The negatives of negative interest rates

The Thinker by Rodin

Donald Trump wants the Federal Reserve to drop interest rates to zero or to even allow them to go negative. It’s pretty obvious why: so he can avoid being at the wheel if a recession inconveniently hits before Election Day. He’s clearly freaking out about the election still more than a year away, as also evidenced by his decision to suspend some tariffs on Chinese goods.

Why should negative interest rates matter to you? It’s not like you can set up a Federal Reserve bank account. The Fed Funds Rate is currently 2.25%. This is the interest rate the Fed requires that one bank charges another bank to park its funds in their bank. It usually parked there only overnight. Any excess reserve a bank has on hand is money they cannot earn interest on. So parking it overnight at another bank allows them to make some money on it.

So what does this mean if the reserve rate is set to 0%? It effectively means there is no reason for a bank to park its excess reserves because it will not earn the bank any money. They might as well lend it. What happens if it’s a negative number, say -1%? Then effectively a bank takes a hit to park its money elsewhere. It would be stupid not to lend it.

A bank could pass its lower profitability from these lower rates onto its depositors. This happens routinely when the Fed Funds Rate changes. We bank at Ally Bank. When the Fed cut its rate by .25%, my savings and money market interest rates were cut by this amount too. Anticipating a rate cut, we at least did one thing smart: we took out a certificate of deposit for one year, which locked in our rate. We’ll earn 2.47% on it after one year, but not before. In general though most people don’t like to tie up their cash like this, so when the Fed Funds Rate drops, they will lose interest income. Better to take that money and risk it on investments is the hope.

Banks could in theory charge depositors’ negative interest rates, i.e. charge them for holding their money. (Considering all the bank fees we pay, some of us in effect already are!) They probably won’t, but accounts that effectively draw little to no interest at least one advantage: safety. Or do they?

Most accounts are fully insured because they don’t pass the threshold of $250,000 per depositor per bank. So yes, if a bank goes under you are likely to get your money back. But since the Glass-Steagall law (passed as a result of the Great Depression) was repealed in 1999, things have loosened. Banks can now invest in speculative investment with depositors’ money. This resulted in the Great Recession when banks loaded up on toxic assets to chase their bottom line. For them, the worst thing that can happen is they declare bankruptcy, which is what happened to so many banks in the Great Recession. The government got to clean up the mess and shoulder any financial losses, i.e. you and me assumed the risk.

Now, as the economy improved and Republicans controlled government again, these financial rules were loosened even further. In 2018, Trump signed into law new regulations that eased oversight on the largest banks, by raising the criteria for what comprises a very large bank. This results in less regulator oversight.

Add in low or negative interest rates though and we add a lot more risk to our financial system. Trump of course is hoping these low rates will incentivize banks to loan money, pumping up the economy. (It might also save him boatloads of money, if he can renegotiate interest rates on his loans.) But by incentivizing banks, we are in effect incentivizing risky loans. In short, we risk another Great Recession, or possibly another Great Depression by doing this.

Some countries are trying negative interest rates to stem deflation or deflation fears. Deflation occurs when money you have today is worth more tomorrow. In that case, there is no incentive to invest the money. Rather, you want to hold onto it, which means it’s not available for others to use. By making savers pay negative interest, it encourages them to loan out the money to stimulate the economy instead.

As a tactic for stopping deflation, maybe it has some merit. It’s working marginally in Japan, which has experienced years of deflation. But the United States is not in a deflationary environment. Hopefully though the Fed is instead trying to prevent deflation from happening in the first place.

Negative interest rates don’t have to lead to financial calamity, at least if they are properly overseen and regulated. But in this country it would be a very nervy thing to do at present. The Fed’s toolset though is very limited and well tried. The Fed’s policy of quantitative easing (imitated by lots of central banks) was one tactic of desperation after the Great Recession when the economy was still a mess even after virtually zero interest rates. Quantitative easing is essentially the Fed buying up investments others don’t want to buy with money the Fed creates out of thin air. They control the money supply, and can create money willy-nilly. That and low interest rates are about all the tools they have left.

A negative interest rate policy looks like the next and more desperate step to keep an economy from sinking into depression. It is basically a tool to use for deflation, which is what happened in the Great Depression. It’s like a fire extinguisher alarm: break glass only in case of emergency.

If investors though figure deflation is going to happen, they have an option: take the money out of the banking system and figuratively put it in the mattress. That way no one can use it but at least it’s safe, unless someone looks in the mattress. It’s more likely though they will move it to currencies and economies that are not deflating.

So hopefully the Fed will take a pass on Trump’s idea. In reality, the problems of our economy are structural and these tactics of the last ten years are basically stopgap measures. The Fed should have been doing more modest increasing of interest rates instead, as our economy, at least if it’s not in a recession, should be able to handle it. Mostly our economy is showing every sign of being over-leveraged and fragile again. If your economy is truly strong, you don’t need to even think about using these tools.

If this house of cards collapses again, it will be felt the way it was last time: soaring unemployment, wiped out savings. A lot of it will be due to risky investments, just like the Great Recession. If you are looking for a true revolution, another Great Recession or Great Depression is a good way to start one.

No bottom for the Republican Party

The Thinker by Rodin

It looks like I have been giving Republicans too much credit. I assumed there was some core group of Republicans who could agree, “This time Trump has gone too far” and bring him down. Apparently, there is no bottom for the Republican Party.

That’s because I assumed that there were some sane Republicans out there. But it looks like when push comes to shove, sanity takes a back seat to subservience and fealty. Republicans apparently love to take orders. They love authoritarians. I’m guessing it gives them some feeling of comfort that somewhere a Big Daddy is taking care of things. Having decided to get on the Trump train, they can’t seem to find a reason to get off, no matter how surreal and ridiculous it gets.

