Won't Get Fooled Again?

Won't Get Fooled Again?

Meet the new boss

Same as the old boss

- The Who, lyrics from Won’t Get Fooled Again

By J.M. Hamilton (11-13-2016)

If the greatest trick the devil ever played on the world was convincing the earth that he did not exist, the greatest trick POTUS – Elect Trump ever played on the American people was convincing the United States he was a populist.  You have to give the devil his due, Mr. Trump made a believer of a great many people.

Both candidates, Clinton & Trump, define the establishment.  Candidates who made their way in the world, not by the sweat of their brow or slogging it out in the trenches day after day (one paycheck away from humility), but rather, via their elite connections.  Both Trump and Hillary are mired in crimes, misdemeanors, personal peccadillos, and moral & social outrages. 

So what ultimately, was the difference between the two candidates?  Trump – like Sanders - said the system was rigged.  And a truer statement never passed through a politician’s lips.

It struck a chord.  Mrs. Clinton, on the other hand, sullied by decades of scandal, never acknowledged what the people wanted to hear.   Our POTUS-Elect acknowledged the corruption, embraced it, reveled in it, and told the American people that he was now a reformed man, who would be fighting for them.  Trump, the populist, was on the people’s side.  When FDR hired Joe Kennedy, a notorious Wall Street speculator, to head the SEC, President Roosevelt was said to have quipped: It takes a thief to catch a thief.

And under that premise - mixed in, apparently, with measures of misogyny, racism, and xenophobia - our new POTUS was elected this week.

How did the MSM, big data, and the pollsters blow this?  Quite simply, trapped in there own bubble, the elite believe their own bullshit.  In an endless feedback loop, we were told by the eminentos, and talking heads, that the alleged progressive, HRC, would win by a considerable margin.  To wake up Wednesday morning at 1:00 AM, and to see the look in the eyes of the MSM – on all the major networks – was worth thousand(s) of words.   Once again the elite and experts blew it.

Had they read J.M. Hamilton, here & here, perhaps they might have been more clued in.

The Dems failure goes back to the Clinton Administration, deregulation, the crony/insider economy, and 35 years of neoliberal doctrine - where the elite and the bigs get bigger, and everyone else gets trampled under foot.  More recently, POTUS Obama walked into the White House in 2008, running on a platform of change, and immediately set about surrounding himself with the same establishment insiders, who had brought the nation to ruin.  Mr. Geithner immediately comes to mind.  

Instead of taking care of a ruined nation and its citizens, POTUS Obama bailed out the Wall Street banks and the elite – bank bailouts that are on-going to this very day.  Under POTUS Obama the insiders became wealthier, more concentrated, and their power grew.  Entire industries are now dominated by cartel and monopoly: great for the 1%, and horrific for consumers, the free market, entrepreneurs, and labor.  Obama originally ran against job killing free trade, but quickly became – in recent years – its greatest advocate.  The President ran on pulling the nation out of a failed Iraq nation building exercise, and like Nixon before him, dallied & delayed on the troop pullout.  And today, the U.S. still finds itself stuck in the Middle East’s briar patch.  Worst of all -while the American people suffered and were evicted from their homes w/out prospects or jobs - the President wasted a House & Senate majority on the Affordable Care Act, which is crony capitalism defined. 

Obama made a deal with the devil to get ACA through.  He assured every medical cartel and pharmaceutical monopoly, that the ACA would not use government leverage & power to rein in industry monopolistic pricing power.  This year, it hit the fan.  In the midst of the election, double-digit ACA premium hikes.  Giving ammunition to Obama’s, and his surrogate’s (HRC), enemies.

Not so ironically, POTUS Trump – the great populist – appears to be already making the same mistakes as his predecessor.  Trump is already surrounding himself with Washington insiders, back-pedalling on his many campaign promises, and going full bore establishment.  (Word has it that Trump’s staff has already reached out to Mr. Jamie Dimon, CEO of J.P. Morgan, to head up Treasury.)  K-Street lobbyist are in overdrive and licking their chops; Mr. Trump (aka Mr. Establishment) is someone the stuffed suits & bagmen can work with.

If Mr. Trump reneges on his pledge to the American people, he will surely be a one term POTUS.   As for the wall that Mexico will build, or throwing Hillary in jail, the latest is “forget about it,” not a priority.  Tax reform benefiting the 1% is on.  Crony-insider appointments to the Trump administration are on.  Bank deregulation – the very dereg that placed the nation into the last economic Hiroshima… On.

The return of Glass Steagall (banking regulation that separated commercial banking from bank investment houses, and prohibited commercial banks from gambling w/ taxpayer money) - a plank in the Republican platform & something Mr. Trump ran on - suddenly, conveniently, MIA.  

As further evidence of Mr. Trumps return to the establishment fold take a look at the stock market.  After the futures market went into a tailspin early Wednesday morning, when Trump’s win had become a fact - the market quickly recovered and range bound indexes, particularly blue chips, hit new highs throughout the week.  All of this after the Wall Street analysts assured us a Trump victory, a certifiable Black Swan event, would crush markets.

For many the most horrifying prospect of all, the campaign promise Trump most likely will fulfill:  Placing backward social conservatives on the Supreme Court – who will legislate Sharia law from the bench - hangs in the air like the plague.  For a taste of things to come, look to VP Pence, who is already shaping up to be the Trump administration’s Chancellor Cheney.  When the SCOTUS appointments go down get ready for a return to the Dark Ages.  We’re talking Torquemada/Scalia types. 

