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It's Trump vs. the Deep State vs. the Rest of Us

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One of the best side effects of the Trump presidency has been the hostility of the so-called “deep state” or “intelligence community” directed at the president.

This, in turn, has led many Americans to realize that America’s powerful, un-elected secret police agencies serve an agenda all their own. Consequently, polls show one’s views of the CIA and the FBI depend largely on one’s ideological bent. Polls from Fox News and NBC news in recent years show that as various government bureaucracies have ratcheted up their hostility to Trump, more Democrats and Hillary Clinton voters have said they trust the CIA and the FBI.

Why the president and this deep state should be at odds has never been obvious to casual observers. Last month, however, in an article titled “Trump’s War on the ‘Deep State’ Turns Against Him,” the New York Times at last explained that there is indeed very real enmity between Trump and agencies such as the CIA and the FBI. The Times contends that Trump “went to war with the professional staff” of the intelligence agencies and the State Department.

The Times notes Trump has condemned “deep state bureaucrats,” and claims Trump’s “hostility toward government was strong from the start. He blamed the leak of the so-called Steele dossier of unverified allegations against him on intelligence agencies and never trusted their conclusion that Russia intervened in the 2016 election on his behalf.”

Trump was right to be defensive, of course. But that controversy over Russia was never really about what the Russians were up to. The focus was always largely about how much Trump colluded with the Russians to win the 2016 election.

Ultimately, the evidence was so non-existent, that after a nearly-three-year investigation, Robert Mueller was unable to establish evidence of collusion between Trump and the Russians. As Glenn Greenwald has noted: “not a single American  — whether with the Trump campaign or otherwise — was charged or indicted on the core question of whether there was any conspiracy or coordination with Russia over the election.”

But this lack of evidence did not stop John Brennan, for example, from claiming for months that he had special secret knowledge of the matter, and that Trump — or at least many around him — were going to be indicted for colluding with the Russians.

Although Brennan is a “former” CIA director, he nonetheless clearly remains well ensconced within the world of his fellow spooks. He is, as ABC News correspondent Terry Moran put it, “cloaked with CIA authority.” Brennan even insisted that he ought to retain his security clearance, presumably forever, even though he is accountable to no one. Such is the mindset of the deep state bureaucrat. They live in a world where they deserve special privileges just for being government employees.

Moreover, Brennan has been joined in his attacks on the president by other former high-ranking members of the deep state, including former FBI chief James Comey and former Director of National Intelligence James Clapper.

Those currently employed by the deep state have joined the anti-Trump campaign as well. Much of the current campaign against Trump is being orchestrated by CIA agents, and according to Sen. Rand Paul on Wednesday, CIA analyst Eric Ciaramella is supplying much of the prosecution’s information. Alexander Vindman, an Army officer and bureaucrat with the National Security Council, has testified to Congress in order to fuel impeachment efforts against the president as well.

Fêting Deep-State Bureaucrats as Heroes

None of this is to say the Trump administration lacks any taint of corruption. Like all presidents, it is likely the Trump administration expects favors for favors. The only thing different about Trump is he is not skilled at keeping the everyday corruption of the White House a secret.

But what is especially problematic for him is the fact that so many of his critics coming out of the bureaucratic woodwork are from intelligence agencies and from the military.

Unfortunately, in the United States there is a well-established bias in favor of employees from national security agencies. Even the very language used by the media speaks to this favoritism. In the Times piece, for example, the authors speak of one of Trump’s critics, one “William B. Taylor Jr., a military officer and diplomat who has served his country for 50 years.” Note the implied selflessness of Taylor’s work. An equally accurate description of Taylor would be “he was employed by government agencies for fifty years” or “the taxpayers paid his bills for fifty years.” Instead, we’re told he “served his country.” The propaganda value of the media’s pro-military bias is not lost on the officers themselves, and it’s no surprise Vindman, a Lt. Colonel, testified to Congress in his military uniform.

