Mark Draper

Mark Draper

Wednesday, 29 June 2016 18:45

Brexit Video Update - June 2016

One of the best macro economic thinkers in Australia, Hamish Douglass (CEO Magellan Financial Group) talks about Brexit.

In particular he assigns a 25% risk that the UK will not actually end up leaving the EU.

He believes that Brexit is not a financial event and not a re-run of 2008.

Monday, 27 June 2016 19:57

Yes Minister - European Diplomacy

Given the Brexit vote last week - we take a look at UK diplomacy from a comical perspective, courtesy of the funny men who created "Yes Minister".

 

 

 

 

 

 

 

The decision by the British people to withdraw from the European Union (EU) took markets by surprise.  Yet, it did not occur in a vacuum.

 Britain's vote to leave the EU needs to be seen in the context of a confluence of global social and economic trends.

  • Large scale migration within Europe (from East to West) as well as to Europe, from Africa and the Middle East.  Lured by both the pull of better economic prospects and driven by the horror of war, these movements of people raise a formidable challenge the social and political fabric of Europe.
  • The long-running trend of international economic integration – Globalisation – has removed trade barriers and opened labour markets to competition, allowing both labour but especially capital to migrate across national borders.  International business and political leaders promoted ever-greater internationalisation over the increasingly vocal fears and frustrations of the Western middle class who faced job insecurity and financial regression.
  • A European Union whose weak form of political representation (at the European level) and barely integrated financial structure was ill-equipped to cope with the fallout of the Global Financial Crisis (GFC) in the absence of the traditional currency devaluation pressure-release valve.

The frustration and sense of powerlessness of the middle-class has become increasingly tangible since the GFC of 2008 and is manifesting itself in a shift away from traditional political parties of the center. The vote to ‘Leave’, is simply one expression of voter dissatisfaction with this state of play and, in the European context, downright anger at the refusal of the unelected bureaucrats in the European Commission to acknowledge their plight.

Turning to the ‘Remain-Leave’ campaign itself, the debate was focused on ideological and rhetorical arguments which were fanned by a cacophony of emotional pleas in the media, rather than points of fact raised by the Treasury and Parliamentary Commission in the lead-up to the vote.

So what now for Britain?

The prospect of a re-run of the referendum is unlikely, couched more in hope than reality.

The immediate effect will be a jolt to consumer and business confidence in Britain, depressing investment and spending, and resulting in significant economic weakness and probable recession.

The Bank of England is highly likely to cut interest rates from 0.50% to zero in coming weeks.

Further weakness in the British pound is to be expected.  In the six months preceding the vote, the pound has traded in a range between 1.40–1.45 per US dollar.  It’s trading around 1.35 per US dollar today, a mere 5% depreciation from the mid-point of this range.  Britain is now a small, open, economy that is heavily reliant on foreigners to finance its large current account deficit.  We expect the pound to act as its primary shock absorber and depreciate significantly to absorb this economic shock, but first expect a back-up of decisions by consumers and businesses.

Turning to the Continent

We expect a re-appraisal of the relationship between the European Commission and the sovereign states of the Union and hence, implicitly, the electorate.  This will result in some conciliatory measures to reassure voters who share the deep frustration and sense of powerlessness of their British counterparts.  Less high-handedness by the Commission and a more consultative approach are likely.  There will also be questions raised around the Head of the Commission who epitomises the powerful elite, unanswerable to the electorate.

Further accommodation by the European Central Bank (ECB) is also likely.  It is imperative that it be seen to be doing something, at least to demonstrate that they are in control.  This will represent a worrisome raising of the stakes.  With sustained economic growth proving elusive despite negative interest rates and quantitative easing in full flight, the market is becoming increasingly unnerved by the seeming impotence of Central Banks globally.  The ECB is thus forced to walk a dangerous line between having to do something and revealing its impotence.

Fiscal stimulus is now probable and we expect the 3% fiscal deficit ceilings to be ignored.

Looking further afield, we expect that the shockwaves will be felt in Emerging Markets, Asia and the United States.  However, it is reasonable to expect the impact to significantly dissipate as we move from the UK and Europe.

The US dollar will likely absorb some of the shock for the world economy by appreciating while the prospects of higher interest rates in the US will be put on hold for some time.

