Trump

Macroeconomic Fallacies, Fed Chairman Bernanke’s Delusions and the Rise of Donald Trump

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The G20 leaders recently called upon the leaders of the developed nations to employ more massive amounts of debt financed government spending to ward off the current economic stagnation and in some instances the early stages of recession. That fits Einstein’s definition of insanity: “doing the same thing over and over again but expecting a different result”. The pursuit of so-called “macroeconomic (fiscal and monetary) policies” has produced a quarter century of economic stagnation in Japan, a $30 trillion debt bubble in China with little to show, and stagnation and looming recession in Europe and increasingly in the US.

Einstein was a genius who remains relevant today. Just within the last few weeks evidence was reported of gravitational waves predicted by Einstein almost a century ago. Proving Einstein’s theories has been the focus of physics during the past century, but he maintained that had he been able to get an academic appointment instead of a position at the Swiss patent office he never would have been able to develop and publish his new path-breaking theories.

In his recently released biography The Courage to Act (2015), former Federal Reserve Chairman Ben Bernanke describes how, initially failing physics, he turned to macroeconomics as an outlet for his mathematical skills. This was auspicious. In physics, when your equations don’t fit the reality it is the equations that must be changed unless there is new evidence to change the understanding of reality. Einstein’s biggest error was rather than waiting for better data when his equations predicted an expanding universe, he fudged the equation (introducing the Max Planck constant) to fit the current understanding of a stagnant universe, then disagreed for most of his lifetime with the next generation of quantum physicists who proved he had gotten it right in the first place. Einstein’s one mistake is the modus operandi of modern macroeconomists.

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A Preference Cascade is Forming.

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trump

Glenn Reynolds has known about this for a long time.

“This illustrates, in a mild way, the reason why totalitarian regimes collapse so suddenly. (Click here for a more complex analysis of this and related
issues). Such regimes have little legitimacy, but they spend a lot of effort making sure that citizens don’t realize the extent to which their fellow-citizens dislike the regime. If the secret police and the censors are doing their job, 99% of the populace can hate the regime and be ready to revolt against it – but no revolt will occur because no one realizes that everyone else feels the same way.

Peggy Noonan has written about it several times.

But in my experience any nonpolitical person on the street, when asked who will win, not only knows but gets a look as if you’re teasing him. Trump, they say.

I had such a conversation again Tuesday with a friend who repairs shoes in a shop on Lexington Avenue. Jimmy asked me, conversationally, what was going to happen. I deflected and asked who he thinks is going to win. “Troomp!” He’s a very nice man, an elderly, old-school Italian-American, but I saw impatience flick across his face: Aren’t you supposed to know these things?

In America now only normal people are capable of seeing the obvious.

This is something I have been looking at for a while.

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Quote of the Day

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But despite all the opportunistic campaign rhetoric, the newly elected President Eisenhower more or less followed Truman’s policies. By July 1953 he had achieved an armistice. And by keeping sizable U.S. deployments of peacekeepers in place, he also ensured what would become a long evolution to democracy in South Korea and the country’s current dynamic economy. Had Eisenhower, in Obama-like worry over his 1956 reelection bid, yanked out all U.S. peacekeepers in December 1955, and blamed the resulting debacle on his Democratic predecessor (“Truman’s War”), while writing off the North Korean aggressors as jayvees, we can imagine a quick North Korean absorption of the South, with the sort of death and chaos we are now seeing in Iraq.
 
[. . .]
 
We can surely argue about Iraq, but we must not airbrush away facts. The mystery of the current Iraq fantasy is not that a prevaricating Donald Trump misrepresents the war in the fashion of Democratic senators and liberal pundits who once eagerly supported it, but that his Republican opponents so easily let him do it.

–Victor Davis Hanson, “Iraq: The Real Story”
 
 
Actually it’s not a mystery. The Republican candidates opposing Trump must have discovered that the dishonest “Bush lied” narrative about Iraq polls better than the truth. (None of the remaining Republican candidates seems qualified to be President. Unfortunately, the Democratic candidates are even worse.)

