Are Our Rulers Cunning or Stupid
or Baldrick Cunning?
Climate emergency. It seems that the Biden administration is in the middle of getting its ducks in a row to make an announcement. But really? What are they going to do? Mandate more electric cars? Mandate a cut in gasoline prices? Double the number of wind turbines? Demolish nuclear regulation so we can get a fleet of nuclear plants on line in five years?
The question is, as it always is: do the politicians know what they are doing? Or are they just flailing around, needing to be seen to Do Something about $5.00 gasoline?
An interesting question is: Did the Bidenoids expect $5.00 per gallon gas when they took over in 2021? My guess is that they didn’t really think about it. If you are an educated-class mover and shaker you don’t really care about the price of gasoline. But you are a believer in the need for the “energy transition.” Why? Well, all the experts agree. We must act now.
But what if the experts are wrong? What if the experts don’t know what they are talking about?
Take the case of Paul Krugman, NYT op-ed columnist and economist. Here he recounts how expert opinion was divided on the American Rescue Plan. Was it “dangerously inflationary” or should everyone relax?
Krugman thought we should all relax, but he was wrong. But why? I think it comes down to the fundamental hole in Keynesian economics, that when you have a recession you just push the button on government spending, any spending. And inflation probably isn’t a problem until the economy recovers. And don’t worry about printing money until the economy recovers.
I think this is wrong, and I bring you three examples.
The Carter stimulus plan of 1977 was a response to the 1973-75 Recession. The idea was to fight unemployment — two years after the end of the recession! The combination of stimulus policy and Federal Reserve accomodation led to 10 percent inflation by 1979. Just to give you a clue: the gold price went from $116 per oz. in August 1976 to $660 in Septermber 1980 before the Fed started fighting inflation. I would say that the Carter experts didn’t have a clue.
The Reagan economic plan of 1981 to deal with the Carter inflation was to raise interest rates to cut inflation — with the help of Paul Volcker at the Fed — and lower income tax rates to promote economic growth. This resulted in a sharp recession, and a fast recovery. So that Reagan could run for reelection in 1984 on the theme of Morning in America. There was also a big boost in the Defense budget.
The Obama stimulus in 2009 was a response to the 2007-09 Great Recession. But it didn’t stimulate the economy much because it was mostly a handout to Democrat constituencies. Voters responded in th 2010 midterms by giving the House of Representatives to the Republicans.
The Trump stimulus of 2017 was a response to the lackluster growth of the Obama era. It featured tax-rate cuts and limitations on the SALT tax deducation. The economy improved sharply until the COVID crisis of 2020.
The Biden stimulus of 2021 was a response to the articifial economic retreat of the COVID crisis and immediately unleashed inflation and, by early 2022, zero growth. It was mostly handouts to Democratic constituencies and a continuation of COVID relief. Of course, it also included a raft of administrative changes to accelerate the “energy transition” to clean energy.
Now I have to say that I don’t understand how Paul Krugman could have made his mistake about being relaxed about inflation. Unless his immersion in Keynesian economics has made him blind to the reality of economics, which is that everything happens on the margin. You raise gasoline costs and restrict production; you get higher gas prices and lower growth. You lower marginal income tax rates, you get more business investment. But Keynesians all seem to believe that if you just sling enough money at the economy you will “stimulate” it.
Now, I wonder why “amiable dunce” Ronald Reagan avoided these traps. Could it be that he had better advisers schooled in better economics? Or did he himself know a thing or two? One “tell” is that a researcher going through Reagan’s papers after his death found that Reagan had read all the conservative economists, like von Mises and Hayek. The researcher knew this because of notes in the margins of the books in Reagan’s handwriting. You think Joe Biden ever cracked a book on economics on the train between Washington and Wilmington?
On top of everything, the failed Obama stimulus ought to have changed some minds in the Democratic Party. The Great Recession was a credit collapse pretty similar to the Great Depression, that Keynes wrote his book The General Theory of Employment, Interest, and Money about in 1936. The whole point of Keynes’ book was to help policy analysts avoid a repeat of the stagnation of the 1930s. And yet, the Keynes-inspired experts that designed the Obama stimulus failed to return the economy to healthy growth. And yet, you don’t hear a word from the Democrats and the educated class that maybe they have a problem on the economic theory front. In fact, their latest enthusiasm is Modern Monetary Theory which says don’t worry about the debt; you can always print more money.
So, did the ruling class really think that the Biden stimulus would work without inflation? Did they just not care? Did they just put all the loot their supporters demanded into the package and damn the torpedoes? Or are they just so stupid that they couldn’t see where they would be, politically, in 18 months?
I would say that the situation of the Biden planners was that they needed a pretty good economic theory, modeled on a computer to show to the faithful, in order to prevent the disaster that has ensued. Otherwise it’s just loot and plunder as usual.
Hey, maybe back in the 1930s a spot of stimulus might have worked. But today, nobody has any idea.
Let’s look at something else on the economic front: how the experts in 1944 avoided a repeat of the post-war deflation and economic chaos that occurred after World War I.