Why should I own shares in this environment?

The ‘Leave’ vote is but one instance of a broader push back against ever increasing globalisation and demands for redistribution of the economic pie by a middle class that feels increasingly more marginalised and frustrated.

Where it can be expressed through the ballot box, governments will respond with measures to placate this angst.  Ultimately, governments don’t create wealth, they re-distribute it.  This is already underway.  Monetary policy is being used to push interest rates to zero or even into negative territory, effectively taxing savers.  Fiscal expansion will need to be financed by taxes, excessive borrowing or simply by printing money.

While cash or bonds might seem like a safe alternative, they entail risks that need to be carefully weighed.  As a saver holding cash or bonds, your interests are diametrically opposed to those of governments who are large borrowers and are in a position to dictate both your return on capital and return of capital.  Essentially you need to believe that the government will act in your interest and not those of the electorate.

The global economy continues to grow and civilised society continues its inexorable progress, questions around the distribution of wealth notwithstanding.  Shares represent an ownership interest in real assets and in corporations that can marshal human and financial resources to participate in various economic activities.  Businesses are living organisms that possess the flexibility to adapt to new threats and opportunities, unlike bonds or cash.  Good businesses will have numerous opportunities to grow and thrive, and reward their shareholders, regardless of the economic environment.

When fear and uncertainty prevail, share prices can fall sharply.  While it may be tempting to simply respond to the financial pain that these price falls cause, it is worth remembering that it is precisely these price falls that open the best wealth creating opportunities. 

 

Platinum Asset Management

Here is an executive summary of the special edition "Brexit Bulletin" from Westpac Economics.  The full bulletin can be downloaded from this article by clicking on the "Download Now" icon.

Last Thursday, the UK voted in favour of exiting the European Union.

• 52% of the population voted in favour of the decision, on a turnout of around 72%.
• The decision was against market expectations, bringing about a savage market response.
• Subsequent to the result being announced, Prime Minister David Cameron resigned, effective by October. The opposition is also in disarray, with ten or so members of the shadow cabinet having quit or been fired.
• Until a new Prime Minister takes office, the next step in the Brexit process seemingly will not take place.
• That next step is most likely to be Article 50 of the Lisbon Treaty being invoked, ushering in a two-year consultative period between the UK and European Union.
• Note the UK will also have to enter into separate negotiations with a further 60 non-EU nations, whose trade terms are dictated by European Union agreements.
• Of particular concern for markets is the potential for the ‘Brexit’ decision to trigger similar reviews of EU membership across other member countries and the unity of the UK itself, with Scotland and Northern Ireland voting in favour of the UK remaining in the EU.
• The above highlights that we are at the beginning of a long process full of uncertainty and tension.
• With the end-point of this process unknown, we are unable to estimate the full impact of Thursday’s decision. IMF estimates however highlight it will be substantial: a shock to the level of GDP of between 1.4ppts and 5.6ppts (in the UK) by 2019. Note, UK growth to March 2016 was 2.1%yr.
• Of course, all of this is not happening in a vacuum. The implications for the rest of the world have, and will continue to be, significant.
• Market pricing for the FOMC (United States) has reversed, with a near 20% probability of a cut now priced in by November. A rate hike is not fully priced in until June 2018.
• Policy intervention by the Bank of Japan also seems likely, with USD/JPY nearing the ¥100 mark.
• Elsewhere in emerging Asia, policy makers will be paying close attention, not only for potential implications for their real economies, but also in case funding dislocations become apparent. Europe has long been a key provider of direct and portfolio funding for the region.
• For Australia, the RBA stands ready to act to provide liquidity (if needed), while the Australia dollar has fallen with the shift in risk sentiment.

 

 

Ben Wellings, Monash University

Britain’s decision to leave the European Union has opened a fundamental crack in the western world. Australia’s relationship with the United Kingdom is grounded in the UK’s relationship with the EU.

Given Australia’s strong and enduring ties with the UK and the EU, the shockwaves from this epoch-defining event will be felt in Australia soon enough. Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive.

What will happen to trade ties?

The importance of Australia’s relationship with the EU tends to get under-reported in all the excitement about China. We might ascribe such a view to an Australian gold rush mentality. Nevertheless, Australia’s trading ties to the EU are deep and strong.

