McCain As Metaphor

Authored by Justin Raimondo via AntiWar.com,

Some people are living symbols, sheer embodiments of a concept that fits their persona as snugly as their skin: e.g. the Dalai Lama personifies Contemplative Piety, Harvey Weinstein is the incarnation of Brazen Vulgarity, and John McCain’s very person exudes the sweaty blustery spirit of Empire.

His entire history – born in the Panama Canal zone, son of an admiral, third-generation centurion, the War Party’s senatorial spokesman – made it nearly impossible for him to be other than what he is: the country’s most outspoken warmonger and dedicated internationalist.

As George Orwell remarked, “After forty, everyone has the face they deserve,” and in McCain’s case this is doubly true. That Roman head, fit for a coin of high denomination, looks as if it might sprout a crown of laurel leaves at any moment:  Grizzled brow, wrinkled with the tension of an inborn belligerence, eyes alight with a perpetual flame of self-righteous anger, McCain is Teddy Roosevelt impersonating Cato the Elder. In the extreme predictability of his warlike effusions, he’s become a bit of a cartoon character. Who can forget his enthusiastic rendition of “Bomb bomb bomb Iran!” to the tune of “Barbara Ann”?

The Senator from Arizona represents something relatively new on the American scene: the emerging class of colonial administrators, Pentagon contractors, and high-ranking military personnel, and their families, many of them stationed overseas. These people have a material interest in the expansion of our role as global cop, they number in the tens of thousands, and they are strategically placed in the social order, with enough social power to constitute an influential lobby.

As the prototype of this mutant species of Homo Americanus, McCain is the perfect enemy of the new nationalism that handed the White House to Donald Trump and sundered the Brits from the EU. It’s no surprise he’s become the antipode of the Trumpian “America First” foreign policy doctrine – a doctrine that is almost never implemented, but that’s another column. His latest philippic perfectly summarizes the spirit and content of the brazen imperialism that is his credo and the credo of his class, We get the whole grand tour of McCainism as a worldview, from the rather odd idea that “America is an idea” and not an actual place to the glories of the “international order.” There is much shedding of blood “to make a better world” – a cause we are told has “made our own civilization more just, freer, more accomplished and prosperous than the America that existed when I watched my father go off to war on December 7, 1941.” Now here is crackpot Keynesianism with a vengeance: the destruction of World War II was good for the economy!

Having “liberated” the world from itself, the United States, as the champion of World Order, is in danger of turning away from its sacred duty to always be shedding lots and lots of blood on behalf of Others. And we know just who McCain is talking about:

“To fear the world we have organized and led for three-quarters of a century, to abandon the ideals we have advanced around the globe, to refuse the obligations of international leadership and our duty to remain ‘the last best hope of earth’ for the sake of some half-baked, spurious nationalism cooked up by people who would rather find scapegoats than solve problems is as unpatriotic as an attachment to any other tired dogma of the past that Americans consigned to the ash heap of history.”

The idea that we led and organized the world for the entire postwar era erases the cold war from history, a neat trick given McCain’s record. And as for our “ideals” and this “last best hope” business, none of that is worth a single American soldier – nor does it have anything to do with a soldier’s proper job, which is protecting this country. Yet what is one to expect from someone who actually believes “we live in a land of ideals, not blood and soil.” Blood never comes into it for McCain unless it’s being shed in some ill-conceived totally unnecessary war. And as for soil – there is none. There’s just “ideals,” floating in a void.

While admitting that the Trumpian version of American nationalism is somewhat undercooked – and, perhaps, not all that digestible – one has to wonder: where does a supporter of the Iraq war, who assured us it would be a glorious victory, get off calling anybody or anything half-baked?

McCain doesn’t even try making a coherent argument: instead, he simply lies by claiming that, having taken the road to Empire, “we have become incomparably powerful and wealthy as we did.” It’s utter nonsense, of course: empires are an expansive luxury. We spend more on the military than the top ten powers combined, and the national debt is at historic heights. We’re effectively bankrupt thanks to out-of-control military spending and McCain’s favored wars of choice.

The idea that we have a “moral obligation” to enforce McCain’s beloved “international order” is rooted in the crazed post-millennial pietism that has motivated so much that is mischievous in American history. The old religious impulse that motivated Prohibition and the “anti-vice” campaigns of the nineteenth century has, today, been secularized and internationalized. The old fundamentalists sought to remake the country, their secular successors seek to remake the world. This accounts for the quasi-religious tone of McCain’s remarks, this talk of “moral obligation” and “shame” if we fail to take up the burden of Empire, manfully and willfully, because “We will not thrive in a world where our leadership and ideals are absent. We wouldn’t deserve to.”

