Shownotes
In this conversation, the veneer of political continuity is stripped back to reveal a world drifting toward harder borders, sharper identities and a reshaping of power once thought unthinkable. Gary Gerstle traces the erosion of the neoliberal order and the rise of a political logic that places national strength above universal norms. He examines how affordability stress, authoritarian impulses and fragmented parties are redrawing economic life and democratic expectations. The discussion widens into a global map of competing hegemons and the uneasy choices facing Europe and the United States. What emerges is a portrait of a century unsettled, yet not without agency.
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Episode TimeStamps:
00:00 - Opening remarks on a shifting world and national security visions
00:44 - Introduction to Top Traders Unplugged and context for the discussion
01:40 - Framing the global macro environment and the need for deeper perspectives
02:24 - Introducing Gary Gerstle and his work on political and economic orders
04:00 - Defining the end of the neoliberal era and what has replaced it
07:02 - The tension between authoritarian forces and liberal democratic hopes
08:17 - Democracy under strain and the implications of Trump’s second term
10:06 - Shock, discipline and the early strategic force of Trump 2.0
14:27 - The economic agenda redefining tariffs, reshoring and political constituencies
17:17 - Manufacturing limits, automation and long term structural realities
21:11 - Tariffs, tax politics and the competing factions within the Republican Party
21:50 - Deregulation, AI, Silicon Valley realignment and state influence
26:34 - The affordability crisis and political expectations around prices
31:23 - Prospects for Democrats in 2026 and shifting electoral dynamics
59:32 - A global lens on rising nationalism, new hegemons and the future of the EU
Copyright © 2025 – CMC AG – All Rights Reserved
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Transcripts
This is a pretty scary vision of.
Gary:The world and that is the vision embodied in this national security strategy.
Gary:So whether that world is going to come to be is up in the air.
But what this document reveals, it reveals a plan for world order that is based on powerful regional and ethno nationalist hegemons who got to run the world.
Gary:Through their power rather than through a commitment to universal human rights. And it's profoundly threatening.
Intro:Imagine spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund fund managers in the world so you can take your manager, due diligence or investment career to the next level.
Before we begin today's conversation, remember to keep two things in mind. All the discussion we'll have about investment performance is about the past, and past performance does not guarantee or even infer anything about future performance. Also, understand that there's a significant risk of financial loss with all investment strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions.
Here's your host, veteran hedge fund manager Niels Kaastrup-Larsen.
Niels:Welcome and welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. This is a series that I not only find incredibly interesting, as well as intellectually challenging, but also very important given where we are in the global economy and the geopolitical cycle.
We want to dig deep into the minds of some of the most prominent experts to help us better understand what this new global macro-driven world may look like. We want to explore their perspectives on a host of game changing issues and hopefully dig out nuances in their work through meaningful conversations.
Please enjoy today's episode hosted by Alan Dunne.
Alan:Thanks for the introduction, Niels. Today I'm joined by Gary Gerstle.
Alan:Gary is Paul Mellon professor of American History Emeritus at University of Cambridge.
He's the author of a number of books, notably the Rise and Fall of the Neoliberal Order. He is currently Joy Foundation Fellow at the Harvard Radcliffe Institute at Harvard University where he's working on a new book, Politics in Our Time Authoritarian Democratic hope in the 21st century. Gary, great to have you back. How are you doing?
Gary:Good. Wonderful to be back in cold Boston and Cambridge.
Gary:It's like Boston and Cambridge used to be.
Gary:I guess Trump must be right.
Gary:There is no climate crisis facing us.
Alan:Exactly.
Gary:Interesting. These are interesting political times certainly are.
Alan:Yes, we're coming up to the end of the year. So it's a good time to take Stock on year one of Trump 2.00. We are welcoming you back. You were on, I think it was about 18 months ago.
So if anybody wants to go back and hear that episode which was very much focused on your last book, the Rise and Fall of the Neoliberal Order, in the context of what we were seeing at the time, which was, I guess the end of four years of biodynamics. So we had transition into a different, I suppose, regime. But we've since had the first tier of Trump 2.0 before we get on to that.
I mean, you know, we've, we've had the end of the neoliberal era. What do you think we've got to replace it so far?
Gary:Well, that's a million dollar question.
I think we, we can say with, with confidence now that even though there are elements of neoliberalism still present in economic practice, we are no longer living.
Gary:In a neoliberal order.
Gary:If we think of some of the principles that structured that order, they are, they have either been abandoned or severely weakened. One can think of free movement of people, the raising of borders of walls, hostility toward, toward immigrants.
The freedom of movement that was characteristic.
Gary:Of the neoliberal era is, is under assault just about everywhere.
Gary:We no longer live in a world that valorizes free trade and globalization above all else. Protectionism that the US Is issuing is, is the order of a day.
Gary:Used to be that protectionism was a dirty word and if you uttered it in politics, you were marginalized in politics and you had no political future.
Gary:And now the US has put in.
Gary:Place a, a very powerful tariff regime which is at odds with any conception of neoliberalism.
Gary:The neoliberal order also valorized the free movement of capital, and that's still, I think, quite alive in the world. But we've seen a pretty profound alteration in how people think about the relationship.
Gary:Of states to markets. And the Trump administration has been quite.
Gary:Interesting in this, this regard, although that this is a Republican Party that has long sanctified free markets. Trump now doesn't hesitate to use government power to shape markets for purposes of national security, for, for reshoring manufacturing.
We don't even have a full list of all the companies that the government.
Gary:Is investing in of.
Gary:If a left of center government were doing this, there would be cries of socialism everywhere. But I think the degree to which government is now willing to shape the private economy for what it takes to.
Gary:Be public purpose or national security interest.
Gary:We've also seen quite a change, sea.
Gary:Change from the era of the neoliberal order.
Gary:So we are moving into an era where governments are going to structure the economy, the movement of people, the free flow of information, much more than had.
