Some Non-Consensus Thoughts about 2022

 My sense is that 2022 will not be rerun of 2021. Presented below are a few of my non-consensus thoughts about 2022.

* 2022 will be the year of foreign policy crises. The Biden Adminstration will pay the price for its chaotic withdrawal from Afghanistan by having to face down Russia, China, Iran and North Korea. (See Shulmaven: Joe Biden, Hang Down your Head in Shame:  ) It is going to be a real mess. As a result the remnants of the Build Back Better program will likely fail.  This will not be the first time in history  that plans for domestic reform fell victim to the exigencies of foreign policy.

* After Omicron peaks in January, COVID will largely be behind us.

*The economy will boom in 2022 as things get back to normal with real GDP growth on a fourth-to-fourth quarter basis exceeding 4%.

*Inflation will still be running hot as 2022 ends with the Consumer Price Index up over 4% on a year-over-year basis. Housing costs will be up over 6%, in the face of labor shortages medical services will be running above 4% and there will be no relief coming from falling oil prices.

*The stock market will prove both the bulls and bears right during the year with the high and low end of the S&P 500 targets of 5200 and 4400, respectively being achieved. (See:  Shulmaven: Powell and Wall Street's Strategist Divergence ) 

*Sometime during the year a leveraged player in the Bitcoin market will fail triggering a mini-financial crisis.

As they say in poker, read'em and weep.

My Amazon Review of John McWhorter's "Woke Racism: How a New Religion has Betrayed Black America"

 

The True Believers*

 

Columbia University linguistics professor and New York Times columnist John McWhorter has written an important book about the plague of woke racism that is now haunting America. He claims woke racism is a religion, not like a religion. Here I believe he goes too far. To me woke racism is a substitute for religion. He quotes Sigmund Freud, “If you wish to expel religion from our European civilization you can only do that with another system of doctrines….” This is precisely what is happening now.

 

Just as Marxists are obsessed class, woke racists are obsessed with race. To them being born white is the original sin and represents a moral stain that cannot be erased. Similarly, while whites are the oppressors, blacks are the oppressed and wherever black achievement fails to measure up to that of whites, racism is the only cause, making this a truly narrow obsession.

 

To McWhorter the leaders of woke racism are the “Elect,” so privileged as to know the ultimate truth. This is very similar to Lenin’s vanguard of the revolution.  The Elect have superstitions, have clergy (e.g., Kendi, DeAngelo and Coates), are evangelical, are apocalyptic and searches out heresies and heretics, hence the cancel culture.

 

What is wrong with this. To McWhorter it hurts blacks. His examples include looking the other way school discipline problems caused by black teenagers, that black identity is based on not being white and unequal outcomes mean unequal opportunity. This last factor is most damaging because it makes to easy to excuse less than satisfactory individual outcomes. In other words, blacks are permanent victims. To me this devastates the whole notion of a coalition of “people of color.” Why would upwardly mobile Hispanics and Asians want to be in a coalition with African Americans caught up in a victim centered ideology.

 

McWhorter believes that instead of woke racism, the way to better blacks in Americans would be to end the war on drugs, teach reading properly through phonics (remember he is a linguistics professor) and to get past the idea that everybody has to go to college. In case of the last instead of costly four-year colleges that are unappealing to poor people, McWhorter favors two-year programs in vocational education that can quickly lead to high paying jobs.

I know that “The Elect” will not be happy with this review and are beyond convincing, but I believe that fair-minded people will read McWhorter’s book so we can go beyond looking at the world through the very narrow lens of race. People are and always have been multi-dimensional.

 

*With apologies to Eric Hoffer

For the full Amazon URL see: The True Believers* (amazon.com)

An Open Letter to Minority Leaders Mitch McConnell and Kevin McCarthy

Dear Leaders:

 

I want to wish you a Merry Christmas but unfortunately, I do not believe you will have a happy New Year unless you mend your ways. It seems that every day you are working to divide our country and to be sure many Democrats are playing the same game. Nevertheless, you do not have to participate in allowing the “Squad” following Democrats to wreck our country too.

 

Here are a few suggestions:

 

Go all out in supporting COVID vaccinations and get your respective caucuses to make public service announcements in their states(districts) urging vaccinations. You do not have to worry about Trump on this; he already gave you all the cover you need. Afterall do you really want fewer Republican voters come November?

 

You should encourage Mitt Romney to get together with Biden/Schumer/Pelosi to make a deal on the child tax credit. Romney has some very good ideas on this topic.