Such ties looked set to get stronger. In November 2015 an agreement to begin negotiations in 2017 on a free-trade deal was announced at the G20 summit in Turkey. Trade Minister Steven Ciobo said in April 2016 that an Australia-EU free trade agreement:

… would further fuel this important trade and investment relationship.

When considered as a bloc, the EU consistently shows up as one of Australia’s main trading partners. Consider the statistics below:

  • in 2014 the EU was Australia’s largest source of foreign investment and second-largest trading partner, although the European Commission placed it third after China and Japan in 2015;

  • in 2014, the EU’s foreign direct investment in Australia was valued at A$169.6 billion and Australian foreign direct investment in the EU was valued at $83.5 billion. Total two-way merchandise and services trade between Australia and the EU was worth $83.9 billion; and

  • the EU is Australia’s largest services export market, valued at nearly $10 billion in 2014. Services account for 19.7% of Australia’s total trade in goods and services, and will be an important component of any future free trade agreement.

This is all well and good. But when not considered as a bloc, 48% of Australia’s exports in services to the EU were via the UK; of the $169 billion in EU foreign direct investment, 51% came from the UK; and of Australia’s foreign direct investment into the EU, 66% went to the UK.

You get the picture.

The UK was Australia’s eighth-largest export market for 2014; it represented 37.4% of Australia’s total exports to the EU. As Austrade noted:

No other EU country featured in Australia’s top 15 export markets.

In short, the EU is not as attractive to Australia without Britain in it.

Beyond trade numbers

But the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.

Brexit represents the further fracturing of the West at a moment when that already weakening political identity is in relative decline compared to other regions of the world, notably Asia (or more specifically China).

EU-Australia relations rest on shared concerns such as the fight against terrorism advanced through police collaboration and the sharing of passenger name records. The EU and Australia also collaborated to mitigate climate change at the Paris climate summit. And they work for further trade liberalisation in the World Trade Organisation – but don’t mention agriculture.

Without the UK, these shared political tasks become harder.

Clearly, Australia-UK relations rest on a special historical relationship. However, it has seen efforts at reinvigoration, as British governments buckled under the pressure of the Eurosceptics among the Conservatives.

David Cameron addresses the Australian parliament in 2014.

Beyond everyday trade, historical links have been reinforced through the centenary of the first world war and the UK-Australia commemorative diplomacy that has come with this four-year-long event.

Cultural ties are most regularly and publicly affirmed through sporting rivalries such as netball, rugby and most notably cricket. Expect these ties to be reinforced as the UK seeks trade agreements and political support from its “traditional allies”.

For those with British passports, there will be a two-year period of grace as the UK negotiates its exit. After that, it will be quicker to get into the UK at Heathrow, but this might be small consolation for the loss of a major point of access to the EU.

The vote to leave is a major turning point in Europe’s history. It marks a significant crack in a unified concept of “the West”. It is not in Australia’s interests.

It’s time for Australia to make new friends in Europe.

The Conversation

Ben Wellings, Lecturer in Politics and International Relations, Monash University

This article was originally published on The Conversation. Read the original article.

Richard L. Gruner, University of Western Australia

Woolworths is ditching its Select private label range. It intends to launch a new brand for a more focused range of products that promises more bang for the buck. The move comes after Woolworths decided in March to axe its Homebrand label as part of its strategy to compete with Aldi.

The move makes sense, but will likely do little to restore consumer trust and sales growth.

Management guru Michael Porter has long argued that products need a clear positioning in consumers’ minds as either special and expensive or convenient and cheap. Woolworths Select was neither, stuck somewhere in the middle. This positioning was confusing for customers.

But will fixing this problem make a difference, and perhaps even keep growing Teutonic supermarket force Aldi at bay?

Unlikely. After all, similar efforts are only baby steps towards what truly distinguishes growing companies: the ability to make consumers' lives simpler. Think of Uber, Netflix, Amazon, but also Aldi. That’s the common denominator.

And yet, research shows that most companies keep confusing the gobbledegook out of us. A lot has been written about how consumers get more than they want, and how more product choice often makes us less happy.

But consumer confusion extends to other tactics too, like pricing and discounting. Shoppers increasingly ask questions such as: why are some products almost always on special (while others never are)? Do half-price offers mean that we usually pay twice as much as we should?