Gary:Had had been the case.
Gary:I think the open question is, are we moving into what some people consider a post liberal future, meaning one that does not hold the principles of liberal.
Gary:Democracy, hi, elections, rule of law.
Gary:Are we moving into an era which values power, civilization, community, more than a set of human standards and values that.
Gary:The whole world is expected to adhere to?
Gary:Or is this future going to be a future in which democracy revives itself, in which the principles of liberal universalism revive themselves? I can't tell you where we're going to be in five to 10 years, except to say that the authoritarian impulse is very powerful in the world.
Gary:And I think the democratic ethos and the democratic forces are somewhat on the defensive.
Gary:It's still a very fluid situation.
Gary:So I don't, I can't tell you in five or ten years whether we're going to be living in a post.
Gary:Liberal authoritarian world or whether democratic values.
Gary:And hopes will revive themselves and lead to a kind of democratic renaissance.
Gary:I think that is now one of.
Gary:The, the million dollar question or the.
Gary:Million, the million pound, the million euro.
Gary:Question that we will be grappling with.
Gary:But I think the, the outlines of.
Gary:A post neoliberal economy have become quite clear.
Alan:Yeah. When you were last on, which was about 18 months ago, you did make this point that democracy is under threat.
You know, that their authoritarian impulses are on the rise around the world.
And certainly that's become even more apparent in the last 18 months, as you say, I mean, but also there seems to be an apathy or, I mean, there's not an enormous pushback against that. You might have expected more pushback. I mean, viewing the US from, from a European perspective, or have you been surprised by that?
Gary:I think Trump's second election was a.
Gary:Devastating blow to anti Trump forces in the United States.
Gary:And Kamala Harris made the defense of.
Gary:Democracy one of her, her principal.
Gary:Campaigning points.
Gary:And she made a, also made a point.
I think her final appearance before the election was at the site where on the Capitol where Trump effectively authorized an assault on the Capitol and a, and a coup by the president against his, his, his own government.
Gary:And one thing one has to credit Trump for is hiding nothing during the campaign. His desire to be.
Gary:An autocrat, to be a dictator, to accumulate enormous executive power.
Gary:He said on countless occasions, I am.
Gary:Your retribution.
Gary:The cruelty with which America.
Gary:Has been uprooting immigrants and, and, and deporting them from, from American society.
Gary:None of that was hidden during the campaign. And, and so I think the, the shock that Trump, despite all that, was.
Gary: eater margin than happened in: Gary:Really, through the resistance to.
Gary:Trump for, for a loss.
Gary:And then came an extraordinarily well coordinated.
Gary:First hundred days of the Trump administration.
Gary:Shock and awe, like the Iraq war. And at least one executive order a day, sometimes two, three or four, attract attacking Trump opponents across an incredibly broad front.
The imposition of tariffs, the, the pursuit of the desire to deport immigrants, the.
Gary:The attack on science, the attack on, on universities.
Gary:I think no one was prepared for the, the disciplined and forceful nature of this attack, which further threw the forces.
Gary:Of resistance against Trump into disarray.
Gary:Trump's first term had been characterized by similar political impulses, but enormous degree of chaos and incompetence. And Suddenly this Trump 2.0 was disciplined. They had a clear plan.
Gary:They had administrators in place.
Gary:I don't know how many chiefs of staff Trump had fired sacked during his first term.
Gary:During his, his first year in, in.
Gary:Office, he still got the same one he started with. Do you ever hear her name in the news? Susie Wiles?
Alan:Okay.
Gary:The fact that she's never in the news, the fact that she's still in place is, is a measure of how.
Gary:Much more disciplined this Trump offensive has, has, has been.
Gary:And so I think the combination of the shock of the victory and how ready the Trump forces were to execute.
Gary:Their plan through the opponents of Trump into deep disarray and explains what from.
Gary:Europe and other places seems to be.
Gary:An extraordinarily weak response.
Gary:But the final chapter on resistance has not been written.
There have been several no Kings protests, and the last one, which was this summer, I think may have drawn more people, millions out in the streets demonstrating.
Gary:Than any previous demonstration in American history.
Gary:And also in the last month or two, the Trump administration has had some serious setbacks across a broad front. And more, more may be coming. So you can see the resistance beginning to stir.
And for Europeans and, and people in Ireland who are wondering whether there is a resistance, there is. And I expect it to mobilize quite.
Gary:Considerably over the next few months, especially as we go into another election year.
Gary:And the victories of Democrats and special elections and in the New York mayoral.
Gary:Election and last night, Miami elected its first Democratic mayor in 30 years. 30 years.
Gary:There are signs of awakening.
Gary:And I think the Trump Administration is.
Gary:In some trouble and we already, the balance of forces have shifted, which is.
Gary:Going to make the next year really interesting and worth paying a lot of close attention to.
Alan:Very good. I mean you talked about the discipline of the administration this time, the success, I guess with the executive orders and getting their agenda out.
I mean, at times from a market perspective, there's been differing views as to what the objective. You know, was there a grand plan or was it being made up on the hoof?
And some suggestion that there was this plan of shifting the economy more in favor of Main street away from Wall street, but different interpretations of whether policies such as the Big beautiful bill really were motivated by that. How would you characterize the agenda from 2.0 from that perspective?
Gary:Well, first let me say that the breadth of 2.0 is extraordinary. It's the economy, it's universities, it's science, it's immigration, it's culture built into the.
Gary:Attack on wokeness in American life. It's attempt to restore great moments in American history to their, to their rightful play.
Gary:So want our listeners to keep in.
Gary:Mind that the, the breadth of this campaign has just been staggering.
Gary:Probably the, the, the broadest campaign in.
Gary: s or first year in office and: Gary:If we focus on the economy.
Gary:Quite interesting. And the.
Gary:Trump campaigned on putting in place a, a broad tariff regime that would fundamentally end the global character of the free trade world.
Gary:Characteristic of, of neoliberalism.
