I know some of our readers have a hard time understanding why I allow (and encourage) posts from a reader (Jon) who sometimes seems like a sharp-shooter troll from the corporate-government alliance.
But he does have value in that he will (occasionally) ask some hard questions deserving of thoughtful answers.
Although he may not like some of my answers, there may be some learning to be sifted from the mix of discourse.
For example, Jon’s comments pick up on the fact that I do view Trump as a possible historical echo of Herbert (Clark) Hoover’s presidency. Hoover was left holding the bag when America entered its last Depression.
Jon writes in a comment:
“You confuse me George. You made an astute observation when you posted this quote from an article.
“In both the tariff and agriculture debates, President Hoover demonstrated questionable political acumen. The “Great Engineer” had proven as ineffective a politician as he was an effective organizer of exploratory commissions and committees. Instead of convincing Congress that his proposals were sound, Hoover chose to limit his involvement and let Congress legislate.’
Then you ask the question, “sound like someone we Know?”
Of course, it is Trump. He is having difficulties convincing Congress to pass his initiatives. He does like committees, but other than the somewhat successful drug raid in L.A yesterday, nothing is getting done. So in your opinion is Trump the next Hoover? And if so, why do you defend him?”
That is a terribly complicated pair of questions.
As I wrote in a November 2016 analysis here on Urban:
“Odds are looking to me increasingly like the notion we had on the Peoplenomics.com site a number of months back (Trump as Hoover II) could be coming to pass.
The key part of history to understand is that Herbert Hoover assumed office in March of 1929. That means that he had 186-calendar days before the stock market actually peaked.
In other words, his first 100-days were pretty good.
Then read everything you can about the Great Depression and the election of Herbert Hoover and the basics of the Roaring Twenties (the TV show with Dorothy Provine is a simple way to learn).
Things are different now, sure. Back in the last Depression the daily OMG came from flappers. And the modern analog there may well be the LBGT movement.
Sh*t dude, the national marijuana legalization battle…our Modern Prohibition replay, right?
It’s all there, all in-your-face and you have to be truly dense not to see it.
Another key: Commoditization was key. Prices were low and consumption was high.
Stock prices were at absurdly high prices then, and going higher, I figure another six months (at least) from here. And did you happen to catch the remarks – what last week? – of former U.S. Budget Director David Stockman?
Look, he’s no fool so yes, once we get the final decent correction before the run at the ultimate top, we have no problem playing the long side of this puppy aggressively.
But when we being to line up with history next year and the S&P is up in the 2,300-2,500 range (and we’re counting out winnings) it will then to be time to load up on the short side.
The chart above may not be perfect, but there are some hard times coming – but not just yet.
Part of the reason? The current fiscal budget will run until next October and the shape and priorities of that new budget will be what shape not only the economy, but it will limit the president and congress ability to manage the initial declines.
In the meantime, the Fed will continue to live “in a box” because if they raise rates the economy will implode and if they don’t then the Roaring part of this modern analog will roar a good bit longer….”
That was my view from November (here for ref). BTW I also talked about the coming attack on the Electoral College. Score another one for the FoG (fat old guy).
Unfortunately, I am also honest enough (and have enough long-term readers) that we would be remiss in failing to mention there was also a high probability of Bush II as Hoover II when the Internet Bubble burst.
Arguably, what saved our ‘fat from the fire’ was the (almost suspiciously) timely arrival of terrorism and the resultant mass employment project sold to voters as the War on Terror (WoT) which included a continuous war front from the local train station and airport (via TSA) to the bombs unloaded over Baghdad.
That – and St. Greedspan’s no-doc real estate loan bubble bought the nation another several years.
We are, as Jon will apprehend, now deep in serial bubble country.
As I put on my best Rod Serling voice and say “Look, at the signpost up ahead: The reincarnation of the Civilian Conservation Corps arrived in this timeframe as well.”
It was called AmeriCorps and it’s all been sold as National Service to America. Not saying it is bad, of course, but the bulwarks of the Keynesian economic response are already in deployment and are having limited effect.
Where we can see the continuing effect is in the latest economic fad Modern Monetary Theory. Which, in effect, argues that if you jigger interest rates exactly so, then you will have a “virtuous cycle economy” almost no matter what.
Sadly, what the theorists miss is the problem of how theory plays against people’s down-home physical needs. Holy shit, what a hard thing to model, huh?
But it comes down to “No matter how you jigger the creation of money and fiddle with nominal interest rates, when people have massively declining disposable income, will they still drink the Kool-Aid set before them by the Jonestown Media Circus.
And it’s here that I come to the defense of Trump.
In my view, he has been cast in a role (unbeknownst to him) as a patsy – a fall guy – for decades of crooked politics before him.
He has some dynamical growth tools left, but not a lot. The Keynesian Spending Festival was already kicked off by Obama who did terrible things to the national budget. In his defense, it would never do in today’s PC world to have a black man holding the bag. But a very rich, successful, questioning, bombastic (and let’s not leave out emotional and sarcastic secretive) rich white guy?
It’s time for the liberally co-opted mostly functionally conservative democrats in the House and Senate (who by label lies) cast themselves as Republicans, to show their true colors.
So not only do with have POJ (pile-on-journalism) with the complicit press but we also have PoP – Pile on Politics where the Republican party bears no more resemblance to the “party of Lincoln” than the a Cimarron has to a real Cadillac. The labels (brand) may be nominally ‘the same’ but that is where all semblance ends. One was a Caddie, one was an X-car.
