My Review of Ray Dalio's "How Countries Go Broke: The Big Cycle"

 Paying the Piper

Ray Dalio, the founder of Bridgewater Associates, which became the world’s largest macro hedge fund, has written an important book on the inexorable reality that accumulated debts have to be extinguished one way or another. He utilizes a host of international examples and aside from the U.S. he focuses in on Japan and China. No matter the country, the piper has to be paid. Dalio’s big cycle lasts approximately 80 years, and it is in many ways similar to the long cycles discussed in Neil Howe’s “The Fourth Turning.” (See: Shulmaven: My Review* of Neil Howe's "The Fourth Turning is Here: What the Seasons of History......" ) It seems that we are on the precipice of Dalio’s big cycle joining  the crisis point  of Howe’s generational cycle. If that is the case, the turbulent time we are now living in is only in its early stages.

 

Dalio’s debt/credit/economy cycle big cycle is made up of a series of short cycles where credit expands and contracts. However, overtime debt increasingly accumulates because it does not generate the revenue needed to service it. The monetary authorities accommodate the increase in debt by going from MP0 where money is tied to a fixed standard, like gold to MP1 where policy is tied to a policy rate to MP2 where through quantitative easing money is printed. At the end of the day when the debt can no longer be serviced at reasonable interest rate, the debt is either directly repudiated or inflated away in order to deleverage the economy. If the debt is not denominated in local currency, it will be repudiated.

 

Overlapping the credit cycle are two other cycles and exogenous events such as acts of nature and the introduction of major innovations that spur growth. The cycles are an internal political cycle evolving around order/disorder and an external cycle similarly revolving around order/disorder. Today the confluence of the big credit cycle with disorder in both internally and externally means Howe’s fourth turning is upon us. What can mitigate this eventuality or make things worse will be the impact of innovative artificial intelligence on our society.

 

Dalio’s solution to the big cycle calls for reducing the federal deficit as a share of GDP from the current 6% to 3% by increasing taxes, lowering spending and lower interest rates. Similar to the 1990’s deficit reduction, if credible, would work to lower interest rates. Some of these nostrums sound similar to what the Trumpies are arguing, except the part about tax increase, tariffs aside. The Trump way of lowering the debt/GDP ratio relies heavily on much lower long-term interest rates that would bring with it other issues.

 

Dalio is clearly worried, and he makes a compelling case to be worried. My criticism of the book is that although he highlights his main points in bold, it still is way to repetitive and because I read the book on my Kindle, the numerous charts were too difficult to read. I therefore would recommend the hard copy.

Havana on the Hudson - Part 2

The Democrats had a great election night winning in New Jersey, Virginia, California, Pennsylvania and Georgia; Donald Trump and the Republicans had a terrible night as voters, especially Latinos, suffered from buyers’ remorse over their votes in 2024; and New York City, especially its large Jewish community, had a horrible night with the election Zohran Mamdani, the antisemitic socialist as mayor. With Mamdani’s plans to build socialism in New York, the city is now further down the road to becoming Havana on the Hudson. (See: https://shulmaven.blogspot.com/2025/06/havana-on-hudson.html )

 

Mamdani plans called for a rent freeze, a massive public housing program, free childcare, free buses, city owned grocery stores, handcuffing the police, $30/hour minimum wage, and much higher taxes on businesses and high-income New Yorkers. For much of this he needs legislative action from Albany. Although most believe that action will not be forthcoming, you can’t count on the wimpy Democrats on holding firm against him. They could very well cave.

 

Mamdani’s program more than anything else is focused on reducing New York’s high rents. Building more apartments will certainly help, but that will not bring relief in the short run, and a rent freeze will actually raise rents on city’s non-rent-controlled apartments. Indeed, the only way Mamdani could lower rents would be for the city to return to hellhole it was in the 1970’s with crime running rampant. Although Mamdani said he would reappoint Jessica Tisch, the highly regarded police commissioner, they have yet to speak and one wonders what Tisch’s conditions would be for her to stay. In a straw in the wind Fire Commissioner Robert Tucker resigned today over Mamdani’s severe anti-Israel stance.

 

For those Jews who are complacent about Mamdani, I would warn them the Mamdani is anti-Israel to his core. Anti-Zionism is what got him into politics in the first place. My question is with Mamdani as mayor, who will protect the Jewish community from street and subway attacks and the defacement of synagogues which actually started last night?

 

Mamdani is no joke, this TikTok Jacobin will have real power and for those with the means it might just make sense to leave the city before it is too late.

Something Investors are not Thinking About

Although there has been recent commentary about the sustainability of corporate profit margins with the stock market bears arguing that the high margins now being reported will soon regress to the mean and the bulls arguing that, at least for now, margins will remain on a high plateau; there has not been any commentary on the sustainability of the historically low corporate tax regime of the past eight years.  Just to note the the high profit margin argument of the bulls is being used to discredit the near record high of the Shiller cyclically adjusted price-earnings ratio. (See:https://shulmaven.blogspot.com/2025/06/my-ucla-anderson-forecast-presentation.html )  

What few people realize that the current corporate tax rate of 21% is from an historical point of view unusually low. Indeed the 21% rate inaugurated in 2017 is the lowest corporate tax rate since 1939. For example, throughout much of the 1950's to the early 1960's the corporate tax rate was 52% (Not a typo) and from 1993-2017 it stood at 35%. Why is this important? 

In an era where most observers believe the federal deficit  now running at 6% of GDP is not sustainable in the long run, something is going to have to give on the tax front. Although no change is likely until 2029, a future administration could very well find the corporate income tax as a tempting target to raise revenue. Indeed the higher corporate margins go, the easier it will be politically  to increase the tax rate. 

Admittedly this is not an issue for today, but it could very well come to the fore in a few years.

