Trump vs The Media: Fake News Edition

Last week saw the latest round in the war between President-elect Donald Trump and the News Media, with the Jim Acosta exchange in particular drawing plenty of attention. In case you live in a cave somewhere and missed it, here it is:

That moment, brandishing a respected news organization such as CNN to be ‘fake news,’ was perhaps a seminal moment. It was the culmination of a brutal back and forth which has lasted the better part of two years. While both sides relish this fight, the media as a class have, at times tried to act as though they have been innocent victims of a brutish Trump.

They accuse Trump of threatening the freedom of the press, a concept uniquely American and central to our way of life. Referring to the press conference, Esquire writer Charles Pierce called Trump’s performance that of ‘an aspiring American dictator.’

All of this, because Donald Trump is the first politician on the right in decades who can attack and defend himself just as effectively as his ideological opponents in the press do, and then some. Some in the media are finally starting to take note of this, and are scrambling to make sense of it. For the last 18 months and more, the media has persisted with its tired tactic of screaming ‘RACIST! SEXIST! HOMOPHOBE!’ at those expressing any opinion to the right of Mao, only to find that Trump was impervious to this tactic when it was tried on him.

Having lost that battle on November 8, the press lurched to the next strategy – delegitimize Trump’s victory. This came about via the promotion of Jill Stein’s recount effort (which ended up in Trump gaining votes), the justification of violent anti-Trump rioting across the country, the justification for the Electoral College to ‘vote it’s conscience,’ the popular vote, and more emphatically, the idea that Trump is some sort of Manchurian Candidate, personally installed by Vladamir Putin.

It is this Russian meme specifically which led to the Acosta moment last Wednesday, as the night before Buzzfeed published an unsubstantiated ‘dossier’ comprised of material collected by Donald Trump’s political enemies, which was implied to have been real intelligence, and put forth as evidence that the Russians had a trove of blackmail material against Trump. (more here)

It was a document which had been floating around political and news media circles for months, and because of the fact that virtually none of it could be verified, it was never reported on, until Buzzfeed decided to introduce it to the world. This set off a firestorm, which culminated in an angry Trump lashing out at the media, and the intelligence community.

The Acosta moment has seemingly woken up the media properly to the idea of Trump as a real force to be reckoned with. The analysis so far has been summed up as ‘Trump is trying to destroy the media by divide and conquer. We must band together and fight him.’

Slate writer Will Oremus goes through this argument in detail. After describing the way Trump singled out CNN and Buzzfeed for scorn over their reporting on the ‘dossier,’ while praising other news organizations (specifically the New York Times) for not running it, he surmises that it is tactical. He writes:

Trump’s words were tactical, not literal. And his purpose became clear during the Q-and-A: to isolate and punish the two specific news organizations whose coverage he found objectionable.

It worked. BuzzFeed was so anathematized that by presser’s end, fellow journalists were picking up their lunch trays and moving to the other side of the cafeteria. “I can understand why President-elect Trump would be upset” with BuzzFeed, said CNN’s Jake Tapper, a co-author of the very story that had just been impugned in the press conference. “I would be upset about it, too.”

Trump had exploited weaknesses—not just the tendency of the press to eat itself, but also its own status anxieties. In particular, he exploited traditional media outlets’ intense desire to be perceived as sober and objective, and thus to be respected by conservatives and liberals alike—a business imperative that has been transmuted into an ethical injunction.

This last point is particularly interesting. The genesis of the battle between Trump and the press is the ideological differences between the two, as I mentioned above. In a very broad sense, Trump is a traditionalist and a nationalist. The vast majority of the press are left leaning, and thus embrace a cultural Marxist, globalist world view.

There is nothing wrong with each side harboring those views; however the press, by virtue of its purported role as a distillery for the truth, has much less room to imbue ideology and engage in opinion. That’s why Editorial Pages were invented, but it seems as though that the entirety of the mainstream media has become an Editorial page.

The reason the media desires to be thought of as completely rational and objective is that because if it is not, it becomes merely just another source of opinion in an ocean of opinions. Preserving the view that the media deals in cold, hard analysis of the truth allows it to float angelically above the rest of us.

The reality is that the media is as biased and as opinionated as the rest of us. Of the publications that most people immediately think of when one thinks of ‘respected news organizations’ (New York Times, Washington Post, Boston Globe, LA Times, Wall Street Journal, ABC, NBC, CBS, CNN, and Fox News), only Fox News and the WSJ do not lean demonstrably to the left.

Indeed, many would scoff at the fact that I even included Fox News in a list of ‘respected’ news publications given it its place in American society as the butt of jokes about objectivity. That the most right-leaning publication on this list also is subject to the most scorn is exactly the sort of isolation and punishment that Oremus accuses Trump of doing to Buzzfeed and CNN.

On the ‘status anxiety’ of the media in general, he writes:

There are status anxieties and resentments within the media just as surely as there are in the electorate, and on Wednesday, Trump deftly seized on them. Americans’ trust in media is at a low point, thanks in part to a highly effective conservative campaign to discredit mainstream outlets as biased. Fake news, a phrase coined to describe fabricated stories devised by hoaxsters, has become the default conservative epithet for historically respected institutions such as CNN and the Times. For journalists at those sorts of outlets, who worked for decades to reach the summit of their profession, nothing could be more deflating. It gives them a pressing incentive to distinguish and distance themselves from less-esteemed outlets, including upstarts such as BuzzFeed, whose “irresponsible journalism,” as CNN’s Tapper put it, “hurts us all.”

Oremus puts the blame for the increased perception of the media as biased on an effective conservative campaign. The reality is different. As mentioned before, the contrast between the cultural Marxist globalism of the left, and the traditionalist Nationalism of the Trump Right underpins the current ideological battle for hearts and minds.

To that end, it is the former viewpoint which has the most currency in modern culture. Concepts such as equality, diversity, and tolerance, as defined by leftists, are the highest ideals sought. This cultural Marixist, globalist view has risen to the level of being the objectively rational way to view the world. The media, in all of its forms, has aided this ascent what is really mere opinion to the level of perceived inviolable laws of humanity over the last three or four decades and more. Trump, who is considered to be in constant opposition to the achievement of these leftist-defined values, has thus become an enemy.

The result has been a sort of Clown World in which expressing a view which does not comport with leftist orthodoxy is a marker for insanity. In that world, the media, by virtue of being leftists, are afforded the position of veneration it seeks, as arbiters of Truth.

This is why the ‘campaign to discredit mainstream outlets’ necessarily has to come from conservatives. That conservatives and mainstream outlets are opposition says a lot – the latter can hardly paint themselves as truly objective if they wholly reject any conservative view to the point it is considered insanity to hold such views.

The ‘fake news’ saga Oremus refers to is indicative of this point. Oremus laments the fact that the term has been transformed from referencing made-up news stories by hoaxers to being used to criticizing anything conservatives don’t like. That would be a fair gripe, until one notices that it was the mainstream media who first used the ‘fake news’ terminology as one of the many excuses as to why Hillary Clinton lost the election.

Actual fake news, as in Macedonian pranksters writing stories about the Pope endorsing Trump and spreading it on Facebook, were hardly consequential in terms of shifting the electorate into voting for Trump. For a start, the actual fake news mostly resided in the realm of social media, the domain of the young, who are both smaller in number and turn out to vote at lower rates than their elders. Furthermore, these older generationsstill get most of their news from ‘traditional’ formats, such as television, radio and newspapers.

The mainstream outlets cleverly paired the ‘epidemic’ of fake news on social media with the rise of the ‘alt-right,’ inserting the likes of Breitbart, Infowars and others into the fray when the discussion of ‘legitimate news’ was being had. Consider this article from The Guardian, which leads with the following subheading:

The ‘alt-right’ (aka the far right) ensnared the electorate using false stories on social media.

In the aftermath of the election, lists like this one from a liberal professor were widely disseminated, but lumped opinion sites which leaned Right in with the fake news. This New York Times article in part disparaged Mark Dice, a YouTuber who regularly roasts progressives, in an article tiled ‘As Fake News Spreads Lies, More Readers Shrug at the Truth.’

In short, it was many left leaning, mainstream media voices that started using the term ‘fake news’ to reference any ‘hyper-partisan’ view from the right. The goal of that effort was to reestablish the Clown World Order I described earlier – Leftist views are objective reality, anything else, insanity. Such a drive was necessary thanks to the victory of Trump, a data point which called that Order into question in the most grand way possible.

To the extent there was a ‘conservative campaign’ to co-opt the ‘fake news’ terminology, it was merely a counterattack to this attempt to delegitimize non-left opinions. It succeeded because it had the truth on its side, in that leftists and rightist opinion is just that, opinion, and the mere fact that the former is in vogue does not render the latter to be illegitimate. Thus, the death of the term ‘fake news’ as a weapon.

Dossier-gate showcased a different sort of media warfare. CNN in particular went to great pains to justify its reporting, on the basis that it merely reported on the existence of said dossier, rather than the sordid details within.

However, by doing so, it made the existence of the document news, in a way in which hadn’t been done before. It was the equivalent of someone coming up to you and saying ‘hey, I know something that could totally change your life forever, but I can’t really tell you what it is.’ You’ve done that person no favors at all; in fact you’ve harmed that person by introducing something that will play on his or her mind until that secret information is revealed to them.

CNN may have not published the specific details, and even went to considerable lengths to repeat how unsubstantiated and unverified they were, but they did make it known exactly where such details could be found, nudge nudge, wink wink.

The goal was just to get the information out there in the public domain, because once there it could be used to stir up chaos. Remember, that this dossier was released after a lengthy campaign by the media and the intelligence community to paint Trump out as some sort of Russian state actor personally installed by Putin, a campaign which has been blared with unbearable loudness over the last few weeks in particular.

The Russians having compromising video of Trump cavorting with Russian prostitutes in The Ritz Carlton Moscow is fiction, but it is fiction that comports with the general post-election narrative of Trump-as-Manchurian Candidate, if you hold a predilection for that erroneous view. It allows the media to discredit Trump on the grounds that he was not legitimately elected, and in the future it allows the media to question any and every action of his it dislikes on the grounds that the action in question might be Trump just doing the bidding of the Russians.

Putin’s response to the dossier was classic, not because of him making light of the idea of Trump needing to indulge in prostitutes after having access to supermodels all his life, but for denouncing those who push the dossier as the worst sort of individuals:

Prostitution is an ugly social phenomenon… But those people who organize such frauds, which have been circulated and promoted against the elected president of the United States, those who fabricate information and use it in the political struggle, they are worse than prostitutes, they have no moral limits.

Putin is absolutely right. In citing the fabrication of information to use in a political fight, he describes the way the mainstream media generally does business with respect to those it opposes. More importantly, however, it draws the mainstream media into the realm of the same ‘fake news’ domain it sought to relegate others to. This is what worries the media the most, hence the seminal nature of the Acosta spat.

I’m not saying that the media prints outright lies, although it has happened before. What the media does do more frequently, however, is to deal in willful misinterpretation, editorializing, and intellectual dishonesty. This is the only way you get narratives such as ‘Russia hacked the election,’ or ‘Trump committed treason by imploring the Russians to breach US national security by attacking Hillary Clinton,’ or the intentional mention of ’17 US intelligence agencies’ in nearly every report about the Russian hacking saga, solely done to give undue weight to what would follow, which was a statement of unverified opinion about who hacked what. It has been repeatedly stated that not one vote was tallied incorrectly, and Trump’s ‘call’ for Russian hacking was a tongue in cheek mocking of the media, when viewed in context.

Another blatant example of this was shown in the CBS reporting of the kidnap and torture of a disabled white teenager by four of his black peers in Chicago a couple weeks ago. The following report was given on a CBS radio station:

The viral video of a beating and knife attack in Chicago suggests the assault had racial overtones. CBS’s Dean Reynolds tells us the victim is described as a mentally-challenged teenager.

In the video he is choked and repeatedly called the n-word. His clothes are slashed and he is terrorized with a knife. His alleged captors repeatedly reference Donald Trump. Police are holding four people in connection with the attack.

That account is factually true, but it is constructed to convey something completely different to what took place. It starts by saying that the attack had a racial component before describing how the victim was called the n-word, with several references made to Donald Trump. Given that description, combined the narrative advanced by those on the left that Trump is a racist who wants to return black people to slavery, any listener would conclude that the victim was black and that the assailants were white, when in fact it was the other way around.

Even more spectacular is that this video, as the report notes, went viral. It was a widely discussed topic for several days so what exactly was this report trying to do by being do deceptive? In this light it reads as a petulant attempt to lash out at the destruction of a popular narrative.

This sort of brazenness is what colors the likes of Jake Tapper’s thinking, when he denounced Buzzfeed’s irresponsibility as ‘hurting us all.’ It completely exposes the game for the public to see, and makes it that much harder for the media to claim the solemn objectivity it craves. When the true, leftist views of many in the media are made so naked, more and more of the public recognize that most of these reporters are in the business of disseminating opinion disguised as news, and they’ll act accordingly, as shown already in diminished views of the media, as Oremus notes.