Gary:And the ostensible reason. And the, and the publicized reason for that was a long term campaign to reshore manufacturing and shift the, as you.
Gary:Suggested, the emphasis on the economy from Wall street to Main Street. A sense that Wall street had been.
Gary:Accumulating too much power, too much wealth.
Gary:Main street had suffered.
Gary:And Trump, you know, for 10 years now has put himself forward as the tribune of workingclass America and the forgotten.
Gary:America, which is not all of America.
Gary:It's not multiracial workingclass America, although he.
Gary:Did attract a lot of Latino support in the last election. It's, it's white workingclass America in towns devastated by deindustrialization that has been going on for 30 or 40 years.
Gary:And, and those places have been forgotten.
Gary:And the, and the neglect and the suffering and the unemployment and the opioid epidemic has ravaged these communities. And you know, Trump has, this is.
Gary:His core MAGA constituency and his promise is to put tariffs in place that would reshore manufacturing and bring back the.
Gary:Good jobs that had fled and they would be located in the areas that had suffered the greatest industrial, economic and capital flight.
Gary:There are a couple problems with that, several problems with that ambition, although I should say that it's a broadly shared.
Gary:Ambition not just by the Trump administration.
Gary:This was the goal of the Biden administration. So we can see an interesting continuity there. The first point to be made is that even if manufacturing is brought back.
Gary:In a big way, it's not going.
Gary:To bring back the jobs that characterize.
Gary:Manufacturing during the 20th century heyday. The automation has advanced so far. The use of robots has advanced so.
Gary:Far that this can re employ no more than a small fraction of those.
Gary:People and communities thrown out of work.
Gary:And there can be no broad economic.
Gary:Recovery without deep investment in the service economy.
Gary:So that's the first point to be made. The second point to be made is that, and this is something that I.
Gary:Think the Trump administration, like the Biden administration, has severely underestimated.
Gary:What's the length of time required to reshore manufacturing? What, what are we looking here? What, what are we looking at exactly? Well, you can't do it in two years, you can't do it in four years.
If Biden had gotten a second term, you would have seen results after eight years. It's a 10, 15, 20 year project. All right.
Well, it's good that American politicians are thinking in the longer term because they're famous or infamous for thinking in two year election cycles. Well, what do you do in the interim? And this became a problem of the Biden administration. It's becoming a problem of the Trump.
Gary:Administration.
Gary:What have you done for me lately? And the neglect of rising prices that is now hurting the Trump administration is.
Gary:The same neglect of rising prices that hurt the Biden administration severely.
Gary:And then what about the constituency of Republicans who don't really want to reshore manufacturing? They just want lower taxes. And this is what they were sold in terms of the, of what tariffs would do they because they're not committed.
There's a big portion of the Republican Party that is still traditional, that doesn't want high tariffs, that just wants the market to be free and taxes to be low. And this was the selling point for.
Gary:These people, that tariffs would raise so much revenue that internal tax rates on the wealthy could be lowered.
Gary:And this was embodied in the big.
Gary:Beautiful bill that is so far the signature legislative achievement of the Trump administration. And Trump, the Trump administration made a big point in terms of arguing it was shifting from internal revenue to external revenue.
Gary:And the promise was that the receipts.
Gary:From external revenue on tariffs would be.
Gary:So great that this more traditional business.
Gary:Oriented part of the Republican Party would be rewarded with lower taxes domestically, which would allow them to invest and use the money as AC as they saw fit without having to worry about government interference.
Gary:So this brought a wing of the Republican Party that historically has been hostile to tariffs on board because it was.
Gary:It was paired with the tax cut.
Gary:And that has worked in the short term. But, but it's important to keep in mind that these, there are two very different factions in the Republican Party.
One is a genuine MAGA faction that wants to reshore manufacturing for the benefit of Main Street.
Gary:And then there is the more traditional Republican group that simply wants lower taxes.
Gary:Free use of capital domestically to engage.
Gary:In the ventures that they want to engage in.
Gary:And if the economy falters, which it has not yet done really in a.
Gary:Major way, you're going to see the.
Gary:Splits between these two groups become far more pronounced because then there's going to be an awareness of trade offs and who's. Whose vision of trade offs is going.
Gary:To win out in that set of circumstances.
Alan:Yeah, you touched on a few of the pillars, I guess, of the, the Trump platform, you know, tariffs, migration, tax cuts.
I mean the other one that was mentioned, you know, quite a lot earlier in the year when people were saying don't just view the tariffs, look at the full package was deregulation and the supply side, which as you say is kind of very much traditional Republican philosophy. I haven't seen as much of that coming through practically. That's still a key part of the agenda.
Do you think we'll see more evidence of that coming through as the administration goes on?
Gary:Well, the biggest area of deregulation has been in relationship to the, the tech.
Gary:Industry and to, and to AI.
Gary:This.
Gary:Is a real break from the Biden.
Gary: lica part of what happened in: Gary:Valley, which has historically been with the Democrats, converted in a very major way to support Trump.
Gary:And if you remember Trump's inauguration, if you were watching it, five or six.
Gary:Titans of the American tech industry were given very prominent seating places and that was a reward for, for their coming on board.
Gary:The Biden administration had at one of.
Gary:Its goals to subject the tech industry and to a, a more serious form of regulation that it, than it had ever been subjected to before, really an EU style of regulation that these, the.
Gary:The, the principle being that these industries.
Gary:Are so large and so powerful and.
Gary:So crucial that they simply can't be left in the hands of an Elon.
Gary:Musk or even a more responsible group.
Gary:Of private capitalists that they.
Gary:There has to be some kind of serious regulation.
Gary:And so the Biden administration set out.
Gary:To regulate crypto, to regulate AI, to.
Gary:Look into breaking up some of these enormous behemoths.
Gary:Microsoft, not Microsoft, because that had already been subjected to antitrust regulation. But Google was in the crosshairs, Facebook was. Was in the crosshairs.