My Review of Andrew Ross Sorkin's "1929"

 The Great Crash and its Aftermath

Andrew Ross Sorkin of CNBC, DealBook, and “Too Big to Fail” fame has written a riveting history the 1929 stock market crash and its aftermath through the eyes of many of its key participants. His writing style puts you in the room with the leading players of the day as they experience the exuberance of the boom and then grapple with grinding bear market that followed. It would have helped if there were an annotated chart of the Dow Jones Industrial average from 1929-1933.

His leading players are “Sunshine” Charlie Mitchell, president the National City Bank and its securities affiliate the leading underwriter of new issues in the 1920’s; Thomas Lamont, the de facto head of J.P. Morgan; Jack Morgan, J.P.’s son and nominal head of the bank; Russell Leffingwell,  a Morgan partner and a founder of the Council on Foreign Relations; Albert Wiggins, president of the Chase National Bank; Jesse Livermore, legendary trader who made $100 million in the crash; Owen Young, president of General Electric and author of the Young Plan for German reparations; John Jacob Raskob, General Motors director, chairman of the Democratic National Committee and developer of the Empire State Building; William Crapo Durant, General Motors founder and leading speculator; Senator  Carter Glass, coauthor of the Federal Reserve Act of 1913 and the Glass-Steagall Act of 1933 and a leading critic of Wall Street speculation;  and Ferdinand Pecora, counsel to the Senate Banking Committee taking on the WASP establishment by investigating Wall Street. We also have cameo appearances of the financier and advisor to presidents Bernard Baruch, and Winston Churchill who was out of government and was speculating in the U.S. stock market, and David Sarnoff, president of RCA, the NVIDIA of its day.

 

The stock market of the 1920’s was the wild west where “pump and dump” pools operated, and insider trading was legal. It was not unheard of for insiders and their friends to receive newly issued stock at a discount from the official offering price. All the while margin was freely available where stocks could be purchased with only 10% of the cash payable upfront. The availability of margin was funded by the call money market at interest rates of up to 20%. It was the call money market that sucked in funds from all over the country, and for that matter the world, to earn high returns. However, this form of leverage could be withdrawn on moment’s notice thereby triggering a liquidity squeeze.

 

I learned a few interesting factoids to comment on. I didn’t know that David Sarnoff was actively involved in the Young Plan negotiations. Perhaps more interesting, I didn’t know that Mitchell of National City and Wiggins of Chase actively lobbied Carter Glass to include J.P. Morgan, as a private bank, in the separation of commercial banking from investment banking. It seems that Glass was close to Morgan partners Lamont and Leffingwell. Thus, any allusion to Glass being the Elizabeth Warren of his day hardly rings true.

 

As someone who has read every front page of The New York Times from August 1929 to March 1933 and has read widely on the subject of the crash and its aftermath, I have a few issues to raise with Sorkin. The first is that the depression was not an inevitable result of the crash. It occurred against the backdrop of inept monetary policy followed by the Fed and more important it was caused by the imbalances caused by World War One rubbing against the rigidities of the gold standard. Thus, the root causes were not domestic in origin as Roosevelt argued, but rather international in origin as Hoover argued. Thus it was no coincidence that the Dow Jones Industrial Average bottomed in June 1932 just when the Lausanne Conference was agreeing to drastic cuts in German reparations payments and the suspension of payments on inter-allied debts. 

 

Sorkin should have read Tobias Straumann’s “1931” where he quoted the 1932 Annual Report from the Bank of International Settlements as follows: “In the circumstance of the German problem- which is largely responsible for the growing financial paralysis of the world – call for concerted action Governments alone can take.”  (See: https://shulmaven.blogspot.com/2019/07/my-amazon-review-of-tobias-straumanns.html ) It was the very Young Plan that Lamont helped to negotiate that made Hitler. His attacks on the Young Plan which stretched out the German reparations to schedule to 1989 and made the payments more rigid, was one of Hitler’s leading campaign issues that gave his Nazi Party 19% of the vote. The prospect of future Nazi victories led to a capital flight from Germany and Austria.

 

I wish Sorkin would have spent more time on what his players were doing in June 1930 when Hoover signed the Smoot-Hawley Tariff Act. The day after Hoover announced that he would sign the bill the Dow Jones Industrial Average plunged 8%, its worst day of 1930.  ( See: https://shulmaven.blogspot.com/2025/04/a-broken-stock-market-and-broken-trust.html ) The Times highlighted the new tariff regime would make it harder for Germany to make it reparations payments and for Britain and France to pay its war debt to America.

 

I also wish that Sorkin were in the room when Britain devalued the Pound and left the gold standard in September 1931, the worst month in stock market history. In response to the fears of a gold outflow, the Fed raised its discount rate from 1.5% to 3.5%. That action was a dagger into the heart of the economy.

 

Thus, in my opinion, the triggers of the Great Depression came in the form of a three-act play. The first was the stock market crash of October 1929, and the second was the signing of the Smoot -Hawley Tariff Act in June 1930. The third and final act occurred when the Fed raised the discount rate in September 1931.

 

My last quibble is that Sorkin used the wrong source for his comments on the interregnum period between the Hoover and Roosevelt administrations. He cites  Eric Rauchway’s “Winter War” which is way too biased against Hoover. (See: Shulmaven: My Amazon Review of Eric Rauchway's "Winter War: "Hoover, Roosevelt and the First Clash Over The New Deal" ) A more balanced account by  Jonathan Alter, a serious liberal, in his “Defining Moment” noted that it was  Hoover treasury department officials, namely Ogden Mills and Arthur Ballentine whose drafts ultimately became  the Emergency Banking Act in March 1933 thereby ending the third banking crisis of the depression.

 

All quibbles aside, Andrew Ross Sorkin has given us a new take on the elements and personalities involved in the crash and its aftermath. Can it happen again? In my opinion, yes. All it takes is human greed combined with lots of leverage accompanied by institutional rigidities and incompetent regulators.