This phenomenon of the media exposing themselves as uniformly opinionated vis a vis Trump isn’t new – it has been a feature of his campaign. What is new are the heights to which Trump took the manner of his riposte this week – elevated by his stature as the elected President – when he referred to CNN as ‘fake news.’

This, in conjunction with Putin’s smackdown yesterday means that Putin and Trump, having access to the loudest megaphones on earth, are prepared to turn the ‘fake news’ moniker around on the mainstream media itself. Trump has already done this several times in his Tweets in addition to the Acosta moment. Even before that moment, some in the media saw the writing on the wall and were begging for the term to be gracefully put down. Too late. That’s an own goal the media will have to live with.

The reality for those in the media is that the two most powerful men in the world have positioned themselves as a traditionalist, nationalist tag-team who won’t fold under their pressure. And they control the bulk of the world’s nukes.

It’s little wonder why those cultural Marxist globalists in the media are squirming.

Fake News Reaches New Highs (Lows): Intelligence Dossier Gives New Meaning to ‘Yellow Journalism’

Is this what Chuck Schumer was talking about last week when he said that the US intelligence community had countless ways to strike back at Trump for daring to question them? Yesterday evening, CNN posted this article, about an alleged briefing of President Obama and President-Elect Trump concerning allegations that Russian intelligence had been collecting compromising information about Trump for years:

Classified documents presented last week to President Obama and President-elect Trump included allegations that Russian operatives claim to have compromising personal and financial information about Mr. Trump, multiple US officials with direct knowledge of the briefings tell CNN.

The allegations were presented in a two-page synopsis that was appended to a report on Russian interference in the 2016 election. The allegations came, in part, from memos compiled by a former British intelligence operative, whose past work US intelligence officials consider credible. The FBI is investigating the credibility and accuracy of these allegations, which are based primarily on information from Russian sources, but has not confirmed many essential details in the memos about Mr. Trump.

The classified briefings last week were presented by four of the senior-most US intelligence chiefs — Director of National Intelligence James Clapper, FBI Director James Comey, CIA Director John Brennan, and NSA Director Admiral Mike Rogers.

One reason the nation’s intelligence chiefs took the extraordinary step of including the synopsis in the briefing documents was to make the President-elect aware that such allegations involving him are circulating among intelligence agencies, senior members of Congress and other government officials in Washington, multiple sources tell CNN.

Things really kicked off when Buzzfeed decided to publish the entire 35 page memo. As the New York Times pointed out in its piece, the existence of the document had been known in Washington DC circles for months now:

The chiefs of America’s intelligence agencies last week presented President Obama and President-elect Donald J. Trump with a summary of unsubstantiated reports that Russia had collected compromising and salacious personal information about Mr. Trump, two officials with knowledge of the briefing said.

The summary is based on memos generated by political operatives seeking to derail Mr. Trump’s candidacy. Details of the reports began circulating in the fall and were widely known among journalists and politicians in Washington.

The first thing to note is that there are a lot of words like ‘alleged,’ ‘unsubstantiated,’ ‘unconfirmed,’ and of course the sources are vague ‘senior officials,’ and British and Russian ‘intelligence operatives.’ In short this is one giant pile of innuendo. Indeed, as the New York Times points out, this story has been circulating for months. Earlier this morning, Tom Brokaw, speaking on Morning Joe on MSNBC, stated that he had received this information four months ago. He and his team tried to verify it, and could not, which rendered the story ‘unreportable,’ to use his word.

Other journalists came out on Twitter implying they had been approached with the story, including Julia Ioffe.

Apparently, the Clinton campaign had the memo as well, but obviously didn’t use it. That a Trump-hating Russophobe such as Ioffe couldn’t be persuaded to run a story that surely is the stuff of dreams for her, let alone the Clinton campaign, which could have easily ended Trump’s chances had this been true, is a clear sign that the story is garbage. Furthermore, if the likes of Tom Brokaw had it, all of the ‘top’ news organizations had it, and like Brokaw, none could verify the story to a ‘reportable’ level.

So why is it leaking now? To this point we’re not entirely sure, but there are some interesting theories. It starts with the fact that the document itself reads like opposition research from Never Trump Republican types and the Democrats during the election. The Never Trump angle of this is particularly of interest, given the following Pastebin:

On january 10, Buzzfeed posted a story under the byline of Ken Bensinger, Mark Schoofs and Miriam elder titled “these reports Allege Trump Has Deep Ties To Russia” and posted a link to a document alleging, among other things, that russia has been cultivating trump for 5+ years, that trump has been in constant contact with the kremlin for information on his opponents, and perhaps most inflammatory, that there are many recorded instances of blackmail of trump in sexual misconduct. A prominent claim is that trump rented the presidential suite of the Ritz Carlton Hotel in moscow, where he knew that the Obamas had slept in; he them hired a number of prostitutes to perform a ‘golden shower’ (pissplay) on the bed and in the room.

Noted #nevertrump voice Rick Wilson later commented on twitter, stating that the report “gave a new meaning to Wikileaks” and that the report was the reason everybody was fighting so hard against the election of Trump.

The remarkable thing? It’s all fake. And not only fake; it’s a prank perpetuated by 4chan, on Rick Wilson himself. A post on 4chan on october 26 stated “mfw managed to convince CTR and certain (((journalists))) on Twitter there’ll be an October surprise on Trump this Friday” along with a picture of a smug face with a hash name.

on november 1, a person without a picture but is assumed to be the same person posted “So they took what I told Rick Wilson and added a Russian spy angle to it. They still believe it. Guys, they’re truly fucking desperate – there’s no remaining Trump scandal that’s credible.”

on january 10, moments after the story broke and began to gain traction on social media, a person with the same smug grin face, and the same hash title for the picture, stated “I didn’t think they’d take it so far.”

This story has taken on something of a life of it’s own. Going through Rick Wilson’s twitter, you can find many different stories from the time that he had shown the story to a wide number of anti-trump news sources, trying to find a news organization that would actually publish the story. During that time period, he referred to it often as ‘the thing’, and often playing coy with followers on the content with the story with anybody who was not also a #Nevertrumper. Unconfirmed sources has people as high up as John McCain giving the story to FBI Director James Comey to attempt to verify the story. Given that Rick Wilson runs in Establishment circles, it is not an impossible scenario that long-serving senators are falling for what amounts to a 4chan troll trump supporter creating an ironic October Surprise out of wholecloth to punk a GOPe pundit who derogatorily referred to them as single men who masturbate to anime.

Leaving out the possible 4chan element (which would really take this saga into a new level of ignominy), and leaving out NeverTrumper Rick Wilson, consider John McCain. This article from The Guardian confirms that McCain forwarded this dossier to the FBI last month.

Now, consider the players here, and consider the nature of this dossier. On one side you have CNN, Buzzfeed, John McCain and the FBI (part of the Intelligence Community), and on the other side you have Donald Trump. This is basically a continuation of the same split which has been in place for the better part of two years now, in which the globalist, establishment interest in the media and in both major political parties have been fighting against a nationalist interloper in Trump who poses a threat to their standing.

Every single step of Trump’s rise has been met with severe resistance from this establishment group, their goal being to stop him from becoming president. Having failed at achieving that goal, they went on to delegitimize the President-Elect at every turn, by bringing up the meaningless popular vote, by heavily publicizing recount efforts in targeted states, by inciting post-election riots, and finally by hyping up the narrative that Russian involvement was at least partially responsible for Trump’s victory.

This latest dossier leak is an extension of that Russian angle, released at a moment just after the intelligence community released its ‘comprehensive’ report asserting that Vladimir Putin himself directed hacking attempts into the DNC to leak information with the view to assist Trump. This dossier, with its ‘compromising information’ is the next phase of the Russian involvement, seemingly showing that the Russians have Trump by the short hairs. In that, given the ‘fact’ that the Russians did the dirty work to get Trump elected, Trump better do what they say or else that compromising information would be released.

Note that this leaked hours before Rex Tillerson, Trump’s pick to run the State Department, is set to have his confirmation hearings. Tillerson has been criticized for his ‘soft’ stance on Russia. The circus created by this dossier leak simply muddies the waters for his confirmation hearings. It will certainly be brought up in the hearings, and Tillerson will be grilled about it.

McCain being involved in this sort of thing is not surprising, but it should really highlight what is going on here. McCain and the globalists, which include leftist politicians and the leftist media, really hate Russia. This story has shown that this Russian antagonism in those quarters has gotten to a point that any slight information, regardless of how absurd it is on its face, is jumped upon as though it were a smoking gun. These interests seemingly won’t rest until there is nuclear war with Russia.

CNN and McCain in this instance are proxies for the wider globalist interest, and in concert with the intelligence community (the much maligned ‘deep state’), it has taken its fight with Trump to the next level. It’s a sign that, despite its defeat, the globalist interest has no plans of relinquishing its place in the world. It is also a confirmation that Trump really is a threat to that order.

But the farcical nature of the information itself renders the whole gamut to be impotent. Yes, in the eyes of the unthinking masses, it may look as though Trump is a Manchurian Candidate. And given that half of the American electorate sides with the Republican and Democratic establishment, the media, a politicized intelligence community, as well as academia in hating Trump and everything he stands for, the slightest of improprieties, real or perceived will be taken to the highest of heights in no time.

This is exactly what happened on Twitter last night in the wake of the Buzzfeed release. The millions who dislike Trump immediately jumped on it, uncritically and dutifully believing that he hired Russian prostitutes to pee on a Muscovite bed that President Obama may have slept on years ago. It goes beyond wishful thinking, and highlights the deluded nature of the anti-Trump crowd.

The irony is that the same globalists, backed by the intelligence community, accused the Russians of interfering in our election in part by creating chaos, when those same interests have been interfering with the start of the Trump era by creating chaos over questions of his legitimacy.

The final aspect of this is the media. As stated before, this dossier had been making the rounds for months, yet it was such nonsense that no respected journalist could run with it. CNN took the plunge yesterday, and when it, a ‘respected’ name had already gone out with the story, other mainstream outlets were almost obliged to follow, in fear of losing clicks, ad revenue and so on to CNN and Buzzfeed. CNN gave them cover, as long as they made a reference to the original CNN report.

Without being dramatic, we are potentially seeing another nail pounded into the coffin of the mainstream press. As mentioned before, they conspired to take Trump down from day one. Having lost that fight, they blamed it on every outside factor they could think of, including the now maligned ‘fake news,’ which they defined as any news item or opinion which ran counter to their world view.

To this end, consider this tweet from Donald Trump, in response to the leaks:

Trump, the President of the United States, referring to mainstream, leftist organizations like CNN and Buzzfeed as ‘fake news,’ is further driving home the current divide that exists. The already waning trust of the public in these institutions will continue to slide. This tweet also highlights Trump’s unique trolling ability, adding in the ‘Nazi Germany’ swipe, which is relevant given that the leftist old media continually compared him to Hitler. Using this story to reframe the situation as the ‘lugenpresse’ having one last shot at him outlines his mastery of the media.

In any case, by putting forth this dossier as a real news story, the old media has forever ruined its right to be the arbiters of ‘fake news,’ if it ever had that right in the first place. Indeed, just the other day, the Washington Post was begging the public to retire the term, having observed that it had been overrun by those on the right, who were correctly redirecting the term to mean ‘the intellectually dishonest drivel emanating from old, legacy media,’ not to mention the outright lies that publications such as the WaPo themselves post.

This saga is yet another example, and given the nature of the salacious details involved, gives new meaning to the term ‘yellow journalism.’

Election Influencers, Part 2

Yesterday, I wrote about the DNI report which was released over the weekend which declared that the Russians had influenced the 2016 election by hacking into the DNC and John Podesta, among others, as well as putting forth pro-Trump ‘propaganda’ on their state backed television networks.

I described how the charge as presented by the intelligence community is absurd; in short the fact that RT or Sputnik put forth a pro-Trump opinion, to mostly a Russian audience, speaking in Russian is hardly the most effective means to affect the US election. With respect to the leaked documents, those documents and emails were legitimate, as confirmed by the report, and thus merely exposed the bad actions that the DNC and the Clinton campaign engaged in. The net effect of ‘Russian involvement’ was more transparency and a more informed electorate, something which the US press and its lawmakers claims they are forever working to achieve.

The response by the media, and most lawmakers has been quite different. The prevailing attitude can be summed up by former CIA acting director Michael Morell, who said last month that the Russian intervention (whatever it actually was, if anything) was an ‘existential threat to our way of life’ which was ‘the political equivalent of 9/11.’

Such heightened language has become par for the course for analyzing this topic for purely political reasons. This politicization tabled by Brian Stelter in this interview with Glenn Greenwald:

After declaring that it is a possibility that there was Russian involvement, Greenwald had this to say about having blind trust in the intelligence community:

…but there’s a lesson, a really critical lesson that I thought we had learned back in August 1964, when the US Senate stood up and authorized Lyndon Johnson to escalate the war in Vietnam with two dissenting votes, based on the intelligence communities’ claims about what happened in the Gulf of Tonkin which turned out to be total false, and the same lesson in 2002 when a group of bipartisan senators assured the nation that the intelligence community convinced them that Saddam had weapons of mass destruction and was in an alliance with al-Qaeda, and the same lesson we learned in 2013, when just months before the Snowden reporting, James Clapper, President Obama’s top security official, lied to the faces of the country when he said he wants to assure the country that the NSA doesn’t collect data  on millions of Americans.

