My Review of Sarah Hurwitz's "As a Jew: Reclaiming our Story....."

Be Strong and Stand Tall

Former senior speech writer to President Barack Obama and head speech writer to Michelle Obama, Sarah Hurwitz has written an important book on the need for American Jews to reclaim their proud identity and go beyond being a “social justice” Jew or a “cultural” Jew. Although Hurwitz was a Bat Mitzvah her experience with Judaism was of the pediatric variety. She didn’t really rediscover her Judaism until she was 36 when she walked into an Introduction to Judaism course. Thus, much of the book is autobiographical.

 

She tells us of her discovery of the very long text-line of Judaism going from the Tanakh, to the Talmud, to later rabbinical commentaries and on to the modern era. She didn’t realize the full depth of Judaism as a way of life and a way of thinking. She also has become learned in the history of antisemitism going back to the early Catholic Church relying on the work of James Carroll’s “Constantine’s Sword.” She goes on to discuss the antisemitism that originated in the Soviet Union and how the Soviet’s anti-Zionism was picked up by the Islamic world.

 

Hurwitz picks up on Dara Horn’s theme distinguishing between Purim antisemitism and Chanukah antisemitism. Purim antisemitism calls for the destruction of Jewry while Chanukah antisemitism is all about societal pressure for Jews to give up their identity. The latter is the antisemitism of the Left in America today.

 

In order to be cool in Left circles Jews have to be social justice warriors and denounce Zionism. I have seen many a letter to the editor signed by an anti-Zionist Jew starting with "as a Jew." She characterizes Jewish anti-Zionism as a luxury belief similar to those who live in gated communities calling to defund the police. Here she goes into the history of the Israel-Palestine conflict where she effectively rebuts much of the pro-Palestinian propaganda that has become mainstreamed in America today.  That said, Hurwitz is a self-professed ‘liberal Zionist” who supports the two-state solution.

 

Her solution is for Jews to lean in to be strong and stand tall against the wave of antisemitism we are now experiencing. We have to reclaim our proud story and to that we have to reclaim our story going back to the beginning.

My Review of Per Hansen's "There Will be the Devil to Pay"

 The Mother of all Financial Crises

This is a book for economic history nerds, not for the typical lay reader. Danish business school professor Per Hansen takes us deep into the financial crisis of 1931 starting in May when the Credit Anstalt Bank of Vienna collapsed and ending in October in the aftermath of England going off the gold standard. Although the crisis has been covered before by Barry Eichengreen, Peter Temin, Liaquat Ahamed and Tobias Straumann (See: Shulmaven: My Amazon Review of Tobias Straumann's "1931:Debt, Crisis and the Rise of Hitler" ), Hansen’s account is the most detailed.

 

Instead of writing history after the fact, Hansen takes us into the minds of four key players in the crisis as they try to make sense of the enveloping collapse. His four players are Montague Norman, Governor of the Bank of England; George Harrison, President of the New York Fed; Francis Rodd, bank of England official on loan to the newly formed Bank for International Settlements; and Harry Siepmann, Advisor to Norman. They all, especially Rodd, took detailed notes. Hansen records many of them in full and he had access to the numerous telegrams that lit up the wires of Europe.

 

For all four of them the maintenance of the gold standard was the highest priority and as Eichengreen, Temin, and yes Keynes noted, it was the fetters of the gold standard that worsened the crisis. Hansen calls out the fact that the United States and France did not play by the rules of the gold standard by failing to ease credit sufficiently to staunch the inflow of gold coming from Germany and England. It was the gold outflow from Germany and England that forced upon them a deflationary spiral from which there was no recovery.

 

All four of them were operating under the lender of last resort rules proposed by Walter Bagehot in 1873. (See: Shulmaven: My Amazon Review of James Grant's "Bagehot: The Life and Times of the Greatest Victorian" )  Bagehot’s crisis rule called for central banks to lend freely, against good collateral at a penalty rate. That works if there is sufficient good collateral to lend against. In the case of Credit Anstalt, there was none. Indeed, Credit Anstalt was more a private equity fund controlling about 70% of Austrian industry, than a commercial bank. Simply put, it was funding long term equity with short term deposits. When the market recognized the bank’s assets were worth far less than was thought, a bank run ensued. What exacerbated the crisis was that Credit Anstalt was a highly prestigious Rothschild bank with a blue-ribbon board of directors. If it could happen to them, it could happen to any bank.

