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China is Just the Fed on Steroids
Market analysts, who somehow are not rich enough to retire, blame current “volatility” on China. I trust another analyst. Pogo the ‘possum famously warned, “We have met the enemy and he is us.”
Faced with slowing growth, China’s authoritarian geniuses ordered their central bank to pledge “supplementary lending”. The idea was to increase liquidity, lower borrowing costs and boost domestic demand.
Over the last six years of slow -- at times zero -- growth, the authoritarian geniuses in our own central bank, the Federal Reserve, inflated markets with $3.5 trillion in Quantitative Easing (QE) bond buying. That’s roughly the size of Germany’s economy.
Beyond that, the Fed kept interest rates at near zero for the banks’ best customers. They probably do not include you, even if you pay your credit card balance every month. We’re talking about big institutions and the truly rich, who borrow at bargain basement rates, invest on Wall Street, and reap gains that dwarf your retirement account.
Those gains have been nearly guaranteed because Wall Street is the only game in town. With interest rates so low, you can’t earn money the old fashioned (and safe) way -- from savings accounts or certificates of deposits. And real estate windfalls crashed in 2008, when the government-inflated mortgage bubble burst.
One reason America sees a growing income gap is that the Fed’s helping to create Wall Street millionaires and billionaires, while White House policies make it harder for businesses big and small to create jobs here in America. Now the Fed’s threat to raise interest rates even a fraction of a point has Wall Street inching toward the window ledge. But we are not following China to that ledge. China has been following us.
Clearest Choice in 30 Years?
To judge from the candidates now surging, Democrats and Republicans are more sharply split than at any time since 1984, when Walter Mondale challenged Ronald Reagan. The current Democratic contenders forthrightly seek to grow government to champion social justice. The GOP nominee could be a true outsider running against Washington.
Let's start with the Democrats. Hillary Clinton remains the frontrunner. But she’s been thrown off course, and not just by the email, Benghazi and Clinton Foundation controversies.
As first lady of the United States Mrs. Clinton was asked by her husband to reform health care. If this seems odd, remember that Bill Clinton promised voters “two for the price of one.” When both Republicans and Democrats overwhelmingly rejected her far-reaching “Hillarycare” plan, Mrs. Clinton lowered her policy profile. Bill Clinton returned to his centrist roots by compromising with Republicans who took over the House. Together they balanced the budget and reformed welfare.
Hillary Clinton might now like to position herself as a centrist, too. But she can’t, because an avowed socialist, Senator Bernie Sanders, is beating her in some polls. There’s also the remote threat that another leftist, Senator Elizabeth Warren, will join the race. So at this early stage Clinton is trying to re-energize the Obama coalition of single women, minorities, young people, environmentalists, LGBT voters and public union members. If Republicans nominate an equally staunch conservative like, say, Senator Ted Cruz, Clinton may try to seize the middle ground. For now though, she, Sanders and former Governor Martin O’Malley are all competing for the progressive base.
Republicans are not nearly as united. The civil war raging between government insiders and outsiders is fiercer than the battle against Democrats. Tea partiers harbor more contempt for Senate Majority Leader Mitch McConnell and House Speaker John Boehner than for President Obama because they feel McConnell and Boehner betray them by kowtowing to Obama. George Will calls their accommodation inevitable given the Constitution’s separation of powers and tells the base to “get over it.” But conservatives see Obama advancing his agenda not through legislation but with a “pen and a phone.” So for now the call for compassionate compromise from the likes of Governor John Kasich is falling flat. Many pundits praised Kasich’s first debate performance, yet today he's just over 4% in the Real Clear Politics average of polls. Donald Trump polls five times higher largely because the base sees him as a fighter.
The outsiders support free enterprise in a curious way. As a businessman, Trump boasts about having greased the palms of politicians in both parties. But as a reform candidate he joins Fiorina and Carson in opposing crony capitalism. They vow to strip the tax code of insider breaks for business.
