Crescendo 2020: ‘There’s No Reason Whatsoever To Expect Anything Resembling Calm’

Crescendo 2020: ‘There’s No Reason Whatsoever To Expect Anything Resembling Calm’

Things may have changed — forever.

That’s one takeaway from the latest note by Deutsche Bank’s Aleksandar Kocic, who, earlier this week, suggested that markets may be forced to cope with a “prolonged period of uncertainty and disorder” following the election.

“Uncertainty is now the only certainty”, Kocic said Tuesday, in the course of flagging various manifestations of fear and anxiety in options.

Read more: ‘Fear Of Massive Risk-Off Trade’ Amid Unprecedented Political Entropy

In a new piece expanding on that, he writes that in the past, democratic transitions were “volatility un-inspiring events”.

But that may have changed in a world where politics in some western democracies continues to exhibit populist overtones and where fringe actors manage to garner sizable support among the electorate and accumulate sway at the highest levels of power.

For a time, it was assumed that this turn of events was a mere “phase”, not a new “fixture” of western democracies. But that assumption has been challenged — and not just in the US, by the way.

“Although the current political landscape appears highly volatile and unpredictable, it is not unlikely that this novel uncertainty becomes an integral part of the new stylized facts of the future political landscape”, Kocic says, on the way to reiterating that, in electoral democracies, victories usually come from “small defections between the left and right centers”. That, he reminds you, is no longer the case. The defections are not “small” anymore.

But in the US’s case, deviation from the center isn’t the only epochal shift afoot. Donald Trump’s populism (defined by an awkward juxtaposition between extreme arrogance and concern for the humble everyman — between a silver-spoon upbringing and purported sympathy for blue collar workers — between a pathological aversion to any kind of self-sacrifice in the name of the common good and hyper-patriotism) has morphed into what I’ve called “soft authoritarianism”. Over the past six or so months, the “soft” qualifier has ceased to be applicable.

For example, asked by Fox’s Jeanine Pirro (for an interview set to air Saturday) how he would respond to “rioting” on election night, Trump said he would “put them down very quickly”. “We have the power to do that, if we want”, the president added. “It’s called insurrection. It’s very easy. I’d rather not, but if we had to, we’d do that and put it down within minutes”.

Addressing the social unrest in the US and The White House’s efforts to craft a response, Kocic puts things in a broader context.

“Political leaders, who bear dual burden of imperative of stability on one side, and the urge to change, on the other, are themselves running an enormous risk”, he remarks, adding that the push to reestablish order from chaos chances exacerbating the chaotic spiral.

“[Leaders] are tempted to counter the confusion of the present with will for order and, in that process, often increase the very chaos which they pretend to oppose, often risking to fall themselves victims to spiraling disorder of their own creation”, he writes, before noting that “based on the crescendo we have witnessed so far, there is no reason whatsoever to expect anything resembling a calm or an ordered, consensual finale of this turbulent year”.

He again cites vol calendar flies in the yen and VIX futures which, he notes, underscore the outlier character of 2M expiries.

“As the elections enter the horizon, event premium in 2M options is exceeding anything we have seen in the last decade and beyond”, Kocic says.

What I would add is that there seems to be a generalized refusal among many in the US electorate to come to terms with the reality of the rather acute political crisis facing the country. Or, to the extent folks do attempt to engage with it, they do so disingenuously to avoid confronting the prospect of autocratic rule, and their own role in acquiescing to it.

People get around this in a variety of ways — there are no shortage of coping mechanisms for those looking to blunt the psychological impact of reconciling their support (current or past, avowed or tacit) for a man whose every historical word and deed was a red flag vis-à-vis his bid for high office.

Most of these coping mechanisms entail some manifestation of blaming the victim. For example, a common way to avoid engaging with the reality of 193,000 dead Americans and the president’s on-tape, recorded admission (to Bob Woodward) that he deliberately played down the pandemic and hid information from the public in February and March, is to claim that state and local officials’ stay-at-home orders during the pandemic somehow cost lives (on net) due to mass suicides, drug addiction, and incalculable (by definition) future psychological damage, among other things.

