Blain’s Morning Porridge Jan 15^th 2025: What happens next? Brave new world or cataclysm?

“Most men and women will grow up to love their servitude and will never dream of revolution.”

Next week the world changes. Again. Trump and his gang take over Washington. What kind of Brave New World awaits us? More of the same, but different? We exaggerate our fears and under-estimate the upside. Where will Trump V2.0 lead the global order and economy? Who knows… anyone for the last few choc ice?

This time next week Donald J Trump’s inauguration and the multiple Washington inauguration balls will be behind us. The appointees of the new era will have measured the relative prestige of their new offices, hung their jackets on the hooks, and be issuing the orders they believe will change the world – moulding it to their leader’s vison. How much will it be a Brave New World, or just a repasting of the old one?

Here in Europe, we are …. concerned.

However, the rest of the World is largely unbothered at the scale of change that might be coming. There is an intriguing piece in the Guardian this morning that says: “European jitters about Trump 2.0 not shared by much of world, poll finds.” The poll measured sentiment in 24 nations around the globe (including Russia and China), and found only  Europe (and South Korea) expect the worst from Trump. “Trump’s return is lamented by America’s long-term allies [in Europe and South Korea], but almost nobody else,” said the European Council on Foreign Relations, a thinktank.

India is the most positive nation at 85% +ve about Trump v2.0, while the UK is the most negative with 50% of Brits being “Never Trumpers”. Only 11% of Brits believe Trump will be good for the UK! Perversely, the report is good news for Russia – in a more “transactional” world under Trump, nations outside Yoorp are increasingly likely to accept Russia as an ally or partner. Interestingly, average opinion held by US citizens of Russia is improving – which may explain European fears where less than 22% of us still perceive the US to be an ally!

It’s clear the geopolitical lines are being redrawn. So will the grounds of global economics be redefined.

At least 50% of the Americans who voted have very high expectations for the US economy. As my American Republican chums never cease to tell me, the Biden Presidency was absolutely “catastrophic” for America:

• The “miserable” economy posted consecutive job gains every single month (a first for any president), while US growth of 13% these last 4 years comfortably exceed that of every single other developed nation.
• The stock market, represented by the S&P500, is up 50% since Jan 20^th 2021.
• House prices have risen almost twice as fast in the last 4 years as they did under the former Republican president – one Donald Trump.

Some might say Biden presided over prosperity, but his critical problem was one of success. The economy boomed, its value increasing day-to-day, but only for those who were part of it. That was what MAGA recognised – and the Democrats never even dreamed existed.

What mattered at the Ballot-Box was those left behind alongside the genetic Republican core. These became the heart of the MAGA sound bites about anti-wokery, restoring American exceptionalism, repatriating the economy, unravelling immigration, and restoring its “warrior-spirit” (which we heard about yesterday in Pete Hegseths’ extraordinary confirmation hearing). It is those who felt left behind and alienated by the Biden Boom who are looking forward to coming US revival.

They voted for Trump because inflation anywhere is a direct tax on the poor. Rising prices hit incumbent politicians around the globe, but particularly in the US where Biden’s apparent attempts to hang on for a second term, and the inadequacies of the unknown Kamala Harris, became the marginal election factors in Trump’s favour. The fact US mortgage rates hit 7% plus and effectively stopped housing entry was just one factor in a complexly polarised US electorate where those who felt excluded, left behind, and marginalised by debt and opportunity, rallied behind MAGA.

Trump’s success – and respect to him for recognising it – was his engagement with the groups left behind. Doing the work on the Podcasts and Socials from which the young form their views was critical – and Trump particularly seized the votes of young men. Recognising the desperate hopes of crypto-enthusiasts was genius – according to crypto-shills the 49% of Americans who love Bitcoin are all Trump supporters – although I would take anything a Bitcoin magazine says with a touch of salt.

Although it was close, Trump won a stunning victory. Respect. How stunning will the Trump economy and world view become over the coming 4 years? There is lots of noise and anguish about how he may utterly destabilise and upturn the world – but the reality is always: “Things are never as bad as you fear, but seldom as good as you hope.”

My own guess is the next 4 years will be nowhere as bad as we fear. Trump may be a useful catharsis for the Western Economy. For every action will be an equal and opposite reaction restoring balance. There are any number of economic and market forecasts and outlooks on the economic consequences likely to stem from Trump’s tariffs, trade policy, tax cuts:

• My own favourite is how the US has been effectively state-captured by a small coterie of Tech-Lord/Hedge Fund oligarchs who hold Trump in their pocket-books. Their intent is to enslave the whole electorate as expendable labour in an AI driven economy from which only they benefit. Yep.. will make a great work of fiction.
• Others foresee Trump’s imperial vision for the USA crashing into the Rocks of entrenched Republicanism in the Senate and Congress. Given how quickly even hardened US Senators have kow-towed to the Emperor of Mar-al-Lago in the confirmation hearings – that sounds unlikely.
• Conflict between Trump and the establishment – particularly the Fed – will result in distraction roiling global markets and dollar sentiment. The vision of Trump and Powell at loggerheads over rates will not engender confidence. But what is the alternative to dollars and the Treasury market?
• US entrepreneurs across the nation could feel massively empowered and encouraged by the anti-woke crusade that starts Monday and the bonfire of regulations to follow.
• The reality is likely to revolve around the usual issues – how will Trump address the USA’s $3 trillion dollar deficit crisis, how to slash govt spending (Musk will struggle with the complexity and special interests), and how to keep the economy fluid as inflation rises as a result of global energy costs and policies.

The big question, however, will be delivery. Trump is a populist. He makes promises – his problem is his supporters expect him to deliver on them. That is why conflict, blame and polarisation will remain at the heart of US politics as Trump finds a never-ending host of “internal enemies” to blame for the non-delivery of political promises. I expect, (no, let’s be honest, I hope), Elon Musk has already been surreptitiously measured for failing to deliver on DOGE and taking the blame for H-1B Tech Visas. That will be an interesting moment.

The one thing I can say with absolute certainty is the next four years are going to be infinitely interesting. I’m absolutely fascinated to read how Trump’s former Strategist Steve Bannon is promising to bury Musk even before Monday’s festivities, calling him Evil and a Racist. (Really? Gosh! Who knew…?) Bannon has recognised Musk’s power is extraordinary, unparalled and could well be deployed under the Trump banner to Musk’s own ends. A war between the Technocrats and MAGA – now wouldn’t that be fun and destabilising? All revolutions tend to consume themselves. The Musk wing of political opportunists is running headlong into the Bannon-esque rabbit-hole of conspiracists and right-wing extremism.

I expect Trump will be delighted to watch them destroy themselves while he gets on with his own agenda… And that might be a whole other can of worms: “Oh brave new world that has such people in it…” (Careful what we wish for… we might just get it…)

Out of time, and off to do the day job…

Bill Blain

Author of the Morning Porridge

www.windshift.capital

billblain@morningporridge.com