At best, discounts have become meaningless. While discounts were used successfully in the past to move excess merchandise, they have become ubiquitous and permanent, providing little incentive to respond. It’s a bit like the guy in the audience of a stadium that stands up to see more: it’s an effective tactic so long as not everyone else is standing up too.

Another major concern that emerges is product claims and packaging; for example, most consumers do not know the difference between “Product of Australia” and “Made in Australia”.

Also, products claiming to be “natural”, “real”, or “healthy” are usually hiding behind meaningless terms, undefined in labelling law and merely meant to persuade rather than inform people. The result is ever more confusion.

So what should brands do to simplify the consumer experience? Ironically, the answer to this question is not simple. It takes an awful lot of work to make things less confusing. An app that you visit once in a while and find easy to navigate may be the result of years of painstaking work, with many difficult decisions made behind the scenes about what should go where, and just as importantly, what to leave out.

Companies should start making every aspect of their product offerings simpler. Consumers do not appreciate clutter; they appreciate everything being transparent, clean and easy.

Marketers should understand that consumers rarely inherently care about brands. In some countries, only about 5% of brands would truly be missed. Whether consumers order an Uber ride, or buy a carton of milk, they often want to invest the least amount of effort and time in making the right decision.

Overloading consumers’ already saturated brains with all kinds of marketing tactics, including dynamic pricing and even heavy discounts can backfire or fall flat. This was clear when consumers showed a lack of interest in even 90% discounted product at Dick Smith’s closing down sale.

Instead, every decision brands make should be guided by a desire to help customers feel confident about their choices. Fortunately, we can learn from a handful of companies that have long understood the principle of simplicity in driving customer satisfaction.

Aldi’s success, for example, is often attributed to its simple business model of providing consistently low and transparent prices for a reduced range of high quality products.

No discounts, no confusing ads, no loyalty cards, no bullshit.

The Conversation

Richard L. Gruner, Asst Professor, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Tuesday, 31 May 2016 15:16

The Squatty Potty

Buy at http://squattypotty.com - Pooping will never be the same. This Unicorn shows the effects of improper toilet posture and how it can affect your health. The Squatty Potty toilet stool has been featured on Shark Tank and Dr OZ show and has thousands of happy customers.

 

Over the course of Platinum’s recent 2016 adviser and investor roadshows in Sydney, Melbourne, Brisbane, Perth and Adelaide we conducted an investor survey which contained an embedded experiment.

The first part of the survey asked roughly half of the total number of attendees in each venue what they considered the biggest investment opportunities were in the current market, and the other half was asked what they considered the biggest risks were. The findings from the some 1,200 surveys collected were broadly consistent across the groups.

The second part of the survey asked all attendees to give their estimate of market returns. The answers here appeared to have been influenced by the positive or negative framing of the first question. While not true in every sample group, across the aggregate data there was a marked degree of greater optimism among those who had considered opportunities compared to those who had considered risks.

Framing

In asking guests to focus on the market from two different angles (opportunities versus risks) prior to making an estimate of returns from global markets over the remainder of the year, the experiment we conducted attempted to highlight the risks of framing.

Forecast returns in each venue were measured across the adviser and investor sample and averages and medians of the opportunity and risk groups were compared.

The aggregate data is tabulated below, with over 1,200 surveys completed – the bottles of champagne on offer to the best forecaster in each session appeared an appropriate incentive!

(Average/ Median)

Opportunities Group

Risks Group

Bias

Investors

5.6% / 5.1%

3.8% / 4.0%

1.8% / 1.1%

Advisers

6.1% / 6.0%

4.6% / 5.1%

1.5% / 0.9%

The findings suggested that there was a positive bias in forecasts exhibited by those who had been given the positively framed survey. The extent of this appeared to be around 1-1.5% against an average forecast level of about 5%.

This is consistent with behavioural psychology studies on the framing effect, which is a cognitive bias that causes our analyses of information and decision-making to be influenced by “variations in the framing of acts, contingencies, and outcomes”. Tversky and Kahneman famously demonstrated that depending on whether questions are formulated in terms of gains versus losses, our perception and assessment of risk and rewards changes even though actual probabilities are the same.