Gary:So the threats to this industry is, were.
Gary:Were real.
Gary:And this, uh, prompted a flight from.
Gary:The Democratic to the Republican Party and certainly had a influence on Trump's electoral victory, especially Elon Musk's use of Twitter to support Trump and his contribution of, I think, 250 to $300 million spent on supporting Trump and, and, and his campaign.
Gary:So they have been amply rewarded by the freeing of AI, the, the freeing.
Gary:Of crypto, the scuttling of antitrust moves on the part of the government to break up these big institutions.
Gary:And so if you want to look for a way in which deregulation has.
Gary:Really flourished since the Trump administration has come into office, then this is the place to look. And there I think you can see deregulation really being in the driver's seat.
Gary:At the same time there, the Trump administration has made for proponents of deregulation, some interesting moves. And in return for allowing Nvidia to sell more chips to China.
Gary:They have to pay a substantial portion of their revenues to the U.S. government. I think intel, for the sake of being allowed to do what it wanted to do, I think had to sell 10% of its corporation, or not sell.
Gary:It, but essentially give 10% of its.
Gary:Corporation to the government.
Gary:So at the same time that the.
Gary:Manifest policy is one of deregulation, the latent policy has been the encroachment by the US Government on the freedom of action of some of these firms.
Gary:And that is something that's, by and.
Gary:Large been flying under the radar.
Gary:And it's worth watching to see how.
Gary:That'S going to develop and mutate over the second and third and fourth years of the Trump administration.
Alan:Yeah, we had Morris Upsfeld, who was previously at the imf, on, and I asked him that question, why are these policies typically not prescribed? And he said, well, for the very reason they're typically not good for economic productivity or growth or fairness or efficiency or incentives.
But, yeah, so that's very much flies in the face of the deregulation, I suppose, philosophy. I mean, you touched on the challenge facing Trump as he heads into next year with prices.
And as you say, affordability is now the buzzword all of a sudden. I mean, I guess, were people naive to think that he could actually solve this in the first place?
Gary:Do I think that they were naive to think that Trump was going to.
Gary:Bend every effort when he got into.
Gary:Office to roll back prices? Yes, the answer to that, they were.
Gary:Naive to think that again.
Gary:Trump hid nothing.
Gary:Yeah, he, he, he's, you know, he's, he said he was going to take.
Gary:Care of Biden inflation in a flash, but if you listen to the whole.
Gary:Suite of things he was proposing.
Gary:He never made clear, other than unleashing energy.
Gary:Productivity and exploration and fossil fuels, he had no scheme for, for rolling, for rolling back prices. And so, yes, I think people were.
Gary:Naive to think this, although I understand that people, everyone, myself included.
Gary:Well, I try and break out of my media bubble since I'm trying to understand the entirety of what's going on in America. But everyone across the political spectrum lives in their media bubbles, and that constrains the news that is, that is coming to them.
Gary:And I think what we have to understand is the degree to which people.
Gary:Were angry about the high inflation of the Biden years.
And, and even though it had been brought under control by the end of the Biden administration, people were living with vastly higher prices without a corresponding increase in, in, in their wages.
Gary:And the anger is brewing now and.
Gary:Is expressing itself in these elections.
Gary:And the hardship regarding affordability, except in the fossil fuel sector, has been increasing across a broad front.
Gary:Housing is as expensive and unaffordable as it's ever been. And Trump has no program for bringing down housing costs.
Gary:There's been no effort to rein in.
Gary:Food prices, which are continuing to increase. And this is something that I see on a daily basis. I do most of the shopping for my family in terms of food, and the expenses are quite extraordinary.
Gary:And then there are two additional sources.
Gary:Of expense that Trump has no solution for.
Gary:One is the freedom given to AI.
Gary:Is leading to the construction of these enormous data centers, which require enormous amounts of electricity.
Gary:So electricity rates are now beginning to go through the roof because there's simply.
Gary:Not enough capacity on the grid to generate enough energy for these AI data centers, as well as customary things.
Gary:And so that's going up.
And then there's going to be another whammy that hits in January because of the Republican refusal to extend credits, credits for people living on the Affordable Care Act, Obamacare for health insurance.
Gary:Those ranks vastly expanded during COVID because of subsidies that the government was offering that were allowing people to buy better insurance and the higher rates and, and the re. The GOP Republican Party has refused to continue those subsidies.
Gary:So in January, which is now around.
Gary:The corner, basically tomorrow, healthcare insurance is going to rise for millions of Americans in, in a very steep way.
Gary:So housing, electricity, health insurance, these costs are all rising.
Gary:And Trump has no, has no plan for reducing these costs and except getting the Federal Reserve to reduce interest rates, which they may well do in December, but that's not going to be enough. And if they're reduced too much, they're simply going to have the effect of intensifying inflation.
Alan:Yeah, well, I mean the picture you paint with obviously the affordability crisis, rising costs, the challenges for people, particularly at the lower income, obviously very clear. At the same time we've got the rising stock market, people holding assets are doing well. And this is part of the narrative of the K shaped economy.
I mean, from a political perspective, you touched on this fracture within the Republican Party ideologically. How do you think that plays out going into next year?
The obvious trajectory would be a resurgence maybe for the Democrats in the midterms and the cycle just repeats itself. Is that how you see it or how do you think it plays out?
Gary: I think democratic victory in:It used to be, it used to be that autocrats once, once they came into power, beginning with Hitler and continuing with Latin American dictators and so on and so forth, once they, they came into power, they got rid of elections. You know, they didn't want to go through them anymore. But that has changed.
Autocrats in the world now want elections as, as a way of affirming the legitimacy of their rule. But they must be elections that they win.
Gary:And so they do everything they can.
Gary:To curate the election, to intimidate the opposition, or in, in the worst case scenario just to declare a result that goes against them is invalid, as Maduro and Venezuela did. It's very ironic that Trump wants to.
