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August 26, 2016 | The Deviant

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

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Because this blog weirdly attracts doomers and hair-shirters, those who gleefully talk of American collapse, market mayhem, financial crisis and things almost as worrisome as Adele, Costco, Justin Bieber or even Kias, we’re always on the lookout for Black Swan events. Whazzat? It’s something that deviates beyond what’s normally expected of a situation and is therefore extremely difficult to predict. Author Nick Taleb made BS events famous.

Used to be that terrorist attacks, earthquakes, severe climate change, negative interest rates or regional wars might qualify. But they’re all mundane now. Even when UK voters lost their collective minds and voted to leave the European Union, it was no Black Swan. Hardly a grey gosling.

So what really keeps economists up at night? What perversely deviant thing can happen that no sane person ever anticipated?

You bet. President Trump.

The fact Donald Trump is the official Republican nominee for a Presidential election now just eleven weeks away is astonishing. His crushing of experienced, articulate, thoughtful rivals like Jeb Bush and Marco Rubio was decisive and overwhelming. Today his rallies continue to be packed, emotional love-ins with a billionaire who arrives on his own passenger jet and has systematically insulted everyone. Except angry white guys.

Trump is a political phenom. His success comes from an adroit use of social media, and the careful cultivation of his image as a political outsider. He also has money, TV fame, a hot wife, buckets of name recognition and an outsized ego – major qualifications for political success. These things, so far, have overshadowed the vacuity of his positions, the flip-flopping on policy, the racism, xenophobia, protectionism, isolationism and blind patriotism he epitomizes. The trouble is, millions of people love that. They want it. More of it.

So to economists, financial markets and money guys, Trump embodies what the system fears. He stands for a breakdown of what’s evolved, wherein globalization’s made corporations more efficient, central bankers have smoothed over economic burps, high-speed trading has taken over from humans, wherein savers get nothing, the middle class has been exported to China and India and the wealth gap has canyoned as never before. Ironically, it’s a billionaire dude who has profited from all of those evolutions that is now Everyman’s champion.

Trump is the US equivalent of Brexit, of the French war on Birkinis and the rise of the right in Germany. He is the antithesis of T2. Trump’s war on Muslims, his wall to keep Mexicans in their place and his desire to bomb Syrians and others back to the bronze age is seen as populism gone bonkers. Middle-class voters angry about job loss, stagnant incomes and an economic recovery which never really came after the housing collapse want something and someone to blame. Trump gives them multiple targets. ‘Make America Great Again’ is code for going backwards in time. Exactly what so many crave.

So here’s the bad news from the bright minds at Citigroup. If Trump wins over Hillary Clinton (what a choice…) financial markets could devolve into chaos and the world would probably tip into recession.

“A Trump victory in particular could prolong and perhaps exacerbate policy uncertainty and deliver a shock (though perhaps short-lived) to financial markets. Tightening financial conditions and further rises in uncertainty could trigger a significant slowdown in U.S., but also global growth.”

The estimate is the global economic expansion – crawling along now at less than 2% – would shed up to .8% because of Trump, pushing the world back into a recession that central banks have spent trillions trying to avoid.

Bad news for Canada, which is already struggling with rising unemployment, negative growth and wobbly real estate markets – which now account for about 20% of GDP. Our country lives on trade. And Donald Trump has said repeatedly he would rip up the North American Free Trade Agreement, under which 80% of the stuff we make finds its way onto US markets.

“I like free trade, but free trade is not free trade, it’s dump trade because we lose with China, we lose with Mexico, we lose with Japan and Vietnam and every single country that we deal with. We lose with Canada — big-league. Tremendous, tremendous trade deficits with Canada.”

Trump (and Clinton) would also rip up the Trans Pacific Partnership, which Canada is enthusiastically endorsing (and has signed) since it gives greater access to Asian markets. Meanwhile Trump has made no bones of his utter distrust and suspicion of Syrian refugees, who were welcomed here with open arms by the federal government, promising to ‘harden’ the border against potential terrorist incursions from the north.

It’s interesting so many people coming to this blog loudly support a guy who has the clear ability to turn order into chaos, make money flee, and rewind Canada. More evidence of the broad-based appeal a simple man in complex times can muster.

This is the Black Swan.

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August 26th, 2016

Posted In: The Greater Fool

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