Signs are pointing to a huge train wreck for Republicans in the 2020 election. Some years back I pointed out that Trump would kill the Republican Party. To severely maim the party, Republicans have to lose both the presidency and the Senate. Barring some massive election fraud, Trump is destined to be defeated in 2020. He’s never polled over 50% and most of the time his approval ratings have been mired in the low 40s or lower. Winning with these sorts of negatives is possible only with massive voter fraud or a third-party candidate that siphons off a lot of Democratic votes. Both the 2000 and the 2016 elections likely would have elected Democratic presidents had it not been for the third-party spoiler effect. It’s not Trump’s base that will win him reelection, but Democratic fragmentation.

Winning the Senate requires flipping three Republican seats, which is a bit of a long shot but not impossible in a wave election. Aside from his base, Trump has managed to piss pretty much everyone off. But even among his base, he is bleeding supporters. White men support him, but according to polling he’s recently lost white women without a college education. Trump is losing farmers from his trade wars, and truckers are seeing major layoffs plus the latest tax law raised their taxes by doing away with a lot of their deductions. Meanwhile, Senate Majority Leader Mitch McConnell is deeply loathed in his home state, with only 33% approval. He can’t even be bothered to pump up a pension fund for coal miners. Yes, in deep red Kentucky, McConnell may lose reelection next year.

Rather than face criticism, Trump does the only thing he knows how to do: reshuffle the deck. This means changing the subject, generally by saying things or posting comments on his Twitter feed that are increasingly outrageous. This is effective but it doesn’t actually fix the issues that got him in trouble in the first place.

Moreover, his pattern never varies. When he decided not to put those 25% tariffs on Chinese goods so people could enjoy nice presents under their Christmas tree mostly made in China, then of course when China added new tariffs on U.S. products as they promised it all went out the window. New tariffs were back on and markets plunged about three percent yesterday. They were doing fine until his announcement.

But just when you thought Trump couldn’t possibly get any wackier, he doubles down on the stupid. Just this week Trump:

  • Said he was the Chosen One, implying he was the King of the Jews
  • Said any Jew voting for Democrats was disloyal and un-American because they should put Israel first … uh, what? And how is putting Israel before the United States showing you are an American patriot? Oh wait, because Trump says so. Gotcha.
  • Ordered U.S. companies to leave China, even though he can’t
  • Decided he could issue an executive order to end birth right citizenship, as if he could unilaterally override the 14th Amendment
  • Blamed the chairman of the Federal Reserve for his economic woes because he wouldn’t cut interest rates fast enough, while apparently absolving himself of the blame of nominating Jerome Powell in the first place
  • Said he wanted to buy Greenland and canceled a summit with Denmark, which manages the island, in a huff because they wouldn’t consider it. Actually, Denmark couldn’t even if it wanted to. Residents of Greenland would have to decide. Oh, and he called their female prime minister “nasty”, his word of choice when acting like the obvious misogynist that he is.

We have a president that is, quite frankly, totally nuts and bonkers. Just one of these by a Democratic candidate like Joe Biden would sink their candidacy. But Republicans so far show nothing but increased fealty to a president who by any objective standard is mentally ill and could not be trusted to even competently manage a child’s savings account.

Moreover, a recession is clearly on the way and every action Trump takes seems to be designed to make it worse. It was tariffs that brought us the Great Depression. Doubling down on tariffs simply increases the odds that a recession will turn into a depression. And if there is a recession, there’s not a single adviser to the president who has either the smarts or the wherewithal to help lead the US out of a recession. The closest we have is Jerome Powell, and only because the Fed is independent of the executive and he can’t be fired. When you surround yourself by incompetent sycophants, well, you get incompetent sycophants. Hell of a way to run a “government” … don’t bother to actually govern!

I was thinking yesterday that the tanking stock market might finally be the straw that broke the Republicans’ back. Moneyed capitalists ultimately hold up Republican power. Yesterday, three percent of their wealth vanished because Trump’s ego was hurt. Likely a lot more of it will vanish soon.

The obvious remedy is the 25th Amendment and twisting Vice President Pence’s arms to get a majority of the cabinet to declare our president is too mentally ill to serve. I’ve been waiting more than two years for this intervention, assuming cooler heads in the Republican Party could prevail. While I still hope for it, increasingly it looks like I misjudged the nerve and sobriety of the Republican leadership. They are wholly captured by their captain, and appear ready to go down with his ship.

Real estate investing is exacerbating income inequality

The Thinker by Rodin

Have you met Kevin? Kevin, i.e. Kevin Paffrath, has a YouTube channel, says he’s a millionaire and will help you get started in real estate investing so you can be a millionaire too. He’s handsome, reasonably young and looks overly caffeinated. The same is true of Graham Stephan who while being a millionaire still lives like a miser. He’s subsisting on a lot of oatmeal according to his many YouTube videos. Both are rich and made their millions buying, selling but mostly renting out their properties. And both are glad to help you do the same, as well as coach you on the secrets that made them rich too, for free if you watch only their YouTube channels but also for money if you want to attend their lectures, get their books or DVDs, and get online with them for semi-private chats.

The YouTube algorithm decided I am interested in real estate investing. I’m not interested enough to actually do what these guys are doing, but I do have a friend locally who is making most of his money through renting out rooms in houses that he owns. Maybe that’s what got me curious. This gives him time to do what he really likes: some IT consulting fixing and maintaining computers, servers and such; and coaching at the local high school which pays much less than the minimum wage.

I’m guessing though that he didn’t get all this property by chance. I’m betting he inherited a significant amount of money that let him get started in this business. I don’t know for sure because I’m too shy to ask him. But Kevin and Graham aren’t that shy, and proudly state that they made their fortune the old-fashioned and new-fashioned way. The old-fashioned way is to buy properties on borrowed money on fixed 30-year mortgages, rent them out and use the rent to maintain the properties and pay the property taxes. The new-fashioned way is to use the tax laws that make it possible for them to pay little in the way of capital gain taxes. It’s the latter that really irks me about Kevin and Graham.

