The percentage of the population likely to contract the Coronavirus may be very small indeed, but the economic impact of its presence could be seismic: whole cities locked down across China, business travellers staying away, leisure travellers cancelling holidays, and worst of all for the global economy, freight not moving - so sales and consumption fall. Stock markets are already getting nervous at the prospect.
Donald, where's yer hairspray?
And while Governments in the UK, and elsewhere in Europe, have some time of their tenure left to run, the current US Presidency does not: Combover Crybaby Donald Trump is up before the electorate next November, along with a third of the Senate and all of the House of Representatives. Trump is floundering: he’s called criticism of his response to the Coronavirus “a Democrat hoax”. He’s scared. Why he is scared is down to the D-Word.
That’s as in Depression. Because, while the German psyche has a fear of inflation burned into it, that of the USA has the fear of another Depression. And for Trump, there is the added fear that the Great Depression took out a Republican President - Herbert Hoover - who was infinitely better qualified than he is. Hoover became a one-term failure.
Added to this is Trump’s love for linking rises in the markets to his presence in the White House. It is as if he had never considered the prospect of the whole thing going into reverse. What sparked the Great Depression was, yes, a collapse in the markets, but what weighs on Trump’s mind is the speed at which the collapse took hold - and could again.
This was described definitively by J K Galbraith in his work The Great Crash: here is part of a later summary from The Age of Uncertainty. “The day of reckoning was Thursday, October 24, 1929. The market had been weak on the days before. On that morning … there was a great unrestrained and unexplained headlong rush to sell. This hit the floor of the Exchange with torrential force. The machinery could not adjust to the panic”.
An intervention by the Exchange’s Vice President Richard Whitney turned the market around. But, as Galbraith recounts, “The following Tuesday the real crash came. This time the bankers did not intervene. According to rumour they were unloading the stock they bought the previous Thursday. With occasional rallies, the market went on down for nearly three years … After the Great Crash came the Great Depression”.
Donald Trump sees the potential for economic slowdown in China and other economies in the Far East. He knows that if those economies catch the Coronavirus cold, his country will most likely be next. He knows what happened after The Great Crash. He does not want to be another Hoover, a President whose campaign for re-election was so disastrous that the New York Metropolitan Opera House was filled with “Republicans for Roosevelt”.
What the world outside the White House must also know is that Trump, having taken credit for a market rise to which he has contributed virtually nothing, is incapable of figuring out how to stop the slump if and when it arrives. And he is incapable of shouldering responsibility for the consequences. It will have to be someone else’s fault.
All he can hope is that the crash waits until after election day. But the market is already soft. When that torrential force hits the Exchange, there will be no time for excuses.
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