‘There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.’
Donald Rumsfeld
We have deliberately not commented on the U.S. election, largely because of the stark contrast in personal outcomes for Mr. Trump. If he had lost, imprisonment was the likely future for him; having won, he is the most powerful person in the world. That huge contrast would certainly have concentrated his mind on winning: to the extent that what will actually happen over the next few years is a real mystery, a walk into the ‘unknown unknown’, as Donald Rumsfeld calls it.
Whether the multitude of his ‘policies’ have any grounding in real political strategy we have yet to see. They certainly reflect the angry maelstrom of popular opinion which has had enough of smooth-talking politicians and diplomats.
Last week we also celebrated Share Radio's 10-year anniversary: we started broadcasting on 5th November 2014. That was a couple of years before Trump's first term, and a lot of water has passed under the bridge since then, both for the U.S. presidency and for Share Radio.
For the former, it's been marked by intense polarisation of private wealth and vast government debt — $35 trillion — as a result of huge economic stimulation and what Mariana Mazzucato calls, ‘The Entrepreneurial State’. Meanwhile Share Radio has certainly learned how to deliver cost-effective radio, but we have also become still more focused on the search for a more egalitarian form of capitalism, and particularly inter-generational rebalancing.
The world and America are faced with really colossal challenges over the years ahead. The tension and conflict that fills the media is just part of this, because both environmentally and economically we are also in a total mess.
The news that we have just passed through that 1.5º limit for global warming, together with the environmental disasters in so many parts of the world, should tell any sensible politician to get a grip on climate change. But Trump enters The White House calling, ‘Drill, Drill, Drill’, and clearly has no intention to end fossil fuel dominance.
It’s a critically dangerous time to have a set-back in renewable energy, and we must just hope that its significantly lower operating and production costs will be enough to keep momentum going over the next four years. The problem is that huge quantities of American oil and gas dumped on the market, combined with Russia's need to maintain its only significant source of income, will seriously deflate the oil price to the extent that it could challenge that renewable energy floor.
There is, of course, the chance that Mr. Trump will finally see the light; but how many Valencias will that take? The fact that the Gulf of Mexico is not unlike the Mediterranean in being a huge, deep basin of overheated water will increasingly threaten Florida with the risk of devastating floods and hurricanes. Mar-a-Lago may be on its east coast, but it's not out of that risk.
Trump is clearly aware that global warming is taking place: why else would he have made a bid to buy Greenland when he was last in power? And he must realise that global warming means sea level rise (5 metres, in the case of the Greenland ice sheet): so that too will threaten his Floridian Camelot.
But it's the economic unknown which really puts the cat among the pigeons. The problem has been building for the past 2-3 decades, but will Trump's attempt at an instant U.S.-focused fix just accelerate a financial crisis of global proportions?
I recall attending regular Capital Economics seminars which often set out the massive scale of the American trade deficit with China, who use their huge surplus to buy vast amounts of U.S. public debt. Donald Trump plans to put an instant end to that by applying tariffs of up to 60% on Chinese imports. He clearly thinks he can stimulate huge productive capacity domestically, notwithstanding his intention to expel all the cheap labour which has resulted from illegal immigration.
He'll be cutting taxes too — and American public debt will, no doubt, climb much higher than its current $35 trillion. Emma Duncan’s article in The Times last Friday was headed, ‘U.S. debt is soaring: something's got to give’.
On Saturday I attended a research lecture looking at corporate zombie-fixation: the process by which commercial companies go through a distressed state until they reach total financial incapacity. If their business is deemed critical to the national economy, they may be bailed out by government — such as the major banks following the 2008 financial crisis — but the legacy of not allowing dysfunctional companies to collapse handicaps growth for years thereafter.
But what happens when a nation the size of United States reaches distressed, or zombie, borrowing levels? It's all very well when the U.S. dollar is the world's reserve currency; other countries, such as China, may well buy that debt. But if they are denied the massive trade surplus that they've enjoyed for decades, who will replace them to buy those vast quantities of U.S. debt?
As junk status looms, yields — and therefore borrowing costs — will rise significantly: but the annual cost of interest already exceeds the combined costs of education and defence. Emma Duncan is right — something has to give, but we might all suffer in the process.
There will be some warning signs that the exploding burden of U.S. debt has reached the distressed stage, beyond purely looking at long-dated bond yields. One of the first of these could be a concerted attempt to end the independence of the Federal Reserve for setting interest rates. Jerome Powell has already made clear that he will not be resigning, thus confirming that this risk is already looming large. Investment markets may become distinctly more volatile over the months ahead — don't expect early 2025 to provide steady appreciation.
And that's just an overview of the environmental and economic unknowns: we haven't even started to consider geopolitical stability in this commentary. So far as that is concerned, we are entering a new world in which Trump could strike all kinds of deals which, as he has stated clearly, will be primarily designed to benefit the United States. The gathering global gang of autocrats must be wringing their hands at the prospect of a general American retreat and, if the U.S. dollar does collapse, that will certainly put the nail in the proverbial coffin.
So, it's a momentous time to be celebrating our 10th anniversary, with this global walk into the unknown. I just wish that we could have started our campaign to find a more egalitarian form of capitalism several decades ago, because that focus on global equity participation and inter-generational rebalancing could just have prevented some of these crises from developing in the first place.
Gavin Oldham OBE
Share Radio