07 Sep Responding to Perplexed

“Perplexed’s ‘unprecedented challenges’ actually are ‘unprecedented opportunities.’” – The Lonely Realist

Last week’s letter from Perplexed presents a stark assessment of the “unprecedented challenges” facing humanity. TLR also sees “unprecedented opportunities.”

The most significant “unprecedented challenge” in Perplexed’s letter is the Doomsday Clock, which purports to measure how close the world is to a nuclear cataclysm. The Clock is a device of the Science and Security Board of the Bulletin of Atomic Scientists which recently reset it at 90 seconds to midnight. If accurate, that is indeed alarmist alarming. While it is appropriate to highlight the risk of a nuclear holocaust, how did the Clock’s Board determine that the world is 90 seconds from Armageddon? Notably, the Board states that is not solely addressing nuclear war risks, but rather is “deeply worried about the [overall] deteriorating state of the world.” The actual risks of nuclear annihilation, after all, are remote since nuclear weapons stockpiles are possessed by only a few nations: Russia, the U.S., China and North Korea (with the other nuclear powers (France, England, India and Pakistan) being no threat to world peace). The Clock’s Board states that it has placed enormous weight on Vladimir Putin’s threats to use nuclear weapons in Ukraine. Russia’s actions, however, demonstrate that those threats are far from imminent realities – they are intimidations. This follows from the fact that Russia and the U.S. have been nuclear adversaries for more than 70 years during which they have evidenced a pattern of stepping back from the nuclear brink. Both well-understand the risks of any nuclear action and have adopted fail-safes designed to avoid mutually-assured-destruction…, a reality that China and North Korea equally understand. Vladimir Putin’s threats over Ukraine have served their purpose in discouraging the transfer of Western weaponry to Ukraine. Russia will not risk nuclear war. Notwithstanding the foregoing, Perplexed also expresses concern about the potential for escalation of the Ukraine War. All indications, however, are that the War is at a stalemate and headed for resolution in 2025 with both sides coming to understand that victory is impossible.

The same outcome is not in the cards for Israel and Iran-Hezbollah-Hamas-Houthi-Syria…, and yet, although the risks of escalation continue, the risks of contagion are negligible. The Middle East does not present the world with “unprecedented challenges.” The same is true with respect to Central African and South American conflicts. Moreover, even though it is unclear what the outcome might be with respect to Xi Jinping’s designs on Taiwan, the economic downturn in China and Xi’s “target date” of 2027 mean that the risk of a China-Taiwan flare-up also is not imminent and does not represent the sort of “unprecedented challenge” that justifies Perplexed’s alarmism.

Perplexed next raises a concern about “the ticking time-bomb of an aging boom-and-bust cycle where national and corporate debts far exceed governments’ and businesses’ abilities to repay.” And yet… the boom continues… and there are those who have faith that Central Bankers have the power and the deep pockets to overcome all excesses. Moreover, the simultaneous worldwide debasement of currencies means that America, possessing the world’s reserve currency and applying Modern Monetary Theory, can continue using its printing press to America’s benefit…, so that the boom may continue for a very long one. The fact that the global economy is on the cusp of Perplexed’s “rapid technological/AI change” adds wind to those sails. AI, far from being a challenge, is likely to provide humanity with truly “unprecedented opportunities” such that the forthcoming AI revolution is poised to be a bonanza for workers, nations and the world at large.

Next on Perplexed’s list is the specter of climate change, with Perplexed speculating on the impact it may have on immigration, food production and disease. Humanity, however, has suffered through worse… and in the 21^st Century homo sapiens has the tools to cope with, and with its new technological tools arguably flourish, even should such conditions come to pass.

Perplexed’s final concern is the “increasingly polarized intra-country economic and political divides between neo-fascists and neo-socialists.” The election of “neo-fascist” Trump or “neo-socialist” Harris, however, will not undermine America or its Constitution. America’s President has executive authority to direct foreign policy – up to a point, appoint judges – with Senate consent, veto legislation – which is rare, and hire and fire Executive Branch employees – with significant cost and effort. However, the separation of powers grants Congress and the Supreme Court the ability to thwart virtually every significant Presidential initiative. True control of America’s government requires control of all three Branches. Even if one Party were to gain control of the Presidency and both the House and the Senate, since both chambers must approve legislation, the experience of the Biden Administration was that this enabled it to pass only watered-down versions of its initiatives. The reality is that Presidents need bipartisan support to effect major change. They are not assured of a blank check even with control of Congress…, and neither Party is likely to achieve control of both chambers in 2024.

As for economic consequences, the fact is that markets go up under both Democratic and Republican Presidents…, and the reason for that is that markets generally go up. So, for example, under President Obama, “an enemy of the markets,” the stock market was up in 8 out of his 8 years in office and, under President Trump, “the greatest friend of the markets” (and despite a pandemic) the stock market was up 70% of the time.

Nevertheless, TLR agrees with Perplexed’s call for improvements to education and productivity and is hopeful that both Presidential Candidates will do what’s necessary to advance policies that address America’s short-comings in both arenas…, and that the future accordingly truly holds “unprecedented opportunities.”

TLR Index

Prior TLR commentaries can be found here.

Finally (from a good friend)