Anyhow, they are happy to try to convince you to get into real estate investing too. It’s also clear from watching their videos that they are more than a little obsessed about real estate and money in general. It’s unclear if they have any time to enjoy their money and seem obsessed with acquiring more and more of it. They figure you are too so why not try to monetize their talent? And to be fair, both men don’t appear to be bamboozling anyone. They qualify themselves as just some guy on the Internet, tell you to get your own independent advice, and that making money in real estate can be profitable if you do it right, but it’s not easy.

I was watching Kevin’s recent video yesterday on why he’s not a fan of Roth IRA’s. It’s definitely a perspective I would not get from my personal financial adviser. He shows you how you could use some of the money you set aside to invest, above the amount you would lose over the years with a Roth IRA (by paying taxes on the money upfront) to buy real estate instead. And conceptually, it sounds great. When you save enough to buy one home, rent it and maintain it and ten years later use its profits to go buy another one.

But it all depends on whether you have the time and energy to commit to buying other properties, maintaining them, and being a landlord. For me, being a landlord runs about dead last on the sorts of things I would do willingly. I might sell used cars first. Basically, I’m bad at confronting nasty people. Not all tenants are bad and making sure you have the right tenant is important to keep an income stream going. But there’s bound to be some nastiness. I don’t want to deal with it. You could contract it out to someone else, but that makes it all less profitable.

Like most homeowners, I discovered that the cost of maintaining houses for over thirty years is considerable. We owned a property in Virginia for 22 years. It was bought for $192,000 in 1993, sold in 2015 for $505,000 but we also spent about $120,000 maintaining and improving it. And of course we paid lots of money in interest payments and other fees. In short, maintaining a house is not for the timid or financially challenged. If you are going to get into this game, make sure you can get cheap loans or have a whole lot of working capital.

I was so busy with my regular job that just maintaining our house was more than enough extra work, and it took 22 years to realize the gain on the property, which was transferred to buying our next property. Fortunately we own it free and clear. If you get into real estate investing, the income may appear to be “passive” but you will probably be working your ass off maintaining these properties and dealing with the hassles of investing in real estate and being a landlord.

In short, real estate investing is not for everyone, and it’s not an easy way to riches. But goodness! I’m learning from Kevin and Graham that there are some real tax advantages to it. And that part had me seeing red. It’s not that I can fault Kevin and Graham for getting these perks, but essentially they delay forever paying taxes on all the appreciation of their properties. Moreover, they can effectively escape ever paying taxes on these gains if you never sell them or don’t use the sale to buy something else. You can, for example, bequeath your properties to your posterity, and they can keep this scheme going indefinitely too.

This is in fact how Donald Trump has made his wealth. It’s why he says he loves debt. Rest assured he is deeply indebted, but if he can sell one property purchased largely with borrowed money and buy another one with the proceeds, he can pocket a lot of cash while deferring gains on them too. This is one of the reasons Trump is pulling all stops to keep his tax returns from getting released. If people discover he pays little to no taxes while they do, they are going to be furious.

When Elizabeth Warren talks about a wealth tax, this is exactly the sort of wealth I want to see taxed. You should too. These are all legal schemes, but they drive wealth inequality, exacerbate deficits and in general keep the government from having the revenue it needs to give us a first-class society.

I’m betting Kevin and Graham would grumble a little, but they definitely owe the rest of us a heap of money in the form of higher taxes. Mostly, we need to tax their capital and property gains. We should not feel the least bit guilty to go after it.

Religion is failing us, Part One

The Thinker by Rodin

We just finished Season 2 of NBC’s series The Good Place, which we are watching on Netflix. It’s a comedy of sorts on the afterlife, more specifically on our views of the afterlife. In this version, pretty much everyone ends up in “The Bad Place”, i.e. Hell. Four clearly flawed not so good people end up in The Good Place, or do they? I won’t spoil the plot if you haven’t watched it. Despite some flaws, the show keeps you reasonably engaged, and manages to be reasonably funny while gently lampooning our common notion here in the West about the binary nature of being “good” or “bad” with no allowance for ambiguity.

Here in Northampton, Massachusetts, where I live now, at the Bridge Street Cemetery, sits the grave of someone who would recognize these versions of Heaven and Hell. Our progressive city used to have strongly Calvinist roots. Anyhow, we have the remains of Jonathan Edwards, a colonial Calvinist theologian whose sermon Sinners in the Hands of an Angry God you may have read when studying American history. Northampton has since gone all-progressive with (I’m not kidding you) rainbow colored striped crosswalks. We have probably the highest number of lesbians per capita in the country. If Edwards could arise from the grave, he’d probably figure he was in hell with all the same-sex couples here walking around holding hands.

For the most part though, Northampton is a very peaceful, civil and charming place, which is why we retired here. I’m inured to all the rampant homosexuality around me. That’s because while we have a disproportionate number of LGBTQA folks, the majority remains happily heterosexual. We quickly learned that same sex couples holding hands were no threat to us. But you don’t have to drive too far out of Northampton to find plenty of Trump voters. It’s the furthest thing from Sodom and Gomorrah around here.

I can’t say the same thing about El Paso or Dayton, Ohio. Both cities suffered mass shootings recently in less than twenty-four hours. Twenty were killed in or around an El Paso Walmart yesterday by what looks like a 21-year-old white guy from Dallas with a rifle, trying to save White America somehow. Naturally he’s a Trump supporter. Around 1 a.m this morning, a gunman killed nine people and injured 26 others in Dayton. He had a 223-caliber magazine and body armor, which let him unleash mayhem quickly. Fortunately, police were nearby and managed to kill him pretty quickly. We don’t know yet this shooter’s age, race or motives, but there’s an excellent chance he is young, white and a Trump supporter too.