In other words: Americans have no right to live their lives in peace, and to leave others in the same condition: they must perpetually be sticking their noses in other peoples’ business, sniffing out “injustice” and making sure the trains run on time.

McCain hails the crusade to “help make another, better world” – yet the American people don’t want another world, they want to live in this world in peace and security, rather than sacrificing themselves to some imaginary “duty” to uplift the world on Uncle Sam’s shoulders. That’s one reason why Trump is in the White House and McCain is on the outside looking in.

The Chinese Economy's Fatal Flaws

Dr. Per Bylund’s recently published article poignantly states one of the core problems in the Chinese economy and its the state-manipulated Keynesian foundation. I do agree with his opinion. And if we dig deeper into the exact situation of Chinese economy, we will find that it’s a typical failing of the Keynesian, cronyist system.

By using the perspective of Austrian business cycle theory, lets take a look at China’s real estate industry, which is suffering more and more painfully from artificial credit issued by China’s central bank, the People’s Bank of China (PBC).

During the 2008 global economic crisis, China’s central government issued the famous RMB 4 Trillion Stimulus Package Plan (equaling to $586 billion).

Since 2009, the Chinese real estate economy has already suffered from three small economic cycles. As it is becoming more difficult for real estate companies to live on artificial prosperity, the duration of every business cycle has become shorter than the previous one. We also see more and more ghost cities because of the economic boom in every sub-economic cycle. There were at least 12 ghost cities founded in 2013, and the number of them jumped to at least 50 in 2017! Bankruptcy is happening more frequently among Chinese real estate enterprises. Since 2016, at least three real estate companies — with a combined debt of at least RMB 763 million — have gone bankrupt. The story of bankruptcy is continuing, with one of the biggest real-estate-driven enterprises, Wanda Group, facing financing problems. If Wanda no longer has access to cheap debt, it might not be able to refinance or roll over all its debt again. If Wanda has to face bankruptcy, it could possibly accelerate an end of the the current Chinese boom. 

The data from the Chinese local governments is also not optimistic; their debt levels have reached almost RMB 25 trillion (US$ 4 trillion) at the end of 2014. In 2015, even the PBC admitted in one of its annual reports saying that China’s financial system is facing higher instability and uncertainty.

The above evidence is not a surprise. All these are the consequence of artificial bank credit created by central banking and central planning.

In China, the loans are easy to get from the State Owned Enterprises (SOEs) or the businessmen who are the friends of the politicians in the Communist Party. China’s real estate industry is also the ally of the state and only the people who are friends of those in authority can participate in housing programs. 

Besides the SOE economic system, what we should worry more about is how the Keynesian and crony system hurts small and private businesses in China, who are driving the economy of this country. Compared with the SOEs, and the businessmen who are the close allies of some influential politicians, it is harder for ordinary entrepreneurs who are running small businesses to get loans. Moreover, the recent market squeeze makes it harder for Chinese small business to survive. These entrepreneurs are not only facing an unfriendly bank credit situation, but also the threat of having to bribe the government to circumvent the massive scale of governmental economic regulations.

Consider the story of a small business boss Li Lang, who is a typical Kirznerian alert businessman in China. Several years ago, he observed a shortage of moving companies in the Southwest Chinese town of Chengdu. He started his business to serve the local people. The business is not easy, not only because it requires hard work, but Li also must bribe and maintain good relations with the local politicians to let them “protect” his business and help him introduce some business opportunities. According to Li, if the local bigwigs in the crony system had already discovered the opportunity of earning a fortune by managing a moving company, it wouldn’t have been possible for him to enter the business. Though now that he has earned a lot of money, he still has to carefully maintain the relationship with the politicians to "protect" his business. His is not an isolated case. In China, the less connections you have with the cronyist system, the less business opportunity you have. And even if you become successful in your business, be careful, the state has eyes on your wealth.

Though we know that the private sector is driving the Chinese economy and has improved the living standard of many Chinese individuals despite state economic manipulation, we still have to emphasize that the nature of the Chinese economic model is dominated by Keynesianism and cronyism.

Otherwise, the false prosperity would make us misread what is happening in China.

*  *  *

In other words - don"t start believing.

Paul Brodsky's Advice To Investors: "Get Angry"

Submitted by Paul Brodsky of Macro Allocation Inc.

Get Angry

Wall Street looks a lot like Lake Wobegone, where the women are strong, the men good looking, and all children are above average. We have always been happy warriors, but it is difficult not to resent the passive nature of investing foisted upon the markets by economic policies that backstop and boost asset prices beyond reason, which in turn diminishes the value of investment intelligence and experience. Passivity implies the markets will always produce positive real returns and real economic growth over all time horizons. It is an illogical and preposterous notion, and yet it is the zeitgeist – all above average.

