We’re only halfway through the year, and already 2024 has produced more high-voltage political shockwaves than any other in recent memory. This way, there’s no telling where the world will be around July next year.
Grandpa Joe’s “trainwreck” embarrassment at last week’s presidential debate, not concrete policy issues – especially Trump’s penchant for protectionism and tax breaks for the ultra-rich – is already the biggest talking point in the American presidential election; especially since the Democrats are not open (so far) to gambling with a replacement this late in the cycle.
So the world will watch as Americans choose between a fast fading octogenarian and a convicted felon for the “world’s most difficult, demanding and important job”; a sad reflection indeed on the state of decay and decline in the US imperium. Already, nobody expects a person of Biden’s declining cognitive abilities to stabilise the economy, trim the $2t budget deficit (7pc of GDP), address Nato’s existential crisis on the battlefields of Ukraine, or even have a clue about the volatility that will erupt in the Middle East when Israel decides to invade Lebanon.
Ceteris paribus, markets will now price in a Trump return (Trumponomics) every time Biden exposes his Achilles heel – trademark tax cuts for the wealthy, preferably weaker dollar to increase exports, and tariffs on everybody from China to Mexico whose endgame will most likely be imported inflation leading to textbook stagflation in the world’s largest economy.
Let’s not forget Trump’s promised to “immediately” cut funding for Ukraine, forcing Nato to cough up the 200bn euros for its campaign against the Kremlin. That creates more headaches for leaders “across the pond” in Europe just when the continent is shocked by an unprecedented rise of the extreme right.
The French are comparing Macron’s snap election “smart idea” to Napoleon’s blunder of invading Russia, and Marie Le Pen’s surprising success in the first round of the presidential election has sent jitters across financial markets, spiking the French bonds OAT-German Bund yield spread to levels not seen since the darkest depths of the European sovereign debt crisis more than a decade ago.
If, as the stars seem to suggest, she does go on to become president, then even Nato’s death rattle will dwarf in comparison to the looming threats of Paris abandoning the common currency and, in the extreme case, the Euro universe as well. Whoever holds the Elysee Palace for now, France is sure to split economically, politically and communally, which guarantees policy paralysis on issues like more funding for Ukraine, etc. Surely, nobody would’ve predicted this in January.
The change of guard in Downing Street, so heavily priced-in far ahead of the final vote, is now the classic buy-the-rumour-sell-the-news trade as gilt market volatility has already subsided. Yet the political aftershocks will take longer to settle after 14 years of “terrible Tory rule” as London tries to gel in with a continent whose political outlook and direction have completely changed since the start of the year.
But nothing beats the winds of change sweeping across the Middle East. Who would have thought after Oct 7, when Israel unleashed its genocide with complete support (as always) of the US-EU bloc, that eight months later the American secretary of state would make a public statement confirming that Israel had “effectively lost sovereignty in the northern quadrant”?
US Secretary of State Anthony Blinken was talking about cities in Israel’s northern border area with Lebanon, where about a hundred thousand people have been evacuated because of Hezbollah’s rocket attacks. Netanyahu’s been unable to keep his promise of returning them to their homes and now, with mounting bad press because of his inability to secure the border, he’s forced to reinforce failure to complete mission in Gaza by opening another active front.
But with Iran vowing to enter the war if its proxy is directly attacked, and the Arab League suddenly removing Hezbollah from its terror list – something not even within the realm of possibility only six months ago – and the fact that Israel has only one real ally left in the world, the stakes of attacking Lebanon are much higher than the mass murder in Gaza.
Netanyahu’s desperation now holds the Middle East’s population and world’s financial markets hostage. Not retaliating against Hezbollah will strip him of legitimacy, depopulate the north, and land him out of office.
Attacking, on the other hand, is sure to bring more death and misery to the region, spark a much wider war, shatter global markets and send commodities like oil through the roof.
It’s been an eventful half-year with clear, ominous implications for the next six months. It’ll be very interesting to see how the usual pundits call it from here.
Copyright Business Recorder, 2024