Stephen Givens is a corporate lawyer based in Tokyo.
There is broad consensus -- even among Donald Trump's haters -- that a Biden administration will not meaningfully change the course of the two policy fronts that most directly affect Japan and the rest of Asia: trade and defense.
Though few will openly concede that Trump got it right, geopolitical and domestic U.S. realities will push Biden's trade and defense policies in the same basic direction, not least in treating China as a multi-dimensional rival and threat. Those who say that Biden will be better mostly rely on the simple fact that he is not Trump, compared to whom anyone else, by definition, must be better.
Those who take silent comfort that U.S. trade and defense policies are likely to stay largely unchanged under Biden should instead ponder the implications of Biden's domestic economic policies for the region.
If Biden and the Democratic Party are to be taken at their word, then their economic policies will be indistinguishable from those advocated by Bernie Sanders and Elizabeth Warren -- both of whom stand to be members of a Biden cabinet -- and written into the Democratic National Committee's platform by the party's hard left.
A few highlights: Biden has promised to "put the end to the era of shareholder capitalism," which he describes as "a complete farce." Echoing Sanders' and Warren's attacks on Wall Street, Biden will raise the corporate tax rate from 21% to 28%, and lift income taxes on people earning more than $400,000 annually.
In place of shareholder capitalism, Biden proposes a "more inclusive" system built on labor unions and minorities. Presumably, he means something like Elizabeth Warren's "Accountable Capitalism Act" that would require companies with $1 billion or more of annual revenues to be federally chartered, reserve 40% of board seats for directors elected by the company's employees, and direct companies to "share" profits with a wide spectrum of "stakeholder constituencies" other than shareholders.
The Biden economic program features a full menu of government-financed "investments": the multi-trillion dollar Green New Deal; subsidies for companies trying to compete with China or under financial stress due to COVID-19; across-the-board student loan forgiveness and free college for students from families whose parents earn less than $125,000 annually -- roughly 90% of U.S. households -- and full universal health care.
Biden says he will re-regulate area of the economy that Trump deregulated, most significantly the energy sector. In his last debate with Trump, Biden -- having presumably calculated the political cost in energy-dependent states like Pennsylvania and Texas -- promised a complete "transition" away from fossil fuels and net carbon neutrality by 2050.
The prospect of a Biden victory on Nov. 3 carries both short and long-term risks for the economies of Japan and the rest of Asia.
Short term, a Biden victory will almost certainly trigger a sharp drop in the U.S. stock markets, already jittery at inflated valuations that defy the gravity of the post-COVID-19 real economy. The risk intensifies if the Democrats take both houses of Congress and look capable of pushing through the full monty of the Biden-Sanders-Warren legislative program.
The trading floor of the New York Stock Exchange, pictured on Oct. 28: a Biden victory will almost certainly trigger a sharp drop in the U.S. stock markets. © New York Stock Exchange/APAdded to this are three potential short-term time bombs that could further roil the markets: a constitutional crisis set-off by a too-close-to-call election that remains undecided into January 2021; an episode that painfully exposed Biden's mental frailty; and, most frightening, the emergence of hard, disqualifying evidence from Hunter Biden's laptop that showed beyond a doubt that his father had sold political influence to unfriendly foreign powers.
Longer-term, those interested in sustainable macroeconomics, as opposed to politically oriented "sustainable development goals," will scrutinize the math of higher taxes combined with yet more deficit spending and expansion of the Federal Reserve's balance sheet with quantitative easing to fund "free" entitlements and benefits.
The key data points include a current federal deficit in excess of annual GDP and over half the population reliant for basic sustenance on some combination of the Social Security, disability insurance, or some other government assistance, mainly welfare and food stamps.
The U.S. and other governments around the world, including Japan, have managed to keep afloat since the financial crisis of 2008 by an aggressive and coordinated program of issuing government IOUs and printing money, without, so far, encountering hyperinflation or a panic.
Some may have been lulled into believing that the first two arrows of Abenomics -- deficit spending and printing money -- if adopted in concert by all of the major economies, can keep going forever. Yet there remain lingering doubts that the real economy can be propped up indefinitely by the paper economy.
Those predicting that the day of reckoning is nigh have been proven wrong so far, but the economic policies that a Biden administration promises would bring things closer to a climactic tipping point.
That stock markets around the world remain at near-record highs just days before the election invites the inference that they disbelieve the polls and expect a Trump victory. If you believe the polls and expect a Biden victory now is the time to cash out or go short.
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November 02, 2020 at 12:00PM
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Biden victory a good time to cash out or go short - Nikkei Asian Review
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