EDITOR: | December 22nd, 2016 | 4 Comments

The New US Administration – Party like its 1929!

| December 22, 2016 | 4 Comments
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Some have styled the new political wave in the US as a return to a 1950s economy but without the 1950s social values. We are not here to make comments on the mores of the day (or days gone by) but it’s worth looking at the concept of perceived idyllic past economies. In this case harking back to the 1950s, a period which at least some of the electorate can remember, is easy but a bit intellectually sloppy. We believe that a better comparison is the 1920s.

The 1920s get a bit of a bad rap these days as they ended with very unpleasant bang in the form of the Wall Street Crash of 1929, which resulted in the Depression of the 1930s and that segued into the rise of Nazism and other “-isms” with the final purge being World War Two’s bloodbath, which ironically led to the sunlit uplands of the aforementioned 1950s and the post-war economic (and Baby) boom.

Follow the Leader

The US was not the centre of the world in the 1920s and thus its presidential leadership did not set the tone for how the world worked or thought. Indeed the US was a rather autarkic (i.e. self-reliant and self-absorbed) economy while its foreign policy was largely isolationist (with a thin veneer of Monroe Doctrine, allowing adventures and meddling in LatAm). The 1950s in contrast was all about US military muscularity and the Pax Americana. If one can believe the policy pronouncements of the campaign, it sounds like the US will be more of the stay-at-home persuasion at least for the next few years.

Then we can look at the personalities involved. The 1920s had Warren Harding, Herbert Hoover and Calvin Coolidge at the helm. The latter has not come out of the history books looking all that great because the Crash happened on his watch and it was perceived probably wrongly that he was roaring downhill and did not want to put his foot on the brakes. How one can criticize him for that after having let the likes of Alan Greenspan and Ben Bernanke do pretty much the same thing since the late 1990s (with two crashes, 2000 and 2008, to their credit) is rather astounding. At least one could claim that Coolidge had a public behind him (beneath him?) that might have lynched him had he tried to take away the punch from the party.

Herbert Hoover deserves mention for being similarly hands off (could one be anything else in pre-FDR America?) but also because he was the only mining engineer to be President of the US. At least he wasn’t a geologist!

Warren Harding though was another kettle of fish, dying in office, with the Teapot Dome Scandal and a host of sleaze surrounding his cabinet that has coloured the perceptions of his Administration making it forgotten and wanting to be forgotten. The Wikipedia article on Harding says “Harding ran for the Republican nomination for president in 1920, but he was considered an also-ran with little chance of success”. Sound familiar?

Then the article on Hoover states “Hoover declined to use a spokesman, instead asking reporters to directly quote him and giving them handouts with his statements ahead of time’. Sound familiar?

Then Calvin Coolidge’s most immortal line was: “The business of America is business” and if that does not typify the Trump approach then it is difficult to think of another example. One could certainly not imagine anything JFK ever said getting double duty as a Trump bon mot.
As we know those who pay no heed of the past are destined to repeat it. The toss-up, talking in retrospect in 2021, will be whether Donald Trump goes down as a Harding or a Coolidge.

The Company They Keep

Presidents that are inclined to be “hands off” in their Administrations had better have a strong team around them to pick up the slack. Warren Harding has gone down in history for not actually being all that bad himself but for having been so poor in his choice of team members and then singularly failing to keep an eye on them. True, his cabinet had some highly respectable names, Andrew Mellon (of the eponymous bank) and Herbert Hoover as the Commerce Secretary but the bad eggs were what he is remembered for, the exceptionally venal Interior Secretary Albert Fall and Attorney General Harry Daugherty. The Trump interregnum has seen a virtual, and literal, revolving door on Fifth Avenue with candidates coming and going and some cases of “don’t call us, we’ll call you” from the Wall Street and Fortune 500 fraternity. However, some have heard the siren call of “duty” and responded. Maybe the history books will never get to show just how many people were asked to joined the team and yet said “thanks but no thanks”.

Only time will tell how this “industrial-military complex” cabinet will play out. For mining mavens though the hope is that those installed in the EPA and other relevant parts of Administration (BLM etc) are as friendly to mining interests as they are to energy interests.

Gatsby

During the election campaign some of the undercurrents including the issue of “where the money was coming from” and “what did it all mean”? This lead to criticisms that the candidate was “more flash than cash”. This inevitably led us to think of the Great Gatsby.
The question then becomes if Trump is Gatsby then would Gatsby have installed gold taps in the bathroom at his mansion in West Egg? In the Robert Redford styling of the man, he had all his own hair and his most decadent moments consisted of tossing around colourful button-down shirts from a London shirtmaker. Not a gold tap in sight. Gatsby had remade himself but was not a shape-shifter once his transition had been made.

