher in the future. That may be true for the future but for the present a period of weaker prices is on the cards.
I read somewhere that the S&P index, which incidentally celebrated its 60th birthday yesterday and which closed down 7.81 points at 2,375.31, had broken its upward trend. I sketched a few trend lines myself and I’m afraid I failed to find out how and where the trend is broken. I can’t see any reasons to sell the market – an end to the Trump Jump is called every time US equities have a down day - from either a fundamental or technical perspective. Yes, the valuations are as rich as they were in 1929 and the wall of cash argument failed to prop up the Nikkei in 1991 but testing the market psychology, it doesn’t feel as though there is fear building up. And as I pointed out a few weeks back, there is little leverage in the market, and where there is no leverage, there can be no serious selling pressure.
Keep calm and carry on.