Fertility rates among wealthy and educated cohorts in advanced economies – from which the investor class is comprised – have already begun to decline, as has the demand for manufacturing output among the working class in most advanced economies. Not a good situation. This reality begs fundamental questions: “are increasingly digital, indebted societies being served well by analog economies” (no) and “why is growth the unquestioned objective of policy makers and political economists” (because growth is necessary to sustain nominal asset and liability prices, which in turn is necessary to avoid credit deflation, goods and service price deflation, and bank and portfolio insolvency)?

The counterfactual to this practical yet insidious economic framework would be an economy that actually economizes, that works naturally to drive prices lower and the purchasing power value of savings higher. Since savings are ostensibly obtained through production, the incentive of workers would be to produce at a competitive global wage scale. Economic right sizing would not be feared and economies would shrink to profitability. Deflation would not be feared either; in fact it would be welcomed. Workers would actually benefit from increasing productivity, innovation and automation. They would be more productive, have more stable income and more leisure time, and be able to save for the future at a positive risk-free real rate of return. Alternatively, rentiers would not be able to reduce the value of production and increase the value of assets by issuing unreserved credit. Alas, such an economy no longer exists.

Our idealism is not entirely bitter or impractical because the counterfactual is supported by math, history and, now, current trends. Baby boomers across developed economies have begun to downsize and spend less. No amount of real growth ever sustained in the past can lift them out of debt or transfer it smoothly.

Something has to give. Central banks and governments have had to fill the void to generate growth that helps reconcile nominal asset and liability prices. While they have unlimited balance sheets with which to synthesize nominal output growth and assume others’ liabilities in perpetuity, the process of transferring the burden of growth from the factors of production to non-productive financial statements creates very wide wealth and income gaps and social unrest. Such theory closely resembles current reality.

We are angered by the elite conceit still on offer from parties benefitting from this unsustainable state of affairs and the collective passivity of public intellectuals and investors unwilling to think for themselves, identify obvious problems, and take action. Their benign neglect or, worse, near unanimous intention to exacerbate the problem through fiscal profligacy, actually evokes excitement among economists and investors. Lost in the frenzy is recognition of a dangerous financial and social setup. The preponderance of “free market” investors and allocators are betting their performance, compensation, careers and sense of self-worth on the hope that Trump Keynesianism and reforms will get them one or two more bonuses, and, failing that, that central banks will monetize financial assets at full value in real terms.

This discussion should offend blithe extrapolators posing as fiduciaries, those that leverage popular opinion without considering the potential devastation from necessary structural change. Institutionalized trend-following investors, proud of themselves for abandoning original thought and reducing the costs they pay to have their assets managed to nine basis points, are being penny wise and oh so pound foolish.

Warren Buffet’s recent attack on high fees is well-founded, but his always stay long mantra is not. Of course high fees detract from returns, and of course investors not always balls-to-the-wall long will reliably under-perform a market that only rises. Given the current setup, however, US real growth and equity values can only be perpetually strong relative to other markets; not real wealth creating on their own.

Corporate equity and property markets are confidence games that rely on promotion and debt assumption. They need a willing conspirator in the form of financial media. Bull markets and ad rates have historically been correlated, and so we should always expect financial media to promote hope in the face of a market trading 22-times earnings, 3-times book and 13-times cash flow.

A dignified spokesperson will reliably extrapolate five cases where investors would have been foolish to worry, and so thoughtful active managers are in the process of being disintermediated by passive vehicles. New heights of consensus-ness have made idiots of thoughtful analysts, investors and allocators. The meaning of “fiduciary care” has shifted from understanding the future needs and risk tolerances of one’s charges to the process of locking in negative real returns while retaining plausible deniability through compliance with regulatory best-practices.

Being content and un-prepared is unconscionable, dear fiduciary. Markets are always risky and they are getting riskier. They are not to be trusted as homes for risk-free saving. Investors at all levels are being deceived on an epic scale and most of the investor class will suffer. It never pays to bet against nature for too long, which presents a wonderful opportunity for free thinkers. The efficient investor today that methodically sets market traps to capture foolish bulls (and bears) will be the dignified investor tomorrow.

Recommendation: Uncross your fingers. Turn off the TV and find your calculator. Remind yourself why you initially got into the investment business. Change your investment objective to “seek positive real returns regardless of economic conditions”. Show your spouse why she fell in love with you. Show your kids – actually demonstrate to them – what it takes to be an adult. Be human. Think. Get angry.