Rage and Silence From the So-Called Peace Camp

 While most of the world looked hopefully on the ceasefire between Israel and Hamas, two of the most vocal callers for a ceasefire reacted either with rage or silence. (See: https://shulmaven.blogspot.com/2025/10/free-at-last-now-hard-part-begins.html ) Students for Justice in Palestine (SJP) applauded Hamas' slaughter of innocent Palestinians and further encouraged them to remain armed. Hopefully their fellow travelers in the West will realize that they have been conned and that the western media will wake up to the fact that Hamas has no compunction about killing their fellow Palestinians. 

Instead of raging at the ceasefire, Jewish Voice for Peace (JVP) has been remarkably silent. Recall that this organization attempted to shutdown Grand Central Station in the name of a ceasefire. Well, they got their ceasefire. Then why the silence? The answer is simple. JVP is fundamentally a left wing group seeking the destruction of Israel as a  Jewish state. Israel winning is anathema to them. They care more about their solidarity with the Left then with the Jewish people and it why they will remain silent about Hamas killing Palestinians.  Shame on them.

Free at Last: Now the Hard Part Begins

After two long years Hamas has finally freed the last twenty live hostages left in the dungeons of Gaza. With the captives being redeemed and an Israeli-Hamas cease fire in place, there is much to celebrate. Nevertheless, we should not lose sight of the very difficult tasks ahead. (See: https://shulmaven.blogspot.com/2025/10/the-israel-hamas-war-is-peace-at-hand.html )

As I write this Hamas gunmen are slaughtering their local Palestinian opponents. This has to stop and if Gaza is to be rebuilt by the proposed middle eastern consortium, Hamas will have to be disarmed. That will not be easy and what Arab state will allow their soldiers to be killed in a Gaza peace keeping mission?

In order for this to work is for the United States, Egypt, Qatar, and Türkiye have to put constant pressure on both Hamas and Israel to maintain the momentum of today. There are few hopeful signs. It appears that there is a new openness to expanding the Abraham Accords and that Indonesia, the country with the largest Muslim population, is prepared to commit troops. President Trump and his team have created the framework for a new beginning in the middle east; let us hope they will have the patience to follow through in the days to come.

My Review of Yaakov Katz's and Amir Bohbot's "While Israel Slept"

Confirmation Bias

Veteran Israeli journalists Yaakov Katz and Amir Bohbot have put together a well-sourced and deeply researched indictment of the vaunted Israeli intelligence services and Prime minister Binyamin Netanyahu in their failure to anticipate the deadly Hamas attack of October 7, 2023. In the bluntest of terms, they were guilty of confirmation bias in which their tunnel vision refused to see the signs of the coming attack by Hamas.

 

They thought Hamas was interested in growing the Gaza economy and the intelligence services had their attention centered on Iran, Hezbollah, and the West Bank. They refused to believe reports coming from the Gaza watchers on the border and, in fact, they did not have a single spy on the ground in Gaza. They relied too much on technical superiority, rather than human intelligence.

 

Hamas, on the other hand had excellent intelligence on what the Israeli’s were up to. They know where the cameras and sensors were, and they knew down to the minute details where troops were stationed and where the safe rooms of the nearby kibbutzim were located.

 

Katz and Bohbot pull no punches in describing the ideology of Hamas. Simply put, Hamas is a terrorist organization dedicated to the destruction of Israel. They do not believe in the so-called two state solution. They believe on one state that does not include the Jews of Israel. Why gullible westerners support such barbarism will be the topic of another blog.

 

The authors highlight the huge military buildup that was taking place in Gaza. Starting with the Morsi regime in Egypt which smuggled in weapons manufacturing and construction equipment in 2012. That enabled Hamas to produce heavy weapon and to construct a labyrinth of tunnels underneath Gaza. Israel has no idea as to the full extent of Hamas’ underground city.

Indeed, Hamas war using western and Arab aid to build a war machine. Further they invested some of that aid into a host of front companies to generate income. One of those companies was actually listed on the Istanbul Stock Exchange.

 

Nevertheless, there were warnings. In 2016 the defense minister urged a pre-emptive strike on Gaza. That was turned down out fear of high casualties. Israel’s 2014 incursion into Gaza did not go as well as planned with casualties far higher than expected.

 

Among the many recommendations Katz and Bohbot recommend are:

·      * Establish a Director of National Intelligence to coordinate the various security agencies. I would also create a Team B to critique the DNI conclusions.

·     *  Create a Department of Informational Warfare. Hamas propaganda has been running rings around Israel.

·      *  Change the defense posture from deterrence to active defense.

 

To conclude I believe that this book should at least be a starting point for the coming investigation of Israel’s intelligence failures. The witnesses are in the book. Netanyahu and his cabinet will have a tough time in defending themselves from this indictment.

Change is Coming for CBS News and the Mainstream Media

 Today Paramount Skydance, the parent of CBS News, announced the acquisition of The Free Press (https://www.thefp.com ) for $150 million in cash and stock, a hefty price for a news organization that has 1.5 million subscribers, but only 175,000 pay. With the acquisition comes Bari Weiss, an outspoken journalist, with a large following. In four short years The Free Press has gathered a stable of writers that include Nellie Bowles* (Weiss' spouse), Jed Rubenfeld, Tyler Cowan, Niall Ferguson, Jonathan Haidt, Ayaan Hirsi Ali and Charles Lane, among others. 

Weiss will become CBS News' editor-in-chief and will directly report to Paramount CEO David Ellison. Weiss' strong positions against wokeness in the newsroom and her support for Israel will bring a breath of fresh air to stultifying  leftwing conformism of CBS. Her goal will be to broadcast news for the broad middle of the American public, namely the center-left and the center-right. "60 Minutes" and the evening news will soon look quite a bit different. 

If she succeeds it would help breakdown the algorithmic programming of social media that is designed to split the country apart in rage. It would also be a wake up call for NBC and CBS as well as the hoity toity New York Times from where Weiss was forced out by a woke ruled newsroom in 2020.

It is said that living well is the best revenge. With the takeover of The Free Press, founders Weiss, Nellie Bowles and sister Suzy Weiss are now quite rich. Dare I say it, Weiss is now richer than anyone in the New York Times newsroom. Needless to say, this will not go unnoticed.