 

On voting rights, you should sit down with Joe Manchin and produce a reasonable compromise that can get 60 votes in the Senate that you can sell to the Democratic leadership. Let the Democrats turn it down if they chose to do so.

 

Lastly, and perhaps most important, you should censure any one of your members who refuse to testify before the January 6^th Committee. I know this will go against your grain, but history is a stern judge.

 

Yours in the Spirit of the Season

My Amazon Review of Brendan Simms' and Charlie Laderman's "Hitler's American Gamble"

 

Five Days in December

 

Cambridge history professor Brendan Simms and King’s College lecturer Charlie Laderman have offered up a revisionist history on why Hitler declared war on the United States and why it was not self-evident that the United States would enter the war absent Hitler’s declaration. The five days between the Japanese attack on Pearl Harbor on December 7 and Hitler’s declaration of war on December 11, 1941, were truly momentous. Two days before the Soviets launched a massive counterattack on German forces deep inside of Russia and broke through on a broad front throughout the month. In Egypt the British were pushing the Germans out of Libya creating great tension in Vichy France.

 

Meanwhile the Japanese were running riot throughout southeast Asia by occupying Thailand, invading Malaya, and attacking the Philippines. On December 10^th land based Japanese aircraft sunk the prides of the British Navy, the battleships HMS Prince of Wales and the Repulse thereby breaking British sea power in region and paving the way for the taking of Singapore. It also marked the end of the battleship era in naval power. Henceforth aircraft and submarines would rule the waves.

 

After Pearl Harbor America declares war on Japan, but it does nothing with respect to Germany. This is despite the fact that there were ongoing military coordination talks between Britain and the United States. Popular history has it that America left isolationism after Pearl Harbor, not true according to Simms and Laderman. To them the isolationist lobby was still strong enough to cause hesitancy on the part of Roosevelt to delay declaring war on Germany. Further much to Churchill’s consternation lend lease aid to Britain and Russia was suspended to reallocate the supplies to the Pacific war. Thus, it is Germany’s declaration of war that brings America into the European conflict making the war truly global.

 

Strategically Hitler’s move was a disaster. Why did he do it? He did not have to act under Germany’s defensive treaty with Japan. Japan attacked the U.S., not the other way around. According to Simms and Laderman Hitler believe that war with the United States was inevitable, and he would rather have it on his terms than Roosevelt’s. He viewed America as the ultimate “have” power while his Germany was the ultimate “have not” power. He also believed that the United States could not fight a two-front war with the Axis and that, at least initially, lend lease aid to Britain and Russia would wane. It was American and British arms that turned the tide at the Battle of Moscow.

 

With the U.S. in the war Hitler had no need to delay his final solution in western Europe. To him the Jews of western Europe were hostages to keep America out, but with his declaration the roundup of western European Jewry was rapidly accelerated.  In the east Jews were treated as enemy and treated accordingly. The infamous Wannsee Conference to plan the destruction of European Jewry would take place in January.

 

This is a book of microhistory that delves into great detail on the high politics of a few days that changed the world along with a series of (wo)man on the street comments on the fast-moving events which gives the book great texture. Simms and Laderman have written a history at its best.   

For the complete Amazon URL see: Five Days in December (amazon.com)

Powell and Wall Street's Strategist Divergence

Yesterday, Fed Chairman Jay Powell calm bedside manner so soothed the stock market that he ignited a powerful rally. The Fed announced it would dial back its bond buying program and pencilled in three 25 basis point rate hikes for 2022 and another two in 2022 that would put the Fed Funds rate at .9% in December 2022 and 1.5% in December 2023. The market had already priced in the rate hikes and with the Fed forecasting the core PCE increasing 2.7% next year, a negative real funds rate of 1.8% can hardly be consideried restrictive. In fact the policy plan will remain highly stimulative throughout 2022.

To me the fly in the ointment is that the Fed's estimate of core inflation is way too low. Powell hinted at that when for the first time he mentioned the rise in paid rent and owner's equivlaent rent. As I have noted many times, I believe that the rent component of the price indices will be up 6% year-over-year by next December. That and rising wage costs will bake in price increases above 4% for the Core CPI and close to that for the Core PCE. Thus the rate environment will be far more challenging as 2022 unfolds.

