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.

  

My Review of Bike Bird's "The Land Trap: A New History of the World's Oldest Asset"

 Civilization held Hostage to Land

 

Mike Bird, the Wall Street editor of The Economist, has written a detailed history of the role of land in society in general and the economy in particular starting with the Babylonian Empire. He makes three broad generalizations about land: it is fixed in quantity, it is immobile and it doesn’t depreciate. Although land is definitely immobile, it is not really fixed in supply, and it can depreciate. The application of capital to land can increase its supply. Witness a good portion of lower Manhattan buildings sitting on landfills and provisioning of water to desert lands to make them productive. Phoenix is a clear example here. Although there are no depreciation schedules for land, the value of land has suffered long term declines due to changes in the broader economy and environmental pollution.

 

Because I once headed real estate research at the old Salomon Brothers, I found Bird’s narrative particularly interesting. I was a careful student of the Japanese real estate bubble in the 1980’s and I chronicled the real estate boom and bust in the United States from the early 80’s to its nadir in 1992. In the Japanese and the U.S cases the collapse in real estate values caused a debt crisis in both countries. As Bird notes the ability to borrow on real estate can put a real estate cycle on overdrive, both on the upside and the downside. The 1990 real estate bust turned out to be small change when a collapse in real estate values triggered the global financial crisis in 2008. On the other owner occupied real estate has served as collateral to fund numerous businesses, some of which have become quite large. Bird cites McDonald’s as an example.

 

If there is a hero in Bird’s book it is Henry George, the author of “Progress and Poverty.” An 1879 best seller. George rightly argued that much of the gains associated with rising land values are the result of improvements in society and are thus unearned. The landowner just sits there and takes advantage of the improvement in society and the economy. George’s solution was to tax perceived unearned increment away to fund the government. At the time he thought a single tax on land would suffice. His ideas became all the rage, and he was almost elected mayor of New York City on his single tax platform. Unfortunately, his movement faded away.  

 

Bird is very cognizant of the fact that in much of the developed world today the ownership land has become a major driver of income inequality. Simply put, those who have it are far better off than those who don’t and because the value of land is very sensitive to interest rates, the easy money policy pursued by central bankers since 2008 has sent land prices skyrocketing. In a real sense, we are living in a neo-feudal world that separates the landed from the landless.

 

Aside from discussing the history of land in the Anglosphere, Bird discusses land policies in China, Taiwan, Hong Kong, Singapore, Korea, and India with the all-time biggest bubble ever taking place in China. In his discussion of Asian land policies, he cites the work of Wolf Ladejinsky a U.S. Department of Agriculture staffer and later private consultant who was instrumental in creating the land policies in Taiwan, Korea, and India. To Bird, Singapore comes across a model where the government own the land and leases it to condominium developers that attaches pricing regulation to make the units affordable. As a result, Singapore has the lowest house price/income ratio in the developed world. Albeit it is a very expensive program.

 

In sum Bird argues that society is trapped by the high price of land. For example, policies that would lower the price of land to make housing more affordable would have the knock-on effect of lowering the wealth of existing owners and possibly triggering a financial crisis if those owners default. This policy bind will be with us for a long time.

My Review of Victor Shvets' "The Twilight Before the Storm"

 The Times They Are A-Changin* 

Viktor Shvets, an investment strategist at Macquarie Bank, doesn’t like the baby boomers, especially the neoliberal order that generation brought into being. Drawing on the work of Neil Howe and others ( https://shulmaven.blogspot.com/2023/09/my-review-of-neil-howes-fourth-turning.html ) wherein generational changeovers drive history he argues that the neoliberal order of 1980-2010 is over and we poised enter a turbulent era with the Gen-Z and millennial generations taking power. He analogizes the coming epoch to that of the 1930’s where communism, fascism and social democracy fought it out for global supremacy which set the world on fire in the 1940’s.

To Shvets the change is being brought about by the merger of financialization with the technological revolution which is creating an unsustainable income distribution that has given rise to populism on both the Right and the Left. He calls this the Fujiwhara effect where two tropical storms merge to create a monster storm. I would note that his view of fairness is horizontal equity as opposed to vertical equity where people are free to enjoy the fruits of their labor and talents.