As a paid subscriber to The Free Press, I can only wish Bari the best.

 *- Just to note I was banned from publishing book reviews on Amazon over Nellie Bowles' book. (See: https://shulmaven.blogspot.com/2024/06/my-amazon-review-of-nellie-bowles.html )

The Israel-Hamas War: Is Peace at Hand?

 On October 27, 1972, Henry Kissinger told the nation that “peace is at hand” in Vietnam. He was premature to say the least. We now have announcements from Israel, Hamas, and various Arab states that they are on board with President Trump’s 20-point plan to settle the Israel-Hamas War. Discussions will begin tomorrow in Egypt with Hamas already agreeing to release all of the hostages, both dead and alive, that they hold. A reason to be optimistic is that unlike in 1972 when the North Vietnamese Army was standing strong, Hamas is sitting on the brink of military defeat.

 

However, the hostage release is not the be all and end all to the conflict. The critical sticking points that remain is whether or not Hamas will disarm as required and that Hamas will have no role in the future governing body of Gaza. Both of those conditions Hamas has yet to agree to. Further complicating the situation is that Israel attempted to assassinate Khalil Al-Hayya, Hamas’ lead negotiator in Doha, an attack in which his son was killed.

 

My belief, or hope, is that these obstacles will be overcome. Why? Simply put, the correlation of forces is such that Hamas’ choice is to accept the terms or be “obliterated” using President Trump’s term. An early sign of progress will be the speed at which the Israeli hostages are being released. Of course, all of Israel will be looking at the physical condition of the alive hostages being released which will obviously affect Israel’s negotiating posture. Meantime, the ball is in Hamas’ court.

My Review of John Malone's "Born to be Wired: Lessons from a Lifetime...."

 Mogul

John Malone is a larger-than-life figure who played a leading role in bringing the cable industry into being. In telling his life story Malone gives us a history of the cable television industry from its humble beginnings to its peak in the late 20th century to its slow decline in the face of competition from streaming. He was also involved in a host of media deals starting in the 1980’s with CNN and right up to the potential of a Warner Brothers Discovery deal with Paramount Skydance.

The title of the book is derived from the Steppenwolf song “Born to be Wild.” We forget that CATV stands for Community Antenna Television. The industry began in the late 1960’s when a few hardy entrepreneurs began putting up towers in rural areas to capture the signals from over the air television. From the towers they strung wires to customers who previously were unable to watch television. Many of the founders actually strung the wires themselves. The industry exploded in the late 1970’s as satellites beamed down programming such as TBS and HBO to the cable operators. And in the 2000’s we witnessed  the full flowering high speed broadband connections into our homes.

Into this milieu stepped John Malone, a middle-class kid from Connecticut with a degree from Yale and a Ph.D. in operations research from Johns Hopkins. He started out at Bell Labs and in his 20’s he addressed the full AT&T board on how to improve its capital structure. After his suggestions were not adopted by the Bell-Heads, he transitioned to a consulting role and subsequently joined Jerold Electronics, a company that manufactures cable hardware.  After being passed over for the CEO job at Jerold’s parent company he struck a deal with Bob Magnes, who was building out his cable operation out of Denver. Malone became the CEO of Tele- Communications in 1973, and by 1996 it was the largest cable operator in country.

Although I was never a player in the industry, I was peripherally involved in the industry through a few small investments. In the 1970’s made seven times my money on Scientific Atlanta, a major supplier of cable boxes. Along the way I owned stock in Cox Communications and Malone’s Liberty Media, and I suffer for my sins by still owning shares in Comcast.

 

When I was working with Salomon Brothers in the 1990’s Bell Atlantic proposed taking over Tele-Communications. Salomon was representing Bell Atlantic in the deal. I remarked to Jack Grubman, Salomon’s star telecommunications analyst, that there is no way the cable cowboys in Denver would culturally mesh with the Bell Atlantic suits in Philadelphia. That deal did not happen, but when AT&T later bought Tele- Communications the cultural issues that I worried about came to the fore.

 

Malone presents portraits of such media moguls as Rupert Murdoch, Sumner Redstone, Ted Turner, Brian Roberts, Barry Diller, and David Zaslav. Afterall he was instrumental in the success of Turner’s CNN and funded Robert Johnson’s efforts to form BET (Black Entertainment Television) Though his Liberty Media, Malone  had control of Charter Communications, SiriusXM, Formula 1, Direct TV,  Home Shopping Network, The Discovery Channel, Match.com, international cable assets, and the Atlanta Braves. Although he has stepped back from active management, he remains a force to be reckoned with in the media world.

 

A good part of Malone’s success was due to his playing the tax code like a Stradivarius. Wherever he could he avoided the payment of taxes and the prime vehicle for that was to create letter stock in his affiliated companies. Although too complicated to go into here, letter stock enables the parent company to segregate the economics of a subsidiary to a new set of shareholders.

 

Not without good reason, Malone was vilified by the public and politicians as a monopolist who delivered poor service at high prices. Some of this was true because Tele-Communications under-invested in service and capital equipment, Hence the need to merge with a big Telco. As Malone recognizes the cable industry gold standard is Cox Communications (now Enterprises), which has the best customer service with the most advanced equipment. I was very unhappy when the company was taken private in 2004. Cox is now in the process of merging with Charter Communications to become the largest cable provider in the U.S.  

 

There is much more to Malone’s autobiography, and highly recommend this book for those interested understanding how our telecommunications cornucopia came into being.

There is a Method to Trump's Madness

 This week the politico/media world is abuzz with the suspension of late-night comedian Jimmy Kimmel over blame shifting comments on the Charlie Kirk assassination. The suspension by ABC/Disney was exacerbated by FCC Brendan Carr’s mafia like threats to suspend the broadcast licenses of its affiliate stations. This time the pearl clutchers on the Left are legitimately concerned about the very real threat to free speech that Carr represents.