Other examples can be found every time Trump fires a lifelong bureaucrat from the upper echelons of the various “national security” agencies. For example, last summer, when Trump fired director of national intelligence Dan Coats, the Atlantic portrayed Coats as a principled idealist who “spoke truth to power.” Coats was fired, the author tells us, because of his devotion to the truth, even if it undermined Trump’s agenda. The best proof of Coats’s honest determination, we’re told, was the fact he “won praise from former intelligence officials.”

[RELATED: “19th-Century Americans Didn’t ‘Support the Troops‘” by Ryan McMaken]

In real life, of course, Coats is a lifelong politician and bureaucrat who prior to his dismissal had collected a government paycheck for four decades. As a politician he lobbied for gun control and supported the disastrous 2003 Iraq War. The idea that his post-Congressional career was marked by dogged devotion to the truth ought to strike one as rather fanciful.

A Slipping Facade

But even the New York Times is no longer pretending that the deep state doesn’t exist, and that it doesn’t have its own political agenda. In fact, as noted by Robert Merry at the American Conservative, the Times article even “portray[s] the current impeachment drama as the likely denouement of a struggle between the outsider Trump and the insider administrative forces of government.”  This is especially significant since it is also increasingly clear that, “American foreign policy has become the almost exclusive domain of unelected bureaucrats impervious to the views of elected officials — even presidents — who may harbor outlooks different from their own.” Merry concludes the past three years of investigations of the president, conducted by government bureaucrats, is “the story of entrenched government bureaucrats and a president who sought to curb their power. Or, put another way, the story of a president who sought to rein in the deep state … that sought to destroy his presidency.”

Some of these deep-state agents even admit their willingness to subvert the official chain of command to suit their own purposes. Vindman, for example, told the impeachment committee he actively sought to subvert Trump administration relations with the Ukrainian government largely to preserve Vindman’s own vision for American policy. In the mind of this mid-level bureaucrat, American foreign policy is set not by elected officials in Washington DC, but by the bureaucrats themselves.

Why Take the Administration’s Side?

Back in 2017, the battle lines between Trump and the deep state were already being drawn, and at the time I wrote:

This isn’t to say that Trump is the “good guy” here. As with the US military establishment overall, the deep state is by no means monolithic. Like any group of self-serving institutions, there are competing factions. Trump clearly has allies within some areas of the deep state, as can be reflected in Trump’s attempts to massively expand military spending at the expense of the taxpayer.

But the fact he’s considered an outsider in Washington by so many should suggest there are reasons to support him over the entrenched bureaucracy.

Indeed, as Greenwald pointed out in a 2017 interview, it’s not a coincidence that former and current members of the deep state clearly preferred Clinton to Trump during the campaign. The deep state bureaucrats prefer an insider like Clinton who who can be trusted to not upset the national security status quo in any way.

Although Trump is no true friend of peace or human rights, he commits his sins largely out in the open. As such, his presidency is relatively transparent, and Greenwald prefers that to the hidden (and extensive) crimes of the deep state.

After all, deep-state agencies face virtually no scrutiny of — and even less real opposition to — their many misdeeds. These, of course, are so numerous as to be impossible to list. But just for starters we might refer to a 2017 article by Sharyl Attkisson in The Hill titled “10 times the intel community violated the trust of US citizens, lawmakers and allies.” It’s a laundry list of illegal, immoral, and blatantly unconstitutional acts which well illustrate the near total impunity with which these agencies operate. Abuse of spying powers is so rampant within the FBI, for example, that even the lopsidedly pro-spying FISA court was forced to conclude the FBI routinely overstepped the bounds of legal surveillance. And, of course, without the heroic whistleblowing of Edward Snowden, the NSA would still be falsely insisting that it doesn’t routinely spy on virtually all Americans, whenever and however it likes.

