03 Dec The World According to TLR
“What do today’s revolutions portend?” – The Lonely Realist
As TLR first noted in August 2019, the world has experienced massive revolutions over the past 250 years in agriculture, industrial production, technology (including artificial intelligence) and biotechnology, all of which are continuing. They have brought unparalleled opportunities for improvements in human health, the environment, food production, working conditions and global living standards. Those revolutions will continue to seed vast changes, jarring to many. An increasing number of people have been caught in the undertow, confused by the accelerating march of history. Too many find life today overly complex. They therefore bury their heads in technological sand. It’s safer to communicate by smartphone, avoiding street crime and awkward in-person meetings.
TLR thrives on the hopes and dreams of humanity’s 21st Century prospects. Despite TLR’s optimism for the future, TLR nevertheless focuses on potential downsides, believing that if downside risk is properly addressed, upside potential will take care of itself. Discussed below, therefore, are some of the things that “keep TLR awake at night.” … including what has kept TLR awake over the past 2 years (SPOILER ALERT: TLR is not a good sleeper).
A list of risks might begin with this past week’s TLR discussion of American economic profligacy. For the reasons TLR has repeatedly described, Modern Monetary Theory is a fictitious hypothesis that is destined to fail. At some point, America will have to pay the piper. MMT – unrestrained spending coupled with unlimited printing of Dollars – inflates bubbles. The “transitory” inflation flippantly dismissed by the Federal Reserve pumped up crypto, real estate and the stock market and yet made America poorer. The Fed and the last two Administrations overspent. As TLR repeatedly cautioned, COVID spending plus Fed quantitative easing would cause inflation to skyrocket … and it did.
By the way, COVID is over …, isn’t it?
Fiscal over-excess has ended (R.I.P. TINA), but hasn’t been eliminated. Monetary and fiscal policy have now started to normalize after the longest period of negative real interest rates since 1820 and the largest fiscal deficits since 1800 (other than during WWI and WWII).
Climate change, however, has become an all-too-obvious environmental risk, presenting a proximate danger.
The Great Political Divide between populists of the Right and populists of the Left, a rift exacerbated by social media, presents another significant risk. Happily, extremism is not the choice of the majority. What is needed, therefore, is leadership that appeals to American values.
The failure to persuade a national majority has led both Political Parties to overreach, centralizing (and abusing) power (both at the Federal and State levels) and trampling individual rights. That’s Statism, an autocratic approach to governing that is antithetical to American democracy.
America’s Rule of Law is evolving. The Supreme Court has held that abortion is to be determined by each State legislature (not locally by each county) and that gun rights are Constitutionally guaranteed (though it would make sense for Congress to raise the legal age to buy guns to at least 21, limit magazine sizes, impose penalties on illegal weapons traffic and possession, and restore stop-and-frisk as a legitimate police tactic so long as it isn’t used in a racially discriminatory way). It’s interesting that seat belts are mandated in all States (other than New Hampshire) while mask mandates are characterized by some as an infringement on Constitutional rights.
Political discussion, once limited to election season, now is an everyday part of family-and-friend interaction …, and limited to that. America would be better-off if politics were a subject of discussion among those with differing political views.
PUBLIC SERVICE REQUEST: Readers – could you please refrain from compulsively checking your smartphones? Thank you.
America’s future depends on educating its youth, and America is doing a very poor job … with politics preventing improvement.
What should America do about immigrants? One reader has recommended “comprehensive immigration reform that allows young immigrants to become U.S. citizens who pay taxes, including FICA. The dumbest thing is not allowing Chinese and Indian PhDs and medical doctors the ability to stay in the U.S.A. after earning their degrees in the U.S. educational system.” The need to address DACA during Congress’s lame duck session presents an ideal opportunity, one that apparently will be squandered.
The US Dollar is King …, at least today. Russia, China and their fellow travelers (the “Axis of the Sanctioned”) are determined to eviscerate American hegemony and remove the Dollar as the world’s reserve currency. They recently started using the Chinese Yuan as a regular medium of exchange (Ruble-Yuan trading rose to 185 billion Yuan in October, more than 80 times its level in February). Further economic and geopolitical realignments beckon, energized by the Ukraine War.
America’s sanctions, tariffs and Statist handouts (for example, the Inflation Reduction Act, which provides $400 billion in protectionist handouts for energy, manufacturing and transportation in ways that resemble China’s centralized industrial policies) are further accelerating deglobalization …, an application of economic populism. History teaches that constricted trade has consequences.
TLR has written frequently on legal and economic topics. As a cautionary tale, TLR warned a year ago that Elon Musk’s serial sales of Tesla shares necessarily would mark their high. Tesla shares have declined ~55% since then.
An index of TLR titles can be found here.
Finally (from a good friend … and a week late)