COVID-19 and Modern Monetary Theory

Toward the end of the movie “Patton”, there’s a scene of a bustle of activity in a German HQ destroying papers in anticipation of being overrun by the American Army.  A German officer laments the coming loss of the war with “Das ist das Ende” (This is the end).  What the coronavirus and the dramatic monetary and fiscal war waged to overcome its economic devastation will bring is the end of a financial era; the idea that the government has to repay its debt.

The national debt in the United States has been rising at an alarming rate.  Prior to the Coronavirus, the debt stood at about $23T.  With the passage of recent laws authorizing spending by the Treasury Department and unprecedented loan facilities by the Federal Reserve, the national debt and the balance sheet of the Fed will exceed $30T.  It will soon, if it hasn’t already, be a number that essentially cannot be retired.  And that’s where MMT (Modern Monetary Theory) will come to “save” us.

There are two main components to MMT; 1) a country that prints its own money can never go into default and 2) unemployment becomes an anachronism as the federal government employs all who cannot find employment in the private sector.  Milton Friedman was fond of saying “Nothing is so permanent as a temporary government program.”  The recent law providing checks to every American and enhanced unemployment benefits for those forced home by government fiat will be the precedent for the passage of a universal basic income law.  This law will probably then morph into the federal jobs program mentioned above.  At this point, MMT will become a formalized policy.

And “Save” us it will in the short-run.  In the long-run, it will ignite inflation that may approach the hyper-inflation of post-World War I Germany.  It was those horrendous economic times that helped the rise of a certain corporal to become Chancellor of Germany.      

Trump Deescalates Iran

Give credit when credit is due. President Trump has opened the door to Iran to change its relationship with the rest of the world. I'm no Pollyanna about the future of Iran but the ball is in their court.

I'm loath to make positive predictions about decisions this president makes as his future actions can sometimes obviate the good decisions he has made. But he's recently backed off his rhetoric that included committing future war crimes to punish Iran and today he made a significant effort to deescalate tensions. And the markets have reacted accordingly

Good things could come from this. Good decisions in the future will be needed for that to happen. Most of them from Iran. But from the president too.

Political Expediency and Abuse of Power = A Future Failed Republic

Impeachment and removal from office is supposed to protect the republic from a morally unfit president.  The ineptness of Donald Trump’s impeachment will make our republic weaker not stronger.  In hindsight, it may have been a mistake.

If ever there were a president worthy of impeachment for “high crimes and misdemeanors”, it’s Donald J. Trump.  His actions epitomize the concerns of the Founders and their reasons for using that term of art in the final draft of our Constitution.  But unfortunately, we also have an equally unworthy Congress to prosecute said impeachment. 

The Democrats’ decision to not wait for the courts to rule on the subpoenas issued to the executive branch has exacerbated the problems that our republic will face in the future.  By not allowing the courts the last word, they’ve given Donald Trump the last word or rather words, “absolute immunity.”  Their short-circuit of the process, when combined with the unprecedented and up to now unheard of “absolute immunity” Trump has declared for the presidency foreshows an ominous future, a republic weakened by an autocratic presidency.

It didn’t have to happen.  The Democrats could have followed the path of previous impeachments; political considerations be damned.  The odds are the courts would have, eventually, allowed testimony from John Bolton, Mick Mulvaney, Robert Blair, John Eisenberg or Russell Vought, the testimony from any one of which may have revealed information debilitating to the president.  Or the Republicans, or at least some of them, could have done what their consciences (aka the voice of God?) commanded them to do, impeach and remove this president. 

In the impeachment of President Trump Democrats and Republicans had a unique opportunity to explain to the American people what is and what is not acceptable behavior by a president.  Many if not most elected Republicans would, in private, acknowledge his unsuitability for office.  His actions that precipitated his impeachment and his actions in response to impeachment are textbook examples of that which the Founders feared in a chief executive.  They are the primary reasons for the impeachment clause.  But more important than a civics lesson, successful impeachment and removal of this president would have, at least partially, reversed the damage done to the presidency itself.  It’s an opportunity lost forever.    