With the gloom of his Presidency surrounding the country, for at least half the nation & rioting in the streets, what might Mr. Trump do to increase his prospects for a second term, assuming he wants one?  Well, he could be the populist he professed to be and actually ran on.  He could turn the free market into an economy that benefits everyone, and not just the 1%.  Let’s run down the list.  These are the issues that actually appeal to many liberals, libertarians, GOP and Dems… not so much, the 1%.

1)    Free trade agreements should be negotiated, and renegotiated from a bottom -up perspective, not from the 1% - down.  And since Mr. Trump is a nationalist, presumably w/ respect for U.S. sovereignty, extra-judicial courts created to protect multinational interests – contained w/in free trade agreements - should be eliminated.  Above all, these agreements should be negotiated w/ full transparency and in the sanitizing light of day.

2)    Deregulation that enshrines existing monopolies & cartels, that leaves workers, the consumer, and the environment unprotected should be avoided; deregulation that passes social costs onto the taxpayer has become another metaphor for corporate welfare.  Some of the worst abuses in capitalism have been as a result of dereg.  (See the Clinton administration, the removal of Glass Steagall, swaps & derivatives dereg, and the resulting ’08 economic collapse).  Dereg for the sake of quarterly returns, that leaves social costs to be picked up by future generations, is a proven abject failure.  Abandon Dodd-Frank, regulation written by and for banks (causing barriers to entry), sure, but not before reinstating Glass Steagall and breaking up the Wall Street cartel.

3)    Tax Reform:  If Warren Buffett is right about anything it’s that it is obscene that he pays at a lower tax rate than his secretary.  Any tax relief/reform provided should start w/ the long-suffering middle class, who cannot escape or dodge taxes.  End the carried interest tax loophole; end debt’s tax deductibility.  Make sure that corporations and multinationals pay taxes based upon EBITA at a rate no less than the rates the middle class is forced to endure.  It’s fair; it’s appropriate.

4)    Minimum wage:  Not a favorite among libertarians and the Austrian school of economics crowd.  The reality is that corporations – who pay a non-living wage – and rely upon the state to keep their employees afloat – are socialist and relying on the state to subsidize their income statements.  In brief, corps that pay a non-living wage are subsidizing their earnings, by using the state to keep their labor pool alive.  End corporate welfare; end crony capitalism; support the minimum wage. 

5)    Mr. Trump was right to denounce the groupthink in the MSM, and threaten the proposed and actual mergers of  ATT/TimeWarner and Comcast/NBC Universal, respectively.  But the Trump administration should not stop there.  In order for capitalism to triumph over crony-capitalism, existing cartels and monopolies must be broken up.  Breaking up predatory monopolies is pro-free market, and it’s pro- labor and consumer.  Breaking up monopolies, also stimulates growth in investment & innovation. 

6)    Trump, like Senator Sanders, is correct, we need to make sure our allies are covering their share of foreign policy alliance costs.  The U.S. taxpayer can no longer foot the bill for European and allies’ defense costs.  Moreover, we can no longer afford to patrol the globe, as the world’s policeman.  These costs should be picked up by the nations and multinationals, who benefit most from trade route protection.  Time to tax countries and multinationals accordingly.  If I can give Mr. Trump one word of praise, it’s a very positive development that it appears that there will be no new Cold War (only time will tell).

7)    On SCOTUS nominees let your inner Rockefeller Republican shine through… ignore Mr. Pence and his ultra conservative social inclinations, and expand your base.   There’s nothing wrong with being popular Mr. Trump, and welcoming socially moderate members to the Supreme Court will go a long ways towards expanding your support.

On a final note, one market that took a considerable hit this week was bonds.  Institutions were dumping bonds, with huge outflows.  The expectations are that Trump's tax cuts for the rich (aka Voodoo economics), and financed fiscal deficits, will lead to higher interest rates and inflation.  Breaking up monopolies and cartels, who inherently often restrict supply to increase profits (see Big Pharma), is one way to combat inflation.  Another way to combat inflation is to have the Fed engage in another round of QE, and write off a sizable chunk of the national debt.  Many other countries, around the globe, find themselves w/ considerable debt to GDP ratios. They too, would have a vested interest in having their central banks write down a sizable portion of their national debt.

With debt written down, proportionately by country, the balance of power and the economic order would be preserved.  Moreover, with national debts written down…. conservative business, economic, and political arguments for economy crippling austerity would vanish.

With Trump’s experiences with debt, his inclinations are correct.   There must be a way to write down a colossal debt load, w/out sending the economy or the dollar into a tailspin. 

The answer is the Federal Reserve.

After all, what’s the alternative … negative yields?

This is make or break time for the Trump administration.  More than a few Americans are willing to give the new POTUS the benefit of the doubt; many, on the other hand, have already written POTUS Trump off, as an unstable narcissist, who will line his pockets while in office.

Like Obama before him, who Trump takes into his cabinet, who he allows himself to be guided by, the decisions he makes, and programs Trump pushes in the first 100 days will make or break his presidency. 

The public is in no mood to be fooled again.

Copyright JM Hamilton Publishing 2016