Why Trump’s Win Shouldn’t Have Been Surprising

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In Logan County, West Virginia, president-elect Donald Trump had overwhelming support.

Logan County is part of the Appalachian region. It used to be a coal mining area. Appalachia stretches from southern New York to northern Alabama, Mississippi and Georgia.

The global financial crisis and its aftermath hit Logan County hard. While the rest of the US was recovering, unemployment in this county doubled. The poverty rate is now 20%.

Jobs disappeared after president Barack Obama introduced clean energy rules. Hillary Clinton also backed this program. Jobs were also affected by the fracking revolution. Fracking made natural gas cheaper and caused a decline for coal.

The Appalachian region is a prime example of why Trump won the election.

You see, Trump won support by promising that he would end the environmental regulations Obama had implemented. And that he would bring all those jobs back.

Voters in those areas had watched their jobs and economic possibilities disappearing for years. With Trump, they started to garner hope that things could change. Even people who knew they were losing jobs from the competing natural gas, rather than from Obama’s environmental laws, saw the choice clearly.

Now these workers are counting on Trump to deliver what he promised during the election. Can he bring jobs and lure giants like Google back into the US?

Perhaps. But not without running a massive deficit. That’s a topic for another day though.

His victory in West Virginia was well expected. West Virginia was a democratic state until 2000, when it turned Republican.

The real surprise came when Trump won in Michigan, Pennsylvania and Ohio — all historically democratic strongholds. And losing those states cost Hillary the White House.

So what happened?

The fact is that people are looking for change, and Trump has promised them that.

Few people realised how angry and divided the US has become. Like Brexit, there is an urban versus rural divide. Trump was able exploit that divide. He connected with voters in the same way that Brexit related to disenfranchised voters in the UK. After all, it’s no coincidence he labelled himself ‘Mr Brexit.’

He criticised trade deals and globalisation, while voicing concerns that his disenchanted voters had.

It is a frightening world out there. There is refugee crisis, terrorism, economic uncertainty, and negative interest rates…among other things. People are scared, and the media doesn’t help in mitigating those fears.

Voters needed someone to solve their problems and take charge. They quietly put their support on Trump, while polls appear to have overlooked these areas.

Clinton and Trump had completely different views on what America’s future should look like.

Clinton’s vision includes building technology, finance and free access to the global markets. During her campaign, she made it clear that she was not bringing any of those mining jobs back to Appalachia. A few months ago she said:

I’m the only candidate who has a policy about how to bring economic opportunity using clean renewable energy as the key into coal country, because we’re going to put a lot of coal miners and coal companies out of business.

In contrast, Trump based his economic program on deregulating the economy to create middle class jobs. He wants to make America great by spending on infrastructure and ramping up the production of fossil fuels.

And once he won, he didn’t wait long to announce a new infrastructure spending program. This program would focus on growth in the manufacturing and commodity sectors.

Much different to Brexit, Trump’s win made markets rally. The fact is that Trump brings more certainty than Brexit. After all, Trump is a businessman, and markets know what to expect from him. Or at least they think they do.

As most markets rallied, Mexican and Chinese stock markets fell. Investors expect Trump to decrease trade with these countries as he imposes tariffs.

He doesn’t want to limit his walls to globalisation to these countries, either. He has talked about renegotiating the NAFTA agreement — the free trade agreement between Mexico, the US and Canada.

This could be disastrous for Mexico; you can already see the effects on the Mexican peso. Plus, there is the promise of massive deportations.

According to the LA Times, globalisation has produced jobs in the US. Yet these jobs pay on average 23% less than what they did before 2008. The problem is that higher-paying manufacturing and construction sectors have been replaced by jobs in lower wage industries, such as hospitality and healthcare.

According to the Brookings Institute, in the first five years following the Great Recession, hourly wages increased only 2% per year. After factoring inflation, this makes a gain of exactly 0%.

Most of the wealth created in the last few years has not come from salaries, but instead from capital income. That is, those who receive income through market investments or real estate assets.

As Gary Burtless, an economist and senior fellow at the Brookings Institute, told the LA Times: ‘If you own capital, you have fared better than people who depend on the sweat of their brow to earn their living.

The fact is that we are living in similar conditions to those that caused the Great Depression in 1929. That is, excessive debt, false expectations and weakness in the banking system. That’s just as true in Australia as it is in the US and across the globe.

And people keep buying assets and stocks — not because they are sound investments, but because they are expecting the value will rise.

That may be true…for a while. But like in 1929, asset values could crash with little to no warning. Is your portfolio ready for a possible market fall of 50% or more? If not, go here now.

Regards,

Selva Freigedo,
Contributing Editor, for Markets and Money

Editor’s Note: After a brief hiatus, Callum Newman is back in action with his podcast, The Newman Show. Tune in now to hear the latest on how you can ‘win the wealth game’ with entrepreneur Mark Robinson. Guests on The Newman Show include the biggest names in international finance. There’s hedge fund legend Jim Rogers, Currency Wars author Jim Rickards, and trend forecaster Gerald Celente. It’s all yours, for FREE. Check it out on iTunes here or Stitcher here.

Selva Freigedo

Selva Freigedo

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain.

She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default

Selva Freigedo

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The Thrifty Issue
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You elaborated clearly the reasons of Trump’s win. Well done! Things surely will change.

wpDiscuz
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