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deglobalization europe Markets populism

De-Globalization And The Path To Ruin – Random Thoughts On A Friday

This won't end well for anyone.

Barring some kind of dramatic turn (which I suppose we should all just assume is coming given what we’ve seen in December), Friday is likely to be a “random musings” day from me.

We’re still mired in the holidays (and only a hermit like myself would use the word “mired” in the same sentence as “holidays”) and the flow of interesting analyst commentary has slowed to a trickle.

Trump is (still) shrieking on Twitter but as mentioned early Friday morning, his rantings have become so cartoonish that it’s “beyond parody”, as it were. It’s impossible to lampoon his border crusade in terms that make his tweets any funnier than they are of their own accord.

So, “random musings” it is. Bloomberg was out with a decent piece on Friday that couched the DAX’s horrible year in terms of de-globalization. I’d say “creeping” de-globalization, but that adjective no longer cuts it. Trump (and the semi-global populist upsurge more generally) have turned the de-globalization knob up to a Spinal Tap-ish “11”.

As we’ve been at pains to explain nearly every day since this site’s inception, de-globalization is a highly undesirable phenomenon. Globalization is being used as a scapegoat by political opportunists to “explain” the plight of the middle class in Western democracies. Blaming globalization is an easy “out” for folks who are laboring (figuratively and literally) under stagnating wages and the psychological overhang of what they perceive to be a generally hopeless future defined by increasing levels on inequality and a lack of upward mobility. Of course that ignores the myriad utilitarian arguments in favor of globalization and that’s the real tragedy of the de-globalization push.

In any event, before I get too far off the tracks, let me steer this back to the DAX which, as Bloomberg notes, is something of a proxy for global trade sentiment. 2018 is the worst year for the index since the crisis and the six-year winning streak (which is now over) was the longest on record.

DAX1HR

(Bloomberg)

A snapshot of the breakdown shows how acute the pain was for some index constituents.

DAX2HR

(Bloomberg)

Chinese equities are obviously another casualty of the de-globalization push as manifested in Trump’s ill-conceived trade war. The SHCOMP is the worst-performing major benchmark on the planet this year, down some 25%.

SHCOMP

(Bloomberg)

Of course Chinese stocks have other problems besides the trade war. Just pulling one out of the (full) hat, the ongoing effort to squeeze leverage out of the shadow banking complex is turning the screws on margin debt which remains subdued and fell further over the course of H2.

ChinaMarginDebt

(Bloomberg)

China’s economy was already decelerating before Trump’s trade war, but he has made things immeasurably worse. Remember, China is the veritable engine of global growth, trade and credit creation and Trump has effectively thrown a monkey wrench into it. That, ultimately, will be to the detriment of the entire world.

And for what? To reduce the trade deficit with China? That’s meaningless and even if you assume it does mean something, China has logged record surplus after record surplus since Trump started really pushing the envelope.

Again, the above are just some random thoughts that may or may not be useful as you try to comprehend what went “wrong” in 2018. What seems indisputable is that de-globalization is a path to ruin, and if/when this push continues to drive the train further off the tracks, don’t say Xi Jinping didn’t try to warn you.

We’ll leave you with an infographic from Goldman and a few links to more in-depth posts on all of the above.

GoldmanTradeUS

(Goldman)

Read more on trade, populism and the suspension of disbelief

Trump’s ‘Cold War’: ‘Keep Your Seat Belts Fastened’, Trade Tensions Will Persist ‘Indefinitely’

Dream States: Why No Resolution To Current Political Conflicts Is Possible

The nostalgia of greatness and the deconstruction of a déjà vu  (NotesFromDisgraceland)

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4 comments on “De-Globalization And The Path To Ruin – Random Thoughts On A Friday

  1. I don’t think anything really went wrong in 2018 when I view this on a longer Timeline… What went wrong over this longer time frame just hatched in that particular year.
    A wise old Steel Barron once warned me at a time when my career was in it’s fledgling phase that “all growth is temporary ” and to look for signs of that transition as I went forward. I did and he was right in his assessments. His words can be applied to the game of Empire that we are engaged in over the last seven or so decades. America is a debtor Nation , as well as a consumer Nation that produces a Pseudo Culture sold to any bidder. The Military rules after the Dollar Hegemony Dies for perhaps another 20 years.
    Trump’s Election to the Presidency is symptomatic in a Historical sense to the transition of the Empires that preceded this one.

    There are choices if Hubris does not rule. These words are merely year end musings as we view the battle from the hilltops..

    • Not my first choice, but rule by generals sounds better than rule by far-right evangelical zealots. I might not care for Mattis and what he represents, but I wouldn’t fear for my life/rights if I met him in a dark alley. Can’t say the same about Pence et al.

      • Be careful, many in the military are the same type of zealots who just can’t show it while in service.

    • huh? How about this explanation — we are in this mess due to trump being elected by a minority of the citizens of America. The majority really believed that such a despicable man could ever “win” and become the President of America. The de-stabilization of our economy and trade and status on the world stage is a direct result of that illegal election. His ignorance and incompetence is shocking and overwhelming!

      This country did not naturally evolve into this predicament regardless of how many ways you try to explain it, using too many words. You and trump both should stop capitalizing words unnecessarily.

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