It’s American carnage, Trump-style. Trump is pushing all the buttons to unleash these horrors by his most unhinged supporters.

Religion is supposed to give us a way to not just cope with life, but to improve it. It’s clearly not keeping pace with the pace of change all around us. The response of many religions is to double down on their articles of faith, but doing so seems to unleash only more of the crazy.

America is rife with “Christianity”, but for the most part doesn’t actually practice Christianity. Frankly, religion is failing us. A belief system oriented around a world where most of us were serfs and reported to a lord doesn’t work well in the 21st century. Watching The Good Place, it’s hard not to ask why so many of us still believe these antiquated notions of heaven and hell.

What passes for Christianity these days is largely crazy and destructive. A majority of Christians in our country are clearly Trump supporters. They clearly approve of most of his policies, including separating families at the border and keeping children in cages and people in crowded, inhumane conditions. These days you can only act as a Christian to someone who is a member of your church. All others can be other-ized as not quite human. These “Christians” find “salvation” (comfort) in conformity and closed-mindedness. They want religion to impose order on a world when in fact doing so makes it worse. Christianity is breeding hatred and intolerance. It is making us less Christian every day.

No wonder so many Millennials are giving up on religion altogether. It’s not improving things, and it’s obviously phony and it’s hypocritical. But also Christianity is a very hard religion to practice, at least as Jesus taught it. It requires an open heart and love toward everyone, particularly those most unlike you. It’s clear that most Christians simply cannot and will not go there. It requires giving your treasure to the least of us. It requires you to act contrary to your nature. It requires you to constantly summon your better self and step outside your boundaries and prejudices. Most of us simply can’t, which simply drives cognitive dissonance that charlatans like Donald Trump are using for their own purposes. It feeds that chaos, the narrow-mindedness and the bigotry that is all around us.

Religion needs to be redefined for modern times. Perhaps we are better without it. Making the present try to fit the ideas of a far past is destroying us.

Future generations are going to loath Republicans

The Thinker by Rodin

The Republican Party has been reaching something of a zenith lately. For a brief while they controlled Congress. They still control the White House and arguably they control the courts, at least the Supreme Court, the one that matters most. They control 33 governorships, the most since at least 1990 and have 22 trifectas: where they control both houses of state government and the governorship (Democrats have 13 trifectas.)

But it’s going to really suck to be a Republican in the future. Republicans will be loathed and it’s not hard to see why. The most obvious reason is that they did almost everything possible to not address climate change. Donald Trump will be the most loathed of the bunch, but anyone that supported his agenda will be (at best) hissed at. Fortunately, most of these prominent Republicans are wealthy enough to move to the Cayman Islands. I’d say they’d best move there ASAP. But having been to the Cayman Islands, I discovered it’s not far above sea level. As islands in the Caribbean and Gulf of Mexico go, it’s going to be one of the first to be mostly underwater as sea levels rise.

People will be looking for someone to blame, and you can basically indict the entire Republican Party. Moreover, they don’t seem to learn. In Oregon, a few Republican legislators are not showing up for work. They are trying to prevent a bill from passing that will help the state address climate change through lack of a quorum. Yes, they want Oregon to keep worsening the climate crisis. The optics of this already looks bad. Imagine how bad it will look like in ten years.

They are much worse than the No-Nothings of the 19th century. They either deny undeniable facts or believe them and simply don’t care to address them. It’s hard to say which is worse. Just not caring about the climate crisis is bad enough, but they actively support policies that will make our future even chancier and bleaker is much worse. A migration crisis is already underway, but it’s only 1% as bad as it’s going to get. Republicans are actively making it even worse.

We could be working to contain these crises, by doing things like investing in Central America so its governments are less oppressive and their citizens can have some hope for the future. Instead, to punish them we are taking away what little money we give them. And since at least Reagan, Republicans have been supporting dictators down there. The political repression in places like Honduras, Venezuela and Guatemala are driving the crisis.

Finally, the concentration camps we are creating along our border with Mexico are getting some attention. From a party that almost universally wants to force mothers to carry children to term, even if impregnated by rape or incest, they systematically abuse children in these camps. A Trump spokesman actually went to court to tell the court that these children don’t need soap or showers. It’s not just children who are being treated inhumanely, but most of the other adults too. Putting too many people into “camps” not sized for their population in the definition of a concentration camp. Yet many Republicans are aghast that some are calling them what they really are. No, they are not death camps, at least not yet, although apparently influenza and other preventable diseases are widespread within them, and many migrants have died under our custody. Still, it’s not hard to see a Donald Trump in his second term feeling empowered to turn them into death camps as yet another “final solution”.

Then of course was their rape and pillage of the rest of us: the obscene tax cuts for the wealthy, the constant cutting of benefits like food stamps and Medicare, mostly unsuccessful efforts to kill Obamacare, the dumping of more pollution into our atmosphere and waterways and the ensuing health affects they cause that are already underway. Trump apparently thinks if you can’t see the pollution, it doesn’t count: as if someone suffering from asthma won’t have worse asthma when more of these pollutants are thrown into the atmosphere. Worldwide, 6.5 million death occur annually from poor air quality. In the United States, it kills about 200,000 people a year, and those are 2013 figures. This is far more people than are killed in auto accidents annually (about 37,000 people). These numbers are likely on the rise. All this from the so-called Party of Life!

The Republican Party will be seen as the selfish death and greed party who were predominantly responsible for making our country a poorer and increasingly problematic place to live. They ignored all evidence that suggested they were wrong. Since Trump, they have labeled anything of this evidence as “fake news”, claiming it can’t possibly be correct and were deliberately faked. No one will want to be a Republican and at some point no one will admit to being a Republican because it will be too dangerous.

