Notwithstanding the shock-horror first reaction to Donald Trump’s stunning victory, when the dust settles, the next president of the USA has already shown some good signs for both the US and Australia.
Firstly, the aged old idea that we will always have a friend in the White House was never true. More accurately, we always had a friend in the White House as long as we did what we were told. Those days are now over. We have no real friends, just associates and partners.
The reality is, we can continue to suck up to Washington till the cows come home, but we will still only get what they want to give us. And that will depend on what they want from us and what we are willing to give them.
That truth is now more relevant than ever. Trump’s unhinged rhetoric and absence of diplomacy should be seen as a breath of fresh air. At least we know what he’s really thinking.
Listening to Trump’s victory speech on election night and putting aside all the rubbish about bringing the nation together and governing for everyone, the future still looks good; Trump’s references to rebuilding America’s infrastructure particularly so.
America’s roads, rail, bridges, not to mention airports, seaports and communications have all been allowed to deteriorate over the past 50 years. Rebuilding them will create full employment. There is a good chance he will choose to pay for it using functional finance, i.e. money creation, not bond issues.
The main reason the several trillion dollars of QE (Quantitative Easing) money did not revive the US economy was that the banks who received it chose to use it to recapitalise after the shock of the GFC. That money never made it onto Main Street.
If Trump plans to re-invest in US infrastructure in a big way and finance it with money created out of thin air (no bond issues) the money will find its way onto Main Street, it will revitalise lagging industries, create employment, improve tax revenues and bring them that long sought after growth that has thus far eluded them since the GFC.
A recovery from the ground up will be vastly superior to any recovery that Wall Street could engender. Wall Street (the markets) have, in fact, been the stumbling block to growing the US economy of late. Too much money has been invested in companies whose balance sheets have not improved.
That is wasted money. It might suit those who are heavily invested in the stock market and have been the driver of a seriously overvalued index, but it hasn’t helped the average American. That was the reason Trump won. Trump’s victory represented a “f*ck you” to Wall Street. And to some extent, the rest of the world.
Beyond America’s borders, there will be new rules to observe. Old alliances will be tested. Trump will be less inclined to be the world’s Sheriff. Nation’s reliant on American generosity in grants, military support and strategic planning might have to rethink their positions.
America is going to be more exclusive, less inclusive. Dis-engagement in the Western Pacific will mean Australia will have to be more mature in our dealings with Asia. Our trade relations with China might well supersede military ties with the US. As scary as that might sound, it shouldn’t be.
But it does mean that we will have to beef up our military strength to something akin to a real middle world power. At the moment we could not defend ourselves without US support. That will have to change.
If we are so petrified of a few unauthorised boat people arriving, the prospect of 250,000 well-armed soldiers landing at half a dozen entry points simultaneously, should be a wakeup call. That scenario however, is far less likely than an economic invasion.
China’s huge holdings of Australian dollars at the RBA should be seen as a great source of future foreign investment. Our economic future is in Asia. We had better start getting used to that.
Donald Trump’s election victory will likely be a watershed for Australia’s long term future. It’s time we grew up and stopped cowering under America’s protective wing. The much coveted ANZUS treaty won’t be worth much from here on in.
For Australia, being the clever country has just taken on a whole new meaning.
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