And that lesson is, we don’t just blindly and uncritically accept the claims of the intelligence community, especially provocative claims about a foreign adversary without seeing convincing evidence presented by them that those claims are true, and we absolutely have not seen that in this case.

Greenwald is absolutely right here, yet on this issue the narrative has been established that one has to blindly and uncritically accept whatever the intelligence community says or else there will be big problems. Here’s Morell, speaking on Face the Nation yesterday:

If the men and women of CIA don’t believe the President is listening to what they have to say, to the facts the put on the table, and the fact based analysis they put on the table, their interest in working there will go way down.

[…]

The other practical effect it has is that we tell people who are spying for us, who are actually putting their life on the line to spy for us, that their information is going to the highest levels of our government, and is being used to make the world a better place. If we can’t tell spies that, if they see that on TV, they’re not going to spy for us. So I think there are significant effects if the disparagement continues.

With respect to this particular instance, the ‘fact based analysis’ put forth by the intelligence community, that revealing the truth about the rigged game the DNC was playing constitutes foreign meddling in our electoral process, to the point that we face an existential threat to our way of life, is hard to take seriously. Morell’s interpretation that having such a reasonable second guessing of the intelligence analysis could lead to a sort of mutiny in the ranks of the CIA can only stem from a political bias.

Greenwald makes this point in later his interview with Stelter, noting the fact that Republicans put forth the idea that not agreeing with the intelligence community when they advocated war in 2002 was unpatriotic. Recall George W. Bush’s repeated utterances of the phrase ‘you’re either with us or against us’ in making his case. Democrats at the time were highly skeptical of intelligence, in their general stance against war.

It seems as though the roles have reversed today, with Democrats beating the drum for retaliation against Russia for meddling in the election. However, the political fault line causing the divide is not necessarily Republican versus Democrat. It is anti-establishment nationalists versus establishment globalists. This explains why the likes of John McCain, Lindsey Graham, and pundits such as David Brooks are all on the same side as Adam Schiff, Hillary Clinton, President Obama and the entirety of the mainstream US press.

Trump’s victory was a tremendous blow to this globalist set, and they have sought to strike back by in delegitimizing Trump’s presidency. They are in opposition to Russia, for varying reasons, which I’ve outlined before. The media, which is the mouthpiece for that establishment globalist view, has worked overdrive in recent weeks to heighten magnitude of what may or may not have happened with respect to the election, playing on patriotic feelings of the electorate to undermine President-elect Trump.

By creating this cloud of doubt around Russian involvement, the globalist defeat can be mitigated. The goal is to grind Trump down to a point where he ‘acknowledges’ that Russians may have played a role in the election. The second he does that, the intellectually dishonest narrative will be spun furiously. You can almost see the New York Times headline should Trump ever give in to some of these claims:

‘TRUMP HAS ADMITTED VLADAMIR PUTIN PERSONALLY INSTALLED HIM AS PRESIDENT’

It would be a box that would forever constrain his presidency, as anything he would hope to accomplish would be dogged by concerns about ‘Russian handlers,’ and the like. The globalists would have achieved their goal of a neutered Trump presidency. Trump is right to resist the intelligence conclusions to this point.

As for the media and lawmakers, their naked politicization of this issue will continue to harm their credibility. A facet of the intelligence report was focused on RT, the state-owned media outlet which was accused of disseminating pro-Trump ‘propaganda.’ This continues in the line of ‘fake news,’ which was a concept established after the election as an excuse as to why Hillary Clinton did not win.

‘Fake news’ is better described as ‘opinions the establishment media disagrees with,’ as evidenced by the outrageous treatment of Beppe Grillo, the outspoken Italian politician. Last week, he had the temerity to put forth his opinion that the mainstream media was the biggest purveyors of fake news themselves.

His views were met with massive backlash from globalist politicians, one of whom declared that the idea that random members of the public should decide what is and isn’t fake news ‘is called Fascism, and those who play to down are accomplices.’ His opinions and solutions were hailed as Mussolini-like. This shows you the state of mind of the globalist set. They put forth a set of options: agree with their consensus opinion, or be declared a fascist dealing in fake news.

Meanwhile, one of the organizations deemed to be ‘real’ news, the Washington Post, has just been caught publishing the most fake of fake news stories, accusing the Russians of hacking into the electric grid. Virtually every word of that article is false, yet the Post went with it enthusiastically, as it is in line with their globalist view.

The inflammatory nature of that claim that the Russians were tampering with the electric grid is orders of magnitude greater than anything that the Russians may have done in terms of hacking. It is potentially an offense warranting a military response. Yet the globalists have no qualms in falsely fanning these flames because it is in their interest.

In this vein, consider the following video from Chuck Schumer last week, in regards to the ongoing row between Trump and the intelligence community:

Shockingly, Schumer all but threatens Trump that his stance against the intelligence community would provoke retaliation by the intelligence community against Trump. It truly is a stunning thing to say, that the American intelligence community would literally strike back against the American President, as though they are mortal adversaries, all over a mere difference in opinion.

However, once you introduce the political aspect, and beyond this the ideological difference between the globalists and nationalists that trumps everything, such claims make a bit more sense.  Globalists such as Schumer, McCain and the mainstream media care more about preserving their power and the propagation of the globalist ideology than what is best for the American people. To them, saber rattling for World War 3 with nuclear-capable Russia is superior to allowing the nationalist bent of Trump and Putin to run unchecked, despite the latter having the potential to achieve real peace and prosperity for the respective peoples of the United States and Russia.

As more and more people on the ground understand these concepts, the credibility of the media and the globalist politicians they shill for decreases and decreases.

Election Influencers

This past Friday, the US intelligence community released what the New York Times would later call a ‘damning report’ about their findings with regards to the involvement of Russia in the US election. This issue was a hot subject of contention over the last 6 months or so of the election, with the multitude of WikiLeaks and other revelations from the Democratic National Committee showing the organization to be corrupt, and in many cases working in league with mainstream media outifits to its own ends.

In the wake of Hillary Clinton’s defeat, the media and the DNC beat the ‘Russians hacked the election’ drum ever louder. Some establishment Republicans, such as John McCain and Linsey Graham cottoned on to this as well, perhaps hoping to parlay these allegations into the increased US military offensive they’d been dreaming about.

All of this noise set up the report that was released by US intelligence on Friday. It was a de-classified effort, which aimed to outline exactly what the Russians did to influence the US election. Both the report itself, and the media coverage of the report and the issue generally are important to analyze with respect to the larger issue of a legitimate Trump presidency, and beyond that, a political intelligence community and heavily biased media.

Analyzing The Report’s Findings

The meat of the report begins as follows:

We assess with high confidence that Russian President Vladimir Putin ordered an influence campaign in 2016 aimed at the US presidential election, the consistent goals of which were to undermine public faith in the US democratic process, denigrate Secretary Clinton, and harm her electability and potential presidency. We further assess Putin and the Russian Government developed a clear preference for President-elect Trump. When it appeared to Moscow that Secretary Clinton was likely to win the election, the Russian influence campaign then focused on undermining her expected presidency

Given that the report was declassified for public consumption, it makes note of the fact that it could not be very extensive in terms of providing direct evidence as this would betray some of its ‘collection’ methods and perhaps compromise sources. Thus, phrases such as ‘assess with high confidence’ are littered throughout the report in lieu of concrete evidence. In short we’re supposed to just take their word for it that the conclusions reached are valid.

According to the report, Putin masterminded an influence campaign aimed at altering the US election by undermining faith in the electoral process and harming Clinton. The Russian government had a preference for Trump, and when it looked as though Clinton would win they focused on stopping her.

If that warrants a deeper look by US intelligence agencies with a view to determining foul play, then surely the actions of the ‘globalist influence campaign’ require a second look as well. After all, the Russian government was not the only foreign entity which was shown to have a clear preference for one of the candidates in the 2016 election.

Hillary Clinton says foreign leaders are privately reaching out to her to ask if they can endorse her to stop Donald Trump from becoming president of the United States.

“I am already receiving messages from leaders,” Clinton told an Ohio audience at a Democratic presidential town hall on Sunday night.

“I’m having foreign leaders ask if they can endorse me to stop Donald Trump.”

The likes of Matteo Renzi of Italy (when he was still PM), and Francois Hollande of France did so publicly, and many other former heads of state such as Tony Blair and Vicente Fox did as well. UK Parliament was forced to debate a motion to ban Donald Trump from the country, after receiving the requisite number of signatures to a petition.

Furthermore, in the vein of the reports’ allegation that the Russians tactically switched focus when they thought Clinton was set to win, when Trump actually won the election, the focus of the ‘globalist influence campaign’ switched to undermining his presidency.

Nationwide rioting, Jill Stein’s recount effort, the focus on getting the Electoral College to ‘vote its conscience,’ and of course the Russian hacking angle, were all tools used to undermine the incoming Trump presidency by planting the seed that something was ‘wrong’ with outcome on November 8. To date, I haven’t seen much in the way of outrage at this blatant attempt to question Trump’s legitimacy, let alone official intelligence inquiries.

The report continues on, painting a picture of a Russian revenge plot, seeking retribution for the US-backed release of the Panama Papers, as well as the Olympic Doping scandal. Putin personally is supposedly holding a grudge against Clinton for negative comments she made about him back in 2011 and 2012.

The report says that Putin preferred Trump owing to his ‘stated policy to work with Russia’ (the horror) versus ‘Secretary Clinton’s “aggressive rhetoric.”’ Yes, intelligence community, Secretary Clinton’s insistence on a no-fly zone above Syria, an action which US Generals are adamant would lead to war with nuclear-powered Russia, qualifies as aggressive rhetoric. No need for the dismissive quotes. The report continues:

Moscow’s use of disclosures during the US election was unprecedented, but its influence campaign otherwise followed a longstanding Russian messaging strategy that blends covert intelligence operations—such as cyber activity—with overt efforts by Russian Government agencies, statefunded media, third-party intermediaries, and paid social media users or “trolls.”

By ‘cyber activity,’ the report suggests that hackers such as Guccifer 2.0 obtained access to the DNC over a period of at least a year, and leaked the information it gathered to organizations such as WikiLeaks, which are also alleged to have had ties to the Russian government. The report alleges that Guccifer 2.0 is actually a Russian, and not a Romanian as is claimed.

One of the most important lines in the entire report is as follows:

Disclosures through WikiLeaks did not contain any evident forgeries.

In other words, the content that was released by the leaks was true. As for statefunded media, this ‘Russian Propaganda’ section of the report details the efforts of the likes of RT and Sputnik:

Russia’s state-run propaganda machine—comprised of its domestic media apparatus, outlets targeting global audiences such as RT and Sputnik, and a network of quasi-government trolls—contributed to the influence campaign by serving as a platform for Kremlin messaging to Russian and international audiences. State-owned Russian media made increasingly favorable comments about President-elect Trump as the 2016 US general and primary election campaigns progressed while consistently offering negative coverage of Secretary Clinton.

Starting in March 2016, Russian Government– linked actors began openly supporting President-elect Trump’s candidacy in media aimed at English-speaking audiences. RT and Sputnik—another government-funded outlet producing pro-Kremlin radio and online content in a variety of languages for international audiences—consistently cast President-elect Trump as the target of unfair coverage from traditional US media outlets that they claimed were subservient to a corrupt political establishment.

[…]

RT’s coverage of Secretary Clinton throughout the US presidential campaign was consistently negative and focused on her leaked e-mails and accused her of corruption, poor physical and mental health, and ties to Islamic extremism. Some Russian officials echoed Russian lines for the influence campaign that Secretary Clinton’s election could lead to a war between the United States and Russia.

If positive coverage of Trump by Russian media is deemed to have been a factor in nefarious intervention in the US election, then the overwhelming negative coverage of Trump by US media is also such an attempt to influence the election. Consider this chart, obtained from the Washington Post.

This overwhelming negative bias by US media has not been classed as an attempt to install Hillary Clinton as president in the way the converse claim has been, let alone received any closer scrutiny by intelligence agencies.

It was through the leaks themselves that the public learned of the ways in which the media coordinated with the Clinton campaign. Multiple reporters, including Glenn Thrush of Politico and John Harwood of CNBC were caught colluding with the Clinton campaign, allowing it to shape their reporting. Then DNC chairwoman Debbie Wasserman-Schultz was observed threatening MSNBC anchor Mika Brzezinski over her coverage of Hillary Clinton.

Despite the report characterizing the paradigm of press as subservient to a corrupt political establishment to be propaganda, the leaks showed that this is exactly what happened.

That comprised about half of the meat of the report. The other half was almost entirely focused on RT specifically, breaking down its political views, TV show lonely, and metrics such as its YouTube and Twitter subscribers.

As mentioned before, there is no hard evidence of any claim made in the report, and many of the claims are conjecture based on inferences and critical interpretations of fact. As discussed before, the leaked information was all true and beyond that, the report also contained this important line, with respect to Russian alleged targeting of US election boards:

DHS assesses that the types of systems we observed Russian actors targeting or compromising are not involved in vote tallying.