They are likely to get a comeuppance, and it will probably be in the form of radical income redistribution as we try, probably futilely, to save our nation and our planet. They will be lucky if people don’t come after them with pitchforks. So now would be a good time for Republicans to have sudden change of hearts, but it probably won’t make much difference to future generations that will try to cope with the wreckage they mostly caused.

Republicans, move to the Cayman Islands while you can but it’s unlikely that the citizens there will treat you any more kindly.

Trump is functionally illiterate

The Thinker by Rodin

One of last week’s biggest stories was of course the “infrastructure” meeting between Trump, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer at the White House. It quickly blew up when Trump took offense at remarks Pelosi made earlier in the day when she accused Trump of a cover up.

His blow up looked quite staged since minutes later he was at a podium in the Rose Garden with preprinted signs that seemed to match the occasion. Also suspicious was an image captured by a photographer of Trump’s handwritten notes (written in Sharpie, of course) with prominent misspellings. Among other misspellings he noted that Democrats have “no achomlisments”.

Trump’s typos are hardly news, but these handwritten notes prove Trump is a very poor speller. He also has very poor grammar. He confuses words. On April 2nd, Trump was ranting about House Intelligence Committee Chairman Adam Schiff. He repeatedly used “oranges” when he should have used the word “origins”. Trump’s speaking is full of malapropisms. It doesn’t seem to bother his supporters. Should it bother the rest of us?

It should bother all of us because Trump is functionally illiterate. I know what you are thinking, “But what about all those tweets? He types them himself.” They tend to have occasional errors but most of the time the grammar and spelling is correct. And this is because his Twitter client points these out and suggests the correct spelling or grammar to use. We all do this, at least if we care about what we post online. Trump though sometimes slips up.

In 2016, The Washington Post compared the grammar and vocabulary levels of the major candidates at the time. Trump’s was at the bottom of the bunch: with a less than 8th grade vocabulary and less than 6th grade grammar. His speech is confusing, to say the least. My daughter does voice captioning for a living. She sometimes has to caption Trump live. Closed captioners hate translating Trump because he rarely speaks in compete sentences. Where do you place the period? It’s so hard to tell. But also, his “sentences” are rarely coherent and veer from place to place. It’s a sign of a very disordered mind that cannot think linearly.

Trump is not illiterate in the sense that he can’t read. But he can’t comprehend much of what he reads. No doubt every textbook he encountered during his education was a challenge. He misses a lot of nuance. In response, he basically doesn’t read and depends on TV and radio for information. That’s why he’s so anxious to hustle out of a meeting to watch Fox News instead: TV is the equivalent of his reading time. That’s why his staff stopped giving him briefing materials. At best he gets a one-page bullet summary of key points. Mostly he wants you to tell him information. Since it appears he is easily distracted, it’s unclear how much of what he hears he actually absorbs. To compensate, he declares himself an “extremely stable genius” and proudly proclaims most decision are made from gut feelings instead of, you know, absorbing the complex and nuanced information that staff could provide to him.

Lots of us share Trump’s disability, which may explain in part why so many people relate to him. Like him, they got through life by overcompensating in other areas and hoping that makes the difference. What his disability reveals though is a man who is far from an “extremely stable genius”. If he can’t master basic grammar and vocabulary, he’s hardly smart by any conventional definition and can’t understand a lot of the material given to him. This means he’s woefully uninformed about the many issues he has to confront and decide on as president. As for stable, someone who huffs out of a meeting after only a few minutes is hardly stable. No wonder Nancy Pelosi is openly calling for an “intervention”. I’m not sure though that Trump understands what that means. It’s one of these words with lots of syllables.

If you are functional illiterate, it means that you grasp most of the basics of reading but lack much of the ability to process and integrate the written word. And that describes Donald Trump’s entire career. It’s not just anyone who can lose a billion dollars over ten years, most of it his father’s money. But you can if you don’t know what you are doing, you can’t read a balance sheet and you run your business by talking to people on the phone instead of absorbing yourself in the minutia of your business.

It also explains why he is stonewalling Congress and blocking any attempts to reveal these underlying falsehoods. No wonder his former attorney Michael Cohen spent a lot of time sending threatening letters to places like Wharton, warning them not to publish Trump’s grades. His career is a cavalcade of false fronts. It doesn’t take too many of these to unmask this Lone Ranger for the fraud he is.

With so many potential vulnerabilities, his luck won’t hold on forever. This is why he finds being dictator much more appealing than being president: no accountability ever! Fortunately for him, the Republican Party is totally on board, because it too projects a different image of what it claims to be compared to what it actually is. It’s unclear though when he is finally unmasked – when his taxes returns show him to be the cheat that he is and his grades prove he is the ignoramus we also know he is – whether it will make a difference.

Until then we continue to have a government led by the most ignorant person ever to hold the office. We have to hope that our constitutional government can somehow survive it.

Monetary policy and the danger of revolution

The Thinker by Rodin

My recent post on quantum computing and its impact on cyber currencies like BitCoin have taken me exploring the world of money some more. This exploration took me to this video, which discusses who controls money and how it is created.

I think this video is meant to be shocking. Most of us are painfully aware of how important money is, because we cannot survive without it. While vital, money is also completely abstract. We like to think money is a form of permanent liquid value. This video points out the “shocking” fact that money is not this and that it is created almost universally by central banks, the Federal Reserve in the case of the United States.

As you get on in the video, you also learn that banks create money when they issue loans. If you were hoping to trade in your dollars for gold bullion, those days are gone. President Nixon turned the U.S. dollar into a fiat currency. This essentially means that the dollar has value because the government says it does. If it’s backed up by anything, it’s backed up by your faith that our government can manage money intelligently.

