Populism averted, but only for a short-while

Macron’s victory has been hailed as a market plus, a win for Europe and common purpose, but it’s likely just a crisis averted, perhaps, for a few more years. Around the globe populism will likely be fanned by inflation, food and energy insecurity and become an increasingly destabilising force on markets.

Blain’s Morning Porridge April 25 2022 – Populism averted, but only for a short-while

“Something wicked this way comes…..”

This morning: Macron’s victory has been hailed as a market plus, a win for Europe and common purpose, but it’s likely just a crisis averted, perhaps, for a few more years. Around the globe populism will likely be fanned by inflation, food and energy insecurity and become an increasingly destabilising force on markets.

Another Monday, and it’s another glorious sunrise here in Happy Hamble. I spent Saturday on a long walk down the River Itchen with the young dog, while Sunday opened with an early open water swim against the tide followed by an uncompromising gardening assault on the weeds and cutting back our olive trees, before a long dinner with friends. The spring blossom this year looks incredible! It all felt wonderful last night….

Maybe it’s a metaphor for what’s to come – but this morning I feel old, bruised, achy, dusty and not a little broken.

I suspect something similar is in prospect for the global economy. Rising political tension and stress around the globe could amplify the current threats of conflict, recession and stagnation, making them look even worse..…

As we worry more and more about fertiliser costs, food prices and supply chain breakdowns getting wheat out of Ukraine, it might be wise to recall the old adage the gap between civilisation and chaos is 7 meals. Chaos is infectious. The perception of chaos does strange things to the behaviours and peculiar madness of crowds.

Few things go wrong overnight. Most market crises are years in the making – for instance; the unnoticed disconnects between prices, risks, and expectations not being spotted till they triggered the liquidity crisis of 2007. Or in politics – where the mistakes of one generation influence the next. Politics around the globe looks fraxious.. and in fraxious times, politicians do silly things.

It’s no surprise there is a lot of hysterical positive stuff this morning about how France, Europe, the Global Economy (take yer pick) just dodged a bullet in the election of Centrist Emmanuel Macron over populist right-winger Marine Le Pen. Its apparently great news for European unity and for French markets. Phew…

Alternatively, it’s a flashing danger signal: 42% of Frenchmen made a conscious call to support the Far Right, and were outvoted by a majority willing to vote for anyone by Le Pen. Macron has a mandate, but a thin one off which the veneer could quickly be stripped. France, like the rest of Europe, will face mounting pressures from inflation, food and energy security, and a potential fracture with Germany over its continued pandering to Russian energy. The gillet jaunes’ trademark jackets are still hanging by the door.

The next French election could be even more testing: Macron successfully retained power for a second term (the first president to do in 20 years) by being the only acceptable alternative to Le Pen. He has done so by destroying the traditional parties of the soft left and right in France. They all but vanished in this year’s election – begging the question: what credible parties will arise to replace Macron? And how will they develop in a time of increasing social tension – which the savvy Le Pen will milk to her advantage?

Social Tension is an excellent breeding ground for populism – reinforcing messages of inequality, unfairness… and resentment. Any politicians trying to reinstate traditional French politics will face a test as rivals try to position themselves for the crowds. Let’s not forget – democracy is the very worst form of government (except for any other alternative). The voting machine of a mass plebiscite can give us terrible populist surprises – like Boris, Trump and Brexit.

In Germany, there are clear signs of dither and conflict within the new coalition. With inflation at a post war high – the ancestral fears of Weimar instability have reawakened. (To be fair we’re a long-way from runaway hyperinflation – but..) Otmar Issing, the aging high priest of the militant wing of the inflation hawks, has accused Madame Inflation (ECB head Christine Legarde as names by Bild) of living in a fantasy.

Oh dear. It was all going rather well. Europe had been responding magnificently to the Ukraine crisis – coming together with common purpose… for a while. Now Germany is dithering over the difficult choices. Do they shut down the economic powerhouse of Europe by accepting the ban on Russian Energy? Or do they compromise to continue energy imports and thereby risk a breach with the rest of Europe. That would be a massive test for any top-shelf politician. Olaf Scholz? Go figure…

In the UK – don’t go there….

There are rumours Boris Johnson could be gone as early as this Wednesday. The Tory “establishment” managed to delay the publication of Sue Gray’s review into “Party-Gate” – a series of Downing Street lockdown parties apparently presided over by our mop-top blusterer of a prime-minister – by compelling the police to mount a half-hearted, slow and obfuscated investigation into the matter. “Oh, we can’t possibly release the report until Plod has completed their investigation” – the plan being for said investigation to take a couple of decades.

The report, which is now leaking round the colander that is Westminster, is “excoriating” according to officials. It’s apparently so damning Johnson will be forced to resign… his name is on the VIP guest list of at least 12 separate illegal events… The notoriously broke Boris can probably raise the fines by flogging a few knighthoods to dodgy oligarchs…

He may still wriggle. We’ve heard all the worst of a bumbling blimp of a PM before. Boris will apologise and act like nothing happened. Like the time he stole the crown jewels and was caught red-handed trying to fence them through a pawnbrokers… only getting off after he convinced a doddery judge he was simply seeking advice on how to clean the diamonds as a surprise for the Queen… Boris is a shady as a barrel full of shadows on a very sunny day.

Who will replace him? Given the dearth of talent, honesty or electability on the front benches, that’s a bit of a Five Famous Belgians question – impossible to answer (unless you use fictional characters). There are few Conservatives with the brains and honour to deserve the appointment. The bulk of the party I voted for in 2019 is now so sullied with Boris’ honking bluff, bluster and money-grabbing entitlement we should get shot of them with alacrity.

