Box Score: Money 2, Value 1

Coming of age in the Reagan era, I failed to understand what I was witnessing. America abandoned manufacturing for services and ended up in a time warp.

As a corporate-level software consultant, my father Karl saw elements of this up close. Invited as a fellow traveler by the president of Wiley & Sons (the journal publisher), Karl sat in on the annual shareholder meeting. A careful investment plan charted growth in assets and employment. During the discussion, the CFO queried, “And what is the annualized rate of return on your plan?” With the follow-on to the response, “I can take that same money and make three times as much in the stock market.”

In that era, the stock market still reflected an investment in other people’s ingenuity. This year, as we approached the election, one Trumpie threatened, “Well, if Biden wins, you can be sure the stock market is going to tank!” The inescapable corollary is that the stock market is no longer an economic bell-weather but an instrument of political influence.

That influence is maintained through the ties between the Federal Reserve and the large banks. We are in the mind-numbing reality that the people that take care of our money no longer profit from making it grow, they profit by making it move. That may seem impossible, but the volume of real estate, trade, and government debt is so enormous that simply the placement fees run into the tens of billions of dollars annually.

The bind for the public is that the money center banks hold no interest in seeing the debt reduced. In fact, the Dow weathered recent financial crises because the Federal Reserve issued borrowing authority that the banks loaned to corporations to buy back stock. The value of stock is now linked to corporate debt.

And in the chaos only the financial system has a guaranteed benefit.

Was this intentional? Hardly, but it was inevitable. This is trumpeted by the liberal economists, but they misdiagnose the problem. I hope with this post to steer them in the right direction.

The liberal economists blame “capitalism.” Capitalism, coined by Adam Smith, is a recent innovation, seeing an effective implementation only in the industrialization of the Western world in the late 1800’s. Capitalism was actually a liberalizing social contract. It held that money and labor could collaborate to improve productivity. Higher productivity meant more money for investors and lower costs for labor. It was a win-win scenario.

Capitalism disproved the precepts of Malthus, who held that population growth would always overwhelm the benefits of productivity gains. In part, however, Malthus was proven right because political power was held by the moneyed noble class. Market control was awarded by royal writ, and once secured ensured resistance to innovation that might lead to diversification of supply. Stability of prices was also important to the nobility and their retinues, often sustained by stipends.

The crack in this hermetic system was warfare, and it was to finance their conflicts that the nobility turned to the banking system, leading to the coupling of political and financial interests that suppressed the development of liberal societies.

So the “Box Score” reads as it is because capitalism is now revealed as a brief interlude in the narrow marriage of politics and finance. It was an interlude during which finance married itself to the production of value and the growth of liberal societies.

Regardless of the outcome, the 2020 election proves at least one thing: that Donald Trump is a symptom, rather than a cause. The disease that created him is a return to the festering myopia of political and financial calculations freed from a concern for value or sustainability. Trump is used as a tool by that system to distract attention from the wizards behind the curtain. He is a live facsimile of the special effects in the Wizard of Oz.

How does this manifest in practical terms? Consider real estate. I was told recently that I had to get in the market, because prices would only go up. Looking over the finance package, I noted with surprise that is allocated 50% of my income to real estate costs, rather than the 30% typical of my youth. So the reason that real estate prices are going up is because the Federal Reserve, through Fannie Mae and Freddie Mac, is issuing loans that allocate more of our income to the payment of interest. The increase in home prices has nothing to do with value – it follows from a systematic manipulation of political and financial levers to ensure that we are indebted.

But the fault is not with capitalism. Capitalism was a God-send. The fault is with something I would call “monetarism” – the pursuit of wealth in the absence of any concern for value.

The economic historian should recognize this plague. What should give pause to the rest of us is the proof, in the results of the 2020 election, that the disease is worse that an out-of-control pandemic that has the potential to kill millions of Americans.

I hope that our democracy survives while our liberalizing politicians adapt to that lesson.

Donald Trump, Really

Working overtime on Wednesday as a Census enumerator, I caught only a glimpse of the debate. Picking through the analysis the next day, I shook my head.