But really, the only ones managing money is the Federal Reserve, since they are the sole suppliers of money. The degree to which the Fed controls the spigot of money generally determines the health of the economy. Quantitative easing, which the Fed (and other central banks) have been doing since the Great Recession is basically the creation of lots of money which are then used to buy assets. Doing this helped pick up the economy and over many years took us out of recession.

So one might extrapolate that it’s not how much money that gets printed that is important, but how frequently it gets circulated. If circulated a lot, the production of goods and services continues apace. If it gets circulated too much, you end up with inflation, which means the same money buys fewer goods and services. If it’s not circulated enough, you may end up with deflation, which seems worse than inflation, in that the same money tomorrow buys more than it will today. In a deflationary environment, you would rather hold onto money than spend it, and that tends to stifle economic activity.

Lots of people like Ron Paul don’t like the way money actually works, which is why they would prefer the dollar be based on a gold standard, or some standard which equates a dollar to some amount of something precious. These people are probably economic Don Quixotes chasing electronic money windmills that may have existed at one time but which are probably gone for good. They look for impartial standards of value instead, which is why they turn dollars into BitCoin and similar electronic currencies.

The video says that central banks, being run by bankers, are a system that essentially pumps money from the lower classes to the upper classes. There’s a lot of recent evidence that they are right, as our middle class seems to be disappearing. Americans owe a lot more than they used to and in general earn a lot less in real wages than they used to. It used to be that wage increases followed productivity increases, but for decades that has not been the case. Today, the level of personal debt is staggering. Without meaningful raises, it gets harder and harder to pay off debt or do things we used to take for granted, like buy cars and homes. The Uber/Lyft phenomenon may be in part a reaction to these new facts of life.

Something ought to be done. In part, Donald Trump’s election was due to these economic anxieties. Trump was going to be our fixer to these various problems by bulldozing his way through all obstacles. Of course, he has done just the opposite. There is more than $1 trillion in outstanding student loan debt, but Trump’s education secretary Betsy DuBois is actually making it harder for people to pay off their student debts, and is promoting pricey private education at the expense of relatively affordable public education. So Trump is turning the screws even tighter on the working class.

Democratic presidential candidates have all sorts of ideas for addressing these problems. My senator, Elizabeth Warren, is distinguishing herself by having the most comprehensive set of policies for addressing these issues, including a lot of student loan debt forgiveness. All these policies though are basically ways of trying to solve the fundamental problem of more of our wealth going to the wealthiest and to put more money into those who need it the most. They all depend on redistribution of income from the wealthy toward the poor.

This “socialism” of course has the wealthy up in arms, since maintaining and increasing their wealth is all they seem to care about. So they are dead set against any of these ideas. Based on how our money supply works though, all this will do is keep pushing more of the wealth toward the wealthy.

It makes me wonder how all of this economic anxiety ends. And that gets me to figuring out what money really means. Money is essentially a social compact for the exchange of wealth, and whoever sets the rules controls the flow of wealth. The Fed is essentially accountable to no one. At best, all you can do is wait for someone’s term to expire. Trump’s inability to get people like Herman Cain on the Fed speaks to Republicans true values: they want the Fed to be populated with people that think like them, and that’s not Herman Cain. He’s too out of the mainstream.

To cut to the chase, the real threat to the wealthy is revolution. That’s exactly what happens if you screw the working class for too long. Revolution is upsetting the whole apple cart and starting over because the system is fundamentally broken and cannot be fixed. I believe this is the root of the partisan tensions we see these days. It’s not about value, or whether you are white or not; it’s about money and who gets to control it and how it should be distributed and used. Revolution though is very dangerous. It brings severe economic disruption, likely civil war, complete upheaval and a fundamental reordering of society. Hopefully when it is over the new system is more fare, but as we watch these things play out in places like Brazil it doesn’t look like that’s likely.

Ideally, rich Americans would understand that giving more back to society is in their interest. Sucking ever more wealth from the lower classes exacerbates tensions and increases the likelihood of revolution. They don’t seem to believe it though, and want to maintain control of the levers of power. If they succeed they will likely bring about the real revolution that will destroy their wealth, because wealth is predicated on connected economic systems that work. Unfortunately, the rich seem to be deliberately tone deaf, increasing the likelihood of the exact outcome they fear the most. Should it occur, BitCoin is not going to save them.

As billionaire Nick Hanauer puts it, the pitchforks are coming.

Time for Mr. Mueller to be a true patriot

The Thinker by Rodin

In case you haven’t noticed, our new attorney general Bill Barr is a horror. We shouldn’t be surprised because essentially he auditioned for his job by circulating a paper before his nomination on why the Mueller investigation was invalid.

Barr’s testimony yesterday in front of the Senate Judiciary Committee confirmed to anyone paying attention that Barr is Trump’s lackey and shill. He will do pretty much anything that Trump wants him to do because that’s how he sees his role. Which is why he thinks looking into Hillary Clinton’s emails yet again is worthy of investigation.

It’s likely to get much worse. Trump is likely to use the Justice Department as his political arm by having it open investigations into his 2020 opponents. Based on the Hillary’s email precedent, Barr shouldn’t object at all. In short, the Justice Department is becoming a new bludgeon that Trump hopes to use to win reelection. Its mission to impartially apply justice based on the law seems to be waning. In short, true justice in the Justice Department may be hard to find.

It’s painfully clear that Senate Republicans won’t check Trump in any meaningful way. It’s increasingly clear that our Supreme Court won’t either now that it has a reliable conservative majority. Trump is the outcome of over thirty years of corrupting the system to affect their ends. They don’t want democracy. They just want to be in charge and remain in charge. Which means that only voters can hold Trump and Republicans accountable.

But Trump has every incentive to corrupt the 2020 elections, and Republicans are jubilantly helping him along. Mueller’s report basically says Trump obstructed justice many times and that the only reason he wasn’t charged is because he wasn’t allowed to charge him due to Justice Department rules. With a five-year statute of limitations, if Trump loses reelection then there’s a good chance he will be prosecuted for these and many other offenses.