Gary:Invade Venezuela to get rid of Maduro for being a dictator, when in fact.
Gary:His own techniques for ensuring his the.
Gary:Continuation of himself or Maga in office.
Gary:Are modeled very closely on what Maduro act actually did.
So and I think one of my worries is that the use of National Guard troops, the sending of the military into all these cities, ostensibly to stop crime and to arrest immigrants, is really.
Gary: ocratic voting Cities for the: Gary:Can use these forces to intimidate people who are likely to vote against him to either make them wait in long lines, to pull them out of lines.
Gary:To make them show their IDs, maybe.
Gary:You arrest a few and deport them on the SP hot to scare all other immigrants from showing up.
So this is a, this is a very real threat and that is why it is imperative that the Democrats do everything in their power to make sure that this is a fair and free.
Gary:Election and that it has integrity.
Gary:And I have felt for some time that if that's the case, the Democrats were going to win, do very well in Congress. It's typical that off your elections allow the opposition party to, to, to gain votes.
And then there are indications now that the Republican Party is in real trouble. The, the elect, the elections that have been happening, the off year elections that have been happening have all gone against Trump.
ery good for the Democrats in:And Mamdani by in New York City his win is significant because he's the one who has squarely put the issue of affordability on the map. He is a socialist. What sells in Brooklyn and Queens is.
Gary:Not going to sell in most of America.
Gary: wave sweeping over America in:And embedded in that is a downplaying of the cultural issues that are important.
Gary:To the Democratic Party having to do.
Gary:With gender, sexuality, feminism, diversity. Those are all things that Mamdani believed in.
Gary:But in his campaign he pushed them into the background.
Gary:And by resolutely focusing on affordability, he has shown Democrats across the country the way to conduct a campaign that they.
Gary:Have to conduct if they want to win.
Gary:He's also got a, a, a brilliant social media profile which can compete with.
Gary:What Trump has used so successfully.
Gary:And he also has a political machine.
It's fitting that he's rediscovered the power of political machine in New York City which had been the innovator of the original and best political machine that politics has ever seen in America.
That is a so called Tammany mostly Irish Catholic machine of New York City which reliably delivered New York City for the Democrats for the better part of 100 years, he has discovered how to, rediscovered how to do this not through Tammany's auspices, because if it had gone through Tammany's vestigial auspices, Andrew Cuomo would.
Gary:Have won that election.
Gary:But he has assembled an army of grassroots operatives going door to door and the importance of grassroots in person, door to door campaigning.
So his resolute focus on affordability, his appreciation for social media, his understanding of the importance of people to people contact and relationships, and developing an army of.
Gary: the Democrats a playbook for: Gary:And if they follow this playbook, not the socialist part, but the other part, then there's hope for the Democrats actually.
Gary: home significant victories in: Gary:Now we also have to ask, well, will the Republican Party understand the peril that it's in and will they adjust? Trump has survived for 10 years and flourished because he's been a great counter.
Gary:Puncher and quite flexible and able to adjust to the moment in terms of what's required.
Gary:There are a lot of premature declarations that he's demented, that he's losing his energy. I don't see that there have been.
Gary:Predictions of this for 10 years now.
Gary:Let's, let's get over it. For a man who's 79 years old.
Gary:It'S remarkable for the energy and drive and the mental acuity that, that he has.
Gary:But there is a way in which he is becoming a second term president, tiring of all the domestic stress, wanting to make his mark in foreign policy.
Gary:Where presidents traditionally have a greater freedom of action.
Gary:And it there are signs that he doesn't quite have the zest for the.
Gary:Kind of combat that has made him famous, notorious and so successful.
Gary:So I think the question is, will his people, his advisors, be able to.
Gary:Make the kinds of adjustments that are.
Gary:Necessary to recover some of what the Republican Party has lost, the early indications. He gave a pretty sorry speech about.
Gary:The affordability crisis yesterday in the United States. If that's all he's got to come up with, he's got to deepen the crisis of the Democratic, of the Republican Party.
Gary:But there's a lot of time left.
Gary:And a lot of time to adjust.
Alan:I mean, you talked about Mamdani, his tactics, strength in that sense, but not the socialism. I mean, the one. Well, one of the things that both Biden and Trump shared were large deficits.
So, I mean, what do you think the path forward from an economic policy is for the Democrats next year and beyond, you know, around the world, the response to the affordability crisis has been more fiscal response, fiscal supports.
But we've already got deficits of 7 or 8% GDP in the U.S. are there reasonable, meaningful policy levers that, you know, that the Democrats can point to as an alternative to solve affordability without boosting the deficit?
Gary:Well, I think this is, no one's talking about that right now because the.
Gary:Democrats are so far removed from national power at the moment that it, the, the urgent, the urgent question is to, to get back into power. And I think the, you know, how.
Gary:To address the affordability crisis without enlarging.
Gary:The deficit is going to be an urgent question that the Democrats are going to have to face.
Gary:The US has more flexibility on those grounds than, say, Britain does.
Gary:You know, I look at Britain and I see the kind of extraordinary constraints under which it's operating and in the US because of the size of the economy, its diversity, its dynamism, and also the dollar as a currency of last resort and the still barely diminished ability of the US to sell its Treasuries to a hungry global market. I think it has more, has more flexibility there. But I think the.
Gary:The Democrats of the future are going to have to take a very serious look at the.
Gary:Biden administration and their desire to, on.
Gary:The one hand, vastly increase investment not.
Gary:Just in physical infrastructure, but in social infrastructure, which would include affordability of, of housing and, and health care, without triggering the kind of inflationary surge that occurred under the Biden administration.
Now, I think the Democrats are still inclined to blame the inflationary surge on the extraordinary circumstances of COVID and certainly that's, that's part of the story.
Gary:But I think they're going to have.
Gary:To have a, have to have a more serious reckoning.