Again, the information which was leaked was true, and not one vote was tabulated incorrectly.

Media Response

As such, any media outlet which has used phrases such as ‘Russia hacked the election’ have been deliberately obfuscating fact. The Russians did not change the vote totals, nor did they put any pressure on any individual to vote one way or another.

At the very most, the Russians used their media outlets to express their views on Donald Trump and Hillary Clinton, and beyond this, Russian actors may have leaked pertinent, factual information in that regard. In terms of Russian media, expressing a pro-Trump, or anti-Clinton view is not propaganda as is claimed in the report, but merely expressing a political opinion.

RT or Sputnik have not done any different to the New York Times, Washington Post, ABC, NBC or CNN in terms of offering opinionated coverage of the election. If RT can be classed to have ‘influenced’ the election, in the pejorative manner that it has been accused, so too has the NYT and CNN influenced the election in this same manner.

Furthermore, RT and Sputnik together have nowhere near the level of influence over the American voter that the likes of the NYT, WaPo, ABC, NBC, CNN, CBS, the LA Times, Wall Street Journal, Boston Globe, and Fox do, in total, not to mention foreign outfits such as the BBC, The Guardian, Der Speigel and Al Jazeera. The efforts of that collective favored Hillary Clinton on balance, not Donald Trump. Yet US intelligence and those media outlets themselves are asking the American public to believe that plucky RT and Sputnik outweighed them all, to such a degree that it tipped the scales for Trump.

As for the leaked content, it bears repeating – none of it was false. The intelligence report confirmed it, as did the victims of the leak by not challenging the veracity of the emails themselves. Not one person piped up to say ‘Hey! I didn’t write that!’ Debbie Wasserman-Schultz was forced to resign as DNC chairman owing to the fact that the coordination among the DNC to boost Hillary Clinton at the expense of Bernie Sanders was true.

In short, what these Russian (to the extent that they were Russian) leaks showed was that the DNC and the Clinton campaign were running a corrupt operation, which used the power structure of the Democratic Party to freeze out Bernie Sanders, and tried to use the media power structure to do the same to Donald Trump.

The leaks exposed the fundamentally un-American position Hillary Clinton held with respect to things such as international trade and open borders. It exposed the dubious links between Clinton, her global charity foundation, and favors done for foreign businessman, politicians and other dignitaries, implicating her as using her position as Secretary of State to personally enrich herself selling influence to foreigners.

This was all pertinent information to the American electorate. As such, the media and the intelligence community are in effect saying that it was wrong for the American electorate to know about the duplicitous and perhaps illegal activities engaged by Clinton and her campaign. It is an argument for a less informed electorate.

On top of all of this, the manner in which some of the leaked information was obtained  presents another side to the story. It was not mentioned in the report, but it is widely accepted that John Podesta was the victim of a basic phishing attack which compromised his email account. This Vox article explains what happened in further detail. In short, it was Podesta’s incompetence which was more responsible than any other factor for his emails falling in the hands of those that would leak them. It is a relief that the likes of Podesta are no longer in the halls of power on this basis.

This hasn’t stopped the media angst. From the NYT article describing the report (emphasis mine):

President Vladimir V. Putin of Russia directed a vast cyberattack aimed at denying Hillary Clinton the presidency and installing Donald J. Trump in the Oval Office, the nation’s top intelligence agencies said in an extraordinary report they delivered on Friday to Mr. Trump.

The officials presented their unanimous conclusions to Mr. Trump in a two-hour briefing at Trump Tower in New York that brought the leaders of America’s intelligence agencies face to face with their most vocal skeptic, the president-elect, who has repeatedly cast doubt on Russia’s role. The meeting came just two weeks before Mr. Trump’s inauguration and was underway even as the electoral votes from his victory were being formally counted in a joint session of Congress.

Soon after leaving the meeting, intelligence officials released the declassified, damning report that described the sophisticated cybercampaign as part of a continuing Russian effort to weaken the United States government and its democratic institutions. The report — a virtually unheard-of, real-time revelation by the American intelligence agencies that undermined the legitimacy of the president who is about to direct them — made the case that Mr. Trump was the favored candidate of Mr. Putin.

The voluminous, dramatic writing in this, the opening three paragraphs of the article, is amazing when juxtaposed with the ‘substance’ of the report – that showed that Russian media had a favorable opinion of Trump, and that Russian hackers potentially leaked accurate information pertinent to the election. Through Michael Creighton-level spy thriller narration, the media has pyramided this into a tall tale of international espionage, warranting a counter attack of sanctions and perhaps more.

This fiction is intended to undermine the legitimacy of Trump’s presidency, just as the report itself. By hyping up the scale of Russian involvement, consistently dropping in phrases like ‘the disruption of our ELECTORAL PROCESS’ to highlight the sanctity of what was done, the media establishes an Us vs Them scenario vis a vis Russia, a country with which we already have priors.

The media then takes the next step and attacks Trump, who has been consistently skeptical of the Russian hacking angle. That the dramatization of the Russian involvement has a shred of truth embedded in it has allowed media pundits to be driven into a frenzy, tripping over themselves to express their shock that ‘Trump is ‘siding’ with a HOSTILE foreign power over US intelligence!!’

What is truly shocking is the fact that the media, and the intelligence community is siding with agitators for war such as McCain and Graham, all because Hillary Clinton, the media’s favored candidate also sided with the warmongers, as discussed before.

It is little wonder why Putin favored Trump – he was the candidate which wants cooperation with Russia. As I’ve discussed before, cooperation with Russia is a non-starter for the globalist influence campaign waged by leftists, which detests the country for its refusal to play ball with American hegemony geopolitically while rejecting imposing Cultural Marxist dogma on its people.

As a result, Russia has been fashioned, incorrectly,  as the mortal enemy of the United States once again. Fake news indeed.

Trump’s Greatest Challenge

…will be restoring the American economic machine to its former glory. To the extent he is able to achieve this, a lot of ills that may crop up elsewhere may be forgiven. Trump’s economic progress will be especially important from a political sense given the fact that Trump is the ‘change’ candidate. He ran, and was elected on a promise to shift away from the status quo in all aspects. Should the Trump economic doctrine fail, it will poison the anti-status quo rhetoric which won him the presidency for decades to come. It will potentially open the door for a complete and total return to power for the ‘establishment’ forces in a way that may be more damaging than if Hillary Clinton had won instead. That underscores how important it is for Trump to get the economics right.

As I write this, we are in the midst of a post-election victory haze which has seen the stock market make new highs virtually on a daily basis. Stock in commodities and manufacturing have risen by upwards of 50%. Trump himself has lauded the reaction in stocks since November 8 as a validation of his election.

In some ways he is correct. Should he enact his policies, especially the cutting of corporate taxes and reducing regulations, the business environment in this country will improve, which will lead to greater profitability and thus higher stock valuations.

The issue is that the market correctly assigning higher stock valuations to publicly traded companies is happening in an environment in which these valuations were already in the realm of the absurd. Indeed, Trump himself lamented the fact that the stock market was in a giant bubble on the campaign trail, calling it a ‘false’ stock market. Now that he has won, and stock prices have rocketed even higher, Trump is being inconsistent in his praise for what can only be described as the bubble getting even more absurd.

What has driven this bubble to its current heights has been the torrent of debt unleashed on the economy over the last 7+ years. This debt, in turn was facilitated by the depressing of interest rates to levels not seen in the history of the developed world, for nearly a decade, without interruption. Sticking with the United States, the Federal Reserve quintupled the size of its balance sheet, which enabled the totality of credit outstanding to continue to expand, in the manner it has done for the better part of four decades.

The result has been the restoration of the 2008 bubble, the popping of which led to so much destruction. What is important to note is that this bubble, like all bubbles, will pop. The only question is the needle which pricks it. It very well might be the Federal Reserve, which is set to raise interest rates at its meeting next week. It might be the plunging of the economy into a full blown recession, which is a natural part of economic cycles, but truly devastating when a bubble has been the foundation of the preceding period of growth.

Regardless of how it starts, the fact is that one peach of a smash is inevitable. This is because of the fact that as it currently stands, the US economy employs a debt driven consumer spending model as its method for achieving economic growth. This sort of model relies on constantly expanding debt, and constantly rising prices. These are two facets which are unable to endure indefinitely, much in the same way it is impossible for a human being to naturally propel oneself through the air indefinitely without gravity asserting itself at some point. From an earlier piece I wrote on the subject:

At some point, markets can’t support prices at the high levels producers need to set, which in turn leads to prices falling, profits falling, trouble servicing debts, liquidations, and layoffs. Yet, the solution presented by mainstream economics is to guide prices higher again.

All actors in the economy, from the government, to households to business are currently over-indebted.

As a result we are getting closer to the point when there will be no one left to take on the new debt required to push prices ever higher, in order to keep the ‘growth’ going. As this become more and more apparent, prices will start to fall, loans will become bad, bankruptcies will rise, and all the rest of it. Then the political game truly begins.

The economic carnage will be universally blamed on Trump, and it will not be a difficult story to sell. The surface level thinking will show that the economy was ‘fine’ under Obama, with rising stock prices, rising GDP, home prices and employment levels, a reduction in the deficit and so on. The fact that these metrics are superficial, and easily gamed by the cheap money which will have evaporated in the downturn will be overlooked.

It is at this point that the most pivotal moment in Trump’s presidency will arrive. He will have to choose between attempts at reflating the burst bubble, and allowing market forces to play out, and then rebuilding on the new landscape that forms thereafter.

The standard politician has always taken the former route. It is the route of political expedience, the route of slavish devotion to abstract metrics such as GDP. The last two administrations have done exactly that. In the wake of burst Internet and Housing bubbles, the Bush and Obama administrations respectively, in conjunction with the Greenspan and Bernanke Federal Reserves ‘stimulated’ the economy via a lowering of interest rates and dramatic increases of debt. The debt taken on under the Bush administration equaled that of the cumulative debt of every president prior to him. Eight years on, President Obama matched that dubious achievement.

The consequence of allowing market forces to run their course would have been catastrophic, in fairness. This is largely because the multi decade advance of asset prices was also the savings vehicle for many in the Baby Boom generation. For decades, they had not had to build real, legitimate savings because asset prices were always rising. When the time came to retire, conventional wisdom held, it was simply a matter of selling the assets and living happily ever after. That all changed when the bubbles burst, particularly in 2008. For many Boomers, their retirement nest egg had been wiped away, or at least severely diminished, just at the very moment they needed it.

The actions of world governments and central banks in attempt to reflate the bubble was in some sense a refusal by the Boomer generation to accept their mistake, demanding that economic gravity be defied indefinitely until they were made whole again.

These actions were able to ‘fix’ the problem in the short run, but are fundamentally inadequate for the long term. Indeed there has been positive talk about home prices which are nominally flirting with 2008 bubble levels. At some point there will again be ‘too much debt,’ and the whole system will be under pressure once more. The fact that asset prices have been engineered higher for the benefit of Boomers means that these very assets will be increasingly out of reach for a younger generation which itself is overburdened by student debt the Boomers never dealt with when they were young.

This will necessitate still further debt and money printing to enable the younger generation to purchase assets from Boomers at these stratospheric levels, in order for them to retire.

This paradigm is the equivalent of fixing the negative symptoms of a drug withdrawal with a higher dose of the drug. I sets in motion a cycle in which the only conclusion is either an overdose or the mother of all withdrawals.

The correct solution is to endure the withdrawals, no matter how bad they are, because they will still be better than a certain overdose. In the context of the current economic situation, that means allowing the gaggle of bad debt which hangs around the neck of the economy like an albatross, to be purged from the system.

Trump should understand this scenario well – for it mirrors the situation he was in personally during the early 1990s. Having overextended himself in the late 80s, he was in a fair bit of trouble, to put it mildly, when the market turned. This is all well documented, but Trump’s Comeback would not have been possible without a renegotiation with his creditors. This allowed Trump to survive without having to sell the assets which he had accumulated to that point, and set the stage for him to grow his empire not only to far greater heights, but with a far greater foundation which offered a substantial margin of safety.

The United States as a whole is need of something similar happening. I suspect, on some level, Trump is aware of the nastiness which might be involved. Back in May, he revealed as much when he suggested that the United States could simply renegotiate its debt to alleviate its problems. This set off a firestorm in the media, which posited that Trump would be threatening the pristine credit history of the US government, which had always honored its debts.

That is patently untrue, but the real cause for alarm comes from the fact that the bond market, and in turn all markets, rest on the fundamental idea that it is true. That is, US government debt is a 100% certainty to be paid on time and in full. As such, for Trump to suggest that the debt could be ‘renegotiated’ would upend world markets.

The premise from which this potential turmoil originates from is faulty however. The US does pay its debts on time, but owing to money printing exercises, it has not necessarily been paying them in full. Paying debts with printed money is to pay in a currency that is worth less than when it was borrowed. In theory, the interest rate should square the difference, but given that interest rates have been held artificially low by the Federal Reserve, a real case can be made that America’s creditors have already had involuntary renegotiations with America, which has been implicitly defaulting on its debt for years now.