But here we are.  The drama that is Congress has culminated in the impeachment of President Trump.  Come January, some semblance of a trial will happen in the Senate and the president will be acquitted.  The damage to the republic and the presidency, however, will continue. 

The Country Needs Closure on Impeachment

Republicans, a president you like to quote these days said in 1961, “ask what you can do for your country.”  Since President Trump released the transcript of the July 25 Zelenskyy conversation there has been testimony that should bring to Republicans a willingness to reevaluate their position on impeachment.  That’s the ask.

The Washington Post recently reported eight instances where a quid pro quo has been alleged and either publicly confirmed or reported to have been confirmed;

1. In the July 10 meeting between E.U. Ambassador Gordon Sondland and Oleksandr Danylyuk.
2. In a debrief of the July 10 meeting where Sondland reiterated what was said in the previous       meeting.
3. On July 25 in a text message from Kurt Volker, special envoy to Ukraine to Andrey Yermak, an aid to Zelensky.
4. On August 10 when Yermak texted Volker tying a presidential meeting to a public statement   confirming new investigations by Ukraine.
5. On August 30 Sen. Ron Johnson (R-Wis.) spoke to Sondland who said that Trump will “release the   military spending” when Trump is confident Ukraine will “get to the bottom” of what happened in   2016.
6. On September 1 in a call between acting Ukraine ambassador William Taylor and Tim Morrison a former special assistant to Trump
7. Immediately following the above call on September 1 Taylor called Sondland who confirmed what Morrison had just been told.
8. On a September 7 call between Taylor and Morrison where they discussed a Sondland conversation with Trump.

Don’t take the word of the Washington Post.  There will soon be public hearings.  Pay attention.  Rise above politics, put aside your ideology for a moment and objectively pay attention.  You think you’re better than Democrats.  Prove it.

The country faces an ominous choice next year; four more years of constitutional crises or a Democratic-Socialist president.  The removal or just the impeachment of Trump may ensure a Democratic victory.  But that’s relatively unimportant.  The country can survive a socialist president.  It can’t survive the continued debasement of our system of checks and balances.

The Democrats in turn, need to show some fairness to the investigations by the Department of Justice of itself.  One is DoJ Inspector General Horowitz’ look into the FISA application and subsequent renewals to surveil former Trump adviser Carter Paige. The other is the “investigation of the investigators” being led by U.S. Attorney John Durham.   This investigation is necessary to ensure accountability within the FBI and Department of Justice.  The ability of Durham to empanel a Grand Jury and expand on aspects of the Horowitz investigation will ensure any criminal indictments needed, will happen.

With all this going on nothing of substance is going to be accomplished legislatively until the Trump impeachment process is completed.  Congress should focus on these three investigations putting them all to bed before the political season gets into full swing in February of 2020. 

Democrats can start by getting Judiciary Chairman Gerald Nadler to schedule a hearing to get testimony from FBI Director Christopher Wray and I.G. Michael Horowitz regarding the soon to be published I.G. report. Sequential scheduling of these hearings is the best way to focus everyone on all the issues.

The country needs closure on all this.  Reach out to your congressmen and senators, encourage them to engage these investigations objectively and quickly.

A New Year’s Resolution for Republican Evangelicals?

It’s time for the Evangelical community to do the country a favor; turn on Donald Trump. 

You got what you wanted out of his election; a supreme court justice, federal district judges, reduced regulations and a tax cut (my personal favorite).  Do the rest of us a favor, relieve the country of this daily nightmare.

Polls show that 80% of evangelicals voted for Donald Trump.  Does any devout evangelical think that Trump believes what they believe theologically or has behaved in his entire life or will behave for the next three years in a manner consistent with Christian values?  It was a tough decision for many, if not most of you.  But in the end, you decided that his narcissistic personality, questionable morals, and bad manners should be ignored for the good of the country.  And to prevent the Clintons from becoming President, but I repeat myself.