In response to these facts, one might still insist “but presidents lie a lot and break laws too!” That’s true, but the difference between presidents and deep-state bureaucrats is well illustrated by the current impeachment controversy. It’s the president who’s facing indictments, public attacks, and the prospect of removal. On the other hand, the deep-state bureaucrats who oversee many counts of corruption, illegal spying and leaking, remain safely hidden from public view. Those who routinely lie, deceive, and abuse their power often go on doing so for decades. As the years pass, they become ever more entrenched in the federal bureaucracy, invisible to the public, and — as we are now seeing — often answerable to no one.

Presidents come and go, and they often face fierce opposition from the other party or from the media. The deep state, meanwhile, is said to be full of national heroes who “serve their country” and “speak truth to power.”

It should be easy to see, in the battle between the president and the deep state, which side is the most dangerous. 



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Economy

Bonus Quotation of the Day…

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… is from page 426 of the late Jan Tumlir’s January 1984 speech at the Cato Institute – a speech titled “Economic Policy for a Stable World Order” – as this speech is reprinted in Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989):

Indeed the difficulty for the economist may now lie in explaining why the world economy still functions at all, however dissatisfied we may be with its functioning. The answer is, of course, that there is a lot of ruin in any economy with a modicum of freedom. I am sometimes unsure whether it is actually an advantage of the capitalist system that it can take such an enormous amount of beating. If it were in the habit of collapsing more frequently, we would perhaps govern ourselves more prudently (and more cheaply to boot).

DBx: Indeed.

I’ve long argued that the economist’s standard assertion that government intervenes into the economy first and foremost to correct market failures fails spectacularly as a positive theory of government intervention into the economy. It’s far closer to the truth to say that government intervention into the economy is fueled not by market failures (as understood by economists) but, rather by the market’s astonishing success and robustness.

The market’s success at raising people’s standards of living creates the expectation that wealth creation is easy and normal while poverty is out of the ordinary. But of course historically poverty is the norm – and poverty so deep, unrelenting, and overwhelming that few Americans today can begin to imagine a condition so crushing. Because the market makes wealth so abundant and its production appear to be normal and easy to the point of being practically automatic – and because nearly all of the massive number of details of the intricate processes at work at every moment to create wealth are hidden from view – the market’s ‘failure’ to create heaven on earth is believed by many to be an unanswerable indictment of the market.

On top of this ‘problem’ is the market’s mighty robustness: tax it, saddle it with diktats, poison it with easy money, accuse it of being run by and for demons and devils, and the market keeps motoring along, improving the lives even of those who most hate it and who do the most to harass it. The market works less well than it would absent these intrusions, of course, but it still works surprisingly well. As long as, and insofar as, prices and wages are allowed to adjust according to the forces of supply and demand, the market’s robustness is Herculean. (The market is not, however, indestructible. Harass it too much and it will quit working.)

If the market truly collapsed completely more often, giving people a taste of what life is like without it, the world would have in it not only far fewer communists and socialists, but also far fewer “Progressives” and “conservative nationalists.”

The market’s true failure, in short, lies is its incredible capacity to succeed and to keep on keeping on. The market fails to prevent people from taking it for granted.

The post Bonus Quotation of the Day… appeared first on Cafe Hayek.



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Economy

Market Talk – December 12, 2019

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ASIA:

According to reports from Reuters, China is trying to propose a plan to promote Macau to be its next “Hong Kong” by building it into a world-leading financial center. China unveiled plans of creating a yuan-denominated stock exchange, as well as allocating extra land to Macau for it to grow. The region was a former Portuguese colony and will target companies from Portuguese speaking countries such as Brazil in order to avoid direct competition with China and the mainland.

Indian Parliament passed Citizenship Amendment Bill on 11-Dec-2019, which proposes to accord citizenship to illegal Hindu, Sikh, Buddhist, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan. It, naturally, implies that migrants, who identify themselves with any group or community other than those mentioned above, from these countries won’t be eligible for citizenship. The bill also relaxes the provisions for “Citizenship by naturalization.” The proposed law reduces the duration of residency from the existing 11 years to just five years for people belonging to the same six religions and three countries. The bill covers six communities namely Hindu, Sikh, Buddhists, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan.