 

The crisis then moves to Germany in July when the Danat Bank failed triggering an internal and external drain on deposits. In an effort to maintain the gold standard, the Bruening government yet again adopts further austerity policies as a condition to receiving aid from the Bank of England, the Bank of

France and the New York Fed. Yes, George Harrison of the New York Fed was in up to his eyeballs in the European crisis. Although he formally needed approval from the Fed’s Board of Governors in Washington, that was a mere formality. As part of the crisis management a standstill agreement on withdrawing international deposits from Germany was put in place.

 

That standstill agreement kept England from withdrawing gold from Germany exacerbating a gold outflow that was already in train. To staunch the gold outflow the Bank of England recommended an austerity budget which triggered a naval mutiny over pay cuts. It was then only a matter of time before England left the gold standard and let the pound float.

 

The German crisis put such a strain on Montague Norman that he suffered a nervous breakdown and was out of action from mid-August to late September. However, there was not much he could have done. Hansen highlights the fact that origin of the European crisis was the after affects of World War I that left a legacy of inflation along with German reparations payments and an inter-allied debt to the United States. In June of 1930 President Hoover called for a one-year moratorium on all debt repayments, but that was scuttled by France. While England would have benefited because it received less reparations payments than what was owed the United States; for France it was the reverse.  

 

Thus, reparations and the inter-allied debts hung over Europe like a dark cloud until the June 1932 Lausanne Conference which suspended all payments. By then the depression was in full force and Hitler was well on the way to power.

 

As someone who read the front page of every New York Times from August 1929 to March 1933 I have to sympathize with the four bankers and others who Hansen portrays. They were living day-to-day in a continual crisis doing the best they can under the circumstances. Hansen takes us into the weeds, which at times makes it difficult for the reader, it is well worth it. They did not know how the movie would end and were forced to make sense out of the situation as they went along. I had the same feeling about the Great Financial Crisis and the COVID crisis. In case of the latter, the Fed threw out the Bagehot playbook, by lending on questionable collateral. It worked, but along with a too aggressive fiscal policy it left a great inflation in its wake.

 

 

The Purim War: Part 2

 We are now nine days into the Purim War (See: https://shulmaven.blogspot.com/2026/02/the-purim-war.html ) where the U.S. and Israeli air forces are pounding the Islamic Republic of Iran. With Iran attacking Saudi Arabia and the Gulf States the war has widened to encompass the entire Persian Gulf with shipping all but shut down in the Straits of Hormuz. At this writing the price of WTI Oil has skyrocketed to $106/barrel. The attacks on the Sunni Arab states are all part of Iran's plan to create chaos in the Gulf to force the U.S. to backdown. In addition as we noted Israel has taken the opportunity to respond to Hezbollah attacks to pound them in Lebanon with the Lebanese government intervening on the side of Israel for the first time.

All of this was expected, but if we step back the Israelis and the Americans have made great progress. Iran's air defenses have been neutralized, weapons warehouses have been bombed, police stations have been taken out and earlier today a major oil depot in Tehran was set ablaze. Tehran was suffering from a severe water shortage before the war, the hit to the depot will only exacerbate an already bad situation.

Make not mistake, from both the Israeli and the American points of view the war is progressing well. Within in two weeks much of Iran's offensive capabilities will be eliminated and with that the Straits of Hormuz will have been cleared.

Today Iran selected Motjaba Khamenei, the son of Ali Khamenei, as its supreme leader thereby undoing a promise of the 1979 revolution to not allow hereditary changes in the leadership. The delay in his appointment signaled major divisions within Iran's ruling circles. By the way Motjaba just happens to own a mansion in London.  My guess is that Motjaba will soon have the same fate as his late father. Once that happens the way will be open for disgruntled members of the Islamic Revolutionary Guard Corps to seize power and open the way for a political settlement. They will be pushed into it when they lose control of the streets of Tehran to the populace and the oil workers at the giant Abadan refinery strike.

The Purim War

 About 2,382 years ago Esther and Mordechai ousted the Jew-hater Haman, first minister of Persia; an event that is now celebrated as Purim by Jews all over the world. In an eerie coincidence Purim starts on Monday evening March 2^nd. This time, instead of Haman being killed, the bulk of the Iranian leadership including the Grand Ayatollah Khamenei was killed in precision airstrikes by the Israeli air force. The U.S./Israeli effort’s goal is to topple the Iranian regime that has long threatened the region and was yet again reconstituting its nuclear and missile programs. With Iranian negotiators practicing “rope-a-dope” tactics with U.S. negotiators, President Trump’s patience ran out, and he unleashed an air and naval armada on the Iranian regime.

 

My sense is that Trump’s logic was the Iranian regime was weakened by the mass protests against it in January triggered by its collapsing economy. The regime responded with brute force and killed anywhere between 30,000-50,000 people. As they say in China, the Iranian mullahs “lost their mandate from heaven.” It will now be up to the Iranian people to establish a new course.