The Clinton’s, while not as obnoxious as Donald Trump on a personal level, have only a passing interest in truth.  But that is beside the point.  In your minds, this election boiled down to one thing, the Supreme Court.  The first response I get when I ask about Donald Trump’s accomplishments is the appointment of Neil Gorsuch to the Supreme Court.  Many anti-Trumpers will quickly say credit for that is misplaced, that it should go to Senate Majority Leader Mitch McConnel for refusing to conduct hearings on the replacement of Justice Antonin Scalia until after the election.  While there’s some merit to this point, it was the only thing he could do.  The effort required the election of a Republican for it to mean anything.  If the Clintons had been elected, the 5-4 conservative majority would have become a 4-5 minority and over the next three years perhaps even 3-6.  So, I get it.

The election of Donald Trump has kept the Supreme Court majority in the more “originalist” interpretation camp.  And with the rumored retirement of Justice Kennedy, that majority may well be extended.  But, we don’t need Donald Trump in office another three years to replace Justice Kennedy.  Mike Pence if perfectly capable of doing that.

Congratulate yourselves for saving the republic.  But, why not save the republic TWICE?  With the Clinton’s we would have had a Diarchy or sorts.  Trump would never share power with his wife or anyone for that matter.  You may have noticed, he seems to admire dictators (Putin, Xi Jinping) and it’s obvious he would like to be one.  But, thankfully, we have a constitution fully capable of preventing him from achieving that goal.  It won’t and hasn’t kept him from debasing confidence in the institutions of our republic, however.  The record is clear; he has little respect for the rule of law or the processes and norms of governing we’ve established over the last 250 years.  Drain the swamp?  OK, it needs some draining, but let’s not throw the baby out with the swamp water.  

In your heart of hearts, I suspect many of you don’t feel great about this situation.  That’s because your support of Trump has come at the cost of hypocrisy.  Far be it from me to preach, but hypocrisy is a sin. I don’t have to tell YOU what happened to Ananias and Sapphira.  They stood accused of deceiving the apostles about their level of spirituality and commitment to the church by holding back a portion of money from the sale of land.  I’m not sure how to compare that to this situation.  Is self-deception a sin?  How about putting politics before God?  Or perhaps presuming to know the Will of God?  I’ve seen posts on facebook where believers say Trump is anointed by God and was therefore elected to save the United States.  No one can refute what you believe, but if you believe this, you belong to very small minority.  And if you’re wrong….??

So, where’s the harm in his leaving office early?  Mike Pence, a man you all are proud to call a fellow traveler would become president.  The Republican Party might even retain the House and Senate when independent swing voters turn out in November of 2018 out of sheer gratitude. 

Think about it.  You can take credit for putting Trump IN the Oval Office AND for REMOVING him.  It’s a twofer.  The only constituency that can save us from him is you.  Only the abandonment of him by you might convince him to resign.  It would be, a MIRACLE.  And we’ll love you for it.  OK, some of us will.  I will.

p.s.  Here’s a link to some advice from Billy Graham about mixing religion and politics.  Advice Franklin doesn’t seem to be taking.http://www.charlotteobserver.com/opinion/op-ed/article186410053.html

Donald Trump's Stock Market

There's no denying the melt-up of the stock market since Trumps election. The S&P is up 21% from Oct. 2016 to Oct. 2017. Impressive. And these are the generous numbers. When I look at the 1 YR performance as of today, the return is 17.17%.

During the Obama Administration the S&P averaged a 14.88% return per year. There were two years where the S&P was in single digits and they were low single digits. I have difficulty believing Trump will exceed that average but only time will tell.

A factor that will impact how well the stock market performs in the future is tax reform, which is actually just a tax cut, that if history is to be believed, will increase the national debt and which will put downward pressure on GDP. The promise of tax reform and a general bias of the Republican Party for business interests is a contributing factor in the stock market rise, along with continued low, perhaps even negative real interest rates.

