Behind the political warfare in the US: Rising fears of financial collapse, social unrest
22 August 2017
There are growing concerns in US and global financial circles that the rise in the US stock market that accelerated with the election of Donald Trump is heading for a major downturn. These concerns shed a revealing light on some of the underlying forces driving the virtual civil war in the US political establishment.
The growing view among Wall Street speculators and corporate executives is that the “Trump trade”, which sent the Dow Jones and other market indexes to record highs, has run its course, with the president increasingly becoming an economic liability. The tipping point in business sentiment came in the wake of the conflict over the Charlottesville Nazi rampage. Trump’s remarks defending neo-Nazis were seen as undermining the interests of American imperialism internationally and threatening to unleash social and political instability at home.
However, concerns over the instability caused by Trump reflect deeper fears. The American ruling class confronts problems that extend far beyond the current occupant of the White House.
In a comment published yesterday, Ray Dalio, the head of Bridgewater, the world’s largest hedge fund, said that politics was now set to “probably play a greater role than we have experienced before in a manner that is broadly similar to 1937.” Whether the US was able to overcome political conflicts would have a greater effect on the economy than “classic monetary and fiscal policies.”
The reference to 1937 is significant. The first half of that year saw a major downturn in the US economy—the decline took place at an even faster rate than in 1932, in the midst of the Great Depression. The year also saw the eruption of the…