The survey results also showed a tendency for advisers to be more optimistic than investors, perhaps itself an interesting topic. Also worthy of noting is that returns forecast tended in aggregate to be broadly consistent with long-term returns from equity markets in the high single digits, with 5% to the end of the year equating to about 7-8% annualised before dividends, an additional 2-3%. This suggests no particularly strong view from the group surveyed that they believe markets are excessively cheap or expensive.

Opportunities and Risks

In the first part of the survey guests were asked to select the three biggest opportunities or the three biggest risks from a list of 12 options.[1]

Healthcare polled as the leading opportunity in each of the samples, with agriculture in the Top 3 of every group except for Sydney advisers. Advisers were interested in e-commerce which had a Top 3 position in all adviser surveys, while no investor group ranked this in their Top 3. Meanwhile every group of investors saw the Chinese consumer as a Top 3 choice, but only Sydney and Adelaide advisers were convinced. Clients may be encouraged to know that our portfolios have considerable exposure to their areas of interest.[2] Chinese consumer growth and e-commerce have been key areas of Platinum’s focus for some time and the presentations by Andrew Clifford and Clay Smolinski address our key investments in some detail.

biggest opportunities


On the risk side, both investors and advisers had the same Top 3 concerns and deflation and negative interest rates caused a little more alarm than the Chinese slowdown or a debt-driven GFC-type event. Here, while the China slowdown concerns a lot of people, Sydney investors were the only group to rate this #1, perhaps symptomatic of their perception of what has been driving their home apartment market. We feel that our clients absolutely had their fingers on the pulse – how to find interesting investment opportunities in an environment of chronic low rates is the top question on our minds as is on yours. In fact, low interest rates are the central theme of this year’s keynote presentation by Andrew Clifford (Chief Investment Officer and Co-Manager of the Platinum International Fund) who drew some important lessons from similar periods in history. More specific insights on how to navigate such a deflationary low-rates environment as investors were addressed in further detail by Clay Smolinski, drawing lessons from our direct experience with Japan.    

Donald Trump’s tilt at the US presidency was the most interesting, as it concerned 40% of Adelaide attendees, versus 20% across the other venues. This could to an extent be a case of “recency bias” as the Adelaide session took place on the day when headlines were dominated by the news that he was to be the Republican nomination. Recency bias, also known as availability heuristic, is the tendency to give more weight and attribute more relevance to information with greater “availability” in memory, which is often influenced by how recent the memories are.

Sudden interest rate rises seemed only to be a concern of advisers – perhaps after the presentation around the lack of inflationary pressures, we hope this fear may have been assuaged somewhat.
greatest risks


This data is a telling snapshot of what is on investors’ and advisers’ minds at this juncture, and along with the illustration of the impacts of framing, it provided a useful interactive lesson amidst this year’s roadshow. We hope our clients in turn gained some useful insights from the presentations by Andrew and Clay on the challenges and opportunities in today’s world of investments.

Friday, 27 May 2016 12:42

Europe in Charts

Europe has endured a long and painful recovery following the GFC and the Euro Debt crisis.  It may surprise many to know however that the European economy is again growing, all be it at a low rate.

This article provides a very brief overview the current state in Europe by charts.

 

 

 

 

 

Stephen Coleman, University of Leeds

This article is part of the Democracy Futures series, a joint global initiative with the Sydney Democracy Network. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.


When cultural practices and performances become obsolete, they rarely simply collapse into exhausted redundancy. Rather, they linger as grotesque parodies, displaying with uncontrollable intensity the very reasons for their implausibility.

The embarrassing spectacle of the hack comedian whose tasteless jokes and predictable routines generate audience cringe rather than mirth stands as a warning that performative repertoires do not come with sell-by dates. You find out your act is outmoded when the audience start to ask for their money back.

Political leaders are beginning to resemble seaside comics who have failed to recognise that the deckchairs are empty. Repertoires that had them rolling in the aisles in the era of Churchill and Roosevelt – or even Nixon and Wilson – now look like mediocre impersonations.

Donning the fluoro gear, Chancellor of the Exchequer George Osborne is a dedicated observer of the political ritual in the UK. Stefan Rousseau/Reuters

Not only are political speeches replete with linguistically risk-averse clichés borrowed from middle management – “facing important challenges”, “we’re listening very carefully”, “moving forward”, “all in it together”, “people who do the right thing” – but the semiotic production has been reduced to a constant replay of metaphors designed for idiots.

