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Trump Is the Next Stage of the Disease

2016 December 22
by Ian Welsh
Donald Trump

One of the more common mistakes regarding Trump is to see him as something that came out of the blue; unheralded and strange.

Trump is a kleptocrat. The US is a kleptocracy. It “formally” became a kleptocracy when the Supreme Court ruled in Citizen’s United that money was speech. (It is ironic that Trump won with less money, but it doesn’t change this fact.)

America was pragmatically a kleptocracy in 2009, when Obama entered office and continued his predecessor’s policy of bailing out bankers, taking houses away from little people and not prosecuting bankers for clear crimes.

Punish the people without money; let the people with money walk.

Trump is a walkimg emoluments violation: He should be impeached month two of his term for his refusal to sell his company.

But he won’t be (though he may eventually be impeached if Republicans decide they’d rather have Pence as President, and that they don’t think Trump’s followers will personally visit their houses to discuss the issue).

Kleptocracies are run for the benefit of the rich. It is that simple. A monarchical kleptocracy like Putin runs, and like Trump seems interested in running, makes sure the peasants get something, which means it may feel slightly better than what came before it. (Putin is very, very popular and was so even before the recent wars for the simple reason that Yeltsin was far, far worse.)

But they are still kleptocracies. Trump’s first order of business is tax cuts, mostly for the rich. There is a report that his team has asked for information on funding of environmental groups, and Trump plans on shutting down NASA’s climate change group.

These things get in the way of making money; and because environmentalism was pushed during a period in which the economy was, for too many people, a negative sum game, it is also unpopular with his base.

But these things are extensions of the already-existing Republican party orthodoxy. Tax cuts and fuck-environmentalism is where Trump stands in solid agreement with the kleptocracy that already ran the country. These things are not what make Trump interesting, or unique, they are what make him simply another stage of the disease.

Understand that what we had in 2016 was a crisis point. There were three options. Clinton was for the status quo kleptocracy. More or less the same, with a bit more help for those hurting the most, like students.

Trump was for monarchical kleptocracy, minus globalism: add tariffs and one-to-one trade deals to the mix, change up the foreign policy, make sure some more people get jobs, while gutting worker rights in general.

Sanders was an opportunity to actually change some of the key domestic policies away from kleptocracy: While not ideal, he was clearly a change from the status quo in a kinder direction, and he came fairly close to winning the Democratic primary, despite an active conspiracy by the DNC to stop him (no, no, it meets the actual definition of conspiracy).

Of those three options, Americans chose Trump: a new stage of the kleptocratic disease. Double down on transfers to the rich, but let’s give more scraps to the poor and fuck over some foreigners to get those scraps while burning up the world even faster. (Obama was not good on the environment; he was bad, but Trump will be much, much worse.)

I am not panicking, or running around screaming. I regarded something like Trump as nearly inevitable, with a small, but real, chance to avoid him by embracing the populist left (in this case, championed by Sanders).

In fact, Trump is not as bad as what I expected. His victory, a squeaker, may wind up precluding Trump 2.0, that is, the guy who would run next time, having learned from Trump what was possible, but far more disciplined, focused, and ideological than Trump.

Trump has the support of some powerful ideologues (most notably Bannon), and he has a world view, inchoate as it is, but he’s a very flawed man. Despite being very good at getting what he wants, it is undeniable that he lacks discipline, focus, and a broad base of understanding. Nor does he self-identify as being ideologically driven. Bannon may want to be the Lenin of the right, Trump does not.

More to the point, because the actions of US elites (and the world’s), along with the repeated votes of US voters, kept pushing America down this path, for decades, I regard running around screaming as pathetic. It’s like running full speed at an oncoming train for five minutes, with plenty of opportunities to veer off, then complaining when you get hit.

Many Americans, and the vast majority of their elites, affirmatively chose, repeatedly, to take actions and institute policies which were most likely to lead to Trump. Those who opposed those policies lost, and a huge chunk of the population sat on the sidelines doing nothing.

There were many, many opportunities to turn away from this path; the largest was to NOT bail out bankers in 2009.

In 2009, I wrote the US off. I knew that Obama had affirmatively made the choice to save oligarchy from itself (quite different from FDR saving capitalism, but not oligarchy). I knew then that something like Trump was the most likely outcome, but I expected worse than Trump, so far, seems to be.

So running around screaming is ridiculous. This was a choice, made affirmatively, repeatedly. If Trump had lost to Clinton, Trump 2.0 would have tried in 2020 and almost certainly won. The US is a kleptocracy, and eventually the disease would move to the next stage, if not reversed.

What I seek to do now, with regards to Trump, is two things. The first is simply to understand him and his movement. We’re going to be living in his America; it’s his world, for some time, so we’d best figure it out.

