Remember, remember, the third of November… Gunpowder, treason and plot…

Joe Biden will emerge as President-Elect of the USA next week – unless there is an upset, which is about 20 percent possible. But a Biden presidency will be beset from Day 1 by doubts about how long he will last. That will spook the markets, writes Victor Hill.

Polls apart

If one believes the opinion polls, Mr Biden is sure to win the presidency next Tuesday, and on 20 January 2021 will become the 46^th President of the United States (POTUS). Except that the final result of the election will probably not be set in stone on Wednesday morning – and may yet be unclear even one week hence. This is because of mail-in voting – which I explained here recently. As I write, nearly 60 million Americans have already voted either by mail or in person – including President Trump (in West Palm Beach) who is no longer a New Yorker, it seems, but a Floridian.

There has been much speculation about an inconclusive outcome – and about Mr Trump’s refusal to relinquish the keys to the White House even if he loses. In my opinion, this is Democratic propaganda. The sublime thing about the electoral college system, used for the election of a US president since the earliest days of the Republic, is that it tends to produce a decisive outcome – with the voices of the smaller states heard as loud as those of the big ones.

The much bigger danger for America and its allies is that, even before his inauguration, Mr Biden may be regarded as a lame duck. Conventionally, it is the outgoing president who is regarded as a lame duck between election day and inauguration day. But this time it would be the incoming president. The question will be: how long can he last?

There is nothing wrong with maturity. And 77 should not be regarded as old these days when my boss, Jim Mellon, is planning to live to 120 – and some of his investees are aiming for 150 years of life. But this 77-year-old (78 on inauguration day) is undoubtedly showing signs of senility, even if that is forgivable. On Monday President Trump mocked Mr Biden for calling him George. 

I’m still of that ilk who equate maturity with experience, even if TS Eliot warned us about them: 

Do not let me hear

Of the wisdom of old men, but rather of their folly,

Their fear of fear and frenzy, their fear of possession,

Of belonging to another, or to others, or to God.^[i]

Joe Biden is certainly experienced, having held almost continuous electoral office since he was first sworn in as a Senator of the United States in January 1973, when Richard Milhouse Nixon was POTUS and Ted Heath was the UK prime minister. At thirty years old he was one of the youngest American senators in history.

But his is the experience of another age. When he speaks it is as if he stands outside history with no references to the over-arching issues of our time: the ascendancy of technology, which has accelerated disparities of income and wealth; the geopolitical challenges posed by climate change such as mass immigration (those boats just keep coming just as the Wall stalls); the inexorable rise of China. He finally won out in a highly contested race of Democratic candidates (some of whom, like Pete Buttigieg – Mayor Pete – were truly original) precisely because the Democratic Party apparatus and those they represent want to push the pause button on world history. Stop the Earth – I want to get off.

One day, so I believe, Donald Trump, will be regarded as ahead of his time – a visionary. Sure, he is crass, narcissistic and insensitive. He can be rude, graceless and tiny-minded. He is most certainly not an intellectual. (It is amazing how successful people can be without reading a single book in their lives.) And he may not even be a successful businessman. Yet history will judge that he had his fingers on the pulse of zeitgeist. He understood intuitively how the international financial and political elite had embraced a new secret religion of globalisation which was entirely inimical to the interests of main street America.

Martin Sandhu, the Financial Times journalist and author of The Economics of Belonging, regrets the consequences of deindustrialisation, the decline of traditional communities, the loss of jobs from localised manufacturing. But cultural factors, in his view, are irrelevant. Even though it is evident that mass immigration and the offshoring of jobs has huge cultural impact on local communities. And he abhors the rise of economic nationalism – the policy that nations should prioritise their own economic interest (as in MAGA and Brexit). Even though that is mainstream in Asia – indeed it is China’s lodestar. China had taken an estimated 4.7 million American manufacturing jobs up to 2016, according to American economist David Autor. Globalists just cannot understand that globalisation can harm because it has become a prevailing religion. One that Mr Trump challenged first.

Whatever you may think about him, Mr Trump is preternaturally modern. He is even more than a reality TV show host: he is the embodiment of what the Italian futurists would have described as a man of destiny. Gabriele D’Annunzio would have lauded him: and that is exactly my point. D’Annunzio was a nationalist, though he never joined the party of Mussolini. It is so easy to slur people as fascists these days when they are really old-fashioned conservatives.

Once Mr Biden assumes power (even if in name only) anyone who disagrees with his administration’s agenda will be labelled a fascist. But that is only the half of it. Mr Biden was clearly set up by the left-wing the Democratic party. It’s not conspiracy theory to imagine that Mr Biden is a Trojan Horse.

This is the fear. He will be wheeled into Washington with fanfare; then, by night, the horse will disgorge the most leftist administration in American history. The progressives and the wokeful will be nourished; but those who favour the operation of free markets will increasingly be muzzled. He will soon succumb – perhaps within two years – and his forceful Vice President will assume power and will ratchet America permanently leftwards…

If Mr Biden takes Texas next Tuesday stroke Wednesday morning as seems likely, then it’s all over for Mr Trump – and the Republican Party will enter a period of intense reflection, especially if it loses the Senate too. The race in all-important Florida appears to be on a knife-edge. But it is still possible that Mr Trump could take Arizona, South Carolina and the key swing states of Pennsylvania, Michigan and Wisconsin. In which case he might surprise us all – once again.