The Indian government has prohibited gift imports through e-commerce portals except life-saving drugs and rakhi. The import of goods was earlier free and not subject to customs duties. The move will impact Chinese e-commerce web sites like Club Factory, Ali Express and Shein who are the largest users of this route.

The US reprimanded Pakistan Air Force chief for misusing F-16 fighter jets by undermining their shared security platforms and infrastructures months after the Indian Air Force shot down an F-16 jet of Pakistan Air Force during an aerial combat over Kashmir. Andrea Thompson, the then-undersecretary of State for Arms Control and International Security Affairs, wrote a letter to Pakistani Air Force Chief Air Chief Marshal Mujahid Anwar Khan in August over the matter.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 8.72 points or -0.30% to 2,915.70
  • Kospi increased 31.73 points or 1.51% to 2,137.35
  • ASX 200 decreased 43.80 points or -0.65% to 6,708.80
  • NIKKEI 225 increased 32.95 points or 0.14% to 23,424.81
  • Hang Seng increased 348.71 points or 1.31% to 26,994.14
  • SENSEX increased 169.14 points or 0.42% to 40,581.71

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00241 or 0.35% to 0.68931
  • NZDUSD increased 0.00003 or 0.00% to 0.65823
  • USDJPY increased 0.5860 or 0.54% to 109.1310
  • USDCNY decreased 0.04597 or -0.65% to 6.98293

Precious Metals:

  • Gold decreased 5.54 USD/t oz. or -0.38% to 1,470.81
  • Silver increased 0.013 USD/t. oz or 0.08%% to 16.9207

Some economic news from last night:

Singapore:

Unemployment Rate (Q3) remain the same at 2.3%

Japan:

Core Machinery Orders (MoM) (Oct) decreased from -2.9% to -6.0%

Core Machinery Orders (YoY) (Oct) decreased from 5.1% to -6.1%

Foreign Bonds Buying increased from -511.1B to 235.8B

Foreign Investments in Japanese Stocks decreased from 394.0B to -200.4B

Australia:

MI Inflation Expectations remain the same at 4.0%

New Zealand:

External Migration & Visitors (Oct) decreased from 1.40% to 0.10%

FPI (MoM) (Nov) decreased from -0.3% to -0.7%

Permanent/Long-Term Migration (Oct) decreased from 4,290 to 4,120

Visitor Arrivals (MoM) increased from -0.1% to 0.0%

Some economic news from today:

Singapore:

Retail Sales (MoM) (Oct) decreased from 2.0% to -2.2%

Retail Sales (YoY) (Oct) decreased from -2.1% to -4.3%

India:

CPI (YoY) (Nov) increased from 4.62% to 5.54%

Cumulative Industrial Production (Oct) decreased from 1.30% to 0.50%

Industrial Production (YoY) (Oct) increased from -4.3% to -3.8%

Manufacturing Output (MoM) (Oct) increased from -4.0% to -2.1%

EUROPE/EMEA:

UK elections went underway today, with still the outcome being unpredictable. The election results will be counted out in the morning. Yesterday, both Labour and Conservatives gave their final pitches with PM Boris Johnson saying his side was the only side who can bring Brexit forward.

France is gearing up for another round of strikes tomorrow over the proposed reforms of the pension plan and age of retirement.

According to the WSJ, Saudi Arabia is seeking to defuse the situation with Iran, with the Pakistani FM acting as a mediator between the two.

The US senate comittee has now officially signed off a bill which places sanctions on Turkey over thier recent purchase of the S-400 missile defense system.