The second is to poke people who didn’t and still don’t get it, because until enough people do, we will keep losing to kleptocrats (whose number includes both Clintons) and people like Trump.

These two things are meant to support realistic assessment of Trump, the US, and the world so that effective action can be taken.

I have a friend who, as a result of Trump, is leaving the US with his two children. He has carefully looked at Trump, made his assessment of the US’s future and chosen a course of action. That is effective.

Make your assessment, take your action. Stop the hysterics. I strongly recommend that many people, who are most worked up, take two weeks off the internet, except for unavoidable work related tasks. Calm down, think, and decide what you need to do for yourself and your dependents. Heck, depending on who you are, you might even be one of the winners from Trump (they will exist).

Then decide what you’re going to do. Understand the consequences of your actions. Make your assessment. If you really think Trump = Hitler you should be getting the fuck out or preparing to fight, and I do mean fight. If you don’t, what do you think he is?

Get real.

In the meantime, I will continue to keep an eye on Trump and his team and try to provide analysis without hysterics or panic. Fear may be appropriate (it is for some people, for sure), panic is not.

But it will be vastly harder to fix this if people keep pretending it wasn’t affirmatively chosen, and not just by people who voted for Trump this time, but by everyone who supported the previous status quo, starting around 1980. Kleptocracy is neoliberalism’s child, its logical end-result, and Trump is just a new stage in kleptocracy, and yes, many people worked hard for this including most people who voted against Trump.

Understanding how and why you got here is necessary to get out of here–not in one piece (it’s too late for that), but without losing any body parts you’ll really miss (always choose to lose a leg–the prosthetics are great).

Trump: Just another stage in the disease of kleptocracy, made inevitable by neoliberalism and affirmatively chosen by modern “liberal” hero, Barack Obama.

Own it.

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Trump and the Taming of the Oligarchs

2016 December 21
by Ian Welsh

Some years ago, I read an article about a Russian oligarch who had wanted to close a factory in a Russian town in which the factory provided the only real jobs.

The people complained to Putin, and some time later Putin appeared on stage in the town with the oligarch. With an eye on the oligarch, Putin explained that the jobs would be kept in the town.

Putin’s speech was described as being cold and contemptuous towards the oligarch.

When Trump convinced Carrier to keep some, not all, jobs, in America, he did so largely through bribes.

What will be interesting, however, is to see how much he makes people bow.

Putin broke some oligarchs and allied with others, but the important thing to understand about Putin’s relationship with Russian oligarchs is that Putin is the senior partner. He is in charge. They can do well, even very well, but if they challenge him, he will force them to bow–or break them.

(For the record, I have less than zero sympathy for the oligarchs; I know how they made their money.)

We all, I presume, remember the picture of Romney meeting Trump, begging for the Secretary of State job (which he didn’t get). I suspect Trump really did want to give the job to Romney, simply so he could force Romney to bow on a regular basis, but Trump’s loyalists hated Romney too much.

Meanwhile, the tech oligarchs have all also met with Trump. He was gracious, but they came to him, despite their clear opposition of him.

One of the issues in the US is that its oligarchs think they don’t have to serve the public good. Apple and other companies have billions stored overseas, they dodge taxes, and they move jobs overseas at the drop of a hat.

They also think they don’t have to bow to the President.

Now Trump cares somewhat about Issue #1 (by which I mean jobs, not tax dodging), but he’s going to care a lot about Issue #2 (bowing to the President). And Bannon cares a lot about both, because Bannon despises America’s oligarchs and wants to see them humbled.

Trump, well, Trump likes power. He wants to be loved by the mob, oh yes, but he values loyalty greatly, and, if crossed, he likes breaking people.

So I expect to see a number of oligarchs and other powerful people made examples of, forced to bow–indeed, forced to kneel.

If Trump wants to get his way, this is necessary. He needs these people to do some things they don’t want to do (make less money by bringing jobs back to the US), and they’ll need to be scared of him.

They need to be personally scared. They need to believe they personally aren’t immune from his power.

Trump will enjoy this. Bannon, if I read him correctly, will enjoy it even more.

Under Trump, oligarchs will do well, even very well. But not if they don’t bow. He wants some crumbs for ordinary Americans, and he needs the oligarchs to give them.

So one of the ways I will know if Trump is going to be successful (i.e., get his people enough goodies to get his second term, and the accompanying adulation) will be by watching the “kneeling to bribes” ratio, and seeing what Trump does to those companies who refuse to cooperate.

Be very clear on this, folks. This is something about which most people are complete idiots.

There is nowhere to go.

The rich cannot actually move their companies overseas. Where are they going to go? Europe will regulate them even harder (see all the problems Google is having). They don’t want to live in China or Russia, and China and Russia are the only countries strong enough to tell America to bugger off. Plus, of course, Putin and the Chinese Communist party won’t just make them kneel, they’ll make them get down on their bellies and grovel like worms.