The Kennedy tax cut reduced marginal rates that were at 90%. The 1981 Reagan tax cut reduced them from 70% to 50%. I think the top tax rate is now 39%. The economic law of diminishing returns probably applies to tax cuts as well, which is why I think we need radical reform and not just another tax cut. This one will have a small initial positive impact but will quickly fizzle out leaving us with at least $1.5T in additional debt.

I'm not a big fan of giving presidents credit or blame for the actions of the economy. Presidents can and do have a responsibility to help set economic goals. But it would be nice if they have some basic understanding of economics. President Trump said the following in an interview with Sean Hannity last month.

“You know the last eight years, they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion, right? And yet, we picked up 5.2 trillion just in the stock market,” Trump told Fox News’ Sean Hannity in an interview on Tuesday. “Possibly picked up the whole thing in terms of the first nine months, in terms of value. So you could say, in one sense, we’re really increasing values. And maybe in a sense we’re reducing debt. But we’re very honored by it. And we’re very, very happy with what’s happening on Wall Street.” Parsing Trump comments can be difficult under the best syntax. But the implication here seems to be that $5.2T in equity gains reduces government debt? I don't think any further comment is necessary.

This didn't get a lot of play in the MSM and I haven't seen a clarification. I guess this one just fell off the table.

Want to know a bit more about Antifa?

CSPAN's Washington Journal had a segment on Antifa this morning. Mark Bray was the guest. He is publishing "The Anti-Fascist Handbook" in a couple of weeks. Mr. Bray is a "long-time activist and historian and was also involved in Occupy Wall Street." He is a Visiting Scholar at Dartmouth College. He does not belong to Antifa but is obviously sympathetic to its mission.

He decided that a book that explains Antifa in the modern day was necessary since Anti-Fascist activism goes back 100 years.

He defines the violence that happens as "collective self-defense" against "some of the most deadly people in our society," and that "we need to be ready to do that (defend ourselves)." He does add that Antifa believes in "preemptive self-defense". BTW, Nation States also endorse this idea. Israel used it in 1967 as I recall and perhaps also in the Yom Kippur War in 1973. But then states have a monopoly right on the use violence. If you don't like that notion, you too may be a candidate for one of the anarchist philosophies.

Another interesting factoid from the program is that Antifa is not one organization but people with a common desire to defend society against Fascists. He noted later that Antifa consists primarily of Anarchists (which explains why there is no formal organization), Communists and Socialists. My reaction is there's no lack of violence in those three political philosophies. An Anarchist assassinated Grand Duke Ferdinand, starting WWI, Communists are responsible for untold Millions upon Millions murdered and Socialism, well, we have a great contemporary example in Maduro of Venezuela.

Now, Mr. Bray apparently differentiates between Communism and Stalinism. He is anti-Stalin, that's cool, but Stalin came out of Communism, not Classical Liberalism. I'll note here that he did admit that Antifa is not only anti-fascist but also anti extreme right-wing or perhaps Alt Right would be the better descriptor. But I'm happy to say he specifically excluded  Right-wing Libertarianism. So, Libertarians can relax, you're safe. Until you're not.

I'm going to buy the book. Why you ask? Because if nobody buys it no one will know what it says. 

Here's the link,

https://www.amazon.com/Antifa-Antifascist-Handbook-Mark-Bray-ebook/dp/B0718VC8GV/ref=sr_1_1?ie=UTF8&qid=1503797976&sr=8-1&keywords=antifa+the+anti-fascist+handbook

Antifa: The Antifascist Handbook

In the wake of tragic events in Charlottesville, VA, and Donald Trump's initial refusal to denounce the white nationalists behind it all, the "antifa" opposition movement is suddenly appearing everywhere. But what is it, precisely? And where did it come…

AMAZON.COM