Posted inUnited States

Regardless of who wins the election, the US is going to lose

Concept american flag on cracked background

Investors have entered a “period of radical uncertainty”, which is unlikely to be resolved irrespective of who wins the US election, a German research institute and think tank has found.

Heinz-Werner Rapp, founder and head of the Feri Cognitive Finance Institute, explained: “America is an extremely torn country with deep political rifts, growing hostility and escalating conflict. The change to the ‘un-United States of America’ began a long time ago, and the US gambles away a part of its future.”

The institute’s analysis is damning for investors who believe a Joe Biden win could represent an easy fix against uncertainty.

The comments from the Financial & Economic Research International (Feri) Cognitive Finance Institute build on a 2018 study.

At that time, it found that America’s global policy shift was seen as being strongly connected with president Donald Trump. But, in reality, the causes go much deeper; reflecting an America that is angry, deeply divided and polarised.

This has turned the US into an ideal breeding ground for populism and protectionism; while the nation reacted by seeking to solve its problems through aggressive measures against third parties.

Increasing risk  

The erratic, behavioural patterns of the US increases global uncertainty, the study said.

For the foreseeable future, investors are being forced to prepare themselves for new ambivalent risk dimensions, which are difficult and complicated to identify, the study added.

It pointed to a number of investment relevant implications, including:

  • A sceptical future projection for world trade and world economy
  • A critical view on political developments and internal stability of the ‘un-United States of America’
  • A need to substitute traditional risk models with concrete scenario analysis

As the phenomenon of the ‘Un-United States of America’ has deeper, structural reasons that already existed before Trump’s election as president, it suggested that they will probably continue for the foreseeable future even without him.

“Trump is only the symptom of the crisis”, according to the study.

US election

Given this political and social reality in the US, its internal divisions will increase significantly irrespective of the outcome of the elections, the institute concluded.

“Should Donald Trump win the election clearly, the US will become an autocratic banana republic in the next few years. If the result is unclear, Trump will challenge the election and thereby trigger a deep constitutional crisis.

“On the other hand, should Joe Biden win, the country would see it getting entangled permanently into dangerous conflicts by militant Trump supporters,” said Rapp, as he outlined possible scenarios.

Thus, the institute argues that the US will become the loser whoever wins the election. This is a result of political rifts that are so deep that rational politics across party lines is hardly possible, blocking important decisions for the future of the US.

“In key points, such as its stance towards China, the fight against climate change or the increasingly excessive national debt, the US is losing strategic control, endangering by own fault its future viability,” explained Rapp.

Elena Johansson

Senior Reporter

Part of the Bonhill Group.