Who will be here after 2020?
Who will be here after 2020? BruceWilley/gettyimages.com

Stock markets are not about economics. They are about sentiments. This lesson was taught repeatedly by the greatest economist of the 20th century, John Maynard Keynes, who was also a speculator. The question is not how the economy is doing, but how do speculators feel about the market? Or, more precisely, how do they feel other speculators feel about the future of the market? And so we have a huge stock market crash in Argentina, a country that elected a pro-austerity right-wing president, Mauricio Macri, in 2015. The market crashed badly because bondholders are convinced that Macri is a goner. He was trounced by the left in a recent primary, and the general feeling is that he will not win the election in October. The left is resurging. The country has clearly had enough of austerity. It is expected that Argentina will demand debt restructuring or will simply default, which has happened before.

But is something similar not also happening in the United States? The markets are in turmoil, and one explanation of this is President Donald Trump's aggressive trade policies. Another, which appeared today (Wednesday, August 14), is an alarming movement in the yield curve, which is watched very closely by speculators. It indicated that the market is demanding more interest for short-term Treasury debt and, also, that market players are moving to "safe" long-term debt, thereby forcing its value down. Again, it is not an indication of the state of economy but of sentiment. The inversion of the yield curve has spooked the easily spooked. But is this what they really fear? This inversion? I want to propose that there is a link between what is happening in Argentina and what is happening in the US.


Now, Trump is playing two games to stay in power. One is the fulfillment of every wish that Wall Street and the 1 percent have ever dreamed of. We are now learning that this segment of society robustly supports him and wants him to remain the president. They have never had it this good. The twin brother of the presidential candidate Julián Castro, Rep. Joaquin Castro, can be thanked for making this fact (Trump's main supporters—the very rich) very public. The economist Paul Krugman's August 12 article, "Useful Idiots and Trumpist Billionaires: Greed, ego and willful blindness at the top," went viral. These primary supporters have finally become visible. But what we mostly see and talk about (particularly on CNN) is Trump's other, more mundane supporters, which tend to be white, working class, and excited by his tough immigration policies and attacks on noted people of color.

But what we have yet to properly consider is this: Speculators might presently be convinced that Trump will not win reelection, and if this sentiment is indeed the case, then we can expect it to also roil the markets. Trump's last two months have been terrible. As the job of keeping his base excited demands more vitriol, the link between him and his primary supporters, the billionaires, is becoming more embarrassing. This explains the sharp reaction to Joaquin Castro's exposure of his supporters and the popularity of Krugman's recent column. It is not hard to believe that the feeling among speculators is that Trump's juggling act is doomed, and so they are already terrified about the rise of not just of the center-left (Joe Biden), but what it perceives as the far left (Bernie Sanders, Elizabeth Warren). This was the devil's bargain that came with Trumporia. The billionaire class got everything it wanted, but at the cost of anything that resembled decency.

If examined closely, one will see that, structurally, the political/economic situation in the US is not that different from the one that's turning Argentina upside down. The bondholders in that South American country are freaking out about the return of the anti-austerity left, who lost power in 2015. In the US, speculators are freaking out about a leftist resurgence that, when it claims power, will, unlike Barack Obama, show no mercy to billionaires. The market crash in Argentina is the "2nd-biggest crash since 1950 for any stock market." What will Trump's crash be like in the United States?