Gary:At the same time, they're going to have to avoid the trap that the Republicans have successfully landed them in in multiple occasions, which is that Republicans are the party that ends up so irresponsible in fiscal matters. Usual, sorry, the combination of spending increases and tax cuts worsening the fiscal situation.
Gary:In the United States.
Gary:So it falls to Democrats. This is true of Clinton.
Gary:It's true of Obama to come in and put the fiscal House in order.
Gary:It's a dirty trick that the Republicans have foisted on the Democrats again and again, and they're going to have to.
Gary:Find a way to escape that trap the third time around.
Gary:So the plans for doing that are not yet in place. And the Democrats or, and the, the.
Gary:People in the Biden administration who I.
Gary:Know and talk to are not talking.
Gary:About that at the moment, but they're going to have to face that issue if and when they come back into presidential power.
Alan:You mentioned some of the kind of policies in terms of the diminishing certain institutions and reduce power, et cetera.
And obviously from a markets perspective, everybody's focused on the Fed and the ongoing attacks on Jay Powell and the pressure to lower rates and now the pressure on Lisa Cook to resign and then putting on Steve Moran on the board as well to try and influence policy. I mean, what's your perspective on that in terms of the Fed in particular, but other institutions?
I mean, how bad can things get, do you think, in this administration in terms of the centralization of power, I guess, and the subordinating of these institutions.
Gary:Define bad for me. When you say bad, what do you have in mind? And then I'll respond more specifically maybe how worrying.
Alan:From a market's perspective, credibility is obviously a key factor. I mean, I guess on the one hand they want more influence, but at the same time, you're talking about the central role of the dollar.
There is obviously a need to attract foreign investors into treasuries, et cetera, so they have to balance those kind of mutual objectives. But obviously putting in a very dovish Fed chair would significantly undermine credibility in the institution and arguably in the dollar as well.
Gary:Right. I think we haven't talked about the.
Gary:Supreme Court yet and the Supreme Court's.
Gary:Willingness to enormously expand the power of the executive to hire and fire anyone.
Gary:Working in the executive branch of government to a far greater degree than has been the case for almost the last hundred years. And the Supreme Court seems willing to countenance the trumpet, what the Trump administration wants to do in that regard.
And that is extremely worrying.
Gary:The Supreme Court, however, has also given.
Gary:An indication, an early indication, that it will not apply that standard to the.
Gary:Federal Reserve, which means that Trump's ability to fire a Fed head of the.
Gary:Fed during his or her term, to.
Gary:Fire Fed governors during their terms, may.
Gary:Be much more limited than he would like.
Gary:On the other hand, he's clearly going to get a, a Fed chair to his liking because Pal's term is up in half a year and there's no chance of I can't imagine a scenario.
Gary:In which Pal is reappointed and maybe.
Gary:Moran is the new Fed chair at.
Alan:At Huss is the current favorite or.
Gary:Has the current, the current favorite. And so he's got to get someone much more to his liking. But Trump cannot command the laws of.
Gary:Supply and demand in the economy as.
Gary:As, as simply by from what he Wills or desires. And, and one check that has always been in place with Trump has been.
Gary:The stock market, which he sees as a key indicator of economic health, or lack thereof.
Gary:It was interesting in the early months of his administration, especially when the first imposition of tariffs, the, or the infamous.
Gary:Liberation day in early April and that sent shutters down Wall street and there was.
Gary:You know, considerable run on the.
Gary:Market for a few days before it stabilized.
Gary:And Trump said something interesting then, which I never heard him say before, saying that the market is so high that.
Gary:A meaningful correction in the short term is not going to harm the pocketbooks of investors or those with assets in the stock market.
Gary:I never heard him say that before.
Gary:And I thought, oh, okay, he may have some longer term ambitions in mind here.
Gary:But since that time, the, the concerns.
Gary:About the economy and its well being have increased significantly.
Gary:There are indications of much greater nervousness.
Gary:On Wall street than have been the case.
Gary:How AI plays into this is crucial because part of what predicted, what was predicted for the Trump's imposition of tariffs.
Gary:Was a severe downturn in the US economy that has not yet occurred. And the question is why?
Gary:It may be that simply businesses are.
Gary:Able to absorb the costs of tariffs for six months or a year. So in another half year they're not going to be able to do that and we're going to see further rises.
Gary:But it's also clear that the excitement.
Gary:About AI, and not just AI, but about robotics and all the advances being.
Gary:Made there has given the stock market and investors a confidence and a surge that was unexpected even as recently as.
Gary:Half to three quarters of a year ago.
Gary:And now we're seeing concerns about the AI bubble and conflicting signals. Is it really a bubble? Is it not a bubble? I expect to see some shaking out of that and we look like we were going to get something of that.
Gary:Sort a week or two ago.
Gary:Now the market has bounced back again. But I think we're in some hot, some hotter water with regard to AI.
And it would not surprise me at all if there was a 10% correction in the market sometime over the next six months. And then the question is, what is Trump's tolerance for correction? There are other sign. There are other troubling indicators as well.
Gary:The.
Gary:Most notably Trump's firing of the director of the Bureau of Labor Statistics because that bureau issued a jobs report.
Gary:Not to his liking. And so reflexively, he simply fired that.
Gary:Person and put into play someone who.
Gary:Does not have nearly the incom, the competence.
Gary:And then there was a month in which figures didn't get reported because of the government shutdown. So far, I think Wall street is.
Gary:Confident that they have enough reliable information so that they can make the decisions they need to make about investment, that they are getting reliable information about where the economy is going and where it's not going. It's not out of the question, however.
Gary:That Wall street will become concerned about.
Gary:The adequacy of numbers and statistics that are coming out of the Trump administration. And worries might deepen that the Trump administration is hiding the real information that they need.
Gary:And if that, if, if, if that.
Gary:Perception seeps into Wall street, it's got to also seep into all the international buyers of U.S. treasuries.
Gary:And that is something that the Trump.