What Trump mentioned in May was an explicit default. In that event, the tumult would be extraordinary, with interest rates rising precipitously, prices falling precipitously, and a temporary state of near depression ensuing, perhaps worldwide. Yet it would be the right thing to do.

The current game of kicking the can down the road and hoping for economic miracles has not worked. Consider that in the last two presidencies, each has had to double the national debt and keep interest rates at historic lows merely to maintain a period of growth with had nothing to show for it but stratospheric asset prices and a war torn planet. In the meantime wages have stagnated, home ownership has dropped, labor force participation has dropped, high paying manufacturing jobs have been replaced by low paying service sector jobs, and only those over the age of 55 have seen a net increase in employment.

This is the paradigm which the Keynesian academics, global central bankers and short term-ist politicians believe justifies the doubling the debt every 8 years to preserve.

In rejecting that prescription, Trump would put America in the position he himself was in in those early 1990s days, when he would tell himself repeatedly, ‘survive til 95. Survive til 95.’ It was at that point he figured that he would be able to have a proper foundation to work from, and that sustainable growth could begin.

The short term carnage which would result would no doubt be pounced on by a leftist media which will have been constantly begging for him to fail. There would be no end of horror stories describing the bankruptcies, foreclosures, layoffs, business closings and so on that would descend upon an a economy ridding itself of bad debts. These unfortunate occurrences would then be used to bolster the leftist line that Trumpism generally, with its America Fist, anti-globalist bent is a proven failure, with a view to then restoring the globalist, politically correct politics it was after all along.

Trump’s messaging  in the face of such an onslaught will have to involve the explicit illustration of our bubble-crash-new bubble cycle, and the framing of our choices as I’ve outlined.

It will be a truly Herculean task, merely because the size of the bubble is such that even the most modest worker will be involved owing to the fact he or she probably has a 401K. It will be difficult for the truism that all long term gains require short term sacrifice to gain traction when that sacrifice comes in the shape of a declining 401K or home price.

Indeed, we live in a culture which has been conditioned to crave instant gratification. The idea of saving and investing, and not seeing the fruits of that saving until years in the future is increasingly an alien concept. To impose a necessary, but painful economic downturn will be potentially suicidal to Trump’s political career, but a necessary component to a sustainable, longer term recovery.

It is because of this that there will be a strong temptation for Trump to do as his predecessors did, and to try and restart the bubble machine. However, as I’ve made clear here, it is the wrong answer. As I’ve mentioned before, I suspect that Trump does know the right answer. Indeed, his campaign was centered on having the ‘right answers’ in other areas such as immigration and foreign policy.

In these arenas his anti-status quo approach is correct. The same is true of the economy, and more specifically the debt driven consumer spending model of growth that currently drives it. That is the status quo. That has led to failure. That needs to go. Trump’s task, if he really is to go down as a great president, will be to destroy the bubble-crash-bubble paradigm and free an US economic machine, now running on savings and investment instead of cheap credit, to start once again, all the while holding the hand of a skittish public through the transition.

On the Carrier Deal

Last week, President Elect Donald Trump signaled his intent to follow through on his campaign promises when he personally intervened in a situation in which would have seen over 1000 manufacturing jobs move to Mexico from Indiana. Carrier, the business in question had planned to move those jobs and announced that the plant would be shut down in February. It became a campaign issue right after that, as Trump latched onto it, citing that specific deal as a symptom of the overall multi-decade problem of manufacturing being gutted in America.

Over the Thanksgiving festivities, Trump took to Twitter to note that a deal was being discussed:

Then a few days later, when it was completed Trump announced that he was going to visit the plant to meet the workers, as part of a ‘Thank You’ tour:

While the move clearly had a ton of political symbolism attached to it, it was a functional reminder of the Trump Doctrine, as it pertains to the economy, jobs and trade. It was a symbol that represents the Trump’s ‘America First’ outlook that he campaigned on.

The whole situation has been met with scorn from commentators on both the left and the Principled Right. From the left, the charge has been that United Technologies, the parent company of Carrier, was enticed to keep the jobs through a smattering of tax cuts and a promise of a more favorable regulatory situation. This was outlined by Bernie Sanders in a Washington Post op-ed.

The specific charge Sanders and others make is that Trump is flip flopping by giving ‘concessions’ to Carrier when he ran on being tough on corporations who send jobs overseas. In particular, Sanders says that Trump promised to levy a tax on these businesses, and here he is actually giving Carrier a tax cut.

This is yet another willful misinterpretation of something Trump does/said that has been a feature of leftist vituperations for 18 months now. During the campaign, Trump spoke of levying a ‘tax’ (tariff) on goods of companies which moved their jobs out of the country. That is a conditional statement. Carrier agreed to keep jobs in the country, and as such are not going to be subject to any additional ‘tax’ on their goods.

Furthermore, the reason for the about face isn’t cause for outrage. All reports indicate that Carrier was to receive a $7 million tax break over 10 years,or $700,000 per year. As Eric Bolling points out, the amount generated by state in taxes from the 1000 plus jobs that will remain far exceeds the amount in tax breaks for Carrier:

This is not to mention the amount of taxpayer money that won’t be spent on welfare for potentially 1000 people and their families.

During the statement Trump made at the Carrier plant, he indicated that his presidency would create a great environment for companies such that they wouldn’t want to leave:

But also, I just want to let all of the other companies know that we’re going to do great things for business. There’s no reason for them to leave anymore because your taxes are going to be at the very, very low end, and your unnecessary regulations are going to be gone.

 

We need regulations for safety and environment and things. But most of the regulations are nonsense — become a major industry, the writing of regulations. And that these companies aren’t going to be leaving anymore. They’re not going to be taking people’s hearts out. They’re not going to be announcing, like they did at Carrier, that they’re closing up and they’re moving to Mexico — over 1,100 jobs.

He cited the fact that during his travels campaigning, the one thing he kept hearing from businesses was that the poor regulatory state was their number one concern. Indeed, the average cost of regulations for a manufacturers was about $20,000 per employee. The Carrier plant specifically was under the burden of 53 new regulations in the last few years, which ultimately had made doing business in America unprofitable. This is why businesses are leaving America, and Trump has vowed to change that, by lowering taxes and massively scaling back regulations.

Many are failing to understand that this Carrier deal is a symbol of what will happen across the business community in a Trump presidency. It is not that Trump will get on the phone with every CEO in America and cut individual deals – of course that is unfeasible. It is that the basics of the deal – the government allowing a business to keep more of the money it earns while not being burdened by onerous regulations – is a generous enough ‘offer’ from the government to business in America such that they will want to keep their operations in the country on their own. That is the point.

Justin Wolfers, a leftist economist, also missed the point when he described this deal as Trump interfering with the natural churn of the economy, in that it creates and destroys jobs on a regular basis:

But the Carrier case also illustrates a larger point about how the economy works. In Mr. Trump’s telling, the economy is a fixed set of jobs getting shifted around a global chess board. Mexico’s loss is our gain and vice versa.

But you should think of the economy as being in a state of constant churn. The economist Joseph Schumpeter used the now-famous phrase “creative destruction” to describe this process by which new firms push out the old. The result can be cruel, but an extraordinarily fluid labor market, many economists argue, is the secret of American dynamism.

For a start, this deal was not about destroying jobs. These jobs were not being destroyed, but moved to another country. These jobs are not obsolete in the context of a modern economy. They were moving because they could have been done more efficiently elsewhere. The key is that the relative inefficiencies of staying in Indiana were totally self-wrought as opposed to being fundamental in nature. Removing those inefficiencies should really be no big deal, but for government it has been.

Furthermore, it is really rich to see an economist like Wolfers cite Schumpeter’s creative destruction. Economists of his ilk decry the phenomenon when it is correctly applied to our bubble economy as a whole. Many, such as myself have called for the American economy to shed its reliance on unstable bubbles and to move towards a more robust economy infused by the dynamism Schumpeter’s of creative destruction concept.

This involves the ‘destruction’ of the bubbles of yore, and thus necessary declines in asset prices, and debt levels, along with substantial increases in interest rates. That is beyond the pale for economists such as Wolfers who think that falling prices are the worst possible thing to happen to an economy.

Back to Carrier, many of the Principled Conservatives on the right are having big problems with the image of a specific company dealing with the government on a one on one basis in this manner. This group of critics (also some leftists, with a sudden reverence for Adam Smith) have slammed Trump for being anti-free market, dictating to individual businesses how to run their companies.

The first response is that in reducing taxes and regulations, Trump is actually moving towards a free market, not away from one. The ‘deal’ Trump is offering is not ‘Stay here, and be subject to high taxes and high regulations or face huge tariff,’ but ‘Stay here, we’re going to lower your taxes and regulatory burdens, but if you want to go anyway, you’ll be subject to a tariff.’

The latter option is a far superior one, despite its protectionist bent. I’m not a hardcore protectionist per se, I do recognize that tariffs are an effective tax, and they are not necessarily a free market construct. But tariffs are superior to a higher income tax, corporate tax and higher regulatory burden. Income and corporate taxes accrue to the government, while a tariff accrues to a protected class of business. The tariff influences behavior, but to a much lesser degree than do income taxes. In my view, the trade off for isolated tariffs for lower income taxes and regulation is a net positive.

Secondly, this specific deal has an element which hasn’t been discussed much – the Military Industrial complex. It has been speculated that Trump threatened the lucrative government contracts that United Technology has with the US government. These sort of contracts, and the existence of the MIC generally are a negative to anyone who of a free market mindset. Over the past 5 or 6 decades these sort of webs have been slowly built and expanded upon to the extent that corporate welfare is a very big problem.

The length of time over which this situation has developed means that untangling them isn’t going to be a quick thing. We aren’t going from a Corporatist attempt at Social Democracy to a free wheeling free market overnight. In (possibly) threatening United Technologies in this manner, Trump has done a very pro-market thing. He (possibly) used a feature of the corporatist landscape as leverage to benefit ordinary Americans.

That same dynamic applies to the arguments over the tariff question. The Principled Conservative argument of free trade listens well, but the reality is that multinational trade agreements such as NAFTA and TPP are not examples of free trade. Republicans and Principled Conservatives always argue against tariffs in that they are ‘regulated’ trade, yet thousand page bills written by politicians and special interests are apparently ‘free trade.’ Real free trade requires no agreements, no legislation, nothing. What we already have is far from free trade. So let’s mold it in our favor. Ideally this landscape would not exist, but when life gives you lemons, make lemonade.

 

Putting A Trump Vote In Its Proper Context

“In a mad world, only the mad are sane.”
Akira Kurosawa

 

As the election draws near, the mere fact that Trump has more than a tangible chance of winning has several in the commentariat a little unnerved. This is shown by the bevy of op-eds and columns written in recent days and weeks which all conveyed a similar point: Please, America, don’t vote Trump – We value stability more than anything else.

Alan Dershowitz, a prominent expert on the law and Harvard Law professor crystallized this sentiment this morning, speaking with Maria Bartiromo, saying:

Let me tell you why I’m supporting Hillary Clinton: We’re living in a world of extremes, the right is getting stronger, the left is getting stronger, the center is weakening. We need a centrist president to stabilize the world, Hillary Clinton promises more in terms of being a stabilizing force than Donald Trump.

On the surface, this sounds reasonable. But Dershowitz showed exactly why it isn’t less than a minute later, when he said:

Look, the problem in American politics is that donors always get special treatment – from Republicans and Democrats. Pay to play is unfortunately a sickness within the American political system, equally applicable to republicans and democrats. Let’s end that – let’s strengthen the laws, let’s de-politicize the laws.

In admitting the politics of the status quo is broken, Dershowitz renders his support for Clinton, on the basis of her ‘stability,’ an endorsement of a broken political world. This is a world which has bestowed upon Clinton a $250 million fortune, incredible power, and a shot at being the first woman to be president of the United States, forever etching her name in history. Does Dershowitz, or anyone else for that matter, really think that Hillary Clinton, having been forged in that broken political world, is going to change it in any material way? Considering her now Wikileaks-revealed duplicity vis-a-vis her public statements and those given privately to the corporate donors which back her, the idea of her being a change agent stretches credulity, to put it mildly.

And make no mistake – change is needed. The political status quo has overseen America’s slide into over-indebtedness, declining educational standards, endless war and destruction in foreign lands, record poverty levels, multi decade lows in labor force participation, and even record lows in fertility.

Indeed, America as it stands today is merely a nominal representation of the colonial experiment which commenced just over 240 years ago. It could be said that the genesis of America as a country was the biggest tax revolt in human history, yet today the populace will at the most grumble angrily to themselves as they pay ever higher taxes on an annual basis.

In its early days, America debated the merits of a monetary system based on gold and silver versus central banking and fiat currency. After some trial and error, it settled on the former. Today’s American economy now relies on the latter, to such an extent that the mere differences in language used from one public statement to the next are said to have big implications on the fate of our economy.

The Federal Government has grown to such an extent that the population as a whole expects certain things from it. This, in comparison to a Federal Government which was once small, and stayed mostly out of the way.