So in Trump’s mind he must not lose. He can see his future if he fails, and it’s inside a jail cell. He is clearly bending the power of the federal government in every way possible to stack the odds in his favor. And Republicans will aid and abet him: by making it hard for people of color to vote, through relentless gerrymandering, through fearless voter suppression and now apparently allowing the Justice Department to be used as a political weapon.

By grossly mischaracterizing Mueller’s findings, Barr’s summary of findings succeeded in muddying the waters. It’s hard to find someone without an axe to grind that the public can trust. Most won’t have time to read over four hundred pages of his report, much of it redacted. Which is why Mueller’s public testimony in front of Congress is needed. We need Mueller to rise to the occasion and be the patriot the country needs by simply telling the truth.

But will he get that chance? Trump’s policy is now to stonewall Congress and refuse to provide them any information, at least no information not in his favor. Mueller is an employee of the Justice Department, but presumably term limited as he was pulled from retirement to investigate Trump and his administration. Trump or Barr could prohibit Mueller from testifying in front of Congress. It’s unclear that they will, but it’s certainly possible if they are stonewalling everything else. It’s also unclear whether Mueller would not testify anyhow.

Polls do make one thing clear: the public trusts Robert Mueller. If anything can right this wrong ship, his testimony might. Clearly, if Mueller says things that upset Republicans, they will berate him and cast doubts on his integrity. It’s unlikely though that the public would buy it, as his integrity has so far been impeccable, unlike Donald Trump’s.

Mueller would be most helpful by simply stating the obvious: anyone other than Trump would have been prosecuted for obstruction of justice, the Justice Department is being turned into a political weapon, that government of, by and for the people is perilously close to disappearing, and the public needs to wake up and fight for its democracy.

Why we must impeach Donald Trump

The Thinker by Rodin

So the Mueller report (with many redactions) finally was made public. Unsurprisingly, the report did not exonerate Trump. It was quite the opposite, in fact. While Mueller could not prove beyond a reasonably doubt that Trump or his campaign conspired with Russia, he found plenty of evidence to show that Trump obstructed justice. He just refused to prosecute these obstructions, believing that constraints put on his investigation precluded this possibility.

Mueller basically laid out the obstruction charges and their underlying evidence and suggested that Congress could impeach Trump in part based on his evidence. Less noticed was another possible approach: wait until Trump was out of office and then prosecute him. But this is only viable if Trump does not win reelection and the subsequent administration chooses to prosecute these crimes within the five years of the statute. If Trump does win reelection, the statute of limitations effectively means he can’t be charged for these crimes. In short, in certain situations the president can circumvent his own accountability to the law. It’s all because of an opinion by the Justice Department that a sitting president can’t be indicted for crimes while in office. (This seems strange to me. What’s the point of having a vice president then?)

I noted before that Trump wouldn’t escape justice. Neither Richard Nixon nor Bill Clinton did. Nixon agreed to resign to keep from being impeached and convicted, a badge of shame that he carried to his grave. On Bill Clinton’s last day in office, Clinton agreed to pay a fine and lose his law license for perjury he committed testifying about his relationship with Monica Lewinski. This was to avoid facing these charges and possible jail time when out of office.

In some ways those were simpler times. Today’s hyper-partisan Congress means that if the House impeaches Trump, it’s almost a slam-dunk that the Senate won’t convict him, just as the Senate refused to convict Clinton and narrowly avoided convicting Andrew Johnson. Nixon would have certainly been removed from office for his cover up, i.e. obstruction of justice charges laid out by his special prosecutor. Mueller laid out ten obstruction of justice charges that could be filed against Trump and likely would have been filed against him if Justice Department regulations forbad it.

I’m surprised no one has filed a lawsuit to challenge these regulations. It’s possible but unlikely that the Supreme Court would declare them unconstitutional. There is no law that gives the president this special treatment, just an opinion (once amended) by the Justice Department’s legal team.

Mueller’s team made fourteen referrals to other prosecutors, only two of which we know about. It’s quite likely that some of these referrals will come back to bite Trump, either before or after he leaves office. It’s already quite clear that New York State will be prosecuting Trump and the Trump Organization for violating its charity laws. The Trump family may face prosecution since it looks like they fraudulently protected their father’s wealth to inherit more of it. Trump’s sister abruptly resigned her appellate court seat recently to avoid an internal investigation. So despite Attorney General Bill Barr’s spin that the report leaves the president untouched, it’s quite clear that Trump will be haunted by charges and court cases, probably for the rest of his life.

There are a lot of wags in Congress discussing whether Trump should be impeached or not. Speaker Nancy Pelosi has already stated she doesn’t want to open impeachment hearings unless there are enough Republican votes in the Senate to make Trump’s conviction likely. Others like my home state senator Liz Warren have publicly stated that Congress has a duty to open impeachment hearings and if the evidence is strong enough, to convict the president and remove him from office.

I’m with Liz. Certainly I’m aware that there is little likelihood that the Senate would convict Trump. I suppose it is possible that hearings would bring to light enough evidence to persuade enough Republican senators to throw Trump overboard. I am for impeachment not for an idealistic reason, but for a pragmatic reason: the lawless Trump Administration must not be used as a model by future administrations hoping to escape justice.

Just two posts ago I noted how alarmed I was because I felt we were at the edge of autocracy. I’m just as alarmed today. The way for a democracy to survive is not to acquiesce but to rise to the occasion. It’s likely if the House held an impeachment vote that it would impeach Trump. It would set a mark in the sand for future presidents that this conduct is unacceptable. It would also force a trial in the Senate that, even if doomed, would hold senators accountable. It would mark those voting against his conviction for life. The case for Trump’s lawlessness is inescapable.