I am a big fan of Neil Howe and I have written a thus far five part series on “Reliving the 1930’s” (See: https://shulmaven.blogspot.com/2023/11/reliving-1930s-part-5.html ) As result a read Shvets’ book with some sympathy, but in my opinion he gets more than a few things wrong. I lived the 1960’s through the rise of neoliberalism as a hippy protestor to working on Wall Street. I know I am far from being the only one. However, his boomers are the ones who went to college, not the ones who fought in Vietnam, went to work in a factory, and suffered through the divorce epidemic of the 1970’s. 

 

While Shvets is critical of the individualism of the boomers in the economic realm, he fully supports their individualism with respect to sex, drugs, and racial tolerance. Basically, the rebels of the 1960’s won a complete victory in the culture war and lost the economic war. To me it was no accident that economic freedom went hand in hand with personal freedom, although you can certainly argue there are excesses in both areas.

 

Connecting our era to that of the 1930’s, Shvets’ believes that ideally, we would have a rerun of 1930’s America along a path toward Roosevelt-style social democracy that would include a universal basic income. However, that path might not be viable and it is not the only path. The social democratic path faces the fundamental reality that in the “Blue” cities of America that are far down the road toward social democracy we see abject governmental failure in the form of high taxes coupled with poor services, failed public education, fiscal bankruptcy, governmental fraud and the widest gaps between rich and poor. That future is hardly enticing.

 

Instead, the fourth turning could lead to a major cultural revolution towards a new religiosity in society. Where the Gen-Zers and the millennials have substituted environmentalism, socialism, feminism, and new ageism for religion, in place of the market fundamentalism of the Boomers, they may ultimately turn to the real thing. It won’t be the first time America has had a religious awakening, and it won’t be the first time that history surprises.

 

*-With apologies to Bob Dylan

Kevin Warsh and the Fed

President Trump announced this week that he selected, subject to Senate approval, Kevin Warsh to be the next chairman of the Federal Reserve Board thus ending this season's apprentice competition. Warsh seems to be a chameleon because doves see in him his call for a lower federal funds rates and hawks see his past positions that called for higher interest rates and a smaller Fed balance sheet. It seems the immediate market response was a collapse in gold and silver prices that were buoyed by the debasement trade.

In my view both hawks and doves will be disappointed. In the short run I think he will support lowering the Fed Funds rate by another 50 basis points taking it down to a 3%-3.25% range in the belief that rising productivity will lower the inflation rate to the Fed's long missed 2% target. As stated here previously, I think that is a losing bet.  ( See: https://shulmaven.blogspot.com/2025/12/2026-year-of-turbulence.html )  Further, consistent with recent market behavior I do not think that long rates will move lower thereby steepening the yield curve. Rick Rieder, Blackrock's CIO and former apprentice for the job) articulated a case for a 3-4-5 yield curve with funds at 3%, the 10-Year at 4%, and the 30-year at 5.5%. That looks like where we will end up this year, but with the 10-Year closer to 4.5%.

In the short run a Warsh Fed will let the economy run hot. That will bring with it higher profits, higher inflation, higher long term interest rates, and a volatile stock market with a downward bias. But if we step back a bit, it is becoming clearer by the day that we are in an era of fiscal dominance. The Fed would thus accommodate continual deficits of 6% of GDP that will put upward pressure on inflation. When the rubber hits the road the Fed will either be forced to tighten triggering a recession or adopt yield curve control to manage the long end of the curve. It will be only then that we will find out if Warsh is a hawk or a dove. If the Fed moves toward yield curve control the debasement trade will have legs.

Donnie Does Davos* and Mayhem in Minneapolis

 It was quite a week. We had President Trump on the scene in Davos doing his best to break up NATO with his threats to acquire Greenland by force. (See: Shulmaven: History Rhyming with Trump and Greenland ) His histrionics certainly put the conference back on the map and it made him the focal point of attention. That was his plan all along, because he quickly retreated. The conference ended with Trump's setting up his so-called Board of Peace which by its makeup looks more like a Board of War.

But not before Canadian Prime Minister Mark Carney gave him a scathing rebuke calling out his attempt to "rupture the world order." Indeed, the world might have changed last week. Carney is now the hero of the Davos set but I would your attention to the facts that he threw Israel under the bus by recognizing the Palestinian state and he has done nothing to bring a halt to the surging antisemitism in Canada. Thus he is hardly the paragon of Western virtue.