Similarly, one common refrain to avoid a head-on collision with the legacy of slavery and endemic racism that pervades virtually every aspect of African Americans’ daily existence in a country which continues to oppress them, is to blame African Americans for “hurting their own cause” by taking to the streets to demand equality.

Finally, when confronted with the inescapable financial reality of the Trump tax cuts (i.e., that they were, for the most part, a handout for the wealthy and for corporations), lower- and middle-income voters tell themselves ghost stories about socialism, which is everywhere and always equated with Venezuela, never with myriad examples of flourishing socialist systems in highly advanced, highly egalitarian (compared to the US, anyway) economies.

These are the psychological contortions of a society that is vulnerable to authoritarian rule. In March of 2019, following William Barr’s blatant distortion of the Mueller report, I wrote that “having crumbled the country’s institutions and having essentially antiquated the whole idea of ‘checks and balances’, Trump faces a new challenge: Shaping and defining autocracy in America”.

“One wonders if he appreciates the gravity of that”, I went on to muse.

I still doubt whether Trump does, in fact, understand the ramifications of his actions. I doubt seriously it’s occurred to him that this particular manifestation of his penchant for defrauding (psychologically or otherwise) people isn’t confined to the directly aggrieved. This isn’t “Trump U”.

The US is on the brink of becoming an autocracy, and American society is so collectively undereducated and oblivious to the most basic of tenets of their own form of government, that many voters don’t even know what’s happening to them.

Deutsche’s Kocic writes that “in our view, the main problem that could arise during the elections is that the actual results will be unknown the day after and that there will be multiple rounds of back and forth with heavy contestation of their legitimacy and therefore escalation of tensions and protracted risk-off trade”.

It could very well be that America never knows the results of the election.

As the president suggested in remarks to Fox’s Pirro, any person or groups of people who decide to express incredulity in the event Trump declares a resounding victory on election night, will be “put down”. And “very quickly” at that.


20 thoughts on “Crescendo 2020: ‘There’s No Reason Whatsoever To Expect Anything Resembling Calm’

  1. The other thing to note is that we seem to be going through another “red scare” period in our history. An increasing number of people believe the government is infiltrated by child sex traffickers and that antifa is waiting around the corner ready to burn everyone’s town to the ground and loot the remains. When Jacob Blake was shot, rumors appeared in my hometown that protestors were coming. Never mind that my hometown likely hasn’t had 100 black people in total visit the town in the past decade (not an exaggeration). The same rumors spread in my current suburban locale. In Oregon, you have people more worried about looters than giant walls of flames on their doorstep. As if looters are willing to risk their own lives to steal whatever Joe Blow has in his garage.

    I assume this was what the folks in medieval Europe went through when Ghengis Khan was running rampant except they legitimately had something to fear.

    1. Genghis Khan never ran rampant in Europe. He died in 1227. The furthest the Mongols got into Europe was Poland, where they won the Battle Liegnitz in 1241. After that they withdrew, never to return to Western or Central Europe, although they did take over Russia.

  2. I think even his supporters know the antifa scare is a hoax and that socialism exists in Europe without a large problem. What I find is that people to do not understand american style socialism benefits those most opposed to the word socialism(farmers, wealthy). Which points to the observation that people like socialism as long as they get it and others do not. I do not ascribe to the thought that people are buying into all the political Cons or that these nuts are in anyway populists. No I think Trump has not thought of the ‘end game’ but David Duke, Steve Bannon, Tucker Carlson, and others have. No they are not telling us what they think the end game is.

  3. I’m grateful it is one person, one vote

    Here’s a typical excerpt from an elite political thinker. Directly excerpted from a Marketwatch opinion column: Americans feel they left to their own devices to cope with the health threat and manage their disrupted lives. While a heavy burden, these demands are manageable as long as people have the cognitive capacity required. The problem is that most people do not.

    This thinking pervades the political elites. They think Joe Blow goes to the President for medical advice? They can allocate joe blows capital better than joe?

  4. finger on nose, nail on the head, etc … The US is on the brink of becoming an autocracy, and American society is so collectively undereducated and oblivious to the most basic of tenets of their own form of government, that many voters don’t even know what’s happening to them.