Is Trump a victim? Well, in a way, I suppose so.
The Pile on Journos effectively made it inevitable that he’d be subjected to talk of impeachment, especially when the press was the source of leaks about US intelligence, not Trump’s meeting with the Russians.
While Trumps a “big boy” I still tend to favor the underdog and it’s easier to do this when one looks to the larger historical context.
Then Jon wondered about my take on war which – sadly – seems to come in the wake of economic depressions.
Jon specifically writes:
“And your rant on war is terrifying. You talk about insanity in telling the truth about our President, yet you endorse the destruction of human lives and civilizations? People have been committed to asylum for far less macabre thoughts. War is never the answer. Never has been, never will be, unless we want to be minions of the military industrial complex Eisenhower warned us of.”
Ah…the facts are on my side on this one.
Jon (*and any other misguided readers who took my view as actually supporting war) must surely realize that I am not advocating for the use of war as an economic tool (Carl von Clausewitz, notwithstanding).
What I am intimating is that humans have a dismal history of actually following economic depressions with wars.
A few examples (if you don’t read Peoplenomics where such fare is more frequently discussed):
Remember the American Revolution, circa 1776? Most people are not aware of the panic shortly thereafter (some Wikipedia data since I feel lazy today). We begin with antecedents to the War of 1812:
“The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson as tensions increased with the United Kingdom. Along with trade restrictions imposed by the British, shipping-related industries were hard hit. The Federalists fought the embargo and allowed smuggling to take place in New England. Trade volumes, commodity prices and securities prices all began to fall. Macon’s Bill Number 2 ended the embargoes in May 1810, and a recovery started.”
Going to war helps “recovery.”
I skipped right over the Depression of 1785 fueling the Chickamunga War on the Cherokee, if you missed it.
Panics of 1857 (and 1860) as a Civil War drivers?
“Failure of the Ohio Life Insurance and Trust Company burst a European speculative bubble in United States’ railroads and caused a loss of confidence in American banks. Over 5,000 businesses failed within the first year of the Panic, and unemployment was accompanied by protest meetings in urban areas.”
Panic of 1907 in the US as a lead-in to WW I? Or would that be to the 9-year Border War with Mexico 1910 to 1919? Economic roots are found again!
“…the run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction.”
Recessions of 1958 and 1960 in close succession to drive the Vietnam War?
“Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957. “
If you want a war, kill the economy with Fed policy for a couple of years then wait for the shooting.
The Invasion of Grenada (1983) the Multi-National Force in Lebanon (1982), and Bombing of Libya (1986) could be argued as lingering but economically necessary after-effects of the 1980 recession:
“The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. This was caused by the new regime in power in Iran, which exported oil at inconsistent intervals and at a lower volume, forcing prices up.”
Then we get into my more recent favorites like the Gulf War of 1990 which ties into the 1990 major recession caused by what?
“After the lengthy peacetime expansion of the 1980s, inflation began to increase and the Federal Reserve responded by raising interest rates from 1986 to 1989. This weakened but did not stop growth, but some combination of the subsequent 1990 oil price shock, the debt accumulation of the 1980s, and growing consumer pessimism combined with the weakened economy to produce a brief recession.“
Next War as a Fix-It?
Collapse of the Internet Bubble brought us both Afghanistan and the Iraq War (OIF).
Libya, Syria,, the war on ISIS/ISIL, and the ongoing Afghanistan and… well, all that is post the 2009 major recession.
When Jon challenges with “….yet you endorse the destruction of human lives and civilizations? People have been committed to asylum for far less macabre thoughts….” we need to be clear.
I am not personally endorsing war given any other options.
I am, however, an unabashed economic realist who can see the proximity effect of “major recession” followed by “major war or conquest.”
It’s a sort of long-term human socioeconomic failure down through history.
These things are not hard and fast; their manifestations do vary by the country, circumstances, mood of the people, ability to rise up and so on.
Yet even when there is a long-delayed effect, such of the mid 1920’s collapse of the German Weimar Republic (with its wheel barrows full of fiat money and prices changing hourly) we see the economic devastation of war following the rise of a maniacal leader in the form of Hitler; born of the savages of war he experienced and rooted in economic discontent with the injustice of the allies reparation plans following WW I. I
These beggared the German people and ensured a second world war in due course.
I don’t like to forecast such evil is ahead in our lifetimes, or that of my children.
But a read of history argues there is an economic link to war.
General Smedley Butler famously claimed that “War is a Racket” but in truth it’s a business model. And such models are like snakes, which is why we study them so deeply. In Pogo-eque terms “Dey is like snakes and their bite’ll kill yah nowadays.”
Those who are not willing to give history a critical read and harsh review stand to be misled by the contemporary demagogues who would pretend the lead the finest country on Earth.
Yes, I do think Trump is trying, Jon. Trying on the job but also trying our patience as a country at the same time.
But we haven’t had a functioning Congress for more than 20-years, so I can cut him a lot of slack, even now.
The new Dr. Steven Greer documentary on Amazon “Unacknowledged” worth your time to watch.
It is tangentially more related to the Deep State warnings of Eisenhower than the daily operating trivialities of playing “pin the scandal on the Trump.”
The “free press” in America is a harsh reminder we get what we pay for.
But if you don’t like the proximity of recessions and depressions to the wars that seem to follow, perhaps you should stay in the juvenile fiction area of the library.
Truth is, I expect Jon (&/or his employers) already know that.
Now you do, too.
Write when you get rich,