This where Wall Street's strategist divergence comes in. The range of strategist forecasts for the 2022 yearend S&P 500 ranges from 5200 -4400, compared to a current level of of around 4700. Credit Suisse is at 5200,while Morgan Stanley is at 4400 with Gooldman Sachs. BofA, and Citi falling in between. My guess is that all of them will turn out to be correct with the market at some points during the year will trade at both high end and the low end of the range.

As readers of this blog know I have been bullish on a Fed fueled stock market since January 2020. (See Shulmaven: A “Rational” Basis for Supporting Today’s Stock Market Valuation and Shulmaven: The Fed Green Lights the Stock Market) Because I am more bearish on inflation and interest rates, I can no longer be as bullish as before. The way I see 2022 playing out is that the highs for the year will be hit early on and lows will be plumbed towards the end of the year as the market begins to price in a tighter Fed. Further my view would be consistent with the history of midterm election years being difficult ones for the stock market.

Trump and Abortion at the Supreme Court

 There were two important court rulings last week and though dealing with separate issues were deeply related. The first was the D.C. Circuit Court of Appeals ruling that the National Archives has to turn over its Trump documents to the January 6th Committee against the executive privilege argument made by Trump. That case is headed for the Supreme Court. In the second case the Supreme Court pretty much ruled in favor of Texas' anti-abortion law that allows for the private enforcement againt abortion providers who perform abortions after the first six weeks of pregancy. Of course standing in the background is the recently argued Mississippi statute that outlaws abortions after the first fifteen weeks of pregnancy. The Supreme Court is expected to rule on that issue in June.

Now how are the abortion rulings related to the National Archives case? It is my guess with the Supreme Court facing intense criticism for its presumed partisanship in favor of conservative causes (e.g. anti-abortion), will rule against Trump in the National Archives case to demonstrate its nonpartisan bona fides. It would happen this way. Trump's lawyers will ask for a hearing at the Supreme Court and Chief Justice John Roberts denies their application and there are not five other justices to grant a hearing. This Supreme Court independence will be hailed as great victory the January 6th Committee and it will give the court the political cover to rule in favor of Mississippi's abortion law, either narrowly or by completely overturning Rowe v. Wade. 

To be perfectly cynical about this, the conservatives on court will throw Trump under the bus. To them Trump was useful in the creation of a conservative majority on court and now that they have achieved their goals, Trump would have outlived his usefulness.

My Amazon Review of Michael Neiberg's "When France Fell…"

 Vichy Water

 

Army War College professor Michael Neiberg has authored an important book on American policy towards Vichy France during World War II, a topic that is usually skimmed over in history books on World War II. He goes into great detail about the failed policies of Secretary of State Cordell Hull who bent over backwards to maintain relations with Vichy and to prevent the recognition of Charles de Gaulle as the true leader of France.

 

The fall of France in May 1940 was a shock to U.S. security. Of a sudden the U.S. appeared vulnerable to Hitler’s armies as the balance of power in Europe collapsed. Immediately the U.S. instituted the draft, began a major arms build-up, and started to search for fifth columnists. Hull wanted to maintain relations with the rump Vichy government to keep the French fleet out German control and to limit German influence in France’s Africa and North American colonies. The problem was that as time passed Vichy became a wholly owned subsidiary of the Reich.

 

Neiberg is particularly good at portraying the rolls of such larger-than-life Americans as OSS Director William Donavan, diplomats William Leahy and Robert Murphy and General Mark Clark. On the Vichy side see the aged World War I hero of Verdun, Henri Petain as president and the crypto Nazi Pierre Laval as prime minister along with Admiral Jean Darland who ran the French Navy and then switched sides, before he was assassinated, by working for the Allies.

 

In essence the Vichy government was a right-wing counter to communism. After the French collapse the French right feared a civil war with the communists as the possibility of a rising similar to the Paris Commune in 1870 loomed. However, because the French Communist party like its counterparts everywhere followed the Soviet line of maintaining friendly relations with Germany until the June 1941 invasion of Russia no uprising took place. Vichy hated the British, especially after Churchill ordered the sinking of several French vessels at Mers-el-Keber.

Through it all U.S. policy until late 1943 could be described as a theme park for policy incoherence. Ultimately the U.S. sided with de Gaulle as plans for the invasion of Europe intensified. To me one of the highlights of the book is that Neiberg uses lines from the movie Casablanca as chapter headings. My main quibble is that the book is way too detailed and too long for the lay reader.

For the full Amazon url see: Vichy Water (amazon.com)