Meantime Minneapolis has exploded in a wave of mayhem culminating in ICE officers claiming their second (alleged) murder victim. With 3,000 ICE officers confronting 25,000 protestors on a daily basis in frigid temperatures things have and will continue to go south very quickly.  ICE looks like an occupying army out for revenge. Whatever Trump's motivations are, it is not helping his agenda as his polls collapse. Indeed, the entire enforcement operation is taking the focus off the real Medicaid scandal in Minnesota and he is making a hero out of the hapless governor, Tim Walz who is likely up to his eyeballs in corruption.

Finally, as of this writing Trump is a pulling an Obama (remember the Syrian redline of 2013) by failing to live up to his promise to support the Iranian protestors. Mass murder has taken place on his watch, and by encouraging the protestors, Trump set them up to be slaughtered on a mass scale by the Ayatollahs. 

*-With apologies to "Debbie Does Dallas" a 1978 porn classic.

Greenland Compromise: Rent, not Buy

Yesterday I wrote about how Trump is following in the footsteps of Hitler and Stalin over his demand to buy Greenland from Denmark. (See: https://shulmaven.blogspot.com/2026/01/history-rhyming-with-trump-and-greenland.html ) Today Trump said he would not use force to takeover the island, but he certainly did not rule out other forms of coercion. 

My sense is that Trump's art of the deal is aiming for de facto, but not de jure, control of Greenland. Denmark has been very adamant that Greenland is not for sale. Denmark has not commented on whether or not it could be rented. Remember, Trump is a real estate guy. So here goes my idea as one way that Trump could get what he wants.

Instead of purchasing Greenland, the U.S enters into a 99-year lease arrangement with Denmark. The lease terms would give the U.S. full operating control over the island in exchange for an annual lease payment amounting to X- $ billions.  That would more than fund Denmark's current obligations to the 56,000 member Greenland community and then some. Thus Denmark would still retain nominal sovereignty over the Greenland and the island would still fly the Danish flag. 

This result is not pretty, but that is the way negotiations could end up.

History Rhyming with Trump and Greenland

Mark Twain noted that history doesn't necessarily repeat, but it rhymes. This is exactly what is happing with Donald Trump's proposal to seize Greenland. Before Hitler took the Sudetenland in Czechoslovakia in 1938 he threatened to invade. Similarly, Putin made noises about taking Crimea in 2014 before invading that part of Ukraine. It seems that Trump is giving new life to my "Reliving the 1930's series. (See: https://shulmaven.blogspot.com/2023/11/reliving-1930s-part-5.html ) The difference here is that instead of acting like a leader, Trump is acting like a three year-old toddler. He neeeeds Greenland. Unfortunately, his tantrum is breaking up NATO and like the previous episodes I noted, it will make the world a far more dangerous place.

My Review of Amit Segal's "A Call at 4 AM"

 A Primer on Israeli Politics

Leading Israeli reporter Amit Segal has written a primer on Israeli politics going back to the State’s founding. I would characterize his views as center-right. However, a long time Israeli friend and former reporter would argue that Segal is firmly on the Right. In the beginning Israel created a parliamentary system consisting of 120 delegates to the Knesset who would be elected via a party slate by proportional representation, not by constituency. In 1948 with the new state’s boundaries up for grabs, it wasn’t really possible to create individual districts. You would think that accountability would flow through the political parties, but, in fact, the party leaders became personality cults starting with David Ben Gurion. It seems that once in power prime ministers never know when to quit. Ego mania is alive and well in Israeli politics.

 

With 120 seats in the Knesset, a majority of just 61 seats runs the country. For the first 29 years the Mapai Party (Labor) had a monopoly on power. However, since 1977 when a rightwing bloc formed around the Likud Party under the leadership of Menachem Begin took power, it has for the most part represented the dominant coalition in the Knesset. Israeli governments are coalition governments, because even during the heyday of the Labor Party, no party ever achieved a majority.

 

The trick is to put together a coalition of 61 members and for the past 50 years by the dint of demographics and divisions in the Left, rightwing governments tended to run the country. It has to be kept in mind that the distinctions between right and left are not of the American variety. According to Segal, what separates the right from the left is the distance from Yasser Arafat and his successors. Historically the left has been open to a two-state solution while the right has not.

