Global Economic Crisis

A resurgence, in effect the predicted second wave of the Covid-19 pandemic, is in full motion, striking at both advanced economies as well as large developed economies, such as India and Brazil. The confirmed worldwide death toll has now passed one million, a number both large and yet most probably a severe undercount of the actual number of fatalities generated by the coronavirus pandemic.

The toll in human misery is staggering. More than 35 million persons have been infected with Covid-19. It spares no one; the commoner and the elite are all at risk, as the recent news of President Trump contracting coronavirus  indicates. However, the damage inflicted on the world’s economy  is as severe as that incurred on public health.

The enforced lockdowns imposed by sovereigns as the only currently available means of halting the spread of coronavirus resulted in unprecedented demand destruction in Q2 of 2020. Optimists predicted a V-shaped recovery as a quick end to lockdowns would lead to a rapid “snap-back” in economic demand. That, and unprecedented deficit spending by governments and money-printing by central banks, temporarily reversed the massive fall in equity prices  and induced unwarranted optimism. Now that governments are again imposing draconian lockdowns throughout the world, the evidence mounts that the severe recession created by the pandemic will eventually morph into a full-blown economic depression.

Even once buoyant economists are grasping at straws, praying that quick development and production of an effective vaccine will save the global economy as well as preserve lives. However, even in a best case scenario, a safe and effective vaccine is unlikely to be widely available until the latter half of 2021. The likelihood is that the world will experience, along with the public health consequences, another 6-months of demand destruction and self-imposed economic suicide. Yet, governments, politicians and economists have yet to grasp the full measure of the Global Economic Crisis that is now upon us.

The imposed shutdown and enforced demand destruction unleashed by sovereigns across the global in a frantic effort to contain the Covid-19 virus has now unleashed an economic contagion of devastating virulence. The underlying weakness in the global economy, mainly unprecedented corporate leveraging, hidden by artificially boosted stock market valuations, are now exposed and vulnerable to an extent that will likely exceed the Global Financial Crisis of 2008 in severity.

All indices of global economic trends – oil prices, equity markets, bond yields – are pointing to a massive global economic contraction, which might very likely become a full blown depression.

The social and political consequences will rival those of the public health emergency. One likely casualty will be President Donald Trump, who until recently seemed headed for reelection on the basis of perceived economic strength.

No longer.

As with Herbert Hoover in 1932, President Trump will have to campaign , not on the basis of the “best economy ever,” but with a depressed economy in freefall collapse, shedding jobs by the millions and with bankruptcies soaring.

The world is about to undergo radical change, unforeseen not even weeks ago.

Jan Hatzius, chief economist at leading global investment banker Goldman Sachs, has issued an updated  projection for U.S. Q4 GDP growth; a lackluster 1.8 percent. This reflects a reduction of 20 basis  points from the previous forecast, with Hatzius conceding that the U.S. trade dispute with China has had a negative impact far beyond what was originally assessed by Goldman Sachs.

The latest projection  from Goldman Sachs on trends in the American economy are  indicative of a growing belief that the ongoing and escalating trade war between China and the United Sates has greatly increased fears  that it will trigger a global recession.

It appears that the leadership circles in Beijing are willing to face a major recession that severely afflicts the Chinese economy as a price worth paying to bring down President Trump in the upcoming 2020 U.S. presidential election.  What President Xi  Jinping of China may be ignoring is that a global recession may have unpredictable and disastrous  repercussions for the Chinese economy and the country’s social stability, and jeopardize the future of Beijing’s “One Belt-One Road” initiative.

The  core supporters of President Donald Trump maintain that despite the at times troublesome tweets and verbal coarseness, this is trivial compared to the tangible economic results achieved during the first year-and-a-half of his administration. The relatively high GDP growth rates and low official unemployment rates are heralded by his adherents as signposts on the road of making America “great again.”

I am not as sanguine. In  the first place, based on the pattern of economic cycles in the last hundred years, the American economy is overdue for a severe  recession. It has not happened yet due to the monetary alchemy of the U.S. Federal Reserve, in lockstep with other central banks across the globe.

Secondly, and more importantly, Trump has now unleashed a trade war. It is the economic equivalent of an economic world war, as President Trump is targeting friend and foe alike;   China, Canada   and the European Union have been hit with sizeable tariffs; these countries have responded with retaliatory tariffs, matching America’s in scope and severity.

Many scholars of the Great Depression have argued that this worldwide economic calamity was not driven by the Wall Street crash of 1929, buy by a massive wave of protectionism in the early 1930s, characterized by a wave of tariffs and quotas.

Has President Donald Trump opened a Pandora’s box that may unleash a massive global economic crisis?

The election of Donald J. Trump as America’s 45th president was not only an irredeemable defeat for the political establishment in the U.S. in general, and Democratic nominee Hillary Clinton in particular. It represented a seismic shock for the nation’s mainstream news media. Never before had American journalism, in print and on-air, been so invested in confidently, even boastfully, predicting the impossibility of one of the two major contenders for president winning the White House. And never before has the hubris and complacency of the establishment media been do devastatingly shattered.

