Diane Francis: The global economy is roiling and no matter who wins the White House things will only get worse – Financial Post

The roiling markets mean a recession looms, and blame rests with the U.S.-China tariff war, Brexit, fears by some Wall Street players that Bernie Sanders will win in 2020, and, ironically, fears by others that Donald Trump will win again.

In other words, it almost doesn’t matter whether a radical Democrat or the erratic President win in 2020. Either outcome represents the continuation of jarring change from norms that up-ends the global economy.

Trump has always been a rogue element but his 25 per cent tariffs on half of China’s exports has slowed growth there, and adversely affected all Chinese trading partners. The result is a global manufacturing slump, a sharp drop in business confidence and a stock sell-off.

Last week, Trump blinked and gave China a four-month reprieve from additional tariffs to calm markets. He also moved to calm down concerns that China may intervene in Hong Kong’s protests. Even he understands that a Tiananmen Square crackdown by China would rock the world in financial terms.

Other geopolitical flashpoints also dampen markets: Hong Kong (world’s 36th biggest economy) protests; Russia (world’s 11th largest economy) protests; Russia’s cover-up of a nuclear accident which may have serious ramifications outside the country; Venezuela’s continuing meltdown; and the India-Pakistani standoff concerning Kashmir.

The damage is now quantified. So far, Germany (world’s 4th largest economy), the United Kingdom (world’s 5th largest economy), and Brazil (world’s 9th largest economy) are shrinking, in economic terms. Others are flat-lining such as Canada (world’s 10th largest), Mexico (world’s 15th largest), and Italy (world’s 8th largest).

A no-deal Brexit, supported by Trump, will cause major dislocation throughout the European Union. And, if the U.S. falls into recession, Canada will fall harder due to our higher consumer debt, federal deficits and unemployment levels. Mortgages, credit card debts and other expenses have increased to the point that the average Canadian now has over $1.81 in debts for every $1 in disposable income, well above $1.09 in the U.S.

By far the greatest angst on Wall Street concerns the U.S. election contest. On the one hand is the Turbulent Trump, one tweet away from catastrophe, and on the other is the voter backlash against his nativist and corporatist agenda as personified by Sanders and the progressives.

Most don’t realize that Sanders is already the de facto front-runner, ahead of Joe Biden, because his health-care and social-justice platform has been adopted by Elizabeth Warren and Kamala Harris. Combined, the three dramatically outpoll Biden.

Sanders is not an unreasonable speculation. Public opinion veers left and American voters take huge risks — Obama and Trump for instance. Sanders is also the best Democrat to beat Trump. He is an articulate and tough New York street fighter, uniquely capable of destroying Trump in a head-to-head contest.

The Sanders phenomenon is already affecting stock markets, said guru Jim Cramer, of CNBC. Health-care companies account for 15 per cent of the market, and these stocks take a blow every time Bernie Sanders and other Democratic presidential hopefuls push for a single-payer system like Canada has.

Cramer added that eight Democratic candidates support the idea in some form, and that there are good reasons for such a system. The result is it’s becoming more popular among some voters, and Wall Street knows it would hurt the current state of the industry.

But the biggest risk of all to markets, currencies and economies is the economic ignorance of the sitting President: Trump doesn’t know what he doesn’t know and spurns advice.

Worse, he’s a genius in his own mind and everything is all about him.

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