Politicians wear hard-hats and orange protective jackets, as if to prove they thrive on the shop floor. Leaders have a routine habit of making speeches surrounded by “ordinary people” who look like involuntary participants in the opening ceremony of the Beijing Olympics.

The surprise is surely not that whole sections of the population are turned off by these preposterous rituals, but that some people are still paying any attention.

Popular distrust of politicians is not a new phenomenon. Apart from a brief period in the mid-20th century when people trusted Churchill because he wasn’t Hitler and then trusted Attlee because he wasn’t Churchill, political leaders have always been accepted on sufferance.

That isn’t a bad thing. The fantasy of perfect political trust evaporated when people stopped believing in the divine right of kings. Democracy can only work well when representatives are held accountable to those they claim to speak for.

The problem of contemporary democracies is not that citizens trust politicians less than they did in the past, but that leaders’ attempts to make themselves appear accountable have become increasingly implausible. Their scripts are stale; their gestures ritualistic; their evasions transparent; their artlessness palpable.

 

The first presidential debate between John F. Kennedy and Richard Nixon in 1960 was watched by more than one in three Americans, an inconceivable audience today. United Press International

Technology transforms image-making

Contemporary political distrust focuses on form as much as content. In the past, leaders were distant and, when it suited them, invisible. They had considerable control over their public images.

Technologies of public mediation have changed that. Television in particular places political actors under unprecedented levels of scrutiny. This has driven party machines to excesses of performance management that cast politicians as mere functionaries delivering approved lines to median voters.

Politicians are caught between a relentless chase for mass-mediated publicity and a permanent anxiety about the risks of unwanted visibility. Now that most people carry smartphones that can capture pictures and sound with a click, political impression management is a losing battle. Politicians continue to perform as if they are on stage (in Goffmanesque terms), but it is the blurry zone between on and offstage that they now occupy, never immune from public judgement.

They are tested by their capacity to conform – literally, to subscribe to a performative form that is readable as “acting like a leader”. But it is a form that is becoming increasingly degraded and obsolete. The new political balancing act entails conforming sufficiently to legitimise the performance, while breaking the formal boundaries with a view to displaying a degree of authenticity that cannot be contained within the bounds of form.

Trump, the performer

Trump’s performance works by using the political stage to denounce the stage. Darron Birgenheier/flickr, CC BY-SA

Enter Donald Trump: so unbalanced in his affair with political form that he permanently teeters between a mesmerising dance of solipsistic decadence and staggering off the stage.

Following a long line of populist form-busters, from Silvio Berlusconi to Viktor Orban, Trump performs as if he had just seen Peter Handke’s 1960s production, Offending the Audience, and concluded that every performance before it had misunderstood what audiences were for.

Handke said that he aimed to do “something onstage against the stage, using the theatre to protest against the theatre of the moment”. This is precisely what Trump does well; he uses the political stage to denounce the political stage. He enters the temple, but only to blow away its walls.

Speaking at a rally before the New Hampshire Republican primary, Trump said what he thought of politicians:

These people – I’d like to use really foul language. I won’t do it. I was going to say they’re really full of shit. I won’t say that. No, it’s true. It’s true. I won’t say it. I won’t say it. But they are.

What is going on here? On the face of it, here is a leader wrestling with the conventions of political form. He simply can’t use certain words. Who knows what might happen to him if he let out what he really thinks? But his frothing authenticity gets the better of him. “I won’t say it. I won’t say it.”

He’s like a character in a Victorian novel who wants to press the hand of the girl he fancies, but is paralysed by propriety. But not quite paralysed; not quite propriety: his authentic self erupts, leaking its proscribed thoughts into the minds of followers who have already bathed in the same forbidden waters.

He is telling them what they know to be true. They trust him in the same way that they are seduced by their own shadow.

This is why Trump’s speech-making never sounds like oratory, but an inner conversation. He is seeking to convince his echo to stay faithful to the original rant.

Manufacturing belief in anything

Contemporary politicians have a trust problem, but Trump is different. It is not a crisis of distrust that Trump symbolises, but an excess of trust. While contributing to a general feeling that “they’re really full of shit”, he uses the pronoun to distance both himself and his followers from the smell. They are politicians. He is a man who happened to stumble on to the stage.

