The ‘Trump-Refugees’

What will you do on the day your boss comes into your office and says “Mike, I have some bad news. Because of global competition, we have had to reduce our costs and have relocated our engineering department to India. As a result, your position here has been eliminated effective immediately. However, the management team is prepared to offer you the position in the warehouse here in the city.And since we need to move quickly on this, we will need your response by Monday. We hate to do this, Mike. We are very sorry.”So Mike, what will you do? How will you feel when this happens to you? Will you feel free and unencumbered, or angry, forgotten, and dis-enfranchised?

I recently had a chance to interview Mike Verge, author of the newly published book, ‘Global Deflation, and the Next Great American Decade to Come’ (now available on Amazon).He says that this debilitating transition scenario is beginning to happen more frequently than anybody cares to admit. The world has entered a period of Global Deflation where the emphasis has turned from new product development to global cost reduction. In his book he illustrates Michael Porter’s premise whereby corporate profits decline as the number of competitors increases. With multiple competitors, all products eventually become commodities and the whole value chain begins to focus on cost reductions. He says the internet is now taking the number of competitors to infinity. It has become  ‘The Silent Killer’ and is now  ‘cutting permanent jobs permanently!’

Trump is right. The media has only been fixated on the positive, and ignoring the negative. In fact the whole financial infrastructure and national media is incented to tell the world how well everything is going. Well the truth is, not everything is going so well. A large portion of the population is going through difficult times. As the world goes global, these are the forgotten people in our own hometowns. They are not from other countries. They are not on boats. They are not climbing walls. They are already here. These are real people. And they are looking to Trump for leadership. Hillary called these people the ‘deplorables’. In his book Verge refers to these forgotten people as “Hometown Refugees”. Perhaps it is time we address these people in their true identity,  ‘The Trump-Refugees’!

To understand how all this came to be, Verge says that we all must understand how deflation works on a global basis.In his book, he creates unique new visual models to explain complex economic concepts. He likens these models to ‘Deflation Sunglasses’.You put them on and all these economic complexities become clear.

To explain all of this, he depends on three key principles:

1. 1.      The forces of inflation and deflation are always in a “tug of war”. On the deflation side are:

ageing demographics, overcapacity, and extreme global debt levels. On the inflation side there is money printing, continual expansion of this debt, and government infrastructure spending.

1. 2.      Deflation can only be fully understood from a global perspective in U.S. dollars as all countries are trying to ‘export deflation and import inflation’.
2. 3.      The internet is the “Silent Killer”. It is the greatest deflationary force of all time.

In his book he goes on to describe a counter-intuitive world where oil prices drop, retailers are reduced to “Showrooms and phones”, banks are formed where nobody pays, and asset taxes replaces income taxes.  And he does suggest some disturbing economic scenarios. But in all of these scenarios he predict the ranks of the Trump-Refugees will grow , not diminish. We should be preparing for that scenario, not ignoring it!