Horizons Newsletter – week 48 // 2020
Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
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Resistance media thrive thanks to Trump
On November 5th, CNN interrupted a speech by President Trump because he was making unfounded claims about electoral fraud. Twitter and Facebook have also repeatedly labeled statements by Trump as misinformation. Moreover, Twitter has announced that it will not grant him anymore special treatment when he is no longer president and will delete his account if necessary. Supporters of Trump and his ideas have long sought alternative news sources and platforms where they can freely express their views. When Trump began retweeting Newsmax, a conservative American news and opinion website that refuses to acknowledge Biden winner of the elections, it saw its visitor numbers soar (from an average 500,000 to 7.3 million a week). Conservative Twitter alternative Parler is currently even the most downloaded app in the U.S. Trump may start his own media outlet, but in any case, his departure from the White House will considerably boost these existing “opposition media”. Slowly but surely, completely separate universes will arise, even more so than now, with different groups each inhabiting their own platforms.
The financial future of the US
With a record-high American budget deficit and Biden’s plan to spend trillions, investors are worrying about the long-term fiscal sustainability of the U.S. Modern Monetary Theory (MMT) counters these worries, stressing that debt-to-GDP ratios are irrelevant to countries that issue their own currency, as they can always print extra money while their only constraint on spending is inflation. MMT implies that fiscal deficits are manageable as long as unemployment and inflation are low, and that fiscal policy instead of monetary policy should manage the economy and inflation. In relation to the emerging Great Power Competition with China, which requires huge technology and military investments, involves infrastructural issues and systemic risks (e.g. pandemics, inequality and socio-political polarization, climate change), MMT is gaining support in the U.S. and in Biden’s campaign. Nevertheless, risks associated with MMT are a politicization of monetary policy, which could render American “twin deficits” untenable. That could also further undermine the American “hegemonic position” to run deficits by investing in overseas assets, and its financial power derived from the U.S. Dollar’s reserve currency status.
Carbon border tax
President-elect Biden wants to make the U.S. an important player in the battle against climate change. To achieve this, he could – together with the E.U. – introduce a carbon border tax on imported goods (such as steel) from countries where carbon emissions are not or barely priced. Such a levy would allow Biden to continue part of Trump’s popular ‘America First’-policy, as well as create room for sustainable innovation and stricter domestic climate policy, without immediately disadvantaging American companies or causing carbon-intensive industries to take flight. As President, Biden might be able to impose these taxes of his own accord, by way of executive orders (under the guise of national security). However, for the necessary accompanying domestic policy, he would need the House and the Senate. Especially in regions that are strongly dependent on imports or exports of carbon-intensive goods, this plan would not be embraced right away. Nonetheless, it could set the stage for the modernization and sustainability of the American economy, which – sooner or later – will be confronted with international climate regulations anyway.