What the markets make of it

The US elections take place against the backdrop of worrying news flow about the advance of coronavirus across the West – North America, Europe and much of Latin America, the latter having been ravaged by the virus. America has lost nearly 235,000 citizens to the pestilence and, as I write, another 17,000 are in extremis. US Covid-19 cases have risen by a record daily average of 71,832 over the past week, according to Johns Hopkins University.

The DJIA, S&P 500 and Nasdaq Composite all dropped more than 3 percent on Wednesday. Those losses erased previous monthly gains. It was also the biggest one-day decline for the Dow since June. But on Thursday the US markets rebounded as data confirmed that the US economy grew at an annualised rate of 33.1 percent in Q3 2020 – in other words the US economy has more or less regained all the losses sustained from the pandemic in the first two quarters. The big question is how the economy will behave in Q4, given the second wave of the pandemic.

The view from this side of the Pond

The consequences of a Biden victory will be profound in the UK – even if Mr Biden will largely ignore us. It will trigger a moment of retrospection about the fateful year of 2016 – the year of Brexit and Trump. A Biden victory, for many, will signal a return to normality – to the good old days of Obama and Blair before The Fall. For some 2016 will become a laughable footnote – 2016 And All That.

And that retrospection will coincide with a re-assessment of the Brexit vote which itself will occur against the backdrop the deal-or-no-deal outcome of the Brexit endgame. Four-and-a-half years on from the referendum it is now impossible that the final outcome of Brexit will please everybody, and very unlikely that it will even please a majority. If there is no deal, there will be a growing body of opinion that we must yet get a deal – and that only Labour can make that happen. (The current brouhaha about anti-Semitism in the Labour Party will quickly dissipate, as it always does.) If there is a deal which is perceptibly inferior to the EU-Canada trade deal, then the Brexit ultras will accuse Mr Johnson of selling out – and the Rejoiners will argue that being out is much less advantageous than being in.

Looking back, I now think that the Brexit vote was not really about the membership of a supranational trading bloc at all – still less about the membership of an incipient federal state…It was much more of a referendum on the legitimacy of the ruling elite – Mr Blair’s New Labour having morphed, under Mr Cameron, into touchy-feely conservatism. Lord Mandelson wanted to rub our noses in diversity while Mrs May abhorred the Nasty Party. Conservatism was junked by all sides.

In so far as the Brexit vote was ever about immigration, I rather miss my Polish plumber and would much prefer to have Eastern Europeans arriving at Gatwick to supposed refugees arriving in Kent by dinghy – a problem that will only ultimately be resolved by cooperation with the French. (Just as, by the way, the defeat of Islamicist terrorism will only be achieved in collaboration with our French neighbours.) Where I live in Norfolk the fields are still worked by Romanian and Bulgarian pickers. There are Portuguese shops in places like Brandon, Thetford and Swaffham. I have, and never had, any desire for these hard-working people to leave the UK.

And Mr Biden is sure to play the Irish card. Any attempt by Mr Johnson to invoke the Internal Markets Act will be condemned by Washington as a threat to the Northern Irish peace process – indeed, a wrecking of the Good Friday Agreement. There will be impassioned condemnations of the Brits in Congress. We can argue as much as we like that the Belfast Agreement promised both communities that the status of the province would not change without the consent of all – and that the imposition of tariffs on goods traded between Northern Ireland and Great Britain would constitute a change of status. But a Biden administration will not engage with such subtleties. We have already been told that there will be no US-UK trade deal if there is any semblance of a border between Northern Ireland and the Republic.

Not that, in my view, a US-UK trade deal was ever going to happen. The issues surrounding farming standards and animal welfare are simply too intractable. There is no way that a British government could accept steroid-enhanced American beef, Uncle Sam’s chlorinated chicken or genetically modified soya beans without a massive political backlash. And there is no way that the Americans would agree to a deal unless their farmers are given unfettered access to the UK food market. The poultry lobby is one of the best funded and most powerful on Capitol Hill.

On the other hand, one benign outcome of a Biden presidency from the British point of view is that Mr Biden and his trade team (it will be fascinating to see whom he appoints as Commerce Secretary) might steer the USA back into the Pacific Trade Partnership – now known as the CPTPP. If Britain could then join this – as Japan is keen for us to do – that would obviate the need for a bilateral US-UK trade deal altogether. It would also be a platform on which to build closer economic ties to the three other English-speaking countries which are already members – Canada, Australia and New Zealand.

Mr Johnson, since he became prime minister, has not even made a visit to Washington to meet Mr Trump, who used to say, repeatedly, Boris Johnson is a friend of mine. Don’t expect him to be an early visitor to the Biden White House, as Mrs May was to Mr Trump’s. Mr Johnson faces a winter of discontent – and he is unlikely to get a Christmas card from Washington.

***

The investment guru Doug Casey was correct when he wrote recently that the real threats to people who possess assets are not economic at all – but political. The rhythm of technological advance will ensure, all things being equal, that living standards will continue to rise, climate crisis will be averted (as I shall explain next week), healthcare outcomes will be advanced, and our children shall live long, healthy and prosperous lives thanks to the judicious application of technology applied by the market economy. So long as socialist politicians don’t take power, that is.

But they are on the march. And they will create division. And they want and need your assets – justly, or not. Doug thinks that civil war in America is quite possible and that China will sit back and count its chickens. I’m not sure that I agree with that. What I do believe is that Donald Trump is the least bad outcome in 2020 – but that the Federal government’s ungainly response to the coronavirus pandemic has sunk him.

^[i] TS Eliot, The Four Quartets, East Coker (1940).