Merryn Somerset Webb
What has been forgotten amid all the angst and anger surrounding the election of Donald Trump is that he said some perfectly sensible things along the way (mostly hidden in the rest). And a good many of those things chime exactly with what the world’s economists have been saying.
No one’s mad for protectionism, and not everyone is behind the idea of large income tax cuts at the top end. But as David Smith points out in The Times, you’d be hard pushed to find an economist, “particularly on the left”, who doesn’t think that a $1trn infrastructure spend is a really good idea. One of the things that has been driving the likes of Janet Yellen and Mark Carney crazy for the past few years has been the way in which saving the economic world has been 100% delegated to them by governments. That has led them down the path of introducing ever more bonkers monetary policy in an effort to, as Carney puts it, “keep the patient alive” – and to being hit by endless criticism for pushing up asset prices and slamming down the returns on cash along the way. They’ve been asking for years for the fiscal authorities to stop “deflecting blame” on to them and to actually help out with a little stimulus. That’s exactly what Trump now intends to offer.
At the same time pretty much all central bankers and economists have also been keen to find a way to create a little inflation (to help deal with our crippling national debts). It looks like they are going to get that too. Bond yields in the US and the UK have risen markedly since the election thanks to a general assumption that the money printing needed to get America building will be automatically inflationary. Finally, it is worth pointing out that rising bond yields in themselves should be making a lot of economists and money managers happy: they (like us!) have been predicting the end of the great bond bull market for years, and presumably investing so as to take advantage of that end. Now it might be here. The same goes for those who have been longing for an environment in which financial deregulation stops being demonised. That’s on the way too (probably).
So there you have it. You wouldn’t know it from the headlines, but having Donald Trump as president-elect means that a large number of the world’s most influential people are finally likely to get exactly what they said they wanted, albeit not in quite the way they wanted and not with quite the hero they hoped for.
On the subject of getting what you want, a reminder that next week we get Philip Hammond’s first Autumn Statement. People keep asking me what I want from this. The answer is simple: nothing at all. There are a lot of things I would like to see happen in the UK (reform of the pension Lifetime Allowance and annual taper system, a wholesale simplification of the tax system, some kind of plan to deal with our deficit, a guarantee of more sunshine in Scotland, etc). But I’d rather this was all done in a careful way in the Budget next year rather than in a rush now. We don’t need any more excitements before Christmas.