They still don’t get it.

The best thing about that debate was that the Trump-loving GOP finally confronted the daily reality experienced by those working in the White House. For the last eight years, the MAGA faithful have seen only what Fox News and heard only what Rush Limbaugh wants them to know about Trump. The man at the center of the MAGA cult is a media fabrication.

But the White House staff knows that to get anything done Trump has to be kept away. He doesn’t golf only because the Secret Service costs fund his country clubs, Trump golfs because they won’t give him anything meaningful to do.

Trump’s career was built upon his willingness to project himself into the public sphere. Until his father’s death, he was the public face of the Trump real-estate empire, and government and investors gave Donald access to get access to Fred. They heard Donald out.

But behind the blather was a team of people that prepped Donald with talking points and figured out which of the promises could be made true. Donald was happy to take credit for what worked, and quickly exorcised his failures.

This tendency was amplified on the set of The Apprentice, where he would explode arbitrarily during the meetings, and the producers would write and film a back-story to justify his performance. This is the true Trump: a man who expects that the world will conform itself to his will. The end result of coddling him, however, is a total divorce from reality.

I look at his signature, and feel only pity. He has no internal life, and overwrites himself in every moment while annihilating his past.

To understand Trump, read “The Autumn of the Patriarch.” Unless you are in Putin’s circle, because they recognized Trump’s malleability a long, long time ago.

A Hill of Beans to Die On?

Just finished listening to Maddow’s interview of Mary Trump.

I find the juxtaposition with Trump’s promotion of Goya beans to be unnerving. Hayes profiled the polling that shows that while Trump is heading for a disastrous loss in November, the majority of self-identifying Republicans consider their loyalty to be to Trump rather than the GoP. Trump’s falling poll numbers are thus an indication that those loyal to the GoP are exiting the party.

In this context, the only rational goal of the man who promised to “run the nation like a business” is to seek to cash in on his position. Investigative reporting shows that Trump is laundering money of uncertain origin through his golf courses. Given the misappropriation of inaugural funds, I would not be at all surprised to learn that Trump is siphoning money from his re-election campaign into his private accounts.

The promotion of Goya beans from the Oval Office is of a piece with this hypothesis. How much has Goya contributed to the Trump campaign?

I suggested here that bookies would find it profitable to run a lottery on Trump’s state of refuge following his departure from the White House. His lack of attention to the COVID crisis may reflect his acceptance of the fact that his loss is inevitable, a vicious punishment for the electorate that is betraying him. I think that following his loss, his only interest, between November and January, is going to be arranging his flight to a state that will guarantee him non-extradition.

Foaming at the Mouth

The degree to which the Republican grandees have abandoned the Constitution is revealed in their justification for suppressing mail-in voting:

If we allow mail-in voting, no Republican will ever be elected President.

Hello: last I checked, the United States was a representative democracy. That means that dogmatists can expected to be checked by the will of the people. When your policies make you unelectable, you need to change your policies.

In other words, what the Trump, McConnel, and their ilk are saying is “if we want to have another Republican president, we will have to abandon our corrupt crony-capitalism Federal racket.”

Which, actually, is just fine by me.

Indentured to Incompetence

When the Clinton Administration briefed the incoming Bush team, they emphasized the importance of sending a clear response to the bombing of the USS Cole. The Bush foreign policy team sneered, proclaiming the Cole a “Clinton failure,” and went merrily about strong-arming Russia and China to modify nuclear weapons treaties to allow the design, test, and deployment of a nuclear missile shield. Remembering the inanity of the designs promoted during the Reagan and Bush era, I shook my head. Some in positions of influence tried to trumpet warnings: Tom Daschle, Democratic head of the Senate majority, stood on the Capital steps late in the summer of 2001 to voice his concern that the Bush team was baiting the wrong bear.

Daschle’s priority was international Islamic terrorism. It took only a month for his fears to be realized, horrifically, with the event known now simply as “9/11.”