 

But there is more here than meets the eye. The move on Kimmel is part and parcel of Trump’s plan to attack the power centers and funding sources of the Left. Think about it; Trump Administration has moved against high level government bureaucrats with DOGE, NGO’s funded by A.I.D., elite universities, Big Law, alternative energy by removing its tax credits, and now the media. The Trumpistas understand that politics are downstream of culture and so it should not surprise anyone that the media is in their crosshairs.

 

Indeed, a sea change in late-night television is now underway. With Stephen Colbert soon to be gone and Kimmel apparently on the way out, late-night television will no longer be a monopoly of the Left where it functioned as both a cheer leader and a therapist for those who tuned in. Further with the Skydance takeover of Paramount, CBS News will no longer exhibit its Left bias and if Paramount moves to take over Warner Bros. Discovery, CNN will move in the same direction. As Bobby Dylan said, “the times, they are a changing.”  All you have to do is look at Trump’s takeover of the Kennedy Center.

 

With respect to funding, look at how hard Trump has hit the big funders of Democratic and leftwing causes. As stated above, look at the contributors from Big Law, government employees, academia, nonprofit organizations, the media, Hollywood, and the alternative energy producers. The next obvious step will be for Trump to use the IRS to intimidate tax exempt organizations that flow big bucks into the Democratic Party and progressive groups.  

 

Historically Silicon Valley has been a huge source of funds for the Democrats, but no more. Just watch the leaders of Big Tech suck up to Trump.

 

As a result, step-by-step the Trumpistas are seizing the organs of power that made the Democratic Party a viable, and many times, dominant political force. Trump is rapidly accumulating power, and the Democrats are cuddling up to the Socialist wing of the party that will bring with it electoral disaster. And it is my guess, that is part of Trump’s plan.

My Review of Barry Strauss' "Jews vs. Romans"

The Jewish Wars

I take my title from Josephus’ “The Jewish War” which recounts the great Jewish revolt against Rome from 66-74 C.E. Hoover Institution fellow, Barry Strauss while using Josephus’ history, he casts a critical eye on this work written in about 75 C.E. From the time of the Roman invasion of Judea in 63 B.C.E to 136C.E the Jews of Israel fought three wars against the Romans and in many of those wars Jews fought Jews in what can be characterized as civil wars. Indeed, like Josephus some Jews fought on the side of Rome and there was so much infighting that the Talmud tells the reason for the destruction of the Second Temple was “groundless hatred.”

Although Judea was ostensibly a backwater state in the Roman Empire it played a major strategic roll in the thinking of Rome and its arch enemy Parthia (modern day Iran). Simply put, Judea in the hands of Parthia would have created a strategic nightmare for Rome. That is the reason Rome deployed one seventh of its legions in Judea between 66 C.E. – 74 C.E. to put down the great Jewish Revolt. That revolt led to the destruction of the Second Temple and the siege of Masada. Thus, it was no accident that such Roman Emperors as Augustus, Tiberius, Vespasian, and Hadrian took a great interest in the goings on in this small province in their empire.  Further, it was out of this clash of civilizations came Christianity and Rabbinic Judaism.

 

Although Judea was down it was not out. There was a revolt of the diaspora in 116 C.E. and then the Bar Kokhba revolt of 132-136 C.E. Although Bar Kokhba’s guerilla army fought bravely, in the end, they were no match for the trained legions. Just as in the first revolt, there were many Jews who sided with Rome, either out of self-interest or fear of how it would end. The Romans then wiped Judea off the map by calling it “Palaestinia.” I wonder how many Palestinians today know that their name came from ancient Rome.

 

Barry Strauss has given us a very readable history Jewish-Roman wars of two millennia ago. That history resonates today. Indeed, it may seem like current events. My one criticism of the book is that it does not give the reader a sense of the economy of the region. He doesn’t go into the role of Herod as the master builder of Judea. Did that bring about prosperity or result in high taxation to pay for all of his projects? He does mention the gap between the rich and poor Jews but, doesn’t really go into detail.  When I was in Israel last year, I witnessed an archaeological site in Jerusalem that portrayed the immense wealth of the city’s upper crust. That aside Strauss has written an excellent history of the period. 

My Review of Peter Cozzens' "Deadwood: Gold, Guns and Greed in the American West"

 Gold in Them There Hills

As an enthusiastic fan of the Deadwood HBO series, I was looking forward to Peter Cozzens’ book on the same subject. Except for the book being too long, I was not disappointed. Cozzens’ “Deadwood” has everything. His cast of characters include Wild Bill Hickock, Calamity Jane, Sitting Bull, President Grant, and George Hearst. We witness Indian wars, cattle rustling, horse thieves, stagecoach robberies, gun fights and water wars. As in the HBO series, the two leading protagonists are Seth Bullock and Sol Star who own a hardware store. Bullock would become sheriff and U.S. Marshall and Star would remain a pillar of the community.

 In four short years 1876-1879 Deadwood sparked the imagination of the entire country with the discovery of gold in the Black Hills of South Dakota. The town was founded by would be miners illegally squatting on Indian land that was later legalized. The miners largely came from the vast army of the unemployed caused by the long depression of 1873-1879. Following them was a smaller army of “soiled doves,” prostitutes in the vernacular of the day, who populated the Deadwood’s notorious brothels.

 Two facets of Deadwood’s short history bring out the economist in me. First Deadwood represents a case study in spontaneous order where the town was created out of nothing. Of course, quite a bit of disorder went along with the order, but Deadwood worked more or less. Indeed, Deadwood was one of the few places in the U.S. where African Americans, Jews and Chinese got along with the majority white Christian population and were respected to varying degrees.

 Second, with the passage of Grant’s Specie Resumption Act of 1875 the United States was put on a path to the gold standard. One of the problems with the gold standard is that the growth in the money supply is contingent the success of miners in finding gold. Hence, the importance of Deadwood. In part, Deadwood helped put the U.S. back on the gold standard in 1879.

