The Post-Debate Great Internal Conflict

President Joe Biden and former President Donald Trump squared off in the first presidential debate of the 2024 election cycle, hosted by CNN and moderated by Jake Tapper and Dana Bash, on June 27, 2024. Credit - Mark Peterson—Redux

Where the great internal conflict is after the debate: It appears to me that now that President Biden's condition is widely known by the electorate, the Democrats will either lose the election or replace Biden as their candidate and, in the process of replacing Biden, will make clear whether the Democratic side will be of the soft or hard left. While it is now clear that the Red Team/Republican side will consist of players from the hard right (i.e., dictatorial capitalists like fascists), we will soon find out if the Blue Team/Democrats will be from the soft left (socialists with liberal values) or hard left (closer to communists). While you might justifiably react to my using controversially stark words like “fascists,” “socialists,” and “communists” to describe the alternatives, I think these are relatively small exaggerations of what’s happening and seeing things through this relatively stark lens is better than seeing it in a more nuanced and blurred way. I hope you know what I'm trying to get at, which is that we are looking at a classic clash between the hard right and either the soft or hard left.

As for the markets, to understand their relationship with politics, you need to understand that markets prefer capitalists--i.e. markets are all valued on the basis of the present value of their expected after-tax future cash flows, so whichever side supports these cash flows will support the markets. At this time, investors from all over the world are asking themselves 1) where can they be most confident that these cash flows will be best and 2) where are these capitalist values most strongly held and protected. This assessment will increasingly drive markets.

To simplify, what I'm saying is that we should be thinking about 1) the choice being between the right or left and how far right or left they are, and the facts that 2) the Red Team will field a leader and team that is from the hard right (strongly capitalist, nationalist, isolationist with deeply conservative values), 3) over the next few months, we will learn how far left the leader and players on the Democratic team will be, 4) the markets will prefer those on the right over those on the left, and 5) unfortunately, those of the bipartisan middle (i.e. those who respect civil rules of engagement and cooperate to create bipartisan leadership, which would be best) are pretty much out of the picture.

Of course, personalities and competencies also matter some—unfortunately, personality will matter much more than competence. As a result of all this, we are in the part of the cycle in which the choice is likely to be between extremists, so you will have to pick a side and fight for it, keep your head down, or flee (see here). This leaves us with a pretty disturbing domestic picture in a world in which the other four big forces (debt/money/economics, international great power conflict, acts of nature/climate, and new technologies) will likely also be disruptive to the existing world order.

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