The major Europe stock markets had a green day today:

  • CAC 40 increased 23.39 points or 0.40% to 5,884.26
  • FTSE 100 increased 57.22 points, or 0.79% to 7,273.47
  • DAX 30 increased 74.90 points or 0.57% to 13,221.64

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00204 or -0.18% to 1.11126
  • GBPUSD decreased 0.00821 or -0.62% to 1.31169
  • USDCHF increased 0.00346 or 0.35% to 0.98606

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Dec) increased from 47.8 to 48.5

RICS House Price Balance (Nov) decreased from -6% to -12%

Germany:

Germany Thomson Reuters IPSOS PCSI (Dec) decreased from 53.55 to 53.43

German CPI (YoY) (Nov) remain the same at 1.1%

German CPI (MoM) (Nov) decreased from 0.1% to -0.8%

German HICP (YoY) (Nov) increased from 0.9% to 1.2%

German HICP (MoM) (Nov) decreased from 0.1% to -0.8%

Swiss:

SNB Interest Rate Decision remain the same at -0.75%

PPI (YoY) (Nov) decreased from -2.4% to -2.5%

PPI (MoM) (Nov) decreased from -0.2% to -0.4%

France:

France Thomson Reuters IPSOS PCSI (Dec) decreased from 43.69 to 42.49

French CPI (YoY) increased from 0.8% to 1.0%

French CPI (MoM) (Nov) decreased from 0.0% to -0.1%

French HICP (YoY) (Nov) increased from 0.9% to 1.2%

French HICP (MoM) (Nov) increased from -0.1% to 0.1%

Italy:

Italian Quarterly Unemployment Rate decreased from 9.9% to 9.8%

Italy Thomson Reuters IPSOS PCSI (Dec) increased from 38.88 to 40.11

Euro Zone:

Industrial Production (YoY) (Oct) decreased from -1.8% to -2.2%

Industrial Production (MoM) (Oct) decreased from -0.1% to -0.5%

Deposit Facility Rate (Dec) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Dec) remain the same at 0.00%

US/AMERICAS:

The US-China trade deal is close to completion, according to President Trump. “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” he posted this Thursday. CNBC reported that US negotiators are ready to cancel the new tariffs and cut existing tariffs by 50% ($360 billion). With only three days left before the US imposes an additional $156 billion on Chinese goods, time is of the essence.

Bank of Canada Governor Stephen Poloz sees Canada’s economy expanding in the new year at a steady. Last week, the central bank voted to maintain the target rate at 1.75% where it has remained for over a year. Growing government debt, not just in Canada, is one of Poloz’s main concerns. “Experience shows that high debt levels can amplify the impact of a shock on the economy,” the governor stated. Poloz expressed concerns over global trade as well, stating that companies are dismantling supply chains in favor of cheaper, less effective, options.

Canada’s Conservative Party Leader Andrew Scheer resigned this Thursday. Scheer’s resignation comes after it was revealed that he used Conservative Party funds to pay for his children to attend private school. Dustin van Vugt, executive director of the party, may be forced to resign as well for similar reasons.

Brazil’s central bank voted in favor of dropping the target rate to 4.5%. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” stated Waldery Rodrigues, special secretary to Brazil’s Economy Ministry. Brazil certainly amped up efforts to build business, attract foreign and domestic capital, lower the debt ceiling, and solve the ongoing pension crisis. However, the pension dilemma is ongoing as are domestic conflicts such as the Amazon wildfires. Unemployment remains high at 11.6%, but is expected to decline in the new year. The government cited optimism about continued economic growth and predicts GDP to rise to 2.3% in 2020.

US Market Closings:

  • Dow advanced 220.75 points or 0.79% to 28,132.75
  • S&P 500 advanced 26.94 points or 0.86% to 3,168.57
  • Nasdaq advanced 63.27 points or 0.73% to 8,717.32
  • Russell 2000 advanced 12.89 points or 0.79% to 1,644.81

Canada Market Closings:

  • TSX Composite advanced 7.29 points or 0.04% to 16,946.90
  • TSX 60 advanced 1.56 points or 0.15% to 1,012.93

Brazil Market Closing:

  • Bovespa advanced 1,235.87 points or 1.11% to 112,199.74

ENERGY:

The IEA report was released this week which was contrary to the OPEC optimism for demand.