It is telling that quickest way to be laughed out of a ‘serious’ political conversation in 2016 is to seriously advocate an abolition of the federal income tax, a return to the gold standard, and a vastly smaller government that balances its budget, let alone all of the above. As these things were once part of the formative fabric of America, it is fair to say that we currently live in a sort of Post-America.

This is further buttressed by the fact that the Constitution has been treated as toilet paper for a very long time now. Exactly how long that is depends on the individual, but one can cite many occurrences which marked the waning influence of the Constitution. The Civil War, 16th Amendment, Federal Reserve Act, the New Deal, Executive Order 6102, the 1971 closing of the gold window, the Patriot Act, and the Affordable Care Act, among others, are all examples of the government riding roughshod over the Constitution.

I am not going to scrutinize the merits of each individual instance. I only bring them up to highlight the fact that going by strict Constitutional originalism, the document has been violated, several times, and well before June 16, 2015, the day Trump’s campaign began. In other words, from the perspective of the principles underpinning America’s birth, and continuing on through its ascent to world power, America as it currently stands is a Mad World.

Yet it is precisely those already-departed American principles, wrapped in platitudes about our 240 year Republic and its democratic heritage, that many commentators cite when declaring Trump to be the most dangerous political force in our lifetime. Consider this from David Frum:

The lesson Trump has taught is not only that certain Republican dogmas have passed out of date, but that American democracy itself is much more vulnerable than anyone would have believed only 24 months ago. Incredibly, a country that—through wars and depression—so magnificently resisted the authoritarian temptations of the mid-20th century has half-yielded to a more farcical version of that same threat without any of the same excuse. The hungry and houseless Americans of the Great Depression sustained a constitutional republic. How shameful that the Americans of today—so vastly better off in so many ways, despite their undoubted problems—have done so much less well.

 

I have no illusions about Hillary Clinton. I expect policies that will seem to me at best counter-productive, at worst actively harmful. America needs more private-market competition in healthcare, not less; lighter regulation of enterprise, not heavier; reduced immigration, not expanded; lower taxes, not higher. On almost every domestic issue, I stand on one side; she stands on the other. I do not imagine that she will meet me, or those who think like me, anywhere within a country mile of half-way.

Not only is it true that America has eschewed its strict Constitutional Republic roots, it is not true that America successfully avoided the authoritarian temptations of the 20th century. Indeed, the America that entered the fights with the Axis dictatorships and then communism looked very different to the America that came out of them. Karl Marx’s 10 planks have been more or less instituted in America. America’s Authoritarianism, however is of a softer variety. While it doesn’t have a definitive figurehead in the shape of Mussolini or Hitler, it does have a definitive ideology spearheading it: the worship of nebulous concepts such as Equalism, Diversity and Fairness.

The most heinous crimes in today’s society are that of racism, sexism, homophobia, Islamophobia, transphobia, and so on. Transgressors are drawn out into the public square for admonishment via social ostracism. You could even lose your job over an ‘offensive’ post on Facebook or Twitter.

The rub is that the threshold for what constitutes offensive behavior is seemingly lowered by the day. The march to describe every slight as Hate Speech increasingly encroaches on that traditional American right of free speech. With respect to the election, and Trump in particular, even being neutral on his positions could get one in hot water.

That’s what happened to Scott Adams, creator of the Dilbert comic series. According to this Washington Post piece, Adams’ once lucrative speaking engagements and licensing deals have dried up, owing to his attempts to explain to the public why Trump’s campaigning has been effective, from the perspective of well known Persuasion techniques. He has become a pariah for this.

In our Mad World of Political Correctness and over-sensitivity, this is just. For there can be no justification for things we don’t agree with, no matter how rational they are. More specifically, nothing can be allowed to impede the leftward march from America to Tumblr: The Country, and anyone who dares stand in the way will be run over.

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Indeed, Donald Trump’s real sin has been his refusal to give in to the Oversensitive Mob and give it what it wants – an acknowledgement of their frivolous charges of racism and sexism – preferably via some sort of tear-laden press conference at the mercy of the same journalists who regularly excoriate him in their columns.

What is particularly interesting about Frum is that he lists several things which in his view would be good for America. All of these things line up with what Trump plans to do, even though Frum doesn’t give him credit for that. The problem for the likes of Frum is that Trump is seemingly too mean in the way he is going about his campaigning.

What this simplistic analysis misses is a lot of the outrage generated by Trump has been intentional – a ploy to draw attention to his ideas. Trump is nothing if not a shrewd marketer and astute media manipulator. He writes about it in his books, and has had 40 years of experience with the media under his belt.

Many have been in the media have been critical of the media itself for giving him so much attention, thereby legitimizing him. You’ll often see a statistic bandied about that suggests that Trump has been given $2 billion in free exposure. The reality is that Trump earned that exposure through his media exploits of well over three decades. When Trump announced his candidacy, he instantly had 100% name recognition. News agencies really couldn’t ignore him, because they’ve never ignored him. Trump is a ratings goldmine – and media corporations live on ratings.

To be sure, the media has countered by covering him negatively, to the tune of 90% of the time according to a recent study. This has both revealed the inherent bias the mainstream media has as well as confirmed the reason why Trump campaigned the way he has. His message is an anathema to a leftist media, and as such the only way to get his message across was to wrap it in a tactical outrage.

Recall the Star of David ‘controversy’ from this summer. It started with Trump re-tweeting this image:

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The media fell over themselves to use this image as evidence of Trump being an Anti-Semite, owing to the fact that the ‘Most Corrupt Candidate Ever!’ text is in an apparent Star of David.

Of course that star could easily be a sheriff star, or a normal star you would find in Clip Art. Yet the media frothed at the mouth, pushing this story for almost a week.

This meant that all over TV and the internet, this image was shown, an image which conveys a message that Hillary Clinton is a criminal.

Through enshrouding his real messages in a layer of outrage, knowing a lapdog media would spread it far and wide for him, Trump has done nothing more than display his penchant for good marketing and media manipulation.

Indeed, Trump’s initial foray into the campaign was controversial, perhaps still his most controversial episode to date. Yes, I’m referring to the moment when he ‘called all Mexicans rapists and drug dealers.’

That was the spin, and the perception that the media spread far and wide and is still used by man as a talking point to declare Trump a racist. What Trump actually did was say that a non-zero subset of those who entered the country illegally committed further crimes once in the country, and that it was a problem. His words were objectively true. However the way in which he said them cause untold outrage which reverberates to this day.

Consider the fact that Trump’s immigration ideas are now widely considered to be racist and xenophobic by most mainstream voices. However, a rational examination of his plan reveals that the vast majority of it is already codified into US law, including the wall. What Trump seemingly wants to add is a more vigorous application of the law in spots where it is currently halfheartedly applied, and in others where it is actively opposed, such as in the case of sanctuary cities.

The outrage Trump created was needed in order to call attention to an issue which has been largely neglected for many years now. If he hadn’t done it, the discussion would have been lost in the shuffle as it had been before. By raising the temperature so to speak, Trump has forced people into a box. To call Trump a racist and xenophobe for completely reasonable ideas is to explicitly advocate lawlessness. That is precisely what a Mad World does, thus to be considered a madman by that world, as Trump is, is tantamount to being the sensible one.

In a similar vein, Trump has been accused of dividing the country. However, it not Trump, but identity politics which has divided the country. In modern America, there is an increasing trend for Americans to define themselves as such, but with a prefix attached. African-American, Muslim-American, Hispanic-American, Asian-American, and so on. Race, class, religion, and sexual orientation are the lines along which the population is increasingly split.

This ground was tread long before Trump’s candidacy. LBJ may not have said that he’d ‘have those N*****s voting Democrat for the next 200 years,’ but he might as well have said it, given that politics has increasingly devolved to pandering to the varying subgroups in America. The resulting atmosphere is one in which your skin color, gender or sexual orientation becomes your uniform, and it is almost your duty to fight for your team lest you be called a traitor.

Trump’s message is simple: America First. In recent rallies, he has consistently conveyed the idea of Americans ‘working together as one people, under one God, saluting one flag.’ Trump has immediately taken some heat for this, particularly the ‘one God’ part, with critics citing this as evidence Trump doesn’t understand the separation of Church and State, or that it intimates a sort of exclusion for nonbelievers.

This interpretation is of course, nonsense. His words are no different to politicians proclaiming ‘God Bless America’ at the end of speeches. The ‘God’ in both instances is open to interpretation, with the listener free to insert the deity of choice to personalize the line. But recall, we’re living in a Mad World, and as such these minor quibbles are worth vast overreactions.

The interesting thing is that Trump’s words are objectively unifying. America First as a concept should be something that everyone can buy into, because individual identity characteristics don’t preclude participation in America as a concept, at least in theory.

But, again we live in a Mad Clown World, a world in which people can’t let go of Identity, because doing so would forfeit a chance at a slice of the bounty collected by grievances and outrage. It is thus the culture as a whole which has already divided itself, not wishing to unite as one people. It is the culture itself which sees little wrong with immigrants hoisting their home flags on American soil, but increasingly views the stars and stripes as an offensive symbol.

With that as a backdrop, Trump is indeed mad. But that means he is sensible.

And what of morality? Many believe that the Billy Bush tape disqualifies Trump from the presidency. The bottom line on this is that there have been several equally vulgar individuals to occupy the role, including Bill Clinton, who had assistance from one Hillary Clinton in concealing the vulgarity. If we’re being truly honest, neither candidate is clean here.

Furthermore, the culture as a whole is in no state to pass judgement on this score. I chuckled repeatedly watching the torrent of outrage and concern for the youth of America having been exposed to Trump’s words, when the likes of Miley Cyrus trotting around stages performing topless with inflatable male genitalia protruding from her crotch likely elicits little more than a shrug of the shoulders for those same people.

This hypocrisy is mirrored in the perception of Trump as unhinged, as it is pertains to foreign policy. And before I go on, a symptom of the Mad Clown World is evident in the fact that coverage of Trump’s Billy Bush moment dwarfed that of an analysis of foreign policy issues, in an age when nuclear capable world powers are positioning themselves for conflict. Sex sells, I get it, but to upstage potential nuclear war with Russia? I’d call that a bit Mad.

And on that subject, Trump is widely considered by your standard foreign policy expert to be dangerous. More frivolously, he is considered to be a national security risk because his flippant attitude may lead us to military conflict over his Twitter account, or something.

The reality is that these foreign policy experts, along with Hillary Clinton herself, have been responsible for nothing but failure for nigh on 50 years. From our excursions in Vietnam, to Kuwait, to Iraq, Afghanistan, Libya and now Syria, these status quo experts have done nothing but cause death and destruction across the globe, in the name of spreading Democracy.

It sounds like a great ideal to have, but ultimately, who are we as Americans to impose our way of life on the rest of the world? The interests of the average American, in America, haven’t been served by any of these adventures, for the most part. The only interest which has been served  is that of the Military Industrial complex. Eisenhower warned us about this.

With respect to the current challenge that faces us, Syria, we face a choice of war or diplomacy. We are already fighting a proxy war against the Russians, who are assisting the Assad regime, who the US wants ousted. The official reason for this is Assad’s atrocious humanitarian record, but some suspect there is more to the story.

It involves the establishment of a natural gas pipeline, running from Qatar to Turkey, passing through Syria. The reason it is sought by the US is because such a pipeline would allow Western Europe an alternative to the Russian natural gas it currently consumes. The goal is to marginalize Russia economically, as punishment for its refusal to get with the EU/NATO program on many other issues.

It is hypothesized that Assad has denied this pipeline, out of allegiance to Russia, and as a result the US wants regime change in Syria. In response to being attacked, Assad has invited Russian forces to the country for assistance. This is where we stand now.

Hillary Clinton has been consistent in her stance that a No Fly Zone be placed over Syria, despite the only way one could be enacted would be through a declaration of war with Syria, and thus Russia. Clinton was explicitly asked about this again at the third debate a few weeks ago and was unequivocal in her response.

Make no mistake, a Hillary Clinton presidency is most likely the pretense to war with Russia, an opponent with nuclear capabilities. If the true reasoning behind the war is correct, the US would be risking nuclear war to establish a natural gas pipeline overseas. Yet, here at home, the US finds the idea of a pipeline running from Alberta to Texas, with no war required, to be untenable. That’s the status quo for you.

It is in this light that the criticism Trump gets for being ‘friendly with Putin’ needs to be examined. The reality is that the Russians don’t want war, as evidenced by the fact they did nothing when Turkey took down a Russian jet last year. Putin’s greatest sin is his refusal to bow to Western, and more specifically US hegemony in geopolitics and the world order. For that refusal to play ball, the US has tried to hit Russia economically, and it is continuing to do so with its efforts in Syria. It is playing with fire, however, as previously discussed.

Trump wants nothing to do with this, not because he is reckless, but because he correctly understands that the US has little business in directing foreign affairs in the manner it has done for decades. To the extent we already have entanglements, they must be dealt with, but in the future the goal of a Trump administration is seemingly to tamp down American Imperialism. It is too expensive, too deadly, and too historically negative in terms of the prospects for nations who pursue such expansive ambitions.

Once again, the Mad Man is sane.