 

Segal points out the reasons for the ascendancy of the right. The 1973 Suez War destroyed the credibility of the left on the security issue. The failure of the 2000 peace talks with Arafat led to the second intifada thereby causing the left to lose the peace issue. In the 2026 election the critical question will be the right’s failure to defend the country on October 7^th, 2023, be enough to topple its long-term hegemony or alternatively will its subsequent success be enough for it to hold power.

 

On the importance of personality over party, Segal highlights the case of General Ariel Sharon who became a Labor Party member to be promoted in the early 1970’s, he then broke with them to help found the Likud Party and later he founded his own party. During his life he built settlements that he would later destroy.

 

Today political divisions in Israel evolve around Prime Minister Binyamin Netanyahu and the question of Jewish versus Israeli identity. Israelis are either for him or against him, so much so that most center and left parties won’t be in a coalition government with him especially when Netanyahu’s guiding philosophy is “no enemies on the Right,” and no one trusts him. That abstention gives power to the Haredi religious parties whose votes in the Knesset are traded for draft exemptions and huge public subsidies that are bleeding the country white.

 

Those citizens who view themselves as primarily Israeli are largely secular and their views about trading West Bank land for peace with the Palestinians are based on a cold-eyed analysis of Israel’s security. On the other hand, those Israeli’s who view themselves as primarily Jewish view Judea and Samaria as sacred ground of the Bible where their forefathers walked and where David and Solomon were kings and where the prophets spoke truth to power. Thus, control of that land is non-negotiable.

 

After reading Segal’s book I have come to the conclusion that the only way to pull Israeli society together after the brutal Gaza War is for Netanyahu and the center left to form a coalition government that would remove the far-right Ben Gvir and Smotrich factions from the government as well as the religious parties.  ( See: https://shulmaven.blogspot.com/2025/10/my-review-of-yaakov-katz-and-amir.html ) That would lower the temperature in Judea and Samaria and pave the way to radically reduce the power of the Haredi parties. It is not perfect, but as they say, politics is the art of the possible and both the right and the left are going to have to swallow their pride.

Donald Trump (National Socialist) - Part 2

Donald Trump took two more steps down the road to national socialism today. (See: https://shulmaven.blogspot.com/2025/09/donald-trump-national-socialist.html ) First, his Justice Department announced a criminal investigation of Fed Chair Jay Powell to further his attempt to control the central bank. In March 1933 Hitler appointed Hjalmar Schacht to lead the Reichsbank to reinforce his control over the economy and to secretly fund the military as part of his first 100 days.

 

Second, his Department of Labor put out a slogan on social media calling for “One Homeland, One People, One Heritage.”  This slogan brings to mind the Nazi slogan “Ein Volk, Ein Reich, Ein Fuhrer,” which means “one people, one nation, one leader.”  Whether the Department of Labor knew its historical antecedents or not, it is a troubling sign. All the while the Department of Homeland Security is over-reaching, to put it mildly, in rounding up illegal immigrants. To anyone with a historical memory, it is not a pretty sight.

Venezuela: Too Early to Tell

Much has been written about the rendition of Venezuelan President Nicolas Maduro to the United States to stand trial on drug trafficking and arms smuggling charges. We have had predictable reactions from the Right hailing it as successful operation to remove an anti-American  dictator and from the Left attacking it as a throwback to the Yanqui Imperialism of the early 20^th Century that will lead to a quagmire.

 

To me, it is far early to tell how it will turn out. What we do know is that Maduro was an evil dictator who tortured and murdered his people with abandon and the country has a heavy presence of Russian, Chinese, Iranian, and Cuban forces. Thus, Venezuela represented a threat to U.S. security. Whether the threat is imminent or not is an open question. We also know that Venezuela possesses the largest oil reserves in the world, but much of it consists of tar sands which is costly to produce and that the oil fields are operating in a dilapidated condition causing oil production to drop from three million barrels a day to just under a million barrels a day over the past 20 years.

 

We are far from being reassured by Trump talking about oil and not talking about a return to democracy. Indeed, the entire security apparatus of the Maduro state remains intact. We do not know to what degree Vice President and now President Delcy Rodriguez will cooperate with Trump. She has given off very mixed signals, and we don’t know where the army will end up. We can surmise that given the intelligence that was available to the U.S military, it is likely that someone on the inside is working for us. Who that person or persons are, and their future role will be critical in the days ahead.