 Cozzens highlights the role George Hearst the mining magnate who struck it rich in nearby Lead City. His Homestake Mine would form the foundation of his wealth and it enabled his son William Randolf to become a press lord and leading politician in the early 20^th Century. He was far from the most scrupulous person, but his mine produced gold through 2002. It truly was the mother lode.

Deadwood’s day in the sun ended with a fire in late 1879 which wiped out the town. However, absent the fire the decline in placer mining made decline inevitable. Capital intensive hard rock mining took the place of the very labor-intensive panning for gold. Cozzens tells a great story of this small mining town that captured the attention of the nation.

 

 

Donald Trump (National Socialist*)

President Donald Trump is nominally a Republican, but in reality, he is putting us on the road to an American version of the national socialism of the 1930’s. Domestically he is attempting to seize the commanding heights of the economy by taking ownership positions in Intel and U.S. Steel and by taking a 15% cut from NVIDIA’s sales to China. ( https://shulmaven.blogspot.com/2025/07/on-road-to-serfdom.html ) Remember that under national socialism businesses remain under private ownership but are under the control of the government. This is a far cry from capitalism. 

 

Further Trump is challenging the independence of the Federal Reserve by demanding the removal of Lisa Cook from the board for allegedly committing mortgage fraud. How did this come about? His minion Bill Pulte, the director of the Federal Housing Finance Agency, pulled the mortgage of files of Lisa Cook as well as the files from such Trump adversaries as New York Attorney General Letitia James and Senator Adam Schiff. Let us be clear, this was no accident and soon the IRS and other federal agencies will get into the act.

 

To enhance his powers domestically Trump has appointed his cronies in the Justice Department, the F.B.I., the regulatory agencies and on the courts. Indeed, one of his private attorneys, Todd Blanche is now a deputy attorney general, and another, Eric Bove, was just confirmed to the Court of Appeals. Perhaps more serious is that he has purged a host of officers in the military and the CIA who might be more loyal to the constitution than to him. A defining feature of national socialism is loyalty to the leader, not to the law.

 

In keeping with his national socialist tendencies Trump is in the process of establishing a 150,000-member national police force in the form of Immigration and Customs Enforcement (ICE) officers. These officers could at the stoke of a pen be empowered to engage in broader law enforcement activity and unlike the military they would not be subject to the strictures of the Posse Comitatus Act of 1878. Indeed, Trump seems to be using the military in violation of that act anyway. Meantime many U.S. citizens have been caught up in the roundup of illegal immigrants.

 

Internationally Trump through his tariff policies is attempting to turn the open economy of the United States into more of an autarky where domestic production would be sheltered from international competition. In imposing his tariff regime Trump ignored Congress which has near exclusive power over tariffs and taxation. Trump has now lost twice the courts on his tariffs; and it will soon be up to the Supreme Court to rule on them. Further Trump has imposed punitive tariffs on our allies all while cozying up to dictators Putin and Xi. This all part of the national socialist playbook. It might be stretch, but could there be a Trump, Putin, Xi axis?

 

All the while the moral eunuchs of the Republican Party have either cheered Trump on or silently acquiesced. ( See from 2019:  https://shulmaven.blogspot.com/2019/02/the-republican-moral-eunuchs-and.html ) Similarly, fearful of retaliation, the business community has remained silent and bowed to his wishes. Thus, in eight short months Trump has seized control of a good part of the economy and the security apparatus of the state.

 

To be sure this not the first time the U.S. experimented with national socialism in peacetime. In 1933 President Roosevelt used the National Industrial Recovery Act (NIRA) and the Reconstruction Finance Corporation (RFC) to take control of a good part of the economy. Fortunately, the NIRA was declared unconstitutional in 1935 and the RFC withered away. Let us hope the Supreme Court does the same thing to Trump’s tariffs.

 

Later in 1971 President Nixon imposed a system of price, wage, rent and dividend controls on the entire economy. Nixon also used the IRS against his enemies and spied on his political opponents. The Nixon controls expired in early 1973 and he was impeached in 1974. Say what you will about Nixon; he respected the process. I doubt that can be said of Trump. In 2009 President Obama temporarily took control of the banking and automobile industries.

 

To conclude Trump is in the process of creating an American version of national socialism. I am not going to use the polite words of state capitalism or American Capitalism with Chinese Characteristics. Forewarned is forearmed!

 

*- The reference to national socialism is derived from Germany’s Nazi Party. The official name of the Nazi Party was Nationalsozialistische Deutsche Arbeiterpartei  or NSDAP which in English is the National Socialist German Workers Party. The Italian version of national socialism was called Partito Nazionale Fascista, PNF which in English is the National Fascist Party.

Trump, Putin, and Ukraine: Part 2

Last week we wrote up what we thought was a successful conclusion to the Trump-European-Ukraine meeting in Washington D.C. ( See: https://shulmaven.blogspot.com/2025/08/trump-putin-and-ukraine-now-comes-hard.html ) Unfortunately, little did we realize that Trump and his hapless special ambassador Steve Witkoff, and Secretary of State Marco Rubio, were played for suckers by Putin. Put bluntly, Putin did not agree to security guarantees from the Europeans to be coordinated by the United States. Putin wants all of the Donbass and no European troops in Ukraine.  

So what is to be done now? The U.S. and Europe should step up arms shipments to Ukraine and greenlight Ukrainian attacks deep into Russia. In addition both the U.S. and Europe should sanction Russia to the max. The attacks have already begun with Russia's energy infrastructure now under long range attack. Gas lines are now forming in Russia. In addition, as we have argued in the past, Ukraine should set ablaze the Russian oilfields in Western Siberia. The path to a negotiated settlement requires Russia to feel real pain putting the ball in Trump's court. Hopefully that will happen.   