Gary:Administration will be very worried about because that is something that can trigger a serious run on the stock market and.
Gary:On Treasuries and put the US Economy.
Gary:Into a condition of fragility that is going to worry Trump a great deal.
Gary:So how much he thinks about this versus simply getting someone at the Fed who's going to lower rates, I don't know. But Besant has to be thinking about this.
Gary:You know, he's got a lot of connections on Wall street and at a certain point, that kind of worry is going to concern members of the Trump administration.
Alan:You mentioned maybe Trump's energy levels coming down marginally. I mean, gone back a while. There was a suggestion he may alter things for a third term or in some shape or form.
I mean, where do you think that is now, do you think? Do you see him moving aside at the end of this term, or is that still a risk that we have some kind of change to normal proceedings?
Gary:Well, we may have a change to normal proceedings, but I don't think it's going to be in the form of.
Gary:A third term for him.
Gary:I should say. I have no special access to Trump's brain, so this is entirely in the realm of speculation. But I.
And in the first few months, the wondrous months of his second administration, he was dropping hints about a third term.
Gary:I've not heard those in the last couple months.
Gary:I think that. And given that this is three years.
Gary:Off, he's got to be 81, 82.
Gary:I don't think he's going to have.
Gary:The zest to camp.
Gary:If you think of the extraordinary campaigning.
Gary: He did in the last month, the: Gary:And you saw the toll it was.
Gary:Taking on him on a rare occasion.
Gary:But those Occasions were quite rare and.
Gary:He kept it up until the very end.
Gary:I don't think he's got the zest.
Gary:For that a third time around.
Gary:So I'm less worried about him insisting that he's a, that he is, he.
Gary:Deserves a third term and is president for life.
Gary: there will be no election in: Gary:Him having the energy to run for, for a third term.
Gary:But those people who are thinking that his days are numbered as president, that he's no longer capable of, of pursuing.
Gary:His goals, of, of having the kind of energy required, I think that's a kind of foolishness and a, and a wishful kind of thinking that.
Gary:Does not help us understand the power that he still retains. His flying to Israel over what, a.
Gary:24, 36 hour period. The degree to which he's traveled abroad to, to other places.
Gary:His hosting the Kennedy center gala event.
Gary:A few nights ago where he was.
Gary:The MC and spoke for 37 minutes and did a whole lot of other things. You know, he's still in, he's still very capable, resourceful man in terms of his energy and pursuing the goals that.
Gary:He wants to pursue.
Gary:So short term, I don't think we're going to see him withdraw and the.
Gary:White House being operated by others.
Gary:But I don't worry right now about.
Gary:Him demanding a third term. I think his, his energy for that is not going to be what it needs to be.
Alan:Yeah. And I mean, in terms of the next three years, obviously, as you get towards the latter part of a presidency, typically it's a lame duck presidency.
And particularly if there was a swing in the midterms, would you see the intensity of the policy agenda weakening over time? Or if the Democrats won, is there some kind of backlash from Trump in terms of trying to tilt the balance back towards Republicans?
Gary:Well, he's going to do everything he can while he's in office to frustrate.
Gary: before he entered politics in: Gary:So it's hard to, it's hard to predict what's going to happen. The, it wouldn't be, it wouldn't surprise me if there's no more legislation for the next three years. Other than appropriations, which have to happen.
In his first term, he, he passed.
Gary:Almost no legislation other than the tax cut.
Gary:He hates legislation. Congress has been supine allow him to roll over.
His penchant for exec executive orders reveals that he thinks Congress is an atavism from another era that no longer has any purpose. So he's already not consulting with Congress on a whole series of issues, not.
Gary:Even with his Republican majority.
Gary:So I don't see, I don't anticipate him having a big legislative agenda and he won't be able to jam it.
Gary:Through anyway if, if, if the Democrats.
Gary:Control at least one house of Congress.
I, I think there are people in his administration, the real zealots of maga, who are going to do everything in their power to complete the work they, they feel needs to be complete before they lose power.
Gary: The presidency in, in: Gary:And that's going to be ridding America of millions of immigrants. It's going to be staff radically diminishing the size of the federal government.
Gary:It's going to mean the staffing the.
Gary:Federal government that remains with layers and layers of MAGA appointees.
So there's going to be a rush to, to accelerate the takeover the, of the deep state, to dismantle the, the parts that they don't like and to make the parts that they do like.
Gary:The property of a MAGA elite bureaucratic core. That's going to be very hard for the Democrats to dislodge.
Gary:So they are going to do whatever they can to institutionalize their achievements in the federal government, to make the task of the Democrats and their agenda that.
Gary:Much more difficult to achieve.
Gary:And they have a very shrewd sense.
Gary:Of power, how to exercise power, how to control the bureaucracy.
Gary:And so I expect the zealots in.
Gary:The ranks of the Trump administration, led by JD Vance probably, and Stephen Miller and Russell Vaught, the head of the Office of Management and Budget, to pursue.
Gary:Those aims with zeal.
Gary: Any expectation that: Alan:Okay. I mean, taking a more global perspective, I mean, some of the themes that we've talked about are evident around the world.
I mean, you've mentioned the UK the challenges there in terms of the policy levers. But the affordability crisis is the same in here, in Ireland, you know, in the uk, rising debt levels around the world.
And equally, what we've seen at elections is generally, you know, whoever is in power has shown an inability to tackle these problems and has been Thrown out.
We saw that obviously conservatives in the UK and now Labour immediately under pressure in Germany, in a previous government out, and now they've thrown into debt break. So generally there's been a shift towards more economic nationalism. The rise of the right. Is that the global.
That's the characterization globally of the new order that's replacing the neoliberalism?
Gary:Yes. I think we have to understand the surge toward authoritarianism, toward ethno nationalism, toward reasserting the.
Gary:Priority of nations over multilateral and multinational organizations.
We have to understand these as part of a global trend and a reaction against what many people in different parts of the world feel has been an over investment in global institutions.
