American Politics has gone Batshit Crazy

On the eve of the 250^th anniversary of the signing of the Declaration of Independence, American politics has gone completely batshit crazy. Where the Republican leadership spent millions of dollars only a few weeks ago pillorying the highly flawed Texas Attorney General Ken Paxton in Senate primary, they are now falling over themselves to support him. It no longer matters that he has been investigated for securities fraud, been impeached by his own party and that is wife is divorcing him over his adultery.

 

On the Democratic side leading Democrats continue to support Graham Platner, their preferred Senate candidate in next week’s Maine primary. Those leaders choose to ignore the fact that Platner is a Jew-hating neo-Nazi who has a habit of sexting a half dozen women while still being married. Several years ago, Anthony Weiner’s New York City’s mayoralty campaign collapsed over his infamous dick-pix.

 

What is going on? It seems that the hatred of MAGA-Republicans for their Democratic counterparts overwhelms any sense of decency and the Democrats hatred of the MAGA-Republicans, if anything, is greater than the Republican hatred of them. Of course, the polarizer-in-chief, Donald Trump has set the tone for the divisions in our land. However, I would caution to note that Trump is the product of something that has been brewing in our politics for a long time.

 

My guess is that the infighting we are now witnessing is reminiscent of the religious wars of the late Middle Ages. Thus, if we are in a religious war where politics has substituted for religion, compromise is impossible. Recall that our founders wanted to separate religion from the state, but the fanatics in both parties are now making that difficult causing our founders to turn over in their graves.

The Redistricting Melee

Donald Trump started the redistricting melee by calling on Texas to undertake an unprecedented mid-census congressional redistricting to create five additional Republican seats. California Democratic Governor Gavin Newsom responded in kind by calling a successful referendum to redistrict California to create an additional five Democratic seats and the partisan war was on. It came crashing down for the Democrats in Virginia this week when their Supreme Court ruled their redistricting referendum unconstitutional. That plan would have created four more Democratic seats. Along the way Trump unseated candidates in Indiana's Republican primary that opposed his redistricting plan for the state.

Then of a sudden the U.S. Supreme Court declared parts of the Voting Rights Act of 1965 unconstitutional paving the way to redistrict a host of Black (Democratic) seats across the South. Tennessee and Louisiana have already acted. Further, by 2028 elections there will be a raft of redistricting across Democratic and Republican states. I don't know who the ultimate winner will be, but I do know the American voter will be the loser. Simply put voters should choose their politicians, not the other way around.

Meantime after being down in the dumps all year, the Republican Party now has some spring in its steps. To me their optimism and the Democrats pessimism is premature. Why? In a wave election, and if there is to be a wave, it will be the Democrats that sweep and instead of helping, redistricting will hurt because it dilutes a party's strength where it was presumably strong.(See: https://shulmaven.blogspot.com/2018/07/gerrymandering-wont-save-republicans-in.html ) Second, I would hope that the electorate gives a big F-You to both parties by voting Republican in California and Democratic in Texas. It maybe too much to hope for, but I fear that both parties are now circling the drain. We need something new.

"Millions for defense, but not one cent for tribute"

 The American delegation to the Iran War peace talks in Pakistan this weekend should take to heart the words of Congressman Samuel Sewall of Massachusetts in 1798 when he shouted out “millions for defense, but not one cent for tribute.” Those words were said in response to French Foreign Minister Talleyrand’s request for a bribe before negotiations would begin to end the quaisi-naval war with France in the so-called "XYZ Affair." 

The United States was only 24 years old and was standing up to the great power of France. We can do no less today with respect to Iran. Simply put, the delegation consisting of Vice President JD Vance, Jared Kushner and Steve Witkoff should put the Iranians on notice that no tribute will be paid by ships passing through the Strait of Hormuz.” Full stop. 

