The Turning Point in the Election

History will likely record that October 27th, the date of Trump’s Madison Square Garden rally, was the turning point in the 2024 presidential election. The vitriol he spilled that night sent the message, “enough is enough.”

Something similar happened on September 11, 1941 when America First leader Charles Lindbergh made a viscous antisemitic speech in Des Moines, Iowa. It was widely criticized and signaled the end of his organization.

Put very bluntly, Trump lost the election with his Madison Square Garden ego trip.

My Amazon Review of Graham Moore's "The Wealth of Shadows"

 Economic Warfare

Oscar winning screenwriter Graham Moore (“Imitation Game”) has written an international economics book in the guise of an historical novel. Moore’s topics involve America’s economic war against Germany prior to our direct entrance into the war in December 1941 and the need to establish a postwar economic architecture that would avoid the foibles of the interwar years. The idea of economic warfare has relevance to today given Russia’s invasion of Ukraine and ongoing trade issues with China.

Moore’s protagonists are Minnesota tax attorney Ansel Luxford and his wife Angela who end up working in Washington D.C. in 1939. Moore goes to work for senior Treasury advisor Harry Dexter White in a super-secret group dedicated to disrupting the Nazi economy and Angela who finds a job as a clerk in the F.B.I. All of the characters in the book are real people and Moore lets the reader know where his account diverged from the historical record. The group initially fails in preventing Brazil from exporting iron ore to Germany largely because of

State Department opposition led by the Nazi sympathizing Assistant Secretary of State Breckenridge Long. Long also worked tirelessly to prevent Jewish immigration to the United States.

 

After the initial failure with Brazil, the group succeeds in freezing German funds in the United States, comes up with the cash and carry scheme to allow France and England to purchase war materials from the United States and accurately predicts that Hitler would have to invade Poland because the German economy was based on continuous plunder.

 

There is much dialogue between British economist and treasury aide John Maynard Keynes and Harry Dexter White. Most of the dialogue is derived from written communications between them. It is no secret that these two did not get along and had serious differences of opinion. This came to a head at the Bretton Woods Conference in 1944 where Keynes backed his proposed international currency, the Bancor, while White succeeded in having the gold convertible U.S. Dollar as the core of global finance.

 

We don’t find out until the very end that Harry Dexter White was all along a Soviet spy. Ansel and Angela discover this when they witness a “dead drop” in the New Hampshire woods outside of the conference.

 

Moore utilized the works of Adam Tooze in explaining Nazi finance, Zachary Carter on Keynes’ views on the economics of global peace, and Benn Steil on the Bretton Woods Conference. He also threw in for good measure a vignette on one of the members of the team buying a used car which highlighted the role of information asymmetry that won George Ackerlof the Nobel Prize.

 

My few qualms about the book are that Moore seems to tilt too much towards modern monetary theory in explaining how the U.S. and Britain financed the war and sets Lindberg’s infamous Des Moines speech in 1940, instead of 1941. Notwithstanding these qualms, Moore offers us an easy way to understand some of the history of World War II and the economics behind it and it highlights the career of the hitherto anonymous Ansel Luxford who was in the room where much history was made.

For the full Amazon URL see:  Economic Warfare (amazon.com)

The Unravelling

 

The world as we have known it for the past 30 years is over. The era of low inflation, ever-falling interest rates, ever-rising stock prices, globalization, and geopolitical stability among the major powers is unravelling. Russia’s invasion of Ukraine has signaled that a new Cold War is upon us and making things worse was the Xi-Putin communique at the Beijing Olympics which marked the beginning of a renewed authoritarian alliance against the West. What this means is defense spending is going to ramp up bigtime with inflationary consequences.

 

The COVID pandemic has taught us that globalization and just-in-time inventory processes have made supply chains far more fragile than we had thought. As a result, higher buffer stocks and the moving of production closer to final demand will increase economy wide costs.  The inflationary process is being exacerbated by the rush to decarbonize the economy with its attendant underinvestment in oil and gas.  As they say, short term pain for long term gain. We are also relearning that reckless fiscal and monetary policies can bring about the high inflation we are now experiencing. It seems that Milton Friedman and his ideas about money are being resurrected from the dead.

 

Domestically there are too many eerie parallels to 1940 America where the Charles Lindberg America First group linked up with the Communist Party to oppose U.S. intervention in support of beleaguered England. Just the other day showboating lefties Alexandra Ocasio Cortez and Cori Bush linked up arm and arm with the right-wingers Paul Gosar and Matt Gaetz seeking Congressional preauthorization before sending troops in support to Ukraine, a move that President Biden said is off the table. And, of course, we have Tucker “Tokyo Rose” Carslon singing Putin’s praise every night on Fox.

 

This witch’s brew means inflation will remain higher for longer, a secular bear market for bonds, a very volatile stock market and as ugly as our politics are today, it will get worse.