This election is probably the most stark choice we’ve seen in a lifetime. It is in many ways a referendum on the constructs of the Post World War II West: Keynesian Economics, supranational unions such as the EU and NATO, the sexual revolution, central banking, the Military-Industrial Complex, the Media-Academia complex, among other things.

While Trump doesn’t explicitly repudiate all of these things, Hillary Clinton certainly would be a continuation of them. Furthermore, she would be a continuation of the status quo, a continuation of the cultural preference of Pretty Lies to Ugly Truths, a continuation of the political preference of short term expedience over long term thinking.

Even if one who is on the fence agrees with every word I’ve written thus far, a sheer, base reluctance to change will still stand in the way of pulling the lever for Trump. I completely understand that point of view. For many, the fact that the power grid still works, and we have access to our daily Starbucks means things aren’t so bad, and there is no need to ‘blow up’ the political system voluntarily.

This is akin to inheriting $100 million, blowing $98 million of it on the proverbial hookers and blow, and feeling relieved upon seeing the $2 million bank balance in a sober moment, that relief stemming from the understanding that you are still better off than 99.5% of the planet.

Unfortunately, that is us, as modern day Americans. We inherited a country from a generations of individuals who built it up into a machine which produced untold riches. With us at the wheel, we’ve been in party mode, adopting an ‘anything goes as long as it feels good’ mentality socially and a ‘spend anything – we can print the money later’ attitude when it comes to economics. That is unsustainable. It is our job to recognize that, and correct course before crisis hits.

Trump is indeed a bonafide Mad Man. But we live in a Mad World. Sanity in this context is a continued slide into the abyss, a continued swim by an unaware frog as the temperature creeps to 100 degrees C.

There’s still time to jump out of the pot.

Peter Thiel On Trump

The man clearly gets it (emphasis mine):

For a long time, our elites have been in the power a long time, our elites have been in the habit of denying difficult realities. That is how bubbles form. Wherever there’s a hard problem but people want to believe in an easy solution, they will be tempted to deny reality and inflated bubble. Something about the experience of the baby boomers, whose lives have been so much easier than their parents or their children has led them to buy into bubbles again and again. The trade bubble says everyone is a winner. The war bubble says victory is just around the corner, but these overoptimistic stories simply have not been true and voters are tired of being lied to.

 

It was both insane and somehow inevitable that D.C. insiders expected this election to be a rerun between the two political dynasties who let us through the two most gigantic financial bubbles of our time. President George W. Bush presided over the inflation of the housing bubble so big that it’s collapse is still causing economic stagnation today. But what is strangely forgotten is that the last decade housing bubble was just an attempt to make up for the gains that have been lost the decade before that. In the 1990’s, President Bill Clinton presided over an enormous stock market bubble and devastating crash in 2000 just as his second term was coming to an end. That is how long the same people have been pursuing the same disastrous policies.
 

Now that someone different is in the running, someone who rejects the stories that tell us everything is fine, his larger-than-life persona attracts a lot of attention. Nobody would suggest Donald Trump is a humble man. But the big things, he is right about an amount to a much-needed dose of humility. He has questioned the core concept of American exceptionalism.
 

He doesn’t think the force of optimism alone can change reality without hard work. Just as much as is is about making America great, Trump’s agenda is about making America a normal country, a normal country does not have a half trillion dollar trade deficit. A normal country does not fight five simultaneous undeclared wars.

 
I’ve long held the opinion that Clinton is one of the luckier presidents in history, in that his favorable reputation is largely down to the Internet bubble that Alan Greenspan constructed during his presidency. This bubble happened to pop right as Clinton was leaving office in 2000. The mess fell in Bush’s lap, which was then ‘cleaned up’ by a Housing Bubble, again constructed by Greenspan.

Unfortunately for Bush, his bubble popped much earlier. Although people look to the crisis of fall 2008, that was merely a culmination of a full year of carnage that ended up making any Republican candidacy an untenable proposition. It’s great to see someone else voice this in public.

Thiel’s general point is spot on as well. This election is ultimately about whether Pretty Lies or Ugly Truths form the foundation of our thinking and policy making. For far too long we’ve been dealing in Pretty Lies, underlined by our economic policy which favors debt and monetary easing whenever we hit the slightest of recessions. Instead of allowing bankruptcies and price declines to take their course, and the economy to reset, policy makers prefer to prop up financial bubbles, allowing un-payable debts to fester in the system until the rear their ugly heads again.

Socially, the cultural Marxist idea that ‘anything goes, as long as it feels good,’ has been the basis of our views on many social issues of the day. The problem with this is that true progress doesn’t necessarily feel good. Maintaining order in a world which is naturally disposed to chaos doesn’t feel good. Everyone understands the physical concept of entropy, and fighting against it to create an ordered system requires work.

Civilization is nothing if not a massive ordered system, which requires work. It requires rules, customs, and for things to be done a certain way, and with respect to the United States, an American way. In the post World War 2 era, we’ve departed from the basic principles that took America from renegade colonies to the verge of greatness in less than 100 years, and from a country ravished by a Civil War to the most powerful nation in the world in less than 50 years.

Between the two candidates, we know that Hillary Clinton is more of the same. Trump at least understands the perils of globalism, and understands that in our own history we already have the blueprint for greatness. Hence ‘Make America Great Again.’ The full Thiel video is below:

Takeaways From the Third Debate

Here’s how I saw it:

Trump Won On Points, Clinton Won on Feels:

Trump was able to strike a happy medium between the first debate in which he was rather incoherent and defensive, and the second debate when he was on point but extremely aggressive. In the third debate, he was more ‘presidential,’ whatever that means. One of his biggest problems to date has been the fact that the uninitiated voter thinks he’s a crazy madman, so he had to convince those viewers that he could withstand attacks without blowing up. He did that, avoiding getting too deep into the weeds on side issues and was able to get a lot of points across firmly and effectively.

He was able to put Clinton on the defensive on several issues, such as the fact that she takes donations to the Clinton Foundation from countries like Saudi Arabia, which throws gays from rooftops and treat women poorly. He also brought up the James O’Keefe video in which DNC operatives were bragging about how they paid people to incite violence at Trump rallies. Clinton’s ‘dream’ of an open border for the hemisphere, as revealed through Wikileaks was also brought up.

In each instance, Clinton had no answer. She pivoted to blaming Russia, or outright ignoring the issue brought up. Her main avenue for scoring points on the night was through emotion. She tried it with abortion, with the typical politician tactic of telling a tale of how some random person from the campaign trail just happened to personify exactly the point wished to be made. She tried it with the use of the THINK OF THE CHILDREN angle with respect to both guns and Syria, and finally with the ‘this is not who we are’ cliche with respect to Trump’s supposed misogyny.

It listens well, but in the end it’s tired. Trump was able to bring new arguments into the fray which both bolstered his case and the case against Hillary Clinton. It still remains to be seen whether the public will see through the emotional manipulation of Clinton, however effective it may be in the moment.

Trump’s ‘Refusal’ to Accept the Result of The Election

Chris Wallace asked Trump (and not Clinton) whether he would accept the result of the election. He was also asked of it by Lester Holt at the first debate. This is a bit curious for reasons I’ll get into later. But Trump’s response is getting most of the play in the mainstream media today (H/T ZeroHedge):cvlboygxyaedl3s debate-4 debate-5 debate-1 debate-3

The media has gone apoplectic over the fact that Trump said that he’d keep us in ‘suspense,’ about how he would respond to the election results. Plenty of words were written and spoken last night about the GRAVE DAMAGE TRUMP HAD DONE TO A SANCTIMONIOUS PILLAR OF OUR 240 YEAR OLD REPUBLIC.

For a start such hyperbole and spewing of platitudes is hypocritical given the allegations that George Bush had stolen the 2000 and 2004 elections, which came from the same people who are today lambasting Trump. It was enough to make Joe Scarborough, hardly Trump’s greatest fan, laugh at the latest faux outrage:

The latest response to the ‘but Gore!’ argument from the left is now something along the lines of ‘but he accepted it!’ Yes, a month later, after it was brought to the Supreme Court. Why shouldn’t Trump be afforded that same level of skepticism if something fishy happens on election night?

That brings me to my next point, which is the James O’Keefe videos. In the last two weeks, the same leftists who are today extolling the virtues of American democracy and the sanctity of our free and fair elections have been caught on camera admitting that voter fraud is rampant, explaining step by step in detail how to perpetrate voter fraud without getting caught, and describing how to subvert democracy by inciting violence at opposition political rallies.

Robert Creamer, one of those involved in organizing those efforts, visited the White House over 340 times during President Obama’s two terms, according to White House records. Both Creamer, and Scott Foval, another one of the head honchos profiled in the O’Keefe videos, stepped down from their positions after they were exposed, a move that confirms the egregious nature of what is shown on the tapes.

In a sane world, there would be a massive investigation and this would be one of the political stories of the year. But who would look into it? The same Department of Justice which is headed by an Attorney General who secretly met with Bill Clinton in an airplane, days before a ruling was to be reached on whether his wife was to face charges? The same FBI which is headed by a Director who then verbally declared she had committed a crime but also stated there was no case? I doubt it.

The mere fact that Clinton is running for an office with the highest security clearance in the land, after provably mishandling classified information in a prior position in govenment, thus disqualifying her from access to such information ever again, is mind boggling. But thanks to the media, the DOJ and the FBI, the public has been conditioned to accept Clinton as a legitimate candidate.

In a similar vein, the constant media pushback of Trump’s assertions that the system is rigged (despite scores of prominent Democrats saying the same thing for years), and the watery-eyed appeals to the history of our 240 year Republic and its pristine elections, are potentially conditioning the public to accept what might ultimately be an illegitimate election result.

It’s not a stretch for Trump to be wary of shenanigans on election night, given everything discussed here, in addition the vociferous objections to things like voter ID and the removal of the dead from voter rolls, when the only conceivable objections to either of those things would be to commit fraud. As Scaborough said, those opposing Trump on this can bathe in the hypocrisy.

A Hillary Clinton Presidency = War With Russia

This is perhaps the most chilling, and important takeaway from the night, but it might get lost in the shuffle given the media hysteria discussed above.

The proxy war in Syria between the US and Russia has escalated in recent weeks and months, and last night Hillary Clinton reiterated her desire to impose a no-fly zone over the area, to ‘hasten the end of the conflict.’

This is in opposition to President Obama, who feels that such a move would entangle us deeper into the region, and in the face of concerns from Marine Corps General Joseph Dunford, chairman of the Joint Chiefs of Staff, who said that a no fly zone would mean war with Russia:

This was how Clinton outlined her support for the no fly zone:

A few things: Clinton noted her awareness of the ‘legitimate concerns’ of the President and the General Dunford. In fact as far back as 2013, she understood the fact that imposing a no-fly zone would create all sorts of problems and cause the deaths of scores of civilians. We know this, thanks to a Wikileaks release of her transcripts to Wall Street bankers (see page 66). Back in 2013, she said this, relating to a Syrian no-fly zone:

So we’re not as good as we used to be, but we still — we can still deliver, and we should have in my view been trying to do that so we would have better insight. But the idea that we would have like a no fly zone— Syria, of course, did have when it started the fourth biggest Army in the world. It had very sophisticated air defense systems. They’re getting more sophisticated thanks to Russian imports. To have a no fly zone you have to take out all of the air defense, many of which are located in populated areas. So our missiles, even if they are standoff missiles so we’re not putting our pilots at risk—you’re going to kill a lot of Syrians. So all of a sudden this intervention that people talk about so glibly becomes an American and NATO involvement where you take a lot of civilians. [ Speech to Goldman Sachs, 2013 IBD Ceo Annual Conference, 6/4/13]
So Hillary Clinton wants to do something – which by her admission requires at the very least the killing of ‘a lot of Syrians’ – in order to save lives.  She took the nonsensical logic a step further in that clip when she spoke of the refugees which are being displaced as a result of this civil war (which she started), and how she couldn’t just stand by watching as people got slaughtered:
I am not going to slam the door on women and children. That picture of that little 4 year boy in Aleppo, with the blood coming down his face, while he sat in an ambulance, is haunting.
Clinton is, in effect, justifying war with Russia, a nuclear power because of a humanitarian crisis created by US involvement which she led, and is using dead children as an emotional impetus to do it. Truly disturbing.

Furthermore, she believes a no fly zone, the establishment of which would lead to war, would then lead to diplomacy in which a deal could be struck. Even if this were true, how could one trust the bargaining skills of Clinton given her tenure at the State Department and her consistent failures in diplomacy with respect to the Russian reset, Libya, Egypt and more?

In the end, a vote for Clinton is a vote for war, potentially of the nuclear variety. It is shaping up to be just that simple. I’ll refer you back to the video above of General Dunford’s hearing. After he declares that a no-fly zone is tantamount to war, leaving the room in a momentary stunned silence, Senator John McCain can be heard grumbling in the background. He then takes over the discussion and angrily guilt trips Dunford for honestly answering the question he was asked, saying:

No, what he asked was should we have a no fly zone so we can protect these people form being slaughtered. That’s what he’s talking about, that’s what we’re all talking about.
Dunford immediately backs down and almost apologetically says that maybe we wouldn’t have to go to war after all. But the annoyance which McCain showed at the original answer was telling. It was as though he was upset that the real consequence of establishing a no fly zone was mentioned, by such an authoritative figure on the matter so as to leave no doubt. Note how he glibly knocks away such concerns about the no fly zone by enveloping it in humanitarian concerns, just as Clinton did last night.