 

Trump is opting for stability over democracy. That may work in the short run, but if there aren’t any plans for elections after six months this whole adventure could go south very quickly. It is obvious that the Democratic Opposition would win an election; they did so under Maduro’s control. The question is whether or not the Maduro security apparatus will allow an election to take place and if it does take place will they allow the winner to be seated. Before rushing to judgement let’s give it some time for events to play out.

 

Outside of Venezuela both China and Russia are looking on. They too can make similar moves in the Taiwan straits or the Baltic States, respectively.

My Review of David McWilliams' "The History of Money"

Money Makes the World go Round

 

Irish economist David McWilliams has written a very informative and entertaining book on the history of money with loads of anecdotes. McWilliams views money as one of the great innovations of human beings just behind fire and the wheel. Why? Money facilitates intra-community and inter-community transactions to the benefit of society as a whole. As the great economist Paul Samuelson noted that money is a social contrivance. McWilliams argues that puts human interactions into overdrive as the lust for it propels economic progress.

 

He takes us back in time to the Sumerian Civilization of 2000 BCE where a handful of grain equaled a shekel and where there were lending transactions calling for the payment of interest all the way up today’s quantitative easing of central banks. The first real breakthrough occurred around 1500 BCE where in Lydia the first gold coins were produced. Later Greek and Roman coinage unify the Mediterranean region as one giant free trade zone.

 

McWilliams history is not dry. He introduces us to Johannes Guttenberg of printing press fame who was quite the scoundrel. One of the original users of his new technology was the Catholic Church where the printing press automated the production of indulgences which brought in great wealth. Calligraphy was out and printing was in. He also tells us that much of the church land in Europe came from the foreclosing of mortgages of the nobility. We also witness John Law’s Mississippi Bubble in France which cratered the economy and made banking a scandalous profession where the name bank was not used for years.

 

There is also an interesting vignette on James Joyce, who while living in Trieste owned a movie theater and later owned one in Dublin. The great writer was from immune from the temptations of money.

 

Gold plays a key role in the history of money. It was widely used for centuries as the coin of the realm. For example, the Florin gold piece of the Florence Republic was widely circulated for three hundred years. However, over time gold backed paper notes were used in place of physical gold thereby creating the gold standard.

 

McWilliams is a critic of the gold standard because it places the economy in a straitjacket by limiting the supply of money which, in his opinion, slows economic progress. When money is easy, but not too easy to cause inflation, the way is open for all kinds of invention and innovation. He believes that the gold standard stifled innovation and thus progress making him a strong proponent of the central bank managed (fiat) currencies we have today. Of course, fiat currencies require a high degree of trust in the issuing authority. Without that its value craters.

 

Here, I think, he goes too far. Economist Robert Gordon makes a convincing case that the bulk of economic progress that we have today arose from 1870-1940 where for almost all of that period the gold standard reigned supreme. (See: Shulmaven: My Amazon Review of Robert J. Gordon's "The Rise and Fall of American Growth" ) Think automobiles, electricity, telephones, indoor plumbing, aircraft and radio, for example. I would note that in 1879 the year the U.S. returned to the gold standard both the incandescent light bulb and the telephone were invented and over in Germany the internal combustion engine was invented and in the 1880’s the U.S experienced a record railroad building boom. It is hard to make the case that the gold standard stifled progress. What did in the gold standard were the huge distortions caused by the financing of World War I and the subsequent battles over reparations and inter-war debts.

 

McWilliams argues that money subjugated the people under colonial rule from 1600- 1960. That was certainly true of Belgium’s barbarism in the Congo caused by the need for rubber to make bicycle tires at the turn of the 20^th Century. Those tires were invented by the Irishman John Dunlop. However, Latin America was liberated in the early 1800’s and long-term economic growth in that entire region was hardly stellar.

 

McWilliams has the U.S. leaving the gold standard in 1936; it was, in fact, 1933. He has the United States returning to the gold standard in 1873; it was 1879. In 1873 the U.S. started the process of returning to the gold standard but wasn’t fully realized until the fulfillment of the Resumption of Specie Act in 1879. My quibbles aside, McWilliams has written a very lively book on what makes the world go round.