So while it might not actually hold Trump accountable, it would formally tarnish his legacy, give little sanction to his behavior, uphold the principle that no one is above the law, demonstrate that Congress had the nerve to push back against a lawless president and make it easier in the future to maintain our democracy.

Pelosi is looking at the 2020 election and wondering if impeachment would distract from a winning message for Democratic candidates. I am thinking that standing up for democracy and the rule of law is the primary responsibility of any member of Congress. That’s what they are elected to do, not to be weasels. If the American people object to that, well then our democracy truly is lost.

Let’s not give in to hopelessness and unaccountability. Let’s do the right thing and open impeachment hearings.

Autocracy and why Trump’s firing of his Secret Service director is extremely alarming

The Thinker by Rodin

I’m getting the sick feeling that we are this close to an autocracy. Things seem to be going rapidly from bad to worse to ohmigod this is incredibly dangerous!

The feelings got real when I learned what Attorney General William Barr was planning to do with the Mueller report: redact as much of it as possible and work as hard as possible to keep the full report from ever getting to Congress. It got worse when I watched our petulant Treasury Secretary Steven Mnuchin brush off Congresswoman Maxine Waters: the idea of wasting his time talking to Congress when he had important things to do! Also, he seems to be aiding and abetting keeping Congress from getting Trump’s tax returns, even though the law requires it.

You don’t have to look far to find plenty of other signs. For example, Donald Trump is thinking of dumping migrants in sanctuary cities. Why? Because he thinks he can and he wants these cities to pay for having the audacity to oppose him. Then there’s his de-facto concentration camps that separate immigrant families and new reports that suggests he wants the U.S. military to build a whole lot more of them and run them, much like the German military ran its concentration camps. And if that weren’t enough, Trump was recently on the border urging CBP employees to break the law by not letting these asylum seekers in. Trump is implicitly saying: I can get away with anything, because Congress won’t hold me accountable in the end. And if you do break the law, I’ll pardon you!

All this is sickening enough, but then there’s the imperial way his administration seems to be blowing off the courts. He’s been under a court order for about a year to resettle these unaccompanied minors with their parents, or at least place them with relatives in the United States. Instead, most of them linger inside former Walmart stores under lock and key and out of sight. Recently, three congresswomen weren’t allowed in to inspect a detention facility for minors in Homestead, Florida. Trump doesn’t care that Congress has the responsibility for executive oversight.

More and more the Trump administration seems to be simply ignoring the courts. Until now, we’ve sort of assumed that if the courts tell you to do something, you must. More and more the Trump administration seems to be just ignoring the courts. After all, what can the courts do but issue more rulings? I guess there is the U.S. Marshal Service, which is supposed to enforce court orders if necessary. But the courts do not control it; it’s controlled by the Justice Department. And our new attorney general Bill Barr seems quite happy to take orders from Trump, even though he is supposed to uphold the law.

Who you gonna call? Ghostbusters? The constitutional remedy for executive overreach is congressional oversight, subpoenas and when all else fails impeachment. Trump’s lackeys are ignoring most congressional subpoenas. Nancy Pelosi has ruled out impeachment, mostly because she knows Trump has no possibility of being convicted in the Senate. And that’s not just because Republicans control it narrowly, it’s because Republicans are very clear that they don’t care about the rule of law. All they care about is expanding their power or, failing that, holding on to their power.

And it’s not like they feel the least bit compelled to follow the rules or precedent anymore. Senate Majority Leader Mitch McConnell, an erstwhile conservative, broke with more than 230 years of precedence to speed up the debate on the nomination of federal judges and no longer allows home state senators to block these nominations either.

Meanwhile, deeply red states like Alabama and Texas are going out of their way to turn their states more authoritarian. In Texas, they are debating a law that could potentially give the death penalty to women who get abortions. Wow! The breadth of this should be astounding, but it’s par for the course these days. Ohio’s governor just yesterday signed a law that outlaws abortions if a fetal heartbeat can be detected. These states are simply trying new tactics to see what might overturn Roe v. Wade now that Brett Kavanaugh is a justice. It’s all supposedly about being pro-life, but at least in Texas they are willing to kill people to do it. It’s all absolutely insane, particularly when you consider that not one of these states wants to give women contraceptives to not get pregnant in the first place, won’t subsidize their pregnancies and do their best to keep these kids off food stamps once they are born. Since so many are nonwhite, they’ll be happy to disenfranchise them when they reach voting age too.

Of course, these red states continue to do their best to gerrymander districts and suppress people of color from voting. Florida wants ex-felons to pay all judgments before being allowed to vote, essentially a poll tax, which is unconstitutional. Its state legislature is also working to overturn the referendum, which allows ex-felons to vote in the first place.

So it is crystal clear to me that Republicans will let nothing stop them from achieving their aims. Increasingly they are simply ignoring courts and Democrats in Congress. In essence, they are wholly abandoning democracy in favor of autocracy, and using inertia built into our system of checks and balances and Republicans open willingness to allow Trump to get away with stuff to bring it about.

Frankly, to me the most alarming sign of all was not Trump’s firing of his Homeland Security Secretary, Kirstjen Nielsen, but his firing of Secret Service Director Randall “Tex” Alles. Think about it. Let’s assume that Democrats do win the presidency in the 2020 election. And it is ultimately up to the Secret Service to evict Trump from the White House. Will his hand-picked lackey evict him? When push comes to shove, who decides to hand over the nuclear codes to the next president? And if you have a Republican senate that won’t fight back on Trump against anything, if he refuses to leave, how do you get rid of him?

It all makes for a constitutional crisis already well underway that looks like it will come to a crescendo on January 20, 2021, but which is likely to all come to a head much earlier than this.

These are crazy, deeply dangerous and incredibly scary times. We are facing what looks like the probable end of a 230 year old democracy.