No one else can stand up to America. Oh, Europe could, if it had its act together, but it doesn’t; and it wants regulation that repel oligarchs. Tax havens are a joke; they exist because the great powers want them to exist, and the second the Treasury cracks down on them, they will go away.

So if Trump wants to put the screws on, he can–especially if he’s smart about it. You make an example of a few people, you reward the others for cooperating, and soon they’re all bowing and scraping.

That’s how it works.

Let’s see if Trump knows how to play the game.

(And, for the record, no, this isn’t good. But the financial crisis proved we already have rule of men, and that this rule is to be used solely to enrich the few and immiserate the many. Rule of law will continue to disappear. I have no sympathy for most of the US’s oligarchs, because, while not as outright nasty as Russia’s oligarchs (on average–some of them are just as bad), they are almost all truly bad people who have strangled the US, and the world, to get where they are.)

The games are on, Caesarism continues its rise. It’s what Americans voted for and elites worked hard to create the conditions for it. Crying over it is like crying over physics.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Trump’s Relationship with US Intelligence

2016 December 20
by Ian Welsh

Trump, as has been reported many times, does not attend most daily intelligence briefings. The CIA, FBI, and NSA have said that Russia tried to elect Trump through hacking, and Trump has fired back at them.

Liberals are wringing their hands about Trump’s unprofessionalism and disrespect for the intelligence agencies.

Some of this is just embarrassing: Given how intelligence agencies performed in the Iraq war, and their dubious and incompetent behavior in many other episodes, and given the historically violent, anti-democratic nature of the CIA overseas, and the FBI and NSA domestically, anyone who is even slightly left of center should be deeply suspicious of anything they do.

But there is a deeper issue, which speaks (again) directly to the inability of most non-Trump people to understand the Trump argument about the world.

The CIA says bad things about Trump, and Trump answers the same way that a hard left-winger would, and that anyone sane should: “Whatever.” Then he points out what a “heck of a job” they did in Iraq.

Daily intelligence briefings are one of the ways that intelligence agencies and the Deep State control presidents. Such briefings set the frame; they create the reality within which Presidents operate, frame the available options, and so on. Start the day with one almost every day, and you will be influenced to see the world the way they do.

And then you become Obama: Handmaiden to the same intelligence agencies you criticized while running your campaign.

Intelligence briefings are dubious activities. If Trump wants specific information, he can ask for it. If an issue is genuinely urgent, the head of the agency can push it personally, but taking those briefings every day is a poison pill, and I am highly skeptical of the notion that it leads to better decision-making.

Instead, it is almost certain to lead to status quo thinking, plus the perpetuation of those activities intelligence agencies most enjoy. (Say hello to Obama’s massive ramp up of drone assassinations, and to his huge crack down on whistleblowers.)

This the same as Trump not bothering to talk to State about his Taiwan call. Of course State is going to say, “Don’t do it,” they are wedded to “One China,” and they’ll also leak like a seive (as they and the CIA and FBI have already been doing).

Why even bother to talk to them about it? Oh, one can make arguments, but if you’re sure you want to change things, and you know they disagree, all talking to them does is give your enemies more opportunities to sandbag you.

There’s a lot that Trump wants to do that I don’t agree with, but putting the Deep State in their place isn’t one of those things. They serve at the President and Congress’s pleasure; they are not part of the Constitution, they do not have to be consulted, and, given their abysmal performance during the last few decades, it’s hard to see why any particular respect should be given to them.

This is the world model that Trump (inasmuch as he ascribes to a “world model”) and Bannon live in, Bannon especially. They do not grant that the people who have been running government are smarter or more competent than they are, they believe the reverse.

So, no, they don’t respect the CIA’s opinion. To them, the Deep State is a potential adversary who needs to be brought to heel.

More about bringing people to heel in a later post.

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Heaven on Earth: The Kindness Maxim

2016 December 19
by Ian Welsh
Clio, the Muse of History

In the past, I have noted that kindness is generally the best policy and always the best policy default. If you don’t have an ironclad reason not to be kind, be kind.

Let’s run through this.

People who are treated badly, become bad. The abused grow up to abuse. The sick make others sick and cannot contribute to society. Happy people are better to be around. Prosperous people can afford your products and services.

Happy, healthy, loving, and prosperous people are the people we want in our societies.

We evolved in bands. Forty to fifty people running around the Savannah. We would have been friendly to some other bands (those with whom we shared ancestors) and we were hostile to most other humans, who were our competitors. The level of hostility varied with carrying capacity; if resources were short because of too many humans, quite hostile, otherwise not very.

We did not evolve to take into consideration the needs of large groups of people. In order to do so, we evolved cultural methods: fictive kinship, culture, story, myth, and religion. These things created fictional identities which went beyond people we knew of or saw every day.