The Wall Street Journal follows Shulmaven on Serfdom

 

Sunday, July 27, 2025

On the Road to Serfdom*  (See: https://shulmaven.blogspot.com/2025/07/on-road-to-serfdom.html )

Trump, Intel and the Road to Serfdom

Hayek warned of the danger of government ownership stakes in major companies.  (See: Trump, Intel and the Road to Serfdom - WSJ paywall)

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By 

Daniel J. Smith

Aug. 20, 2025 1:47 pm ET

Trump, Putin, and Ukraine: Now Comes the Hard Part

I have been writing about Ukraine since 2014 (See: https://shulmaven.blogspot.com/2014/03/the-ukraine-what-is-to-be-done.html ) and as recently as last March. (See: https://shulmaven.blogspot.com/2025/03/shame.html ) Yesterday’s White House summit meeting with European leaders and Ukraine President Volodymyr Zelensky reversed the very negative vibes set off by Friday’s Trump-Putin Alaska summit where it was feared that Trump was about to sell out Ukraine. The conversations were both serious and friendly and it seems that there was a real reproachment between Trump and Zelensky.

 

However, the hard part is now ahead of us. It remains to be seen whether or not Putin will actually meet with Zelensky. Today Switzerland offered up its good offices as a meeting site. Should that happen, it would open the way for a trilateral summit with Trump, Putin, and Zelensky.

 

What has to be ironed out is the precise border between Ukraine and the Russian held provinces. That border would have to be defensible, which means that the current Ukrainian position in the Donetsk region would have to be maintained, something that Russia is opposed to. Another question is what the European security guarantee would cover.  For example, would it include troops on ground, air support and rebuilding assistance? Perhaps more important what would be the modalities of the United States’ role as security coordinator. Would it include intelligence sharing, military hardware, and air support? Although Trump has ruled out combat troops, would it allow for support troops involved in training. And don’t forget Putin has a vote in all of this.

 

Nevertheless, for the first time since the war started over three years ago there is a pathway to a settlement. It certainly won’t be perfect because Putin’s aggression would be rewarded, but it will enable Ukraine to be a viable and prosperous state. Remember, diplomacy is the art of the possible.

My Review of Andrew Lambert's "No More Napoleons"

The Balance of Power

King’s College naval historian Andrew Lambert has written an over-detailed evaluation of British geopolitical strategy from 1793-1914. After fighting France for 22 years Britain settled on a strategy of offshore balancing and maintaining order in Europe enforced by the Royal Navy and a small expeditionary force. The initial goal was to prevent a revanchist France from regaining control of Europe. The architects were Prime Minister Lord Liverpool, Foreign Secretary Castlereagh, and the Duke of Wellington. The latter initially as the hero of Waterloo and later as prime minister. Their policies were enhanced by Lord Palmerston as both foreign secretary and prime minister.

Britain’s greatest fear was that a continental power could launch an invasion from the low countries. Hence it was crucial to keep France out of the Scheldt Estuary and the Port of Antwerp. When Belgium split off from Holland the 1839 Neutrality Treaty orchestrated by Palmerston kept France out. The result of that treaty and Britain’s troop presence in Belgium in 1870, kept both France and Germany out of Belgium during their war. This would not be so in 1914.

The linchpin of the strategy was the power of the Royal Navy whose goal was to be at least twice as strong as any two powers. Aside from a quantitative advantage the Royal Navy had the most technologically advanced fleet by taking advantage of steam power, screw propellers, gunnery, and hydrology. The Royal Navy truly ruled the waves and it enabled Britain to become a global power through its colonies, but for that power to be maintained there had to be an offshore balance in Europe.

For most of the 19^th century the policy succeeded largely because France was in a long-term relative decline while Britain was moving to its heights. However, after 1870 Britain entered into a relative decline in relationship to a newly reunified Germany. As a result, it required an alliance with France which severely limited Britain’s freedom of action. Britain learned the hard way in the trenches of France. Given all of Britain’s interest in Belgium, it is a wonder why Germany was unsure about Britain’s entry in World War I after it invaded Belgium.

Although Lambert discusses the 1815 Vienna settlement, he makes little note of Count Metternich of Austria whose interest in a stable Europe was greater than Britain’s. He also does not cite Henry Kissinger’s “A World Restored” on the Congress of Vienna. He also left out a discussion on the 1878 Congress of Berlin where British Prime Minister Disraeli played a leading role in settling, at least for a time, the Balkan question. There is way too much information in this book, and I would only recommend it to history nerds.

 

  

The Wall Street Journal Follows Shulmaven on Socializing the Economy

 Today's Wall Street Journal brought with it an important article by economics columnist Greg Ip entitled "U.S. Marches Towards State Capitalism...." (See: https://www.wsj.com/economy/the-u-s-marches-toward-state-capitalism-with-american-characteristics-f75cafa8?mod=hp_lead_pos5 , paywall) In the article Ip outlines how the U.S. is moving towards state capitalism with Trump's demands for a share of NVIDIA's chip exports to China, the golden share in the U.S. Steel takeover and Biden's industrial policy. In my words, socialism with American characteristics. 

Aside from the over-night news about chip exports, Shulmaven made the same case on July 27th where we added tariffs and Biden's DEI policies. ( https://shulmaven.blogspot.com/2025/07/on-road-to-serfdom.html )Whether we call it state capitalism, socialism or fascism, the result is the same. We are entering a world of state controlled economic activity which in the words of Hayek will put us on "the road to serfdom."

Will AI be a winner Take All Market?

 Much has be written about the explosive growth in capital spending on AI by Google, Meta, Microsoft, and Amazon. (See: https://www.wsj.com/economy/the-ai-booms-hidden-risk-to-the-economy-731b00d6?mod=author_content_page_1_pos_1 , paywall) Those four companies are on tap to spend about $360 billion this year on building out data centers and related investments. Given the high prices of their stocks, market participants are assuming that AI investment will have a huge payoff in the future and are willing to overlook short term declines in free cash flow.

My sense is that investors are underappreciating three risks. The first is that the return on tangible capital will likely be lower than the hitherto high returns on intangible capital earned by the four companies. Second, the bidding war for talent where $100 million payouts have taken place will squeeze margins. Third, and perhaps most important, is that AI will not, at least initially, be a winner take all market. It is likely that AI will be nowhere near as profitable as winner take all Microsoft's operating systems, Google's search, and Meta's social media. 