So will the Trump experience be “party like its 1929”? The infrastructure program talk sounds more like New Deal/WPA 1935, which must be particularly galling to fiscal conservatives. Still everyone loves a party (except the neighbours) and if Mexico is the neighbour then, unlike Nick Carraway, they will not be invited over and will just have to put up with the noise. That then begs the question as to who will wash up the glasses and plates and tidy up afterwards… surely not the guests at the party?

Conclusion

Usually transitions consist of announcements of dull cabinet secretaries, key ambassadors and minor flunkies and functionaries. This transition could best be described as “never a dull moment”. The message that is coming through though is somewhat akin to Calvin Coolidge’s aforementioned dictum that “the business of America is business” with key positions going to business people and the few politicians in the mix must show their pro-business credentials to get past the guards.

The Trump ascendancy has much to do with a perceived American sunset (or descendency) with emerging economies “eating the lunch of the US” and reversing the dominance of the global economy since the 1920s. China is perceived to be the main party crasher (and hors d’oeuvre snatcher) and Gatsby (oops, sorry Trump) has called in security to remove them from the premises. The interesting issue now is whether the US will manage to trigger a proper recession in China and if it does than will the rest of the world be able to avoid catching the same cold. Data that we have highlighted in our recent Investor Intelligence Report (contact for subscription details) would indicate that the West and developed economies are actually looking a lot better than the developing (corrected!) economies and that now it is time for the party that has raged for twenty years in the small houses in the neighbourhood to move back into the Big House and maybe Trump is the Gatsby to make it happen.


Christopher Ecclestone

Editor:

Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>


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Comments

  • Jack Lifton

    Christopher,

    You say “the West and developed economies are actually looking a lot better than the developed economies…” I am sure that you mean in the second instance the “developing” economies. Watch your gerunds, please, while typing. I saw a great comment this morning on the blog, “Naked Capitalism,” which pointed out that the U.S. “boom” of the 1920s began with the rapid spread of electrification to private homes of the middle class and that the consumer economy was in that period kicked off by the flood of (then new) technological innovation and the concomitant development of its (technological innovation’s) mass production. Personal motor cars, home appliances, and the like flooded the consumer market.
    After the second World War pent up demand joined innovation to give us the post-war boom, and it remained strong for the next 25 years.
    Professor Robert Gordon has made a convincing (to me) argument lately that the great age of technological innovation was 1870-1970, and that it, along with rapid productivity gains, has been running out of steam (the control of which ignited the first technological innovation) ever since.
    Academics are now saying the future of capitalism will be decided in Asia, not the USA. I tend to agree that unless Trump can somehow reverse the financialization of American capitalism we are doomed to an ever lowering standard of living.
    A return to American self-sufficiency in natural resources will require a massive increase in domestic manufacturing as its principal driver. This would need substantial automation to increase productivity to make American manufacturing costs highly competitive again.
    One can hope.

    Jack

    December 22, 2016 - 9:57 AM

    • Christopher Ecclestone

      Well spotted Jack.. and has been amended… the likeness/contrasts between these decades sounds like the subject for another note!

      December 22, 2016 - 11:00 AM

      • Jack Lifton

        Christopher,

        I love this topic. By all means please write about the contrasts among the decades of the twentieth century with regard to economic drivers. I read the other day that beginning with the “crash” of 1929 all of the financial crises since have originated with events in the U.S. domestic economy; but that it is now a race between the U.S. and China as to which one will set off the next “crash.” It’s clear that Mr Trump. like Mr Hoover, before him has come into office at a perilous (we can see with hindsight) time for the economy. If his concept of running the U.S. economy as if it were a giant (loss making) corporation with a view to bring it back to profitability is, in my view, quite a good one, but perhaps the globalization of finance has made the repurposing of the U.S. economy (from individual greed driven to general population beneficiation) not possible. Sadly as the proliferation of nuclear weaponry descends to the lunatic fringe of the world the return of this planet to the status of a glowing companion of its star seems more likely than not. I note in passing that even the hint that the geniuses of the US Federal Reserve will raise interest rates has dampened considerably the American consumer’s demand for big ticket goods such as cars and appliances. Michelle Obama has recently and famously said that she “has no hope” for our future. Perhaps she can spare some “change” for those of us who paid for her 8-year first class holiday. But, I ramble…

        December 22, 2016 - 11:48 AM

  • Leonard MacMillan

    Christopher, your conclusions are always perceptive but oh so entertaining, thanks for the smiles. I am passing them along. Great writing style.

    December 22, 2016 - 3:07 PM

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