Theses are all hacks for a fundamental evolutionary problem: We’ve evolved to be pretty good to those we see all the time, and not to care much about people we don’t.

This was fine when were just a particularly clever animal. Even when we got to the point of making wholesale changes to the environment (usually through agriculture), the worst we could do is ruin a local ecosystem–we couldn’t mess up the world.

But, today, for good or ill, we live in that “interconnected world” and the “global society” everyone talks about. What happens to someone in Nigeria, Brazil, or China matters to me. Their happiness, their health, their prosperity affects mine.

And how they affect the environment affects me, too. How I, a first-worlder with a huge carbon footprint, affect the environment, affects them.

Their well-being affects mine. It is in my interest for them to be better off.

This isn’t what you’ve been told. Economics treats the world as a zero-sum game, a matter of managing scarcity.

The world has scarcities: resources, dumps for pollution like carbon, etc. But civilization isn’t, usually, a zero sum game. Instead, it’s usually negative sum or positive sum, or both. For some time for Westerners, and a few other developed nations, it has been positive sum, and there have been many other periods of positive-sum games.

My win is everyone else’s win.

Creating a good society requires both managing actual scarcities and understanding that actual scarcities are scarce, and that most things people want to do are positive sum. It requires turning most of what we do into positive-sum games. A good society is one in which “your win is my win” is made true far more often than not.

“We win together” is a prescriptive statement which must be made into a descriptive statement. (It is also a descriptive statement in general, because if my win isn’t your win more often than not, we don’t live in a good world.)

So humans must see beyond their identities, their tribes, and their nations, to treat all humans as people whom we want to be healthy, happy, prosperous, and loving. For their sakes and for our sakes.

But there is an additional step required to create a good society, a good world, a good civilization.

We must care for non-human life.

The mass-death of trees and plankton affects you, it affects me. The mass death of fish affects you, it affects me. The destruction of marshlands causes floods and reduces water quality; it affects you, and it affects me. Ecosystem collapse—well, you get it.

The problem here is that I’ve given you the rational argument.

Rationality is marginal. It’s not that humans can’t be rational, it’s that rationality is the lesser part of why we do things or how we make decisions. We make decisions based on emotions, and those emotions are based on our ideologies and identities.

Rationality, or “reason,” allows us to weasel out of doing the right thing too often. It is a tool for our emotions; emotions which right now scream: “My interests, my ideology, my identity, my people matter MOST!”

For a good world to exist, we must feel that other humans should be treated kindly simply because it is the right thing to do. We should be revolted by anyone going hungry, anyone being tortured, anyone being raped. The moment we think “They had it coming,” we’re on the wrong track. (Punishment is not the point, removing the ability of bad actors to continue to act badly is.)

And this principle needs to be extended to non-human life. We need to feel bad when animals are dying in large numbers and going extinct–bad enough to do something about it. We need to instinctively, by default, move to protect them. We should be as revolted by images of dolphins being slaughtered as we are by humans being slaughtered. If we kill for meat (and I eat meat), we should insist it be done humanely.

This must be based on values, principles, and identity, of feeling that humans and animals and even plants are all alive–and because they are alive, they must be treated with respect.

There are sound, pragmatic reasons for doing so; there are also sound moral reasons for doing so (read the Hidden Life of Trees). Anyone who doesn’t think most animals don’t feel pain, or don’t suffer, is on a profoundly unethical, immoral track.

This is the right thing to do, morally and pragmatically, and if we don’t figure out how to do it, we’re little better than bacteria that grow until they destroy their own environment and experience a great die-off.

Be kind. It creates the world you want to live in, and it may well save your life and the lives of those you claim to care about. By granting life the love you reserve only for a few, you give those few (and yourself, as it happens) their best chance at long life and prosperity–and grant it to your descendants as well.

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Everything Cost Clinton the Election

2016 December 17
The Person Most Responsible for Clinton's Loss

When the result (in popular vote margin in the key states) is as close as it was in the US election, every factor in play contributed to the result.

Did the Wikileaks release cost Clinton the election? Probably.

Did Comey’s last minute letter to Congress about Clinton’s email cost the election? Probably.

Did Clinton choosing not to campaign in Wisconsin cost the election? Probably.

Did Clinton’s neglect of the Rust belt cost the election? Probably.

Did the Clinton campaign’s refusal to listen to locals cost the election? Probably.

Did the Clinton campaign’s flawed model cost them the election? Probably.

Did Trump’s superiority in earned media cost the election? Probably.

Did Jared Kushner’s innovative ad campaign cost Clinton the election? Probably.

Did voter suppression cost Clinton the election? Probably.

Did calling a quarter of the electorate “deplorables” cost Clinton the election? Probably.

Right. Hopefully you have understood the point.