In 2009 news stories reported that fewer Americans had been killed in Iraq the previous year than were murdered in Chicago. Iraq had an imperfect but functioning democratic government. The war was essentially won.

In 2016 Iraq has largely fallen apart. ISIS, Iran and Russia dominate much of Iraq and Syria. ISIS controls territory in North Africa. Jordan and Saudi Arabia are hanging by threads. Turkey and Russia have skirmished. Israel no longer has regional air superiority, perhaps not even air superiority in all of its own territory. Talk of regional and even world war is in the air.

The principal differences between 2008 and 2016 are Obama’s terrible decisions to withdraw US forces from Iraq and then to stop defending our other Middle Eastern interests. Bush had nothing to do with it except to the extent he was inept at promoting his case at home. Many if not most Americans neither understand why we invaded Iraq nor remember the bi-partisan, international consensus for invasion that existed in 2002 and 2003.

Quote of the Day

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Vote ONLY for someone who has failed and has LEARNED from failure. This limits the field to Trump, Cruz and Carson.

–Chet Richards, in a response to this post at Belmont Club

What should the next President be like ?

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trumpmugger

This is not the same as who the President should be. Richard Fernandez has some ideas on what he (or she) should be like.

let me suggest that only four things matter in selecting a man (or woman) to face a challenge whose present dimensions cannot be predicted. For purposes of debate, let these four qualities in descending order of importance be:

1.An ability to face the facts, however unpleasant they may be.

Yes, this is critical and we have had enough of liars and careerists. Is Trump a liar ? I don’t know.

2. An unswerving patriotism. This is not the same as a sincere feeling of love or empathy for America, though that is good. In this context it means the willingness to share the fate of the principals of which he is an agent.

Yes, we are ruled these days by elites who do not plan to share any pain. This is unrealistic but they have been raised to believe they can avoid unpleasant reality. What do we do about this ?

3. Nerve. This is the quality of grace under pressure who no one, unless he has the misfortune to be tested, can be sure he possesses.

Yes, the only real test is the reality and then it is too late. A few have tried to analyze this, and it is not easy.

some individuals did not panic because their body naturally protected them.
Unlike the majority of people who were flooded with a stress hormone, they had much lower levels and also showed signs of another hormone that actually calmed them down.

He referred to Chesley Sullenberger, the pilot of the aeroplane that was successfully landed on the Hudson River in New York last month, as an example.

“There are some individuals who when confronted with extreme stress their hormone profile is rather unique,” he said.

“It doesn’t reach the same peak as the rest of us. So we’re all ready to scream in our chairs, but there are certain individuals who just don’t get as stressed.

“Their stress hormones are lower and the peptides that down-regulate that stress are higher, so you can see in action the hormonal regular system really hitting overdrive.

“Certain people are cooler under pressure and they perform very, very well during these periods of time.”

In his novel, Once an Eagle by Anton Myrer, the author was critical of men in combat who had no fear. They are abnormal and dangerous. Still, Hemingway defined courage as “Grace under Pressure,” and that implied that fear was still present.

In the movie “Patton” an incident was described in which George S Patton Jr attacked three men who he believed to be kidnapping a woman.

patton

Does Trump look like the young Patton ? They seem to have similar expressions.

My own life has been lived as a surgeon and there are surgeons who take beta blockers to deal with tremors caused by high levels of stress hormones. I have never had a problem with anxiety during surgery but, of course, I am not the one under the knife.

4. Intelligence. This is important, because it determines basic competence. But it surprisingly the least important attribute in this list. Intelligence, though rare, is not nearly as hard to find as the 3 characteristics above. You can find staffers who can give you intelligent advice. You cannot find staff to give you a character that you do not possess.

This is so obvious that it should not need to be said but we are ruled by staffers.

What do we make of all this ? I don’t know. Trump is an interesting character and I have no idea how he would function as president. I do think we might get a chance to find out. We should know more in a few weeks.