The World Economic Order is Predicated Upon a Stable America

[Tom Rinaldo]

There are fundamental reasons why the Dollar is the defacto world currency, why New York City it the defacto world financial capital. There are fundamental reasons why international creditors finance American debt. One could easily say that virtually the entire world risked being over exposed to downside risk by placing too many eggs in the American basket. But they did that with their eyes open, because compared to other major world economies, compared to other major governments, the United States was remarkably stable.

The American Civil War was over 150 years ago. Power in America at the highest political level has always been transferred peacefully, without large scale civil disturbances associated with those transfers. The United States has always met its fiscal obligations, we never default on our loans. We operate our economy, our entire society, around rules that are not entirely subject to the whims of one powerful interest at any given time. That gives international interests some degree of security about the future of their investments in America, allowing them to plan for the future here without having to allow for the potential of wildly differing scenarios scrambling all projections.

Donald Trump may be on the verge of dissolving all of the above. True, he may not actually do so. But then again he may, and that injects a powerfully high degree of uncertainty into all calculations about the future of America. And that undermines confidence in the unique expectation of ongoing stability that the United States has up until now perhaps uniquely benefited from in the world.

Markets react to many things that are often described as fundamentals; stuff like rising interest rates and lowered demand, tight and loose labor markets and the like. But there are few things more fundamental in today's world order than the underlying trust in the stability of America. And now that trust is eroding, because of Donald Trump.

[AJT]

1. I think this is just a correction. If the economy is heading for a downturn

in the summer then the dems can point to problems with the economy, but it is way too early to think we are headed for a sustained bear market.

[Tom Rinaldo]

2. It might be just a correction. One is long overdue...

...but it can also be an early harbinger of of increasing numbers of people who have something to lose becoming anxious over a type of uncertainty that few if any have ever confronted before about the basic stability of our nation and its institutions. That could explain at least part of the volatility creeping further into financial sectors as it has already done so in other aspects of our society.

[Tom Rinaldo]

3. It ultimately doesn't matter if yesterday was a leading indicator or just an omen

Unless the growing pervasive sense that we have left normal behind ends, not much separates us from drastic market instability and heavy losses. Under normal circumstances normal fundamentals would prevail. When normality is lost fear drives markets, and fear can erode any set of previously healthy fundamentals.

It is not only an actual loss of stability in American society and government that can take us over that brink. It just requires an erosion of confidence that American will remain stable that could set off that slide. It can take far less than wide scale social unrest to trigger that. A growing fear that the American government will blunder into another Korean War, a looming major league constitutional crisis should the American President defy a court subpoena to give testimony, a terrorist incident whether from the domestic right or external that is mismanaged and politicized, public disclosure that actual vote tallies have either been tampered with and/or can not be prevented from occurring with our current technology, many many destabilizing events can be potentially foreseen. When that those type fears grow individuals seek to cash out of the market and foreign governments either look for safer harbors or panic further grows if none can be identified.