 

The delegation should also remember the first words of the Marine hymn, which begin with “from the halls of Montezuma to the shores of Tripoli…”  Tripoli being the focus of the Barbary Pirate Wars of the early 1800’s. (See:https://shulmaven.blogspot.com/2026/04/the-purim-war-part-4-cease-fire-fog.html) President Thomas Jefferson had no qualms about fighting the Barbary Pirates and certainly the Trump Administration should show the same fortitude in fighting the modern-day Iranian pirates.

The Purim War - Part 4, The Ceasefire Fog*

The rally in the stock and bond markets and the collapse in oil prices is signaling that the Purim War is all but over. That, indeed, may be true, but we are a long way from a final settlement and there is a nontrivial chance that fighting will resume.  In fact, both sides have already reported ceasefire violations. We will know more this weekend when the U.S. and Iranian negotiators meet in Pakistan.

In the meantime, ships aren’t traversing the Hormuz Strait, and it looks like Iran wants to set up a tollway. Should that happen, it would represent a severe challenge to “freedom of navigation” on an international waterway, a concept that the U.S. went to war three times in its history. (War on the Barbary Pirates, The War of 1812, and World War I) If Iran prevails on this issue, it could rightly claim, that despite its enormous tactical defeat, it won a significant strategic victory enabling it to hold the global oil market hostage.

Although President Trump has stated that Iran will give up its enriched uranium and end its nuclear program, this hasn’t been confirmed by word and deed by the Iranians. Remember that ending the Iran nuclear program was the primary goal of the war to begin with. We will learn much on this point in a few days.

 

As we previously noted Israel would take the opportunity to take care of its unfinished business in Lebanon. ( See: https://shulmaven.blogspot.com/2026/02/the-purim-war.html ) As we speak Israel is pounding Hezbollah in Lebanon and both the Iranians and the Pakistanis are saying Israel’s war in Lebanon are part of the overall cease fire. Both the U.S. and Israel believe that it is separate issue.

 

Thus, the way I see it, the war is far from over with the ultimate winner being determined by the Hormuz and nuclear issues.

 

*- See: https://shulmaven.blogspot.com/2026/03/purim-war-part-3-end-game.html

Purim War- Part 3, The End Game*

The end game in the Iran War has begun. By attacking Israel’s Dimona nuclear facility and the Temple Mount, the home of Islam’s Dome of the Rock holy site, Iran has demonstrated it has become desperate. To add an exclamation point to it, Iran fired off an intermediate range ballistics missile (IRBM) at the Diego Garcia airbase 4,000 kilometers away to prove it had a missile capable of reaching western Europe. Instead of scaring off Europe, it will bring NATO around to giving full support to our efforts to reopen the Persian Gulf to navigation.

 

The existence of the Iranian intermediate range missile represents a proof text of the existence of the imminence of the Iranian threat.  Simply put, Iran’s strategy is now to take down everything around it as the price of its regime collapsing. Make no mistake, Iran is being run by a death cult thereby making it less likely that the Mullahs would seek an offramp.

 

In response President Trump has threatened to destroy Iran’s electricity infrastructure if it fails to reopen the Strait of Hormuz by early tomorrow evening. The first round would likely be done with an electro-magnetic pulse weapon used in Venezuela that would not permanently destroy the facility. That along with the Saudi move to kick out the Iranian embassy indicates that by early next week the entire gulf will be ablaze with tit -for- tat Saudi/Iran attacks on each other. In this environment the Persian Gulf will be closed to all.

 

Needless to say, the oil and stock markets will reflect this turn of events with oil prices moving sharply higher and stocks sharply lower.  

 

·       See: Shulmaven: The Purim War and Shulmaven: The Purim War: Part 2 )

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.

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.

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.

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.

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.

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 Josh Dawsey's, Tyler Pager's. and Isaac Arnsdorf's "2024: How Trump......."

Slow Motion Train Wreck

Washington journalists Josh Dawsey, Tyler Pager, and Isaac Arnsdorf have written a personality-driven account of the 2024 presidential election. Starting in 2022 they take us behind the scenes of the Trump, Biden, and later Harris campaigns for the presidency. There is an inevitability to it all, but after all the book is an after the fact accounting of the election.