In the wake of its failure, the humility one would expect from the media has been largely lacking. Instead of a post-mortem introspective on its journalistic failures, much of the media has been looking for scapegoats outside the confines of the Fourth Estate. In addition, some in the conservative faction of mainstream media have blamed the failures in news reporting on Trump’s campaign on the old standby slogan; “liberal media bias. ”

If “liberal media bias” is responsible for a lousy job by journalists covering the 2016 presidential campaign, then how does one explain the fact that Fox News, a paragon of mainstream conservative journalism , hosted many talking heads who told the American electorate that Donald Trump could not win, even in the early evening of November 8, 2016, when the first election results filtered into the newsrooms? Then there is the example of ultra-liberal, progressive and leftist documentary film maker Michael Moore. Three months before the votes were counted, Moore penned a prescient piece on  his website entitled, “5 Reasons Why Trump Will Win (http://michaelmoore.com/trumpwillwin/). The film maker made no bones about his deep contempt for Trump. Yet, when it came to analyzing the dynamics of the 2016 presidential election, Moore had the intellectual integrity to put aside his personal bias, and judge the likely outcome on an objective analysis of facts he knew through deep connection with many of the voting constituencies that would prove pivotal for Trump’s electoral triumph. His most emphatic prediction was that Trump would win the rustbelt states of Michigan, Ohio, Wisconsin and Pennsylvania, giving him the presidency. And that is exactly what happened. So, ideology would not appear to have been a decisive factor in explaining why the media got the election so wrong.

These are the three primary reasons I believe explain why America’s major news organizations failed to  adequately cover the major news story of 2016; Donald Trump’s presidential campaign.

1. The traditional separation between news reporting and editorializing broke down. For generations, the power of American journalism has been objectivity, with news coverage being uninfluenced by the editorial posture of a newspaper, radio or television network. This Chinese Wall that underpinned the traditional integrity of news coverage and separated the straight news department from the editorial side of a news  organization largely vanished in 2016. Much of what was passed on to the public as straight news coverage of the Trump campaign could have been  composed by the editorial department, and had the character of political propaganda, often indistinguishable from the musings of Trump’s GOP and Democratic opponents. While it was certainly within the purview of editorial writers to express critical views of Donald Trump, when supposed journalists composed similar views in the guise of news, it short-circuited their ability to understand the revolution in political affairs that was sweeping America in 2016. It is ironic that Donald Trump and Michael Moore understood this dynamic, while the men and women whose profession it is to report and explain such phenomena almost entirely missed it.
2. Journalists suffered from a failure of imagination. Clearly, America’s political establishment – Republican and Democratic – failed to understand the internal forces at work in American society that paved the way for a President Trump. However, too many political journalists relied on sources within this same myopic establishment. This meant that often their perspective was undifferentiated from  that  of the traditional political establishment in the United States. By being embedded with the political establishment, many journalists assigned to cover the presidential election were constricted in their ability to look beyond conventional norms for conducting a successful presidential campaign. The dismissive tone towards Trump’s unconventional and unprecedented presidential campaign reflects this failure of imagination. This resulted in journalistic myopia, manifested in news coverage that grossly underestimated the impact and effectiveness of the Donald J. Trump For President campaign.
3. American news organizations did not comprehend the power of celebrity and social media in shaping the presidential campaign . There was much reporting in the final weeks of the presidential campaign on the superiority of Hillary Clinton’s ground game, traditional media advertising and the overall imposing strength of her campaign infrastructure. The word coming out of news organizations in America was not only that the Democratic nominee was ahead in the polls; her powerful ground operation would guarantee a strong voter turnout, while the supposedly all-but-invisible Trump ground effort meant all he could rely on were campaign rallies, which many in the media suggested, based on  historical precedent, would almost certainly prove inferior in generating voter turnout. What American journalists did not get was that celebrity branding, just as in the consumer marketplace, has increasingly been the most decisive factor in the nation’s political campaigning. Not only did Donald Trump have perhaps the most powerful celebrity brand in America; its fusion with an array of social media platforms enabled the candidate to build an unprecedented level of interconnection with potentially tens of millions of voters, bypassing the need for a conventional campaign infrastructure, traditional advertising and even a reliance on favorable news coverage by the mass media. For the most part, the nation’s journalists were largely ignorant of these tectonic shifts occurring within the presidential campaign landscape.

Come January 20, 2017, Donald Trump will be inaugurated as the 45th president of the United States. Incisive, accurate and thoughtful reporting on the incoming Trump administration will be crucial for the American people. However, such a level of journalistic quality will only occur if the news organizations of America demonstrate humility, recognize the many failures  and inadequacies in the manner in which they covered the 2016 presidential election, and earnestly learn and apply the lessons that are so clearly manifested. Failure to do will reduce their role to irrelevancy among a large part of the American people, as the era of Trump is upon us.