It is thus ironic that Clinton has such support from leftists, despite her taking the same warmongering position as a notorious neocon warmonger. These are the same leftists who were up in arms during the Bush administration owing to the endless Middle East adventures the US embarked on. Hillary Clinton has done nothing but continue them as Secretary of State, and definitively promised to continue further last night.

Despite the fact these unnecessary adventures could directly result in nuclear war, these same leftists are not only standing behind Clinton, but have the audacity to declare that it is Trump who might get us into a war frivolously.

Clinton’s actual record of promoting just that, frivolous war, is apparently meaningless, because Donald Trump says mean things sometimes. It truly is a clown world we live in.

Final Thought

Not really a huge takeaway, but I was wrong in my debate preview about Chris Wallace. He did a good job last night, particularly compared to the moderators in the other debates. He was fair to both sides, and equally tough, which made for a substantive debate.

How this will play out on election night is to be seen, but from where I sit, the dynamic of the election is as follows: Trump is seemingly wearing a clown suit and speaking with helium gas, but what his actual words amount to the fact that two plus two is equal to four. Clinton speaks with professorial calmness and assuredness, but does so in relaying the argument that two plus two is equal to twenty-two.

It is up to the electorate to note this, and act accordingly.

The Great Unmasking

Last month, Donald Trump caused a stir in the economic world, with his analysis of the Federal Reserve and its monetary policy during an interview he did with CNBC.

In it, he was adamant that the zero interest rate policy of the Federal Reserve had created a ‘false stock market.’ This was after last week, in which he had said that the interest rate policy had created a ‘false economy.’ His reasoning for both was that the decisions were political in nature.

According to Trump, Janet Yellen, the Federal Reserve Chair, was embarking on these policies in order to help President Obama, in order to make sure he ends his term with a positive economy.

Politics aside, the administration, and most left leaning economists have quick to point to the job numbers as a sign of the recovering health of the economy. The fact that the stock market has made fresh all time highs in 2016 has been used to tout the strength of the business community and commerce. Indeed, at a campaign rally last month, President Obama vociferously patted himself on the back for an economic job well done:

Janet Yellen, during her remarks explaining the Federal Reserve’s interest rate decision on September 21, painted a rosy picture of the economy, repeatedly citing the employment figures along with household income increases as evidence.

It is my view that these data points – mainly the employment data, and the performance of the broad stock markets – are merely masks which give the perception of strength and improvement, while concealing a deteriorating reality underneath.

The Labor Market Mask

Let’s look at the employment data.

While it is true that the unemployment rate has come down to 5%, from about 10%:

Part of that is because the labor force participation rate has declined throughout President Obama’s tenure and is at multi-decade lows:

labor-force-participation-rate

With a ‘normal’ labor force participation,  the unemployment rate would be much higher, at least 10%.

The problem isn’t just with the totality of the workforce and the employment rate, but with the types of jobs which are being created in this economy, and who is filling them. Even a cursory look at the below surface trend reveals some problems.

The following is a breakdown of the labor force participation rate by age group: (Credit to the excellent Doug Short, who is a tremendous resource with his charting)

labor-force-participation-by-age

The following chart shows the breakdown in cumulative job gains for prime age workers versus those over 55, from 2007 through August 2016:

jobs-old-vs-young

The following chart shows the cumulative gains in the food and hospitality industry versus manufacturing:

water-bartender-mfg-workers

These charts show that the labor force is getting older, and the jobs that are being created are mostly of lower quality, in terms of goods producing. The bartenders vs manufacturing chart is somewhat tongue in cheek, but it does highlight the fact that most of the jobs that are being created are in the service sector, which are less paying jobs. The jobs that are being lost are the higher paying goods producing jobs.

Also concerning is he fact that the jobs data for September 2016 showed an increase in part time jobs of 430,000, compared to a loss in full time jobs of 5,000. In addition, there was a spike in the amount of individuals who hold multiple jobs of roughly 300,000, from 7.5 million to 7.8 million. The following two charts highlight these developments:

part-vs-full multiple-oct

Put it all together, and what we have is an economy which appears to be creating low paying jobs, which are being filled by people who may already have jobs, but need second and third jobs. Or, individuals who were laid off from a full time job, and are replacing it with multiple part time jobs, at lower pay.

Regardless, these are not signs of a robust economy, and those who point to headlines touting ‘X million jobs created since the recovery’ are being duped by an attractive mask that hides a horror show.

The Asset Price Mask

But what about the stock market? Isn’t it at all time highs?

It is, but masks are present here as well. Namely, the Federal Reserve. For nearly 8 years, the Federal Reserve has been engaged in unprecedented levels of monetary accommodation, with the Federal Funds rate resting at 0% until the most modest of raises in December 2015.

That raise was supposed to be the start of an easing cycle, which many experts predicted would result in four rate hikes for 2016. However, the stock market subsequently began 2016 with the worst start in the history of the stock market. This prompted an abrupt about face from the Fed, and then the ‘experts,’ with respect to the rate hiking schedule. Four rate hikes became two, and two became one, and as of this writing there is talk that there will be none at all.

That 12% stock market sell off in the first three weeks of 2016, on the back of the Fed raising rates for the first time in 7 years, from 0% to a negligible 0.25%, is indicative of the whole story: This market lives by the Fed and dies by the Fed. Some, myself among them, would call that a bubble.

The Fed’s persistence in keeping interest rates as low as possible is ultimately rooted in its flawed belief that elevated asset prices are the key to prosperity. Consider Ben Bernanke’s 2010 explanation of accommodative monetary policy and its intended result, the ignition of the ‘wealth effect.’

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate this additional action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

This is a description of an economic growth model that starts with the Fed lowering interest rates, pumping money into the economy, continues with various actors in the economy increasing their borrowing, and ends in them buying assets, which increase their prices, emboldening the owners of those assets to further spend or take on more debt as a result of their increased ‘collateral.’

The hope Bernanke and all Keynesian influenced central bankers had, and still have, is that this process continues and feeds on itself, a phenomenon known as the ‘virtuous cycle.’

Indeed, the Federal Reserve has accomplished this, expanding its balance sheet from roughly $800 billion in 2008 to roughly $4.5 trillion today:

fredgraph-2

Which has led to skyrocketing corporate debt:

fredgraph-3

Which has, in part, led to a substantial rise in the S&P 500, which I will use as a proxy for ‘asset prices’:

fredgraph-4

The problem with this, the Fed’s preferred model for growth, is that continued asset price increases rely on ever expanding debt, to provide the impetus to buy. It is a simple fact that debt cannot expand in perpetuity. It is limited by the ability to service that debt, which is in turn limited by the productive capacity of the borrower in question.

With respect to corporate borrowers, that productive capacity is seen in earnings. If corporates can produce increasing earnings, they can sustain larger debt loads, which justifies the higher debt-induced prices. The following chart, of the S&P 500 index compared with earnings of the companies in that index, tells an interesting tale:

spx-earnings-vs-stock-index-price-1

In short, the continued rise in stock prices are not justified based on the diminishing productive capacity of the companies themselves. A reason for this diminished capacity is general weakness in the economy itself, evidenced by the labor market situation which was discussed earlier.

An economy in which more and more people are working multiple lower paying part time service jobs instead of higher paying full time goods producing jobs is going to be an economy in which fewer and fewer people have incomes which allow them to spend freely. These household budgets are further constricted when taking into account the fact that the Fed is trying to engineer prices higher, so as to kick start the ‘virtuous cycle’ of the ‘wealth effect.’

The math just doesn’t work. Rigid incomes lead to constrained household budgets, which do not lend themselves to increased spending at higher price points, nor do they lend themselves to increasing borrowing to spend at higher price points.

Despite this roadblock, share prices continue to remain elevated, because the continued low interest rate environment established by the Fed enables corporates to take up the burden of spending. They can borrow at record low rates, and buy back stock. Or, other investors, banks, foreign central banks and others can borrow at low rates, in order to buy elevated stock prices. The rationale here is less a belief in a prospective restoration of business fundamentals, and more in a belief that buyers will buy for the sake of buying, rendering elevated prices becoming even more elevated.

Even the Fed is worried about the developments they have created:

In the minutes of the Fed’s September meeting, released this week,some officials “expressed concern that the protracted period of very low interest rates might be encouraging excessive borrowing and increased leverage in the nonfinancial corporate sector.”

 

Despite these worries, investors continue to demand corporate debt, helping fuel a years-long rip-roaring rally in corporate credit that shows few signs of stopping. Corporate bond issuance this year is set to total $1.5 trillion, nudging past last year’s tally, according to the credit strategists at HSBC, led by Edward Marrinan. Issuance of high-grade debt is expect hit [sic] another record high this year.

 

It’s all a sign that, in the words of the bank’s strategists, “Market participants seem to be downplaying—or looking past—the risks associated with the steady deterioration in the credit fundamentals of the US corporate sector,” such as rising leverage, contracting earnings, and stressed revenues.

 

After the financial crisis, many companies focused on rebuilding their balance sheets to withstand another shock. But as the prolonged period of low interest rates continued, cheap borrowing costs prompted, well, more borrowing. Much of that went to fund shareholder-friendly activities like dividend increases and share buybacks. It also funded big mergers and acqusitions.

Emphasis mine. The preponderance of ‘shareholder-friendly activities,’ not least of which being the explosion of asset prices themselves, looks very good on the surface. Indeed, many law makers, academics, and market cheerleaders (such as President Obama) have been in a celebratory mood over the last few years, boldly declaring that the Federal Reserve’s actions had worked.

However, the divergence described by the WSJ – that the Fed itself worries about – between elevated asset prices and the fundamental deterioration of those prices is real, and cannot persist in perpetuity.

Removing the Mask

Deteriorating fundamentals cannot support the further debt burdens that are required to keep asset prices rising even further beyond these levels. And the Fed knows it. This is why they abandoned the original plan for multiple rate hikes in 2016, as that would have slowed down borrowing and thus slowed down the impetus for asset price increases.

In this manner, the market going from four expected rate hikes to now one or zero rate hikes is an effective rate cut. This is what the Fed has been relegated to, sitting on its hands and hoping a miracle happens. If they are proactive in doing anything more accommodative, such as another round of QE, they will put themselves in an untenable position. They can’t on one hand tout the robustness of the economy  yet embark on further emergency policies, such as QE would be. The situation would be exposed for all but the most die-hard believers in the Fed.

Regardless of their games, or ‘forward guidance’ as they would call it, reality will assert itself at some stage. The mask will eventually come off. How exactly it will happen is uncertain. But this situation has happened several times before in financial history. There is no escaping a scenario in which too much debt has been taken on relative to the ability to service it. All the Federal Reserve (and central banking in general) can accomplish is to push the date of reckoning out into the future. But even that does damage.

The current boom/bust episode is merely the latest in a 40 plus year credit binge following the ending of the gold standard in 1971. This has eventually led to constantly rising asset prices, which fooled the majority of the public into eschewing the idea of accumulating real savings.

Most used their home or 401k as their savings account. This was fine as long as the stock and housing markets kept rising, which they did, temporary bear market corrections notwithstanding. That all changed in 2008, when the bubble burst in earnest, and asset prices crashed.

This resulted in mass layoffs, but more importantly, many who had counted on elevated real estate and stock prices for retirement were now out in the cold, just at the moment they were ready to retire. This meant they were forced to return to the labor market, because they had built up no real savings over the preceding decades. This explains the surge in labor force participation for the over 55 segment, discussed earlier.

The under 55s have struggled to regain a foothold during this latest ‘recovery,’ still being several million jobs underwater from where they began the Great Recession. Some of this is down to competition from the over 55 workers, who flooded the market. Many of them, closed off from their former occupations, went into parts of the market usually populated by younger workers. Hence the proverbial ‘Wal-Mart Greeter.’

That position really should be filled by a 16 year old kid, working his first job and acquiring the basic skills involved with employment. Instead, the position is filled by a 60 year old who is working one of his last jobs because he didn’t accumulate savings during most of his productive years.

This phenomenon doesn’t bode well for the economy as a whole going forward. When you have an economy which is severely under-employing those who are in their peak earning years, not only is the economy not going to be moving as robustly as it should, but in the future, as those workers persist with decades of under-employment, they too will have to encroach on future younger generations as they try to get their careers off the ground. Multiple generations impaired at once.

And therein lies one of the ultimate problems with central banking, played out over decades. It, like most of government, prioritizes political expedience over longer term sustainability, papering over the cracks instead of repairing them, thus consigning the ultimate costs to be dealt with in the future.

In this greater sense, reality will assert itself here as well. The exponential increase in debt and increases in money supply papering over business cycle after business cycle can only end in a currency crisis, as it has done many times in the past. One can only hope we correct course before such an event occurs.