Why? At the present time there are six highly capitalized entrants in the AI market and many smaller ventures competing for market share. The six are ChatGPT, Gemini, Anthropic, Perplexity, Meta AI, and Grok. Although ChatGPT has the current lead, this is a highly fluid market environment with deep pockets competing for market share. Thus, my guess is that investors will soon be disappointed with the returns coming from AI. The likely beneficiaries of this competition will be consumers and the highly talented employees.

The Guns of August*

One hundred and eleven years ago the guns of August opened fire signaling the start of World War I. Although far from being deadly, the July employment report reeked carnage on the stock market with the S&P 500 declining by 1.6% on Friday while the bond market sustained a massive rally with the 2-year note yields declining by 27 basis points and 10-year yields declining by 14 basis points. The markets are clearly sniffing out a recession.

 

Nonfarm payrolls increased by a meagre 73,000 jobs, but what really spooked the markets was a gigantic downward revision of 258,000 jobs for May and June. Further, all of the gain can be accounted for by healthcare and social services, hardly growth drivers. The three-month average for employment gains of 35,000 jobs is indicative of a stalled labor market. The far more volatile household survey was much worse with the average monthly decline from May to July of 287,000 jobs. My guess is that the administration’s immigration raids are now taking their toll on the job market. The labor market is experiencing simultaneous demand and supply shocks.

 

In March I called for the recession of 2025 to begin in the second quarter. (See: https://shulmaven.blogspot.com/2025/03/the-recession-of-2025.html ) That obviously didn’t pan out, but with real final domestic demand growing at only 1.2% in the second quarter and the job market stalling out, it was pretty close to a recession.

 

The day before the employment data came out, President Trump announced a panoply of tariffs on a host of countries that have failed to make a deal with him. Those tariffs and the earlier ones announced for the E.U. and Japan means that the U.S average tariff rate is now about 19%, eight times above where we started the year. Simply put, Trump called the market’s bluff on the TACO trade an eventuality we noted in June. (See: https://shulmaven.blogspot.com/2025/06/stocks-too-complacent-about-taco-trade.html )

 

As a result, with Trump’s tariffs now baked into the cake and with a stalled job market, the U.S. economy is on course for stagflation. The tariffs will keep inflation as measured by the core price indices above 3% and that will put the Fed between a rock and a hard place, especially because the unemployment rate will remain well contained, at least for now.

 

Adding insult to injury President Trump fired BLS Commissioner Erika McEntarfer because he didn’t like the revisions to the employment data. His big, beautiful economy is not as beautiful as he thought. This banana republic move will lower the market’s confidence in future data coming out for the government’s data mills, not a good thing.

 

Lastly, I have been skeptical of the stock market’s big rally off the April lows. (See: https://shulmaven.blogspot.com/2025/06/my-ucla-anderson-forecast-presentation.html ) My sense is that this skepticism will soon be justified.

*- With apologies to Barbara Tuchman

My Review of George Selgin's "False Dawn: The New Deal and the Promise of Recovery, 1933-1947"

The Recovery that Failed

Libertarian economist George Selgin has written an intriguing history of the New Deal and role Keynesian thought played in it. The book is largely a critique of Eric Rauchway’s “The Moneymakers.” (See:   https://shulmaven.blogspot.com/2015/12/my-amazon-review-of-eric-rauchways.html ) In the main I agree with Selgin. Simply put, many policies attributed to Roosevelt weren’t really his and by and large Roosevelt was wary of deficits as a macroeconomic policy tool. In Selgin’s framework the New Deal consisted of three R’s: recovery, relief, and reform. Selgin focuses on the recovery aspects and notes that Roosevelt’s deficits came from funding relief.

To begin with the ideas behind the Emergency Banking Act of 1933 which closed and then reopened the banks came from Hoover’s treasury department, namely Secretary Ogden Reed and Under-Secretary Arthur Ballentine. Further Roosevelt opposed the deposit insurance provisions of the Glass-Steagall Act because of the moral hazards associated with it. That issue would come to the fore in the 1980’s. A criticism of Selgin is that he does not give credit for how successful deposit insurance was during the 1937-38 downturn. The bank runs of the early depression were over.

 

As to deficit financing, the biggest deficit took place in 1936 when the World War I veterans’ bonus was paid out. Roosevelt opposed it and his veto was over-ridden. The payout provided a short-term boost to the economy and played a significant role in his re-election. However, in 1937 the lack of such stimulus played a role in that year’s downturn.

 

In the Spring of 1938 Roosevelt and his advisors finally took Keynes’ advice and embarked on the first true Keynesian stimulus of his administration. However, in the light of the World War II spending that was to come, it was far too little.

 

Selgin credits the massive gold inflows of the 1930’s for the modest recovery that took place. The gold came from Stalin’s stepping up gold production in the Soviet Union and European flight capital fearing Hitler. It was the gold inflow that enabled the Fed to embark on a policy of monetary easing, a policy that was halted in late 1936 as the treasury sterilized the gold inflows out of fear of inflation.

Roosevelt did take the U.S. off the gold standard in 1933 and raised the price of gold, a stratagem that Keynes advised. To Keynes it would be path to monetary ease. However, according to Selgin the increase in price of gold came from the ideas of George Warren who thought that a rise in the price of gold would automatically increase commodity prices. It did not.

 

Along the way Selgin notes how Roosevelt’s reforms stalled the economy, and the anti-business nature of his policies greatly weakened private investment. That would not turn until World War II ended and the feared depression did not take hold. Selgin observed a rise in business optimism in the aftermath of the war; however, this sentiment was not reflected in stock prices, as Wall Street experienced a three-year bear market from 1946 to 1949.  Stock market investors at the time were clearly worried. As a result, it would have helped to have some discussion of stock prices during his 1933-1947 history.