And of course Trump’s biggest issue is illegal immigration. Unlike Jeb Bush, the U.S. Chamber of Commerce and The Wall Street Journal, Trump insists on securing the border before legalizing millions more immigrants. He may or may not be proposing the sort of mass deportation last ordered by President Eisenhower in 1954; Trump's six-page plan is less sweeping than some of his of-the-cuff remarks. By contrast, President Reagan in 1986 granted a mass amnesty. In return, Congress was supposed to secure the border.
Crazy or not, Trump's call is resonating not only with America Firsters like Pat Buchanan but also with what used to be called Reagan Democrats who fear for their jobs and wages. Stressing growth and job creation, Trump even hopes to convert a critical number of African Americans and Hispanics. Click here to see my video on the "Stump for Trump" sisters.
Bill Clinton ran for president in 1992 as a moderate Southern governor. When Democrats lost the 1994 mid-term elections, Clinton declared, “The era of big government is over.” Barack Obama ran in 2008 not so much as a progressive Democrat but as a unifier who transcended party divides. John McCain, Mitt Romney and all the Bushes also tried to project moderation. Remember, Bush 41 ridiculed Reagan’s “voodoo economics” and Bush 43 never met a spending bill he was willing to veto. In other words, both parties veered toward the middle.
2016 might be different. Both the Democratic and Republican candidates may present as clear a choice as Walter Mondale and Ronald Reagan did in 1984. Reagan trounced Mondale. But times have changed. Next year we’ll see how much.
School Daze: What to Study
Shakespeare said this time of year “whining schoolboys,” and presumably schoolgirls too, “creep like snail unwillingly (back) to school.”
But that’s only if they're not studying the right stuff. While little kids don't have much choice, big men and women on college campuses do. So I got suggestions from three students about how to choose “such stuff as dreams are made on”.
Early in her senior year of high school, Sandi (not her real name) was taken on a field trip to a vocational school. She came home and gave her mom a heart attack. Sandi had always toyed with the idea of becoming a dentist but wasn’t sure she’d really like it. The vocational school offered training for dental assistants. Sandi asked her mother, “Why not study that and then work with a dentist? If I like it I can go to college and maybe dental school.” Mom worried about the social stigma attached to kids who don’t go straight to college. Then she conceded that Sandi was right, and remarkably mature.
Ever since World War II and the GI Bill, our society’s thought of college the way we used to think of high school: as a necessary rite of passage, and evidence that kids are “well educated” -- even when their studies leave them with what Oscar Levant called “a smattering of ignorance” and ill-equipped to make a living.
That wasn’t exactly Kevin’s problem. Yet he had another just as common. He studied political science at Miami University with the vague idea of becoming a politician someday. Well into his senior year, Kevin panicked. What was he going to do after graduation? Like too many other guys who can’t do math -- including myself -- Kevin wound up applying to law school. He didn’t really want to be a lawyer. He just thought of law as a respected profession. Kevin was surprised to hear how hard it is in this economy for young lawyers -- especially young lawyers who aren’t passionate about their vocation -- to find a good job. The kind of job that Geoff already has while he’s in college.
As an incoming freshman at the University of Dayton, Geoff couldn’t decide between business and engineering. A counselor said he didn’t have to: UD has a co-op program with GE aviation. Geoff’s dual interests made him an ideal candidate for supply chain management. Geoff got a paying position with GE while still in school, with the virtual certainty of being hired by them or by any number of other businesses when he graduates.
The point is that help is available, and not just help with often ruinous student loans. You first need to decide if college is right for you at this time and, if so, what to study. Most of us don’t spend enough time studying that. If you do, chances are that instead of being a "whining school boy" you’ll have what Shakespeare also described: a “shining morning face” on your way to class.
What Trump Should Have Said
Donald Trump’s performance at the first presidential debate lost the support of one of my best friends. She had felt he was the only fighter in the field. He channeled her anger over President Obama’s policies. And Trump was fun.
But last night she wrote him off. From the Rosie O’Donnell joke to his failure to adduce proof that Mexico’s government is aiding illegal immigration -- that and much more showed Trump at his worst. But worse still was his flippant refusal to support any eventual GOP nominee.