It was all pretty cunning. They pretended to keep the gold price at $35 per oz. with the Gold Exchange Standard while inflating the economy to avoid a post-war deflation. Everything was copacetic until the Gold Exchange Standard broke up in 1971 and gold shot up to $180 in 1974. And then up over $600 by August 1980 in the Carter years. Our rulers prevented the chaotic economy of the 1920s and 1930s, but they inflated the currency into the stratosphere. Oh and the inflation brought the WWII Federal debt down from 120 percent GDP in 1946 to 31 percent GDP in 1980. Thanks, geniuses.
The Gold Exchange Standard was set up at the Brettons Woods conference in 1944 by Brit John Maynard Keynes and Commie Spy and US Treasury official Harry Dexter White.
So we can say that the experts that designed the post-WWII monetary regime were successful. They prevented a deflation, as occurred after WWI, and they brought the war debt down with gradual inflation, and they paid back the 30 year bonds of 1946 in dollars worth a lot less than in 1946.
But here’s the thing. How many national politicians understood what Keynes and White had done? In 1944? Did Ike understand in 1952? Did JFK? LBJ? Carter?Anyone? Well, Nixon had to deal with the undertow with the dollar crisis in 1971.
My guess is that back in 1944 a few people in high places understood what Keynes and White had done. But by 1960 they had all retired. So their replacements had No Idea.
The question is whether our globalist leaders that are pushing the transition to “clean energy” are smart guys like Keynes and White, or dumb idiots that just think they are smart.
My guess is that they just know that all the smart people say we have to “do something” about climate change. And the world is full of activists in all the government departments and interfering with the Tour de France. So the fact that the Biden administration has gone full climate change does not indicate that it knows anything, but just that elite opinion is all agreed on the subject, and the NGOs are all agreed and the ESGs are all agreed. And of course, we always have a stimulus to repair the economic nightmare of the previous Republican administration.
Over at Conservative Tree House Sundance thinks that it’s all a cunning plan. Maybe, or maybe a Baldrick’s Cunning Plan.
At any rate, I don’t detect a sign of a Keynes or a Harry Dexter White on the political stage or behind the scenes.
Another point to consider is Peter Turchin’s notion of the “overproduction of elites.” See, back in the day, only a few people went to university and those heading for politics would study stuff like Modern Greats, meaning philosophy, politics, and economics, getting their heads into the theory and practice of politics and managing a modern economy. But now millions of kids go to college to be educated for an elite life. Only even with all the NGOs and aide and staffer jobs and activism opportunities there isn’t enough opportunity to go around. And anyway, the education is useless, but the kids don’t realize it.
I’d say that when you have an overproduction of elites you have millions of third tier would-be elitists grabbing at every crazy political cult on offer, in a desperate attempt to be creative and to matter. Do you think that describes our current society?
I think that the elite overproduction theory and the failed stimuli help to explain the rise of populist nationalism, and help to explain the rise of Trump on the platform of Make America Great Again. I would say that the ordinary American is troubled by economic problems like the price of housing. But the fuss about climate change and systemic racism: what can an ordinary person do?
However, the folks in the educated elite believe in the danger of climate change. Everyone like them does, and they are driving “EVs” to prove it. And they are embarrased by the failure of blacks to thrive. Thus they buy into systemic racism and Diversity Equity and Inclusion. Plus, a lot of them benefit with jobs from clean energy programs and climate change regulation and DEI administration.
And ordinary Americans are the ones on the receiving end of this self-serving elite game. Most of the time it is just irritating. But when gasoline doubles in price in a year and consumer price inflation is 10 percent and baby formula is hard to find and house prices are out of sight for young people, then the irritation grows into anger.
If you are a wise ruling class you understand that you don’t want the irritation of the ordinary American to escalate into anger. So you manage your economic policy and your glorious plans for the climate to make sure that nothing happens too fast. Plus, of course, you will know that there are bound to be mistakes and miscues, and you don’t want them to be big enough to get you thrown out of office.
I think you get to understand the elite problem when you look at the January 6 investigation. If Speaker Nancy Pelosi thinks her One Big Thing is to stop Donald Trump from running for president again, then I think she does not have a broad enough understanding of the state of politics in America.
Donald Trump did not come out of nowhere and bewitch the white working class into kicking the Democrats out of power. He touched a nerve in ordinary commoner Americans who believed in 2016 that the economy didn’t seem to be working for them any more.
And I’d say that goes double in 2022. The ordinary Americans are not wrong. Our ruling class is only interested in its special concerns, in the glorious march to safety on climate change, and the moral necessity to fight for oppressed peoples.
Let us remember that climate change won’t really start to bite for a century, at least, assuming that the experts have the science right. And discrimination based on race, sex, and sexual orientation has been illegal for 50 years.
Meanwhile, college is ruinously expensive, house prices are out of sight, and ordinary people find themselves stigmatized as deplorables and bitter clingers.
Couldn’t we spend a little ruling-class time on the needs and aspirations of ordinary people?
The answer from the ruling class, clearly and repeatedly, over and over, is shut up, peasant. You don’t know anything.
Now, we all know that western imperialism is just about the worst thing ever. But back in the day, the District Officers out in the country would report back to the Viceroy from time to time that “the natives are restless.” The imperialists understood that their rule would be imperiled if the restlessness turned into something bigger.
But I don’t see a sign that our present rulers understand this simple wisdom. And that could be their undoing. Because it isn’t the peasants that don’t know anything. It’s the rulers.