 

What happens next depends on the staying power of the remnants of the regime and the willingness of the U.S. and Israel to sustain a long campaign. Meantime, by attacking U.S. bases in Saudi Arabia, Iran lost the neutrality of the Arab gulf further isolating them. The other thing to think about is whether or not Israel will take advantage of the situation to cleanup its unfinished business with Hezbollah and Hamas.

 

Of course, it goes without saying, the Democrats are up in arms against Trump making war without congressional authorization. However, a careful reading of the war powers act means that what Trump did, as commander in chief, was legal so far. However, he does have to report to Congress on the war, and Congress will have a say. My sense is that Iran 2026 is not Iraq of 2003 but then again time will tell. But make no mistake, the middle east will not be what it was as of last Friday.

My Review of Sven Beckert's "Capitalism: A Global History"

Anti-Capitalism

Harvard history professor Sven Beckert offers up a history of capitalism, but in fact he has written an anti-capitalist screed. Although never mentioned, he follows in the footsteps of Honoré de Balzac’s well-known aphorism, “behind every great fortune there is a great crime.” Beckert treats capital as a unitary bloc, rather than as a multitude of businesses in competition with each other. Further, he sets up a strawman argument that from its creation, capitalism needed state support—as if that violates the notion of a free market. So, what? Adam Smith noted that capitalism needs the state to enforce laws and contracts and provide for defense, among other functions.

He starts his history in Aden around the year 1000, where, to him, the first islands of capitalism are formed. Trust me, he has written a very long history that takes up 1300 pages. His definition of capitalism is a society where capital seeks to reproduce itself in an ever-growing accumulation. This differs, to him, from the primitive markets of 4000 years ago. What is strange to me is that he hardly discusses money and its role in creating a capitalist society. Money in the form of gold coins existed 2500 years before his Aden merchants. (See: https://shulmaven.blogspot.com/2026/01/my-review-of-david-mcwilliams-history.html) He also ignores the role of the free trade zone established by Rome, while noting the importance of the free trade zone established by Islam that supported the Aden merchants.

In Beckert’s opinion, the critical catalysts that put capitalism into hyperdrive were the Caribbean sugar trade centered around the British colony of Barbados and the great Potosi silver mine in Bolivia, which flooded Europe with money. Great fortunes were made, and those fortunes were built on slavery—in other words, Balzac’s crime. However, slavery existed long before capitalism, as in the Hebrew slaves of Egypt. He makes short shrift of the anti-slavery movements in capitalist England and the United States that brought it to an end. One thing he gets right is that capitalism is highly adaptable to changes in circumstances.

With the rise of industrial capitalism in the 1700s, he not only notes its effects on cities but also on the countryside. In the country, common land became enclosed to increase food production and drive farmers off the land into the city to supply labor for the new factories. Beckert is critical that through about 1850, real wages stagnated in England. This is when Marx wrote his famous manifesto highlighting the immiseration of the working class. Nevertheless, that very same manifesto offered a paean to the new capitalist world that was being born. Then, of a sudden, real wages started to increase. He offers no explanation.

He casts blame on capitalism for causing racism, sexism, and environmental destruction. None of these are unique to capitalism, as all three have existed for millennia. And if Beckert were fair, he would note the environmental destruction on a grand scale that took place in Soviet Russia and Communist China. Indeed, most of the progress in ridding the world of racism, sexism, and environmental destruction has taken place under capitalist auspices.

What really bothers me is his use of the Marxist term, “commodification.” He uses it over and over to denounce the growing role of markets in our daily lives. He doesn’t like dating apps. Along a similar vein, he cites such leftist economists as Polanyi, Piketty, Sraffa, Braudel, Hobsbawm, and Gramsci, for example, while spending far less time on Chandler, Friedman, Schumpeter, and Mokyr. His sympathy for socialism is obvious.

While he lives comfortably off the benefits of capitalism in Harvard Square, he just doesn’t get that capitalism involves huge risk-taking and somehow misses the spirit of enterprise that invigorates the process of capitalist accumulation that drives our society forward.

Trump Gets a Lesson in Constitutional Law

" All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem arises. But the deliberative nature of the legislative process was the whole point of its design."

