America Turns Inward

If we didn't need any more evidence the results of yesterday's primaries indicate that the American electorate is turning inward. The rise of Trump and Sanders proves that there is a strong anti-free trade consensus. Although Sanders and Trump voters vote with their pocketbooks in favor of free trade every day at Wal*Mart, at the ballot box they resoundingly vote against it. These facts will be confirmed when the Trans Pacific trade deals goes down to defeat, if it is ever voted on.

Moreover with Trump appearing to be a direct descendant of the isolationist America First movement of the early 1940s and with Sanders firmly believing in the American retreat of his socialist roots, the world will soon become a more dangerous place. We have written many times before that we are in the process of reliving the 1930s and unfortunately the evidence grows with each passing day. We are getting pretty close to gangs of Trump and Sanders supporters fighting it out in the street. Simply put, the political situation is getting very ugly. Soon the markets will reflect it.

Reliving the 1930s

According to aphorism attributed to Mark Twain, “history does not repeat itself, but it rhymes.” I am afraid our generation is reliving some of the horrible experiences of the 1930s. The Great Recession of 2008-09 was our version of the Great Depression. The recent experience certainly was not as bad, but after many decades of plenty, it certainly felt that way.

As the 1930s progressed concerns shifted from the still depressed economy to the rise of fascism and a series of foreign policy crises in Europe and Asia. Instead of Hitler fascism we are now witnessing the rise of Vlad, “The Impaler,” Putin’s version of it. In the 1930s Germany was the revisionist power seeking to undo the strictures of the post- world War One settlements. Today Putin is attempting to revise the post-Cold War settlement established from 1991-1994. His seizure of the Crimea and his attempts to further dismember Ukraine are part and parcel with his strategy to restore the past greatness of Russia. Just like Hitler, he is succeeding.

Why? The West is doing its best to rhyme the failed policies of the 1930s of vacillation and appeasement. Both the United States and Europe want the world go away so they can hide in cocoon of isolation. This is true of factions of both the left and the right of the political spectrum. Unfortunately this policy is a luxury we cannot afford. To paraphrase the Russian revolutionary Trotsky, the U.S. and Europe might not be interested in the world, but the world is interested in them.

Instead of making speeches, our vacillating President should act by imposing real sanctions on Russia, providing direct military aid to the Ukrainian government, increasing rather than decreasing the military budget, moving NATO forces into the front line states on a more permanent basis and take the energy infrastructure steps necessary to wean Europe off of Russian gas. Will President Obama act? The stakes are high!