What is happening right now is hysteria. An attempt is being made to overthrow the election by saying Russia influenced it, through Wikileaks and Guccifer 2.0.

So far there is no hard evidence for this, and Wikileaks, at least denies it. That US intelligence believes it to be true is nice, but almost irrelevant to anyone with enough memory to remember what they believed in”high confidence” about Iraq.

I seriously suggest you READ the NIE on Iraq from 2002. It was essentially ALL WRONG.

So, if the intelligence community and Obama want to make this charge, they need to release the hard evidence. Their word is not good enough, especially that Putin was personally involved.

I point out, once more, that even if true, this amounts to “overturn the election because a foreign government helped release TRUE information about one of the candidates.”

If it actually occurred, I would regard it as a neoliberal coup, similar to the ones which occurred in Greece and Italy, meant to insure policy continuity in the face of someone who doesn’t agree with all the tenets of neoliberalism.

I don’t think faithless electors will throw the election (but who knows), however I note something else important: creating this as the primary storyline mitigates, hard, at looking at stuff which Democrats can actually control: like their own abysmal campaign, at virtually ever level from basics like canvassing (“we don’t need literature”, said the Clinton campaign), to their model, to their message “America is already great”, “deplorables”, to clearning the field so a candidate with huge negatives would be annointed the candidate.

If Democrats had gotten even one or two of the things listed above which were in their control right, and which did not depend on their opponents actions at all (and the list is incomplete) Clinton would almost certainly be President-elect today.

Running against Russia in the election was stupid; the act of a Goldwater girl who doesn’t understand that the USSR fell almost 30 years ago. Making them the primary actor in Clinton’s loss and Trump’s win pushes attention away from the things which can be fixed by Democrats unilaterally, and is dangerous to boot, both domestically, by degrading political norms even further, and internationally, by hyping a heavily nuclear armed state as an enemy when America has almost no actual interests in opposition to Russia’s. (Syria and the Ukraine are unimportant to the US’s interests. Period.)

Meanwhile, the Democrats have spent the last eight years being slaughtered at the State and local levels. In February of 2009, I wrote that Obama was planning to ditch the 50 state strategy, and received a torrent of abuse (mostly from Kossacks.) The Whitehouse said that was bullshit; their hero wouldn’t do that!

He did.

Self-goal. Something completely under the party’s control that they chose to do, which hurt them.

In the end, whether or not Russia released some derogatory–but true–information about Clinton and other Democratic candidates, that act was only one of many factors which cost Clinton the election.

Concentrating on it is stupid, demagogic, and dangerous and allows people whose fuck-ups were far more responsible for the loss to largely slide.

Democrats should concentrate on what they can control, and understand that, as the side with less guns, constitutional norms protect them more than they do the other side.

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The Lies at the Heart of Our Dying Order

2016 December 16
by Ian Welsh
The Course of Empire by Thomas Cole

One should understand why people have lost trust in experts, the media, and politicians.

It is not difficult, it is the same reason people lost faith in Soviet Communism: Promises were made that turned out to be lies, those promises were not kept.

Soviet Communism was supposed to lead to a cornucopia and a withering away of the state. Instead it lead to a police state and a huge drought of consumer goods, and often enough, even food. Communism failed to meet its core promises.

The world order we live in was born in 1979 or 1980, with Thatcher and Reagan. It made a few core promises:

  • If the rich have more money, they will create more jobs.
  • Lower taxes will lead to more prosperity.
  • Increases in housing and stock market prices will increase prosperity for everyone.
  • Trade deals and globalization will make everyone better off.

The above core promises all turned out to be lies. It’s that simple. For the last 40-odd years, most of the population experienced either stagnation or decline.

Understand clearly: By 1979, people had lost faith in the post-WWII order. They were willing to try something new.
That “new” order has now betrayed too many people, and it is falling. It will continue to fail. We are in the twilight of neoliberalism (a longer article on that topic is forthcoming).

This is the reason why people are going for “fake news.” This is why people are willing to listen to demagogues. This is why people don’t trust the press–and why should they? The press has lied to them repeatedly, it is the original fake news. This is why people don’t listen when hundreds of economists say Brexit is bad–why should they? Most economists missed the housing bubble.

Neoliberalism has discredited everyone who bought in to it. Who didn’t buy into it? Well, the hard left and what people are now calling the “alt-right.”

So people are turning in those directions, though more to the right. Because people are ideologically and identity driven, and most are not intellectuals, what they look for are signifiers that someone is not like the people who screwed them, who lied to them for 40 years.

Trump does not talk like those people. Farrage does not talk like those people. On the left, Corbyn does not talk like those people and, to a large extent, neither did Sanders.

And so, people are turning to people who don’t parse like the “typical” elite. Many of those people are also selling them a bill of goods (Trump, to a large extent), or are nasty pieces of work (Trump, Alt-Right). To a lot of people, however, that doesn’t matter: They can’t take the pain any more. They are assured a long decline and they will take a flyer on anyone who might shake things up.