The channeling of the benefits of globalization to a relatively small elite and the part of the societies that benefits most directly from this kind of globalization.
Gary:The hostility toward immigrants is one of.
Gary:The most urgent issues facing Europe, as is the case in the United States. And it's not an issue that's going away.
And progressives in the left, if they want to come back into power, have to find a way to address that issue in ways that have until this moment escaped them.
Gary:I think we also have to pay attention to the different conception of world order that has taken root in the.
Gary:Trump administration and that is present in other countries like China and, and Russia.
I've just read, I don't know if you have yet, the National Security Strategy of the United States of America, this manifesto issued by the Trump administration to guide its national security strategy going forward.
Gary:And there, there are two elements of that report that jump out at. At me. The first part is the first thing that jumps out at me is that the Western Hemisphere gets more attention than.
Gary:Any other part of the world. And it's the first region of the world that this national security strategy addresses.
Gary:If we flash back to the Cold War, the idea that the first foreign.
Gary:Policy issued, identified by the United States would be the Western Hemisphere as opposed to the Soviet Union and China and the worldwide spread of communism.
Gary:This is inconceivable. In, in that moment, what does the focus on the Western Hemisphere reveal? It reveals first that the U.
S once again wants to turn the entirety of the Western Hemisphere into its own lake and private province, as was.
Gary:The case in the late 19th and early 20th century. And that Western Hemisphere stretches from Greenland.
Gary:In the north, not quite to Argentina.
Gary:Although there's a lot of sympathy for the current ruler of Argentina and the Trump ranks, but certainly from Greenland in the north to northern South America and the south, Venezuela. A desire to assert US primacy throughout this region.
Gary:So we can expect very aggressive policies.
Gary:Throughout the Western Hemisphere on America's part, as currently is being demonstrated through the.
Gary:Blowing up of alleged narco terrorist boats.
Gary:In the Caribbean and in the Pacific, which has received an enormous amount of national and international attention.
Gary:But it also reveals something else, that we should now conceive of the world as a series of power blocks, and each of each of them controlled by a regional hegemon. And the regional hegemon in the Western hemisphere, in the U.S. and by implication, who are the other regional regional hegemons?
One is Russia under Putin, and the other is China under Xi and the Communist Party.
And the focus on the US early on on the Western Hemisphere is also a tacit admission that the US Is going to have to have to extend similar privileges to hegemons in other parts of the world. And that helps us to understand the privilege that Trump is extending to Putin in terms of setting the terms of peace with Ukraine.
There is more in this document about protecting Taiwan than there is on protecting Ukraine. But it also asserts the right of Xi to exert regional control in his part of the world. So it's no longer a world governed by international law.
It's a world governed by powerful regional hegemons who agree to respect each other's sphere of influence. That sphere of influence extending not just to the borders of the hegemon, but beyond to a region that they will be allowed to dominate.
And the harshest, harshest criticism by far.
Gary:In this document is directed at Western Europe.
Gary:Trump hates the EU as a transnational entity, and he also indicts Europe for. And this document indicts Europe for two things.
s and in the:And they want to see a similar reassertion of Europe, European civilization, which means white Christian civilization in this moment. And I think there's also a critique of Europe for not having its own defense capacity.
There's no value or praise given to NATO or the Western alliance. It's a declaration that Europe has come.
Gary:Up short, because you can't take Europe seriously in the world unless it's bent on becoming its own regional hegemon. And if it's going to do that, it has to be responsible for its own defense and expend the kind of money on defense that it has.
Gary:Been unwilling to. And then the third critique of Europe is the, is that it has interfered with freedom of speech, a basic liberty.
There's no criticism of freedom of speech in Russia, there's no criticism of freedom of speech in China. There's criticism of freedom of speech in Europe.
What's the, what is, you know, and the, the criticisms of Europe's lack of regard for democracy are really projections of Trump's own lack of regard for democracy in the United States. Why is this going on?
It's meant to empower the right in Europe and to turn, to make Europe not simply its own hegemon, but to make it a right wing hegemon allied.
Gary:With Putin to the east and that trumps America to the West.
Gary:This is a pretty scary vision of.
Gary:Of the world and that is the vision embodied in this national security strategy.
Gary:So whether that world is going to come to be is up in the air. But what this document reveals reveals.
Gary:A.
Gary:Plan for world order that is based on powerful regional and ethno nationalist hegemons who are going to run the, who got to run the world through their.
Gary:Power rather than through a commitment to universal human rights. And it's profoundly threatening to what the EU represents.
Gary:And it is a call to arms in Europe.
I think this the call and on the one hand to develop an independent military capacity, but more than that, to stand up for the EU values that are most important. Because if the US is Trumpified, which block in the world is going to.
Gary:Be able to be to carry the principles of universal human rights into the future?
Gary:It's got to be the eu.
Alan:Yes, well, very sobering on that. Very thought provoking and sobering note. We'll have to leave it, but very much appreciate you coming back on Gary.
Always fascinating to hear your insights. When is your book due out?
Gary:Well, I'm writing it now. I hope to finish it by the.
Gary: Beginning of not: Gary:So hopefully it will appear in the.
Gary: Latter stages of: Alan:Very good. Well, people should keep an eye out on that.
But yeah, very much appreciate you coming on to speak to us again and I'm sure we'll have you on at some point again in the future and see how all of these themes evolve. But from all of us here on Top Traders Unplugged, thanks for tuning in and we'll be back again with more content soon.
Ending:Thanks for listening to Top Traders Unplugged. If you feel you learnt something of value from today's episode. The best way to stay updated is to go on over to iTunes and subscribe to the show so that you'll be sure to get all the new episodes as they're released. We have some amazing guests lined up for you, and to ensure our show continues to grow, please leave us an honest rating and review in iTunes. It only takes a minute, and it's the best way to show us you love the podcast. We'll see you next time on Top Traders Unplugged.