Trump embodies the crudest fantasies of the American dream. He can be trusted because, by his account, he is self-made – except for the estimated US$200 million trust fund given to him by his father, which rather skews the narrative.

Because he is perceived as a man who made his own fortune, he is seen as a leader who owes nothing to anyone. Why vote for a politician who’s in the pocket of shady billionaires when you could vote for a shady billionaire?

The logic is perverse, but it is the foundation of a form of projection that allows the following to be accepted as strategic thinking:

Now, we have to build a fence. And it’s got to be a beauty. Who can build better than Trump? I build; it’s what I do. I build; I build nice fences, but I build great buildings. Fences are easy, believe me.

I saw the other day on television people just walking across the border. They’re walking. The military is standing there holding guns and people are just walking right in front, coming into our country. It is so terrible. It is so unfair. It is so incompetent.

And we don’t have the best coming in. We have people that are criminals, we have people that are crooks. You can certainly have terrorists. You can certainly have Islamic terrorists. You can have anything coming across the border. We don’t do anything about it. So I would say that if I run and if I win, I would certainly start by building a very, very powerful border.

This image of a man who builds nice fences, great buildings and beautiful walls can only be understood from the perspective of biblical metaphor. The politicians droning on about “cutting the deficit” as they pretend to blend in on the factory floor are mere theatrical extras compared to Trump, on stage and in flow, so hard and tall and foreigner-resistant that his audience purrs collectively in claustrophobic bliss.

G.K. Chesterton reminded us that when people stop believing in something, they do not believe in nothing, but are more likely to believe in anything. Trump is a vessel for the deposit of American disbelief. He is the “anything” that occupies the space that would otherwise be “nothing”.

Trump’s support comes from his ability to turn a crisis of distrust into a willingness to trust anything he says and does. Jamelle Bouie/flickr, CC BY

Can democratic politics re-invent itself?

Here lies the lesson for democratic politics. Just as obsolete forms atrophy slowly, lingering until the last drop of affective vitality evaporates, so new political forms often emerge as prefigurative contortions, only discernible through the trace lines of oddity.

Trump might not be the New Normal, but neither can his performance be dismissed as the Old Crazy. He is a spectre of things to come: of political performance in an age of projection rather than representation.

To represent is to stand in for those who must be absent. To represent democratically is to diminish the consequences of the electorate’s absence from the sphere of everyday decision-making by remaining accountable to their interests, preferences and values.

Political projection is representation in reverse. The dummy produces a ventriloquist that is in its own image. Citizens are not re-presented, but offered a fantasy of presence through the demagogic persona of a leader. They, the shit-filled politicians, cannot be trusted because you, the hollow public, should not be trusted.

Trump, on the other hand, provides a receptacle for indiscriminate trust – in him, in yourself, in anything, but never something.

The faultlines in democratic politics are clearly marked. On the one side is a system of representation that is bad at making people feel represented. On the other is a process of projection that satisfies a visceral desire to be affectively registered, but amounts to little more than an incontinent protest against conventional political form.

Obsolete modes of representation are unlikely to defeat Trump – as the US Republican contest has shown. A key question for contemporary democracies is whether they can reinvent practices of democratic representation that allow people to communicate in ways that build commitment to something rather than surrender to anything. Such practices must amount to more than participatory tokenism or technological gimmickry.

Obsolete forms of representation as a distant relationship, ritually reaffirmed by periodic elections, cannot be resuscitated by simply putting them online, encouraging politicians to expose their inner feelings on TV chat shows, or changing the voting system. Clogged up with prejudices, resentments and semi-articulated desires, the political atmosphere surrounding prevailing relations of representation generates default disappointment.

The fast-growing cast of anti-politicians who seem drunk on cheap trust (for Trump is by no means alone) will surely thrive and expand unless a more meaningful form of representation is established.

Rather than devoting huge energy pointing to the absurdity or toxicity of this new populism, democracies would be better served by beginning a debate about what it means to represent and be represented; what form democratic representation might take in an era of instantaneous communication.

The Conversation

Stephen Coleman, Professor of Political Communication, University of Leeds

This article was originally published on The Conversation. Read the original article.