The cost multiplier for inaction was astonishing, and certainly enormously satisfying to bin Ladin and those inspired by his an example. A meaningful response to the Cole would have cost perhaps $10 million. The response to the coordinated attacks on the World Trade Center, Pentagon, and Congress – involving two wars, time-consuming and costly restrictions on travel, and interruption of international commerce – mounted into the trillions of dollars. For every dollar not spent on prudent prevention, we spent nearly a million dollars.

Swallowing their criticism, the rational party accepted the outcome of the Bush Administrations incompetence as “the new normal.”

Today, with the nation’s economy smothered by pandemic, the apologists for the Trump Administration insist that this is “the new normal.” But step back into the last Democratic executive, a man excoriated by Trump’s “Birther” movement, and we see that this is nothing normal at all. The Zika and H1N1 threats were effectively neutered by the Obama Administration. The total number of lives lost was in the low thousands, with no significant impact on the economy.

The lessons learned from those efforts were institutionalized in protocols for international cooperation led by a team directly in the White House itself.

While I respect the Office of the Presidency, my scorn for Trump is complete due to his utter contempt for the office itself. The Presidency is not a man, it is an institutional process for coordinated decision-making and action. Information is fed into the White House and plans flow out. Trump has not only besmirched the office, he has decimated the processes built over two hundred years to empower presidents to accomplish the nation’s goals. The motivation for those willful acts is Trump’s record of corrupt business dealings, evidenced even during his campaign as he attempted to wield his political prominence to influence civil cases already in progress. Once in office, he systematically bent the powers of his office toward destruction of the institutions assigned to prosecute his corruption.

While the politicization of the security and foreign policy services may be the longest-lasting of those institutional rapes, in real time we are finding ourselves again indentured to incompetence in the Executive Branch. Elimination of Obama’s pandemic action team left the world without a leader in the reaction to COVID-19. The early response to the disease has already cost trillions of dollars, and we can expect the death toll to rise toward 100,000 American lives. Millions of jobs have been lost under the weight of business failures. The obligations of missed payments and unfulfilled contracts will take years to unravel in the court system.

And Trump’s supporters shrug their shoulders and mourn “This is the new normal.” No it’s not. It’s the old abnormal. Wake up, and if you’re unwilling to vote for a Democrat, at least stay home until your party can prop up a candidate with at least minimal competence. I, for one, am tired of being indentured to your blind loyalty.

“We Will Get Through This”

No we won’t, Donald. Hundreds of thousands of us will get sick, perhaps 100,000 will be unable to resume their previous life because of lung damage, tens of thousands will die.

All because you did not act when the Democratic caucus advised you on February 5th that you needed funding to plan for the outbreak. All because you downplayed the danger and allowed people to continue to congregate. All because you did not act to ensure supplies and equipment were in place.

You can “play by instinct” and do your word salad and monitor your Tweet likes to find out what plays well with your base. You may escape blame. But the hospitals and governors will assemble the numbers and you will be called to account in the next election.

You said we’d “win so much you’ll get tired of winning.” Well we’re dying instead, and even Twitter won’t save you from that contrast when November comes around.

WTFU

I’ll re-iterate yesterday’s point in secular terms. Prior administrations, recognizing the disastrous costs of a future pandemic, established an office directly within the White House to ensure international coordination when new diseases are detected. This reflected recognition that the primary spawning ground is currently Southeast Asia. It is in tracking Asian outbreaks of influenza that we build our current flu vaccines.

Prior administrations used the White House office to prevent the spread of MERS and SARS and Ebola. The Trump Administration, in some kind of “Make America Great Again” isolationist pique, dismantled that office. Thus when COVID-19 reared its ugly head, there was no one to lead the response. Worse, the President downplayed the seriousness of the outbreak, and deflected blame to others when it began to make inroads in American communities.

The end result of this strategy was visible in yesterday’s CDC press release. In the most ridiculous display of sycophancy imaginable, the CDC head spoke fawningly of Trump’s initiative in helping to “flatten the curve” of infection. What this means, people, is that they recognize that the disease is out of control. 60-70% of Americans will be infected, with fatalities up in the high hundreds of thousands or low millions. Their only goal is to slow the rate of infection to avoid saturating the American health care system. If that happens, fatalities could reach into tens of millions.

