The World Economic Order is Predicated Upon a Stable America [View all]

[Tom Rinaldo]

There are fundamental reasons why the Dollar is the defacto world currency, why New York City it the defacto world financial capital. There are fundamental reasons why international creditors finance American debt. One could easily say that virtually the entire world risked being over exposed to downside risk by placing too many eggs in the American basket. But they did that with their eyes open, because compared to other major world economies, compared to other major governments, the United States was remarkably stable.

The American Civil War was over 150 years ago. Power in America at the highest political level has always been transferred peacefully, without large scale civil disturbances associated with those transfers. The United States has always met its fiscal obligations, we never default on our loans. We operate our economy, our entire society, around rules that are not entirely subject to the whims of one powerful interest at any given time. That gives international interests some degree of security about the future of their investments in America, allowing them to plan for the future here without having to allow for the potential of wildly differing scenarios scrambling all projections.

Donald Trump may be on the verge of dissolving all of the above. True, he may not actually do so. But then again he may, and that injects a powerfully high degree of uncertainty into all calculations about the future of America. And that undermines confidence in the unique expectation of ongoing stability that the United States has up until now perhaps uniquely benefited from in the world.

Markets react to many things that are often described as fundamentals; stuff like rising interest rates and lowered demand, tight and loose labor markets and the like. But there are few things more fundamental in today's world order than the underlying trust in the stability of America. And now that trust is eroding, because of Donald Trump.