RUTHFULLY YOURS

https://quadrant.org.au/magazine/2019/07/sometimes-a-coup-is-just-a-coup/

I see that Nigel Farage has sparked yet another political innovation. Dry cleaners of the world are smiling. A few weeks ago, Mr Farage presented what Aristotle might have described as the final cause, that for the sake of which, an agitated onlooker tossed the contents of his plastic cup into the campaigning politician’s face and all over his dark blue suit. It looked like a nice suit, too.

It’s a gesture that is catching on. During President Trump’s recent state visit to the UK, one of the President’s supporters was—language police: what’s the correct participle?—milkshaked? Milkshook? I favour “shook”. Anyway, a chap in Trafalgar Square got doused by an angry anti-Trump protester. (Why are all anti-Trump protesters always so red-in-the-face angry?) What a waste of a good milkshake. Were Thomas Aquinas available, he might analogise the procedure to the sin of Onan, the misuse of a God-given faculty and improper spilling of precious liquid. But the Atlantic, noting the new popularity of (left-wing) people tossing milkshakes at (right-wing) people with whom they disagree, assures us that “Sometimes a Milkshake Is Just a Milkshake”. At least it’s not boiling hot coffee, the author wrote—or acid, or a Molotov cocktail. Be thankful for small mercies.

That’s one way of looking at it. Another is to note the artificially induced persistence of public insanity on the issue of Donald Trump. Here, the title of Charles Mackay’s classic Extraordinary Popular Delusions and the Madness of Crowds says it all. As Noël Coward sang of mad dogs and Englishmen, “They’re obviously, definitely nuts!” There is, however, a looming disturbance in bedlam. There is still plenty of skirling insanity. Jerrold Nadler, the Democratic chairman of the House Judiciary Committee, gives almost daily performances from behind his desk in the US Capitol. But there is a chill wind blowing through those chambers that is making the children shiver and think of heading home. The name of that refreshing breeze is William Barr, Donald Trump’s new Attorney-General.

Mr Barr has been around the political block a few times. He was Attorney-General once before, way back in the last century, under George H.W. Bush. Unlike his predecessor, Jeff Sessions, there is no rabbit about William Barr. When he was first confirmed, there were cries from people in Jerry Nadler’s corner for him to recuse himself from anything that had to do with the Democrats’ campaign to destroy President Trump (this is what we call an “investigation”), but Barr did not even bother to laugh. The man is entirely unflappable. After Robert Mueller delivered his two-volume fantasy fiction manuscript to Barr this spring, Barr and his colleagues dissected the report. They noted that it had determined that there was no collusion or co-ordination between the Trump campaign and the Kremlin (sadness!).

They also concluded (what Mr Mueller had forborne to conclude) that the President exercising his constitutionally-defined powers did not count as obstruction of justice. The Democrats in Congress and their PR representatives—that is, the press—had been bitterly disappointed to learn that the President of the United States was not in fact a Manchurian candidate who was in Putin’s pocket. (Actually, I could have told them that years ago, but they never asked.) After that bitter disappointment they had pinned everything on obstruction. “Surely we can get Trump for that! It worked against Richard Nixon, didn’t it?”

swtotd.blogspot.com

The TED spread – the difference between Three-month U.S. Treasuries and Three-month LIBOR and an indicator of perceived credit risk in the general economy – declined from 314 basis points to 131 basis points during the fourth quarter of 2008, after reaching a high of over 458 basis points on October 6. (Historically, the yield spread had been closer to 50 basis points). The S&P 500 bottomed on March 9, 2009 at 676.53. The Second Quarter of 2009 marked the end of the 2007-2009 recession. The rate on Fed Funds, which began 2008 at 4.25%, ended the year at 0.25%. Despite having spent almost half a century on Wall Street, I am an observer not an expert on credit markets, so what follows are opinions that should be taken with the proverbial grain of salt. It is my contention, however, that monetary policy over the past decade has been driven by political wants not economic needs.

In my opinion, the incoming Obama Administration, in 2009, used the credit-driven recession to justify a political agenda of increasing the role of government and “…fundamentally transforming the United States of America,” as Mr. Obama put it five days before the 2008 election. Apart from demonizing Republicans, the first thing the new Administration did was to call the seven-quarter recession a “Great Recession,” reminding people of FDR and the Great Depression. Certainly, the bankruptcy of Lehman on September 15, 2008, and the ensuing credit crisis, made for a frightening few weeks, but the scare was over by the end of the year. While Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and President of the New York Federal Reserve Bank Timothy Geithner have been criticized by some for their handling of the crisis, it is my belief they saved the system. Monday morning quarter-backing may argue that there were some things they did they should not have done and other things they did not do they should have done, but the bottom line is that, while Lehman want bankrupt and other banks were forced to sell out, by the end of December the crisis was largely resolved, as could be seen in the decline of the TED spread mentioned above and in the fact that high-yield bonds had begun to rally a month before year end.

For six and a half years, while the economy expanded from $14.2 trillion in 2009 to $18.2 trillion in 2015, the Federal Reserve left the Fed Funds Rate at 0.25%. It was only in the fourth quarter of 2015 that the Federal Reserve finally lifted the rate to 0.50%. The rate remained at that level until December 2016 when it was increased to 0.75%, just before the Trump Administration took office. During 2017, the rate rose, in three increments, to 1.50%. In 2018, the rate rose in four increments to 2.50% where it remains today – higher than it was but still low by any historical measure. However, once again, political pressure is being put on the Fed, this time by President Trump – and silently acquiesced to by members of Congress – to lower rates, a mistake, in my opinion. It is expected that this afternoon the Fed will reduce rates by twenty-five basis points.