To characterize this as a laudable outcome is simply absurd. That it is being touted in press conferences is tantamount to admission that Trump behind the scenes is threatening to fire anyone who does not flatter his leadership. He is holding the American public hostage to his ego. Obviously the President does not recognize that he abdicates leadership with statements that he’s “not responsible for anything.” Followed by “someone in my Administration did it,” it’s clear that his paranoia has grown from the “Deep State” to blanket his own people.

Those in the Republican Party who projected this faker into the Oval Office have much to answer for. You should have helped the Democrats throw him out on his ear.

Papa Bear is not a Bridge Player

The conservative media is playing up the notion that “No Trump” means that the Mueller investigation was a witch hunt.

The fact is that collusion with Russia has been proven in the Trump campaign – people have pled guilty and gone to jail for it.

Papa Bear picked those people to run his campaign. Even if he wasn’t guilty of collusion himself, he acted consciously to prevent the investigation from proceeding. He admitted on national TV that he fired James Comey because the Russia investigation was a “made-up thing.” That has been disproven.

Whether he is guilty of obstruction is unclear – he can always claim that he was simply acting based upon information provided by others. But you would have to be pretty clueless to believe that Trump didn’t knowingly hire a whole team of people that colluded with Russia, all while pursing a major and highly lucrative real-estate deal with Moscow, all while hiding tax returns that will show proof of collaboration in Russian money-laundering.

William Barr’s first act as Attorney General was to force the Mueller investigation to a close, and then give the President a clean bill of health. The Trump team and conservative media are on a full-court press, following Karl Rove’s dictum that “a lie told often enough eventually becomes the truth.”

And I recall the words of Revelation 13:

Who is like the beast? Who can stand up to him?

Woe unto you, America! This is no accident – this is a (P)Resident Evil.

Trump Pump and Dump

A “pump and dump” scam is a method used by unscrupulous investors to take money from “get rich quick” investors. It was common in penny tech stocks during the ’90s, and is openly advocated by virtual currency (“E-coin”) investors today.

Pump and dump starts by sending the victims a notice that an asset is “ready to move.” A large purchase is placed to drive up market valuation. When the victims pile on to take advantage of the “opportunity,” the price continues to rise. The scammer sells back into the market, reaping profits. When the victims run out of money, the asset valuation returns to its original value, leaving the victims with nothing.

Now we might not be terribly sympathetic to the get-rich quick investors, but it is worth noting that Trump has a history of association with Mafia pump-and-dump operators. With him as president, they have a bold opportunity.

This one relies on the futures markets using a technique called a short-sell. Organizations wishing to secure the price of an asset will place an order today, taking the risk that the price will fall in the future. A virtual seller can reap a profit by taking the risk, hoping that the price will indeed fall so that they can buy the asset for less than the buyer paid for it.

As the futures markets have evolved, they have come to include almost every financial asset, include stock market exchanges.

Now imagine that you have a president that likes to make threats of trade wars. You notice that the market drops like a bomb on the day of the announcement, recovers for a couple of days, then tanks again when a new announcement is made. Investors that know the timing of the announcements can short the index, reaping profits each time the market falls.

Of course, we don’t need such imagination. We have such a president, who excels at saying alarming things that destabilize markets. Now add his association with mafia market manipulators, and you have to wonder…how much money is his family making (including the Kushners) each time an announcement is made? How much money is Carl Icahn making?

President on the Couch

It was obvious during the second Bush presidency that Jr was working out his father-figure-issues in the Oval Office. He was fortunate to have a mother and wife experienced in managing fragile men, and it wasn’t until retirement that he began to paint pictures of himself in the bath tub.

As we watch ethics and legal issues whittle down Trump’s inner circle, we are seeing a narcissist exposed to the world. Trump lacks the resources of the Bush clan. He’s going to have a psychotic break.

Heaven help us.