        Justice Neil Gorsuch concurring in Learning Centers v. Trump

President Trump is learning the same way that President Harry Truman learned over 70 years ago that the power of the presidency is not unlimited. In Youngstown Sheet and Tube v. Sawyer (1952) the Supreme Court found that President Truman could not seize the steel mills under the exigency of the Korean War without the express approval of congress. Similarly the court ruled that Trump does not have the power to impose tariffs under the International Emergency Economic Powers Act (IEEPA) without the express approval of Congress. To be sure Trump has other tariff statutes available to him that are authorized by Congress and he is using them as we speak.

What all this means is that tariff are here to stay, but much of the recent arbitrariness of the process will be removed. There will of course be a series of court fights about how the refund process will work for those who paid the illegal tariffs. My guess is that will take time given the number of claimants and the huge dollar amount in excess of $100 billion.

Nevertheless, the bottom line is that for the first time the Supreme Court placed a real check on Trump's growing dictatorial powers. The next check will likely come when the court decides that he can't arbitrarily remove members of the Federal Reserve Board. Thus in a modest measure the framers of our constitution are being vindicated.

My Review of Jeremy Grantham's "The Making of a Permabear:........."

Regression to the Mean?

 

I met Jeremy Grantham of GMO fame on several occasions many years ago and I had a working relationship with Dick Mayo, the M in GMO. Thus, it was a pleasure to read Jeremy’s autobiography written with the help of Edward Chancellor. Grantham is a value investor’s value investor and as such numerous times in his career he was out of step with a raging bull market, hence the title “Permabear." In the interest of full disclosure, I would characterize myself as a value investor.

 

Grantham was born in Yorkshire, England in 1938, just at the onset of the war that would kill his father. His background was middle class and he attended Sheffield University, a far cry from the Oxbridge of the elite. However, the future Nobel Laureate John Hicks read one of his papers. Nevertheless, by the dint of his efforts and natural intelligence he ended up at Harvard Business School and ultimately into investment management.

 

He broke off from Keystone, a prominent mutual fund manager in the early 1970’s to form Batterymarch Financial where he was a pioneer in the nascent index fund industry. He left them to form his own firm, and Dick Mayo soon joined him. The mid-1970’s was a heyday for value managers as the once exalted nifty fifty cratered and practically everything else moved higher. Simply put, value was having the sale of the century.

 

Like most value managers, Grantham believes that stock valuations and profit margins are mean reverting. Simply put, when the market’s price/earnings ratio gets down to around 7 or 8, the market as a whole is a buy and when the ratio is well into the 20’s on normalized earnings, the market is a sell. Grantham backed up his investment analysis with serious quantitative research that covered international markets as well.

 

The dot.com boom of the late 1990’s tested Grantham like no other. Valuations went to the sky from 1998 to early 2000 leaving GMO’s performance in the dust. Nearly half of its assets when out the door. Here Grantham is very astute in talking about business risk and career risk. Being bearish in a bull market brings with it enormous risks to investment managers and their principals. Trust me, as a sell-side equity strategist at Salomon Brothers I felt the brunt of career risk. Nevertheless, Grantham stuck to his guns and was buying REIT stocks that were yielding up to 9% at the time. I had the same instinct at the time and built a personal portfolio holding a basket of REITs. I later became the REIT analyst at Lehman Brothers. In early 2000 the dot.com boom crashed and burned, but unlike in the mid-1970’s the overall stocks market did not get really cheap.

 

In the early 2000’s GMO recovered dramatically, but by mid-decade Grantham blew the whistle on the unsustainable housing boom. Yet again he was early, but dead right. Although stocks suffered from a vicious bear market in 2008-2009, the averages only stayed cheap for a few short months by Grantham’s reckoning.

 

As I write this Grantham is again calling out what he perceives to be the outlandish valuation of the U.S. stock market. Profit margins are at an all-time high and the cyclically adjusted price/earnings ratio is just a touch away from its 2000 peak. What’s going on? Perhaps, the economy has changed so much that it is now dominated by a few highly profitable tech monopolies that are skewing aggregate profit margins. Furthermore, the emphasis has shifted from tangible capital to intangible capital. That was true until last year when the tech behemoths started to massively spend on data centers to support artificial intelligence. The big question is whether or not those investments will be sufficiently profitable to support today’s valuations.

Grantham, through his foundation, is a very active environmentalist. He almost went to jail in opposition to the Keystone XL pipeline. He rightly worries about climate change and chemical pollution. In his private life he attacks the major oil companies, but my guess is that as a value manager he holds the stock in those very same companies. In his environmental hat he applauds the decline in population growth, but as a money manager, he realizes that might have negative consequences for future profit growth.

 

To sum up, Jeremy Grantham is quite the character. and it comes through in his book. For those readers interested in the stock market, its contrarian take is well worth the read and if you are of value bent, like me, it will gird you for the market that lies ahead.