Lying is bad policy. It may get you what you want in the short run, or even the medium run, but it destroys the very basis of your power and legitimacy. Lying is what neoliberal politicians, journalists (yes, yes they are neoliberal), and their experts have done to themselves and they destroyed both their own power and legitimacy and that of the order they supported. No one with sense trusts them: If you trust these people, you have no sense, it is definitional. I always laugh when some idiot says, “But 90 percent of economists think X is bad.”
FAIL. They also missed the housing bubble. They lied or were “mistaken” about trade deals. Their opinion means nothing.

All this screaming about fake news is something I will take seriously when the New York Times, who helped sell the Iraq war based on “fake news,” is listed as fake.
The current order has very little credibility left, and they are losing more and more. Look at all the poll failures: Somehow, the polls almost always get it wrong against insurgents, not for them.
No, neoliberalism is dying, and its defenders are discredited, and both things deserve to be the case. That does not mean its death-throes will be pleasant (they won’t be) or that what replaces it will be better, just that it has run its course.

Those who supported it took their rewards: The top tier got filthy, stinking rich, their courtiers received good jobs and money, even as both disappeared for their victims. They will have to be satisfied with that, because posterity will be absolutely scathing to them, as it is to the generation leading up to World War I.
Lie repeatedly, fail to keep your promises, and things like Trump and Brexit will be the result. It is that simple.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Trump’s Coming Confrontation with Yellen and the Federal Reserve

2016 December 15
by Ian Welsh
Federal Reserve Seal

Okay, so the Federal Reserve, coincidentally, now that Trump has been elected, has decided that the economy is at full employment and they’ve raised rates.

The funny thing is, it’s true. Sort of. The unemployment rate (u-1) is low enough to be considered “full employment.” What that means is that the labor market is tight enough that, for the first time in Obama’s reign, workers actually got raises in 2015.

According to the economic policy regime which has run the Federal Reserve, and the US, since Greenspan, that can’t be allowed. The moment employment starts causing “wage push inflation” (wage increases faster than the general rate of inflation) it must be stopped.

Of course, out of Obama’s era, there has been only one good year so far (though 2016 will probably come in as decent), and the only reason the unemployment rate has improved is because millions of Americans gave up on finding a job. As a percentage of the population, there are about as many jobs as there were at the bottom of the last recession.

There was quite a bit of growth, but it didn’t make it into wages. The only way it will do so is if the labor market stays tight for years, because there are years (decades, really) to make up for almost all the gains going to the top few percent.

So, Yellen probably “should” have raised rates six months or so ago. She didn’t, probably because she’s Obama’s appointee–the same way that Bernanke didn’t when he “should” have because he was Bush’s appointee, and wanted a Republican to replace Bush.

Under Barack Obama, the deficit (how much the US pays on its debt) dropped, but the debt increased by $7.917 trillion (not including the first year, which he didn’t control). The deficit dropped because the Federal Reserve kept interests rates extremely low for years and years and bought up a pile of debt as well.

But the debt is higher than it has been, in relative terms, since the WWII debt splurge. And if Yellen raises rates, debt service charges will start to increase (not immediately, much of it is in longer term instruments).

More to the point, higher interest rates are meant to make sure that wages increases stop, the unemployment rate increases, and that (in effect) the economy never actually recovers from the financial crisis.

So Trump has a problem. He needs cheap money if he’s to have a good economy, and Yellen is ending the cheap money era–just as he’s been elected.

It’s not completely a coincidence, but it’s not entirely not a coincidence, and if I were Trump or his team, I’d be livid, and it looks like they are.

Worse, Trump has a big stimulus plan. It’s a bad plan, but it’ll still create some jobs, and Yellen has said:

“I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment,” Yellen said.

That’s Fed speak for “spend the money if you want, but we’ll neutralize every dollar you spend.” Which, by the way, has been orthodox Fed policy since Greenspan and arguably Volcker–almost 40 years.

So, Trump (and Bannon) if they want a good economy and their stimulus to work, have a problem: Yellen and the Federal Reserve Board. And Yellen has stated she won’t step down till her term ends, in 2024.

They can do two things. The first is to wait, not for Yellen, but for the terms of other Federal Reserve members, to expire. Two slots of the six (seven with Yellen) are currently empty, he can fill those. That gives him two. One, Powell, is a Republican and may be amenable; and Fischer’s term expires June 2018. So by late 2018, Trump might have a Fed willing to cooperate with him–or at least not sandbag him.

BUT that’s quite a while, and assumes that Powell is amenable. It gives Trump only two years to make the economy work how he needs it to work, and means his first two years will be sandbagged by the Fed. Trump’s followers are not going to care what the reason is, they expect results.

