Sunday, December 18, 2016

"Those who cannot see must feel"

 - by New Deal democrat

That's the translation of an old German saying that I used to hear from my grandmother when I misbehaved.  It is pretty clear that, over the next four years, the American public is going to do a lot of feeling (including, unfortunately the plurality of voters who *did* see).  The results will range somewhere in between bad, disastrous, catastrophic, and cataclysmic, depending on how badly foreign affairs are bungled and how much basic norms of republican government irreversibly give way to despotism.  

I have some hope as to the former because both China and Russia are smart enough to figure out that they can get what they want by bribing Trump without resorting to armed conflict.  As to the latter, unfortunately, I hold out little hope.  Already North Carolina has crossed the line into Banana Republic-dom, and there is not the slightest reason to believe Trump will allow himself to be constrained by, well, anything.

On my to-do list is to go through a list I have been given of every country in the world which has a Madisonian presidential system, to see if any of them have not somewhere along the line fallen into despotism.  I believe that the answer until now has been that the US is the only country which had not succumbed. Someday if and when the Second American Republic is assembled, diluting or eliminating the powers of the Presidency are essential.

In the meantime the autocrat will have his day.  After all, no fascist ever was overthrown so long as they were winning.

But ... this is a good time to repeat that my view of economics dictates my politics, not the other way around.  Libertarians and neoliberal economists fail by not taking into account bargaining power.  They take contracts as a given, to be neutrally enforced by Solomonic courts. But contracts - and their enforcement - have everything to do with bargaining power, and left to their own devices, as the saying goes, "Thims that has, gits." Thus, over time, without a countervaling force, economies tend towards oligopolies and polities to oligarchies.

And all of that gets revealed in the numbers over time.  So my view is, all I have to do is faithfully report the economic numbers, and the political argument follows.  Go back 100 years and compare the economic records of Democratic and Republican administrations, and the record speaks for itself.  Most Democratic administration beat most Republican administrations.  Outside of the high inflation era of the late 1970s early 80s, where a  supply-side stimulus was helpful and non-inflationary, demand side economics which target ordinary Americans works better to improve their lot.  In simple terms, give a wealthy man money and he will hoard most of it.  Give an ordinary person money and they will spend it. Spending has a bigger multiplier effect than hoarding.

I have no illusion that we can do anything to prevent what is now directly in front of us.  But its results will be in the numbers -- particularly in wages, income, and employment.  I will continue to report them faithfully, and continue to tell you based on the numbers how I expect the next months and several years to unfold.

For now, I see no recession in the next 9 months.  If anything, I expect pretty good numbers over the next 3 to 6 months.  But the next recession is out there somewhere, its stage beginning to be set in the long leading indicators. There is every reason to believe it will feature outright wage deflation (i.e., carrying debt into the recession will be unusually toxic), and there is no reason to believe that the new regime will pursue any means that will help ameliorate it.

I will report the numbers as straightforwardly as I can to help you brace yourself.