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Republican presidential candidate Donald Trump speaks during a rally at the Antique Car Museum property on Oct. 25 in Tallahassee, Fla.Mark Wallheiser/Getty Images

I don't watch many movies, but the other day I got around to seeing The Big Short.

If you're not familiar with it, it's the story about how a few men identified in advance the fraud implicit in the mortgage-backed securities (MBS) scheme that led directly to the near collapse of the global financial system in 2008.

Naturally, no one believed these guys when they tried to borrow money to short the MBS market (which, in itself, was a challenge since there was no way to do that at the time). They finally got the money, succeeded in finding a way to short the securities, and, in the end, made millions when the meltdown they predicted became reality.

Flash forward to now and another "Big Short" opportunity has presented itself. It's nowhere near as complex as the MBS scandal. In fact, it's right there for everyone to see. It would be the election of Donald Trump as President of the United States. Should that happen, shorting the S&P 500 (buying put options on the index) would likely make you a lot of money.

That may seem like a strange thing to say. Mr. Trump is a businessman after all, and many of his policies would favour large corporations. He wants to cut the U.S. corporate tax rate from 35 per cent to 15 per cent. He would give the go-ahead to TransCanada's Keystone XL pipeline and, presumably, other such projects that require the government's approval. He would revive the coal mining industry. His climate change stance (he doesn't believe in it) would lead to a watering down or even elimination of many of the regulations that hamstring businesses.

Surely, all this and more would be great for Wall Street, even if devastating to the environment, right?

Yes, that's true to some degree. But other aspects of his policies would, if implemented, lead to financial chaos that would almost certainly plunge the U.S., and the world, into a new recession, if not depression.

Look at his trade agenda. He wants to tear up NAFTA, which he calls the worst trade agreement in U.S. history (interestingly, it was negotiated under the watch of another Republican, president George H.W. Bush). He wants to build tariff walls that would impose punitive taxes on imports from countries like China and Mexico (and presumably Canada by extension, although he never mentions us except to bash our health care).

The global trade wars that would result from such actions would carry us back to the depression era of the 1930s. They would not bring back prosperity to the U.S. heartland. But they would lead to a resurgence of inflation, which has been kept down in part because of low-cost imports from abroad.

But there's more going on here than Mr. Trump's anti-trade rhetoric. Based on his own words, his administration would attempt to undo 75 years of history, with totally unforeseen consequences. He has disparaged NATO. He appears to advocate nuclear weapons for countries like Japan and South Korea. He is contemptuous of a numerous minority groups (e.g. Muslims, Mexicans), in violation of the U.S. Constitution. He condones mass bombings and the use of torture. He despises the media. He wants to get cosy with Vladimir Putin. He believes the U.S. voting system is rigged. He has threatened to jail Hillary Clinton.

The massive uncertainty that would be unleashed if he should be elected on Nov. 8 would be unequalled in U.S. political history, especially if the Republicans retain control of Congress. For the first time, the country would face the imminent danger of a virtual dictatorship and a police state. Investors would, quite rightly, flee for the hills.

Let's hope this scenario never unfolds. But let's not fool ourselves. Many Americans are angry and frustrated with the failures of their political leaders to address their issues. They see Trump as their saviour and nothing, it seems, will shake them. As he himself once said, he could stand in the middle of Times Square and shoot someone and he wouldn't lose a vote. That's how despairing some of his supporters are.

Thankfully, it now appears that Trump's campaign is in the process of self-destructing. But never say never. The unthinkable is happening more frequently these days (remember the shock of Brexit?). Hope for the best, but be prepared to act quickly if the worst happens.

When I was in university, I took a literature course that included the great Irish poet W.B. Yeats. He might have been writing about the Trump campaign when he penned one of his greatest poems, The Second Coming. It begins with these lines:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The final lines foretells the threat we now face:

And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

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Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to www.buildingwealth.ca.

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