The other option is hardball. Governors can be removed for cause. Trump can say they have performed badly (it’s not a hard case, and people who voted Trump and many others will agree) and remove them. This can then go to the Supreme Court, which, if Trump is smart, will then be firmly in Republican hands.

I will be frank: I would absolutely do this. I would have done it as Obama to Bernanke (if Obama had actually wanted a good economy, or to have banks go under) and I would do it as Trump. For four decades, the Federal Reserve has sandbagged wages and made sure the rich got richer. This is not even in question, and the financial crisis was only the largest proof of it, not nearly the only one.

I think this is coming. The Federal Reserve bows (and Yellen has been very clear she won’t) or the resisting Governors get booted.

There will be screams from Democrats and “liberals” and I will ignore most of them. As with ending the Trans-Pacific Partnership, this is the right thing to do, and it’s something that should have been done decades ago. Appointed technocrats sandbagging Congress’s fiscal policy and deliberately crushing wages was always evil.

Get out your popcorn, folks.

Oh, and these sort of stakes are why there is such a huge effort, abetted by the CIA (and opposed by the FBI) to make sure that Trump doesn’t take office.

Like it or hate it, he’s going to have to destroy much of how DC has done business for the last 40 years, and many people in power really, really don’t want this.

Don’t defend the Federal Reserve if you claim to care about workers, the middle class, or anyone under the top 10 percent or so. They have acted unutterably evil for decades, and if it takes another evil person to destroy their power, I’m fine with it. Frankly, the Federal Reserve should be placed under direct control of Congress with four year terms at most, and every central bank in the world should lose its “independence.” They have misused that independence to do little more than make the rich richer for decades and they are profoundly anti-democratic.

It’s a pity so much that has to be done will likely be done by someone like Trump, and that he’ll do much of it the wrong way to support terrible policies like tax cuts, but that’s what happens when the Left allows the Right to be the populist party, and chooses to be the party of bailouts and technocrats.

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If People Want To Use “Ze” As A Gender Neutral Pronoun, Whatever

2016 December 14
by Ian Welsh

Oxford’s student union has suggested using “ze” as a gender neutral pronoun.

(Edit: Apparently, they haven’t even done that!)

It is an offense to use the wrong pronoun deliberately, but not required to use “ze” for everyone. This follows the University of Tennessee suggesting tutors ask students which pronoun they prefer.

I remember in the 70s when “Ms.” came into use. It felt really awkward, but in a couple years I didn’t even notice. It was an issue of basic politeness, if a woman didn’t want to announce her marriage status, it was polite to accommodate her and did me no harm. Gender neutral pronouns exist in various languages, and frankly, if “ze” comes into wide use, I might prefer it to the awkward “he or she” in places where “they” likewise feels awkward.

However, this is a minor issue, especially in America, where the right to an abortion has been receding for years and is now at real risk of being lost. I’m for trans-rights, etc…but the right to an abortion effects far more people and is far more basic.

(Theresa May, the UK’s Prime Minister, also supports a reduction in the allowed time for abortions to 20 weeks from 24, though how much she cares about this issue is unclear, and it’s not nearly the same thing as an overturning of Roe v. Wade in the US. Meanwhile, in Canada, we have no abortion law, and the world has not ended.)

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Trump Is No Longer Trump

2016 December 13
by Ian Welsh
Donald Trump

Stop thinking of Trump as Trump alone. He was never entirely that, and he’s definitely not that any more.

Trump is now Team Trump. The two most influential people in his court appear to be his son-in-law, Kushner, a fellow real-estate developer (and the guy who made the key strategic decisions which lead to Trump’s victor), and Bannon. Bannon is an economic nationalist with white nationalist leanings, who identifies with the working class and wants to bring manufacturing back to America. He’s quite willing to have a trade war to do it.

Priebus, the chief of staff, is also influential, but seems to be a bit of a drone. Trump’s children are influential, and it appears that Ivanka, his daughter, is the most influential of the three. She’s probably the most liberal person in the administration (even if she, strictly speaking, isn’t in the administration).

Trump has loaded up successful oligarchs and generals.

Steve Bannon

Steve Bannon

So, for example, his shift on China policy is in alignment with a lot of generals’ thinking (China is the real threat) and with what Bannon thinks (manufacturing jobs, economic nationalism).

His economic and labor policy will seek to both undermine labor rights and to spike the economy, which is essentially what authoritarians tend to do.

But the important point is that Trump, because he has only a few fixed ideas, even more than most Presidents, will be defined by the agendas of his closest advisers. To understand Trump’s moves, you need to understand his court.

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The Trump China Showdown Aligns with Reality

2016 December 12
by Ian Welsh
Chinese and American flags flying together

Trump received a phone call from the Taiwanese president. That was a violation of the One China policy, where in order to have diplomatic relations with China, one cannot have formal relations with China.