The oil markets had a green day today:

  • Crude Oil increased 0.4992 USD/BBL or 0.85% to 59.3943
  • Brent increased 0.4959 USD/BBL or 0.78% to 64.3858
  • Natural gas increased 0.0381 USD/MMBtu or 1.68% to 2.3095
  • Gasoline increased 0.0032USD/GAL or 0.20% to 1.6422
  • Heating oil increased 0.0141 USD/GAL or 0.73% to 1.9477
  • Top commodity gainers: Wheat(2.16%),Steel(13.28%),Ethanol(1.90%), and Natural Gas(1.68%)
  • Top commodity losers: Cocoa(-9.37%), Oat(-5.03%), Baltic Dry (-4.93%), and Orange Juice(-0.97%)

The above data was collected around 12:40 EST on Thursday.

BONDS:

Japan -0.02%(-2bp), US 2’s 1.63% (+2bps), US 10’s 1.88%(+9bps);US 30’s 2.24%(+2bps), Bunds -0.32% (-0bp), France 0.03% (-1bp), Italy 1.34% (+2bp), Turkey 12.10% (-8bp), Greece 1.39% (-61bp), Portugal 0.41% (+5bp), Spain 0.47% (+4bp) and UK Gilts 0.82% (+5bp).

  • US 30-Year Bond Auction decreased from 2.430% to 2.307%
  • US 4-Week Bill Auction increased from 1.500% to 1.540%
  • US 8-Week Bill Auction increased from 1.520% to 1.540%

 



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Economy

Was There a Housing Bubble?, by David Henderson

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In his recent book Shut Out, Kevin Erdmann, a finance expert and visiting fellow at the Mercatus Center at George Mason University, has two main messages. The first, which is not controversial among economists, is that restrictions on residential construction in coastal California and the urban Northeast have constrained supply so much that housing in those areas is virtually unaffordable for people in the lower- and middle-income classes. His other message is more controversial, that the financial crisis last decade was not due to a housing bubble but, rather, to bad policy decisions based on the idea that there had been a bubble. Whereas I was already convinced of his first point, I, like the majority of economists, was skeptical of his second. But because of all the data and reasoning he brings to the issue, I now find myself at least 90% convinced.

Probably because his second point is the more controversial, Erdmann spends about the first half of the book making that case. At times his narrative gets bogged down and his language is often sloppy. For example, he uses the word “shortage” to refer to a situation where demand increases but supply doesn’t. Economists, however, tend to reserve that word for situations where the price fails to clear the market such that quantity demanded exceeds the quantity supplied. The good news is that he often saves the day with pithy, clever quotes that sum up his message. Also, the more than 100 graphs he uses in the book seem like overkill, but that is better than underkill.

 

Types of cities / Erdmann makes his case by looking at the diverse characteristics of U.S. cities rather than lumping them all together, and by studying changes in housing prices and rents over time. He focuses on the 20 largest U.S. metropolitan areas and divides them into four categories: Closed Access cities, Contagion cities, Open Access cities, and Uncategorized cities. The five Closed Access cities are New York City, Los Angeles, Boston, San Francisco (including San Jose), and San Diego. In those cities, local and state governments have imposed strong restrictions on construction.

Erdmann seems a little vague about when those restrictions got really tight. His narrative suggests that it was in the 1990s, but there’s no index to help one look for a clear answer; he did confirm in an email to me that he dates it to 1995. In those cities, housing starts, even in economic expansions, have been low, incomes have been high, rents have been high (and rising) even relative to incomes, and there were large rates of out-migration of households with low incomes.

The above are the opening 4 paragraphs of David R. Henderson, “Was There a Housing Bubble Last Decade?Regulation, Winter 2019/2020, pp. 63-65. Read the whole thing. [Scroll down about 60 percent of the way.]

Thanks to Jeff Hummel for improving a previous draft and to Kevin Erdmann for promptly answering the questions I emailed him.

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