By Simon Bond

It may be that a negative interest rate policy is designed to ignite demand that doesn’t actually exist. 

Companies and businesses are encouraged to borrow at low rates in order to build, but what of the “unintended consequences”? Companies use the borrowed funds to enact stock buy backs in order to juice their share prices in the face of falling earnings. As natural growth is harder and harder to come by and sustain companies also look to mergers and acquisitions as another means of growth. As a consequence divisions are shuttered as merged and overlapping departments struggle, downsizings occur and people lose their jobs as more and more desperate management looks to any means to satisfy short term market expectations. 

On the flip side the lower interest rates encourage more individuals to borrow at low rates to buy into the ever ascending property market. The classic bubble blowing scenario whilst the hollowing out of the middle classes continues. 

In 2008 when Lehman Brothers collapsed the largest age cohort in the US was the 45 to 49 year olds, those who WERE in their supposed peak earnings prime. As a consequence of the bail outs and following downturn many of these people were laid off and are still unable to find meaningful jobs, even when they do find work the odds are that the pay is less than their previous job. In the meantime, the people who kept their jobs have had no meaningful wage increases and have lost many benefits and services.

As Barack Obama famously said to the banks during the crisis; “My administration is the only thing standing between you and the pitchforks”.

Random quotes from some Millennials. “I watched my parents struggle with a home they could barely afford, and I came away with the message that they were worse off for having become homeowners, not better”. 

“The people who are doing all right, or better than all right, are fewer and fewer, and the rest of us are falling farther behind”.

“But in fact we’re enriching the owners of whatever app or platform we’re using, becoming just a data point on the path to their payday while we age without assets. It’s their world, and we’re just renting it”.

So now we come to today and people’s astonishment regarding the rise and rise of Donald Trump, Ted Cruz, Bernie Sanders and Co. Well get this, the people who lost their jobs and their Millennial kids are still angry, in fact they are seething with pent up rage and they are looking for someone to stick with a pitchfork. And they have found them, the current group in Washington.

The great disconnect is this: some 60% of American voters are angry. Do prosperous and economically-satisfied consumers vote for radical change? Isn’t the resounding message from voters one of enormous economic frustration? The promise that a “rising tide will lift all boats” has not materialised, leaving the electorate deeply cynical of political promises.

Newt Gingrich has an astute political mind. He recently wrote some hard truths on the inability of the establishment to understand the Trump phenomenon.

His view is as follows: “Why, since Trump defined the race from the day he announced, did almost no one in the media and political elite believe that he could win the nomination— even long after it became clear he was dominating the field? What was it they failed to recognise? The answer is simple. It wasn’t Trump that the media and political elites failed to understand. It was the American people. The American people were dramatically more fed up with Washington— with the incompetence, the arrogance, the corruption, and the failure—than Washington could begin to understand. 

Americans increasingly saw that normal politicians on both sides of the aisle could at best only manage the decline. The country was concluding that real change would require real change: someone who was different enough and daring enough to force genuine reforms. And over the course of the campaign, more and more Americans came to believe that only a personality as bold and revolutionary as Trump could, in fact, make America great again. The elites could not (and still cannot) understand this appeal because they do not recognize the problem—namely, themselves. 

For the same reason, they didn’t understand it when every single candidate with a traditional political message failed to gain traction. Nor did they understand the appeal of Trump’s greatest rival for the nomination, Ted Cruz, whose message was “defeat the Washington Cartel.” “Washington Cartel?” they wondered. “What is he talking about?” And of course they didn’t get it. If the media and political elites had enough self-awareness to fully grasp why the American people might support Trump, Cruz—or for that matter, Sanders—the vacuum for these candidates might not have existed in the first place. Trump’s skill and personality enabled him to become a serious candidate. 

But it was the American people’s desire for fundamental reform that propelled him to the nomination. It will now be up to Trump to expand on the base he built in the primary to earn the support of every American who believes we need fundamental reforms, and that the risks of predictable decline are greater than those of unpredictable renewal. As you hear many of the same people who said Trump could never be nominated prognosticate about his chances in the general election, ask yourself: have they learned enough about the American people to understand why a political revolution could seem the safer route? If not, they still don’t get it.