That actually could have been Trump’s strongest moment, had he gone on the attack. Instead, Trump if he’s lucky may now be saved from himself.
Here’s what Trump, from his point of view, should have said: “I am a proud Republican. But I put my country over my party, especially because the party of Ronald Reagan has been hijacked by establishment weaklings who are no better than Democrats. I cannot and I will not support anyone who refuses to secure our borders and our broken visa policies from tens of millions more illegal immigrants. I will not support anyone who refuses to defeat ISIS and keep Iran from getting nuclear weapons. And I will not support anyone who refuses to keep American jobs in America. As for what I’ll do if a weakling wins the nomination -- which I do not believe will happen, because I’m going to win -- I reserve my God-given liberty.”
But the entrepreneur famous for seizing opportunities did not seize that opportunity to rally his base and advance his agenda. Instead Trump literally shrugged.
Now here’s how Trump’s failure may save him. If the chairman of the Republican National Committee, Reince Priebus, had any backbone he would now do what he should have done before: bar from debates anyone who will not pledge to support the nominee. And he would be doing Trump a favor. Because Donald Trump is not going to get any better at debates. It’s not in his nature. He is not good at being questioned. He is not good at coming up quickly with specific information; Trump has “people” for that.
With Trump off the stage he would continue to grab the lion’s share of free media (not to mention all the media he can buy) and he would rob his rivals of the biggest reason most people might watch the next eight debates: Donald Trump.
However, Priebus probably will not act. And that may be for the best. I’m not saying a Trump nomination would serve the party or the country well. And my friend now feels the same. She was impressed by someone on the early "kids table" debate -- Carly Fiorina. Talk about a smart, experienced, inspiring fighter. Keep your eye on the former Hewlett-Packard CEO. Meantime, one way or another, we’ll always have The Donald.
The Brits' Immigration Crisis
My wife and I just returned from our younger daughter's college graduation in England. All the talk there was about two things: A certain Lord Sewell photographed in a brassiere while snorting cocaine off the breasts of a prostitute. And illegal immigration.
What's being called the Calais Invasion is the flight of immigrants from France, at least 5,000 of them having fled there from Libya. The current state of Libya could be a blog in itself.
In 2011 President Obama and Secretary of State Hillary Clinton helped topple Muammar Gaddafi even though that former US foe had given up his nuclear program in the wake of the Iraq invasion and was feeding Washington anti-terror secrets. Gaddafi's fall led to the civil war that still rages, including an al Qaeda offshoot murdering Americans in Benghazi.
And it led to this mass exodus of Libyans.
Brits do not oppose illegal immigration because they're racists. With the collapse of its empire, Britain began welcoming Commonwealth citizens, and today the UK seems as cosmopolitan as the UN.
No, Brits on both the right and left oppose illegal immigration for the same reason most Americans do. Because as the Nobel prize-winning economist Milton Friedman said, open borders are ruinous for a welfare state.
Britain's economy, like Germany's, is doing better than much of the rest of Europe. Perhaps not coincidentally, both Britain and Germany have conservative governments. But even many Labour supporters are howling over illegal immigrants being put on the dole as soon as they reach England.
In America the situation is different. Democrats back President Obama unilaterally legalizing millions of illegal immigrants. And establishment Republicans like Jeb Bush, the Chamber of Commerce and the editors of the Wall Street Journal also support "comprehensive immigration reform" even before our border and visa problems have been solved. Those Republicans want cheap labor. Democrats want votes.
Donald Trump first grabbed headlines and the top spot in GOP polls by calling many illegal immigrants from Mexico rapists. He has not walked that back. Conservative pundits in the US and the UK call Trump an intemperate opportunist. But Trump has not tempered his opposition to all illegal immigration, from any country.
Expect to hear plenty about that at Thursday's GOP debate. And don't be surprised to find that Trump's message keeps resonating -- on both sides of the Atlantic.
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