And as the Labour party – evening a recovering Marxist like myself is struggling to be positive.

We will find out just how bad its going for the Selfservatives in the local elections in 10 days time.… (The one Tory I might trust would be Sajid Javid – short-lived chancellor who had the decency to resign when Boris and Dominic Cummings tried to undermine him by stripping him of his advisors – but he’s spent his political career working hard rather than addressing his popularity.)

And if you think I’m overdoing my political fears – well just look across the pond. The election not won by Trump was 2 years ago and now we’re dominated by who will win in November. The US has become essentially unmanageable – impossible to agree on critical policies and spending..

But a thought did strike me over the weekend – maybe there is a way to economic recovery, while achieving geopolitical goals? I’d been chatting to a retired senior British Army officer. He was full of praise for the resilience of the Ukrainian troops, saying they’d clearly been trained by Brits. I asked what he meant… “The British Army’s special power is to make do with less. Decades of cuts in manpower and lousy equipment, and we still field the best Army in the world because we are experts in making do. The Ukrainian’s have learnt that lesson well.”

In contrast, the one budget that is sacrosanct in the US is the Military – and no matter how bitter the political wrangling, it is always divided 30% to the Army, Navy and Airforce, with 10% to the Marines. The US military has become an implement of economic policy, feeding the “Military Industrial Complex” that Eisenhower warned about, with orders while creating massive multiplier effects across the economy.  It works.

It does raise the issue – what’s the efficiency frontier of such an approach, and when does it result in policy errors.. The West won the last cold war by outspending the enemy. Can we do it again… or have the risks changed?

I shall leave readers with that contentious thought…

Five Things to Read This Morning

WSJ – Twitter, Elon Musk Are in Talks to Strike a Deal

FT – The Threat of a global “buying strike” rises as cost-of-living hits

BBerg – EU Breathes Easy After Macron Re-elected

BBerg – Credit Suisse Special Audit Backed by Norway’s Wealth Fund

WSJ – The Fed Wants to Raise Rates Quickly, But May Not Know Where To Stop

Out of time, and back to the day job..

Bill Blain

Strategist – Shard Capital


  1. Will Boris be gone by Wednesday? We can hope but he will fight like hell to stay. If he is still here on 5th May I will have to vote Labour in the local elections which is going to hurt.

    • Cheer up John… I voted for Boris back in 2019. It hurt, but it seemed better than voting for Corbyn. Now… I wonder. And my kids have just about forgiven me…

  2. I don’t know what kind of “Marxist” you were before now but I’m afraid you haven’t recovered- just changed your current brand. The entire electoral system is Neo Marxist. It doesn’t even have an alternative. To the extent that Le Pen lost I would assume she has some credibility as a political entity. Reading your article on Zerohedge I assumed you weren’t financially literate but then I see that your site provides “financial commentary”. I guess I’m not one of those “smart people” whom you identify as your audience.

    You need to read up on monetary policy and how all this “politics” stuff actually works. Then you might be able to identify what is and isn’t Marxist.

    • Dear Paul
      What a joy to have truly smart people like you reading my stuff. How clever you are… And, I surrender.. I know nothing about finance or politics or markets. I make it all up. Fair cop as we say in the UK.
      Now… please, don’t demean yourself to reading my silly posts again.. put the bacofoil back on your head.. and feel secure in your own imagined brilliance.

      (All other readers
      Sarcasm alert – but he probably doesn’t know what that is… 40 years in these markets, and still floating… Can’t wait to see his response – which I will share if he does.. Its like seal clubbing..)

  3. Lumping the causes of Trump, Boris and Brexit into the result of populism Bill is wrong. You ignore in the US the ridiculous nature of how primaries and elections are financed and fought meaning that only a very narrow raft of candidates are ever capable of getting onto to the ballot in the first place. Hence we end up with a very poor slate to begin with. This to some extent is true in the UK but not nearly to the same extent. The UK system suffers from patronage and cloneism (similar to what seems to be the norm in the corporate world) where candidates from a certain background or ethos are presented to the electorate. This results in a very grey slate which many of them very poor, exhibiting the worst traits of political thought in breeding you can imagine. Which makes characters like Boris or Farage appeal to the voters, innured through countless Major type clones. Brexit on the other hand was very much a core belief, largely immune to the pressures above. In my 20 years plus of campaigning, I always felt confident that a large portion of the population got the fact that the EU was undemocratic, elitist and ungovernable. In a straight in/out question, which we eventually got, I felt very confident that there would be a significant vote for these reasons. So simply attributing three outcomes to populism, I think is a bit facile. It does of course beg the question, “but aren’t we meant to have a representative democracy?” in which case are we saying we should be governed, Macronesque like, by “our betters” who decide for the populus what they should and should not want?
    The other issue is that like any organisation – whether it be the local sailing club, childrens’ sports clubs, residential associations, local government and national government – if it depends on essentially volunteers (and I class national govt here too given the number of outside sources of remuneration they seem to have) then we get what we allow to happen. Unless people are willing to step up and volunteer to steer these organisations, we will always get a large swathe of bad organisations, run by people like Trump and his less nasty but equally incompetent equivalents.

  4. “The voting machine of a mass plebiscite can give us terrible populist surprises – like Boris, Trump and Brexit.”

    Isn’t populism the populace expressing their thoughts and feelings? Or is that not allowed?

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