It is quite clear that Trump did this deliberately, it was not a gaffe, but planned.

China stated this was unacceptable, but was willing to pretend it was a gaffe.

Trump doubled down, accusing China of currency manipulation hurting the US (not true right now, but massive in the past), of not helping enough with North Korea, and of unacceptable behaviour in the South China Sea, where it has been building islands in order to seize control of the sea. He said he sees no reason to abide by One China if the US isn’t getting something in return.

China’s official response is that there will be no negotiations over anything without One China first.

A Chinese tabloid which is party associated said that if the US rescinded One China, China should invade Taiwan and arm American enemies.

And here we are.

Some basics. One power maximum; the potential power, of a modern state, is equal to its industrial power. Many nations may not have as much power as their industry allows, but this is the limiter.

China is now the world’s largest manufacturer. It is the world’s potentially most powerful nation. However, China’s policy has been (quite sensibly) to gain the base first, then arm, for classic guns or butter reasons.

China did manipulate its currency to gain their manufacturing base, but the US and other Western elites were entirely complicit. China offered large profits to individuals and corporations, and they took that money. It’s that simple.

China’s ascension did not just hurt the US, it hurt Japan, who is probably America’s most loyal ally (with the possible exception of the UK or Canada).

The manufacturing jobs performed in China would have been, in an alternate universe, done by the people who elected Trump in the Rust Belt.

Trump and his advisors do not believe that China and the US’s interests are aligned; they see China as the rising power, who is rising at the expense of the US.

This is not insane. In fact, it is accurate. It is possible to imagine a world in which that rise led to shared prosperity, but no one is offering such policies and no one ever has.

Now, I want you to turn your attention to Russia. Yes, Russia.

See, the problem with NATO expansion, the overthrow of the Ukrainian government, the color revolutions, and sanctions against Russia, and all that stuff, is that it was forcing Russia into China’s camp.

Russia does not want to be China’s ally. Russians (at least in the past, not so sure any more) would far rather have allied with Europe and the US, but Europe and the US would simply not allow it. Running on crazed fumes from the Cold War, the US and Europe feared Russia, who is no longer a threat to take first sport, rather than China, who is.

Note that Trump has also expressed great skepticism about NATO. He puts it in money terms: “Why should we pay for Europe’s defense?” But the end is the same, a NATO pointed at Russia doesn’t make sense to Trump or his advisors.

And Trump’s plans for the US involve a change in trade, anyway. People are scared of a trade war, and they should be.  Right now, what Trump is saying is at a meta-level which most people are too stupid to get: China is going to have to make a deal which helps American manufacturing, and everything is on the table in order to negotiate that. Everything.

Because Trump owes his election to the Rust Belt. He must deliver for them, in four years, or he will not be re-elected. His people, at least, will understand this. The election was too close. Trump must deliver.

And if China won’t cut a deal? Fine, slap tariffs on them. America is still America; American consumers can still consume, and if it turns into a trade war, manufacturing jobs may well come back to the US.

This is high stakes poker. It could cause a serious war, or it could send the world economy into a serious tailspin.

It is also a realignment moment. The US is pivoting from treating Russia as a big enemy, to treating China as the big threat. This is, whether you like it or not, rational: China is the actual threat to American hegemony.

I assume Trump thinks there is a deal to be made–perhaps he even thinks there is a way to make the deal into a win/win. We will see.

But do not think this is pure insanity, or that it is not well thought out. This is based on a world model in better accord with actual world conditions–more so than the world model under which Obama was operating.

If the status quo continues, the US will be superseded by China. At that point, if China and Russia are allies, options for the US are extremely limited. China is the rising power, Russia is a great power, but won’t a threat at the “super power” level again in the immediate future.

I will remind readers, once again, to stop assuming that Trump and his team are idiots just because they are doing things in new ways. I do not know if this pivot will work, and it could blow up spectacularly, but it is not prima facie stupid.

In fact, politicians who actually put the US’s real interests first would have never allowed China into the WTO, and certainly would have gone out of their way to make sure that China’s ascendence was a win/win, rather than a win/lose OR (if they were ruthless and slightly less smart) they would have done everything they could to prevent it. (I would not have favored that, to be clear).

Certainly, the US should have pivoted East years ago. This is a move which is made much more dangerous and problematic than it could have been by the fact that it wasn’t done when it should have been, enabled by an absolutely deranged policy towards Russia, which schizophrenically treated Russia as if it were both powerless and a huge threat.*

The world is getting a lot more dangerous, fast. But it was going to anyway. This may not be the best China policy possible, but it at least acknowledges reality.

(*I understand the impulse to prevent Russia from turning back into a huge threat, but that could have been managed with far less difficulty and in ways that wouldn’t have estranged Russia.)

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