  5. I would argue that it has already happened, we are just awaiting the final confirmations. The past four years, if not the past 20, have been a drawn out constitutional crisis. In essentially every theory of democratic political legitimacy I have studied, legitimacy is derived, however mediated by layers of representation, from a social contract ratified by the will of the governed.

    In 2000, Rehnquist said the constitution didn’t require Florida to count the actual votes. Let’s pretend for a moment that the Voting Rights Act has not been under full frontal assault since then, that we aren’t in the middle of a pandemic that requires more voting flexibility, that the sitting President hasn’t already been impeached for interference in the upcoming election, and that this final constitutional fail-safe process hadn’t already tragically broken culminating in the “no witnesses necessary” vote by the Senate. All that seemingly stands between here and the abyss is one man, John Roberts. Even he would need to ignore the jurisprudential doctrine of stare decicis and the 2000 precedent, and take a rather non-conservative approach to interpret the law differently. Does this setup instill confidence in the robustness of the system, or point to the system already having proven its fragility? Regardless of the ultimate outcome, I think we already know that at least 30%, if not substantially more, of the citizenry will believe it to be illegitimate.

    We could also mention that the Republicans in Congress have not “legislated” in any semblance of good faith since at least the inauguration in 2009, when party elders met and decided their strategy going forward would be to perfect the art of stonewalling the other party at all costs, including the cost of total self-destruction. We could mention myriad lawless officials like John Yoo, Dick Cheney, Roger Stone, and others ultimately not held to account. We could mention the NSA being authorized by Obama to extendedly spy, domestically, on over a million citizens without warrant, violating their most basic constitutionally protected civil rights, the very revelation of which was not made by the courts supposedly vested with this authority, but by a whistleblower risking his life to break very serious laws. We could point to issues with broad overall public appeal (2/3 for stricter gun control, 7/10 for Medicare for All, etc.) that are somehow “impossible” for the political system to effectuate. We could perhaps throw in the economy becoming largely centrally planned by 5 unelected officials.

    One can think of different phrases to describe all of this, but “democracy” and “the rule of law” seem hopelessly naive, if not outright disingenuous at this point. “Authoritarianism” is as accurate as any label.

  6. There is one other group not heard from that could enforce a return to a democratic state. The US military. Would they decide to enter the fray if it became blatantly clear that Trump and his band of A’holes were trying to hijack the government?

  7. One could argue that corporate-centric authoritarianism combined with an accommodative Central Bank is supportive of equities.

    The risk off mood would be a buying opportunity regardless of who wins/takes the power, no?

    1. I think you’re missing he larger point. In an increasingly authoritarian state, how would you know the “rules” would remain as you know them allowing you to invest with confidence? How would you know that the companies you invest in would remain in the good grace of the authoritarian? The whim of the authoritarian could change things quickly. They may be “corporate-centric” but would they be YOUR corporate-centric?

      1. A concluding comment to the above: the US is investable because of the rule of law, particularly with regard to property. In an authoritarian state, that kinda goes out the window, doesn’t it?

  8. Praise be…how long after a Trump re-election before we start living in a Hand Maid’s Tale type of reality? Salvagings and hangings at Fenway Park may mark just the beginning, liberals accused of drinking children’s blood will be executed first along with the entire staff at CNN, under his eye…

  9. All fair points. To be clear, I’m not rooting for this to happen. But I wouldn’t want to be blind to the fact that authoritarianism has been a boost, at least in the short term, to markets, and that’s partly why authoritarians receive support from capitalists: low wages, reduced worker rights, government spending for loyalists, support for loyalists’ monopolies and accrual of influence.

    Believe me, I’m spending to support civil rights and democracy groups. But we can’t be oblivious to the fact that big tech is acquiescing to the government. CEOs of all stripes have kissed the ring. Those who haven’t become the news and don’t receive government grants.

    The rules for investment under authoritarianism, one could argue, become extremely clear: stick to loyalists’, short dissenters. Again, I don’t like the game, but we must play it.

    The Crux of the issue here is: will you divest fully if Congress removes from the Constitution presidential term limits in 2023? Where would your money go?

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