What the book lacks is a review of the structural backdrop to the election. There should have been tables of polling data on the relative popularity of the candidates along with the electorate’s view on whether the country was on the “right track” or the “wrong track.”

Much of the ground here was discussed in “Original Sin,” but that book ended with Biden dropping out of the race. (See: https://shulmaven.blogspot.com/2025/06/my-review-of-jake-tappers-and-alex.html) Both books are consistent in the view that Hunter Biden’s legal problems weighed greatly on Biden. The authors are sympathetic to Harris, but they do note her many unforced errors, specifically her failure to fully rebut her 2020 positions on hot button social issues, her failure to separate herself from Biden and picking the lackluster Tim Walz as her VP selection.

 

I learned much about the Trump campaign and how Suzie Wiles brought a modicum of discipline. She was instrumental in neutering Ron DeSantis, her former boss and the real rival to Trump. I also didn’t realize how important Steve Witkoff and Laura Loomer were to Trump. Witkoff was his consistent consigliere and is now a special ambassador to the Russia/Ukraine and the middle east. Loomer, despite being somewhat of an unguided missile, rallied support for Trump before and during the campaign.

 

The book also reinforced my view of Ron Klain, Biden’s chief of staff and campaign honcho. Klain instinct was always to seek support on the Left. This was true post-debate and well before, when he was in charge of policy. In my opinion it is was his predilections that kept Biden tacking Left while in office which, in my view, doomed his presidency.

 

This authors give us a real fly on the wall perspective to both campaigns, but I said at the outset, a full review of the structural parameters of the race would have been helpful.

Israel and Iran: The Fog of War

 With Iran rushing headlong towards nuclear weapons, last Friday Israel engaged in a pre-emptive strike on Iran’s nuclear programs and its leadership exactly one day after President Trump’s 60-day deadline for a negotiated settlement expired. Iran immediately counter-striked with a barrage of missiles on Israel’s population centers. Since then, the world has been watching successive Israeli air raids on Tehran and Iranian missile attacks on Israel.

 

To Israel this is a war of necessity. Iran has promised to destroy Israel since the Ayatollahs came to power in 1979. Over the years Iran built up its proxy fighters in Gaza, Syria, Lebanon, and Yemen. However, with the destruction of Hezbollah in Lebanon, the removal of the Assad regime from power in Syria, and the degrading of Hamas in Gaza, Israel, for the first time, had a free hand to strike Iran.

 

Israel’s goal is to eliminate Iran’s capability to develop nuclear weapons. To that end it has decapitated much of the program’s leadership and has degraded parts of its facilities. However, Iran’s major uranium enrichment facility is buried 1500 feet below ground at Fordow. It is not clear that Israel has the ability to take out Fordow, which might require U.S bunker-busting bombs. If Fordow remains operational, the war would be a failure.

 

As of this writing it is unclear whether the U.S. will attack Fordow and risk a much wider war in the middle east. Alternatively, if the U.S. does not act, the risk of a nuclear Iran would be far greater. Absent Israel pulling a rabbit out of the hat, the ball is in Trump’s court.

 

What happens at Fordow will determine the course of the war and that will not be televised. Without U.S. support can Israel use special forces in a very risky operation and/or taking out the above ground infrastructure (electric power, water, ventilation) by air that keeps Fordow operational remains to be seen. We know Israel has a presence on the ground in Iran, but it is likely inadequate to overcome the heavily guarded and forewarned Fordow site. Remember, Israel cannot conquer Iran, it is pursuing a limited goal of removing Iran’s nuclear capability and that has to be done quickly because Israel doesn’t have the resources for a long war.

Stay tuned.

My Review of Jake Tapper's and Alex Thompson's "Original Sin"

The Tragedy of Joe Biden

Joe Biden was elected president in 2020 on his being both a moderate and a transition candidate who would serve one term. He failed on both accounts by swerving to the Left under the aegis of Bernie Sanders and Elizabeth Warren and then by declaring himself a candidate for re-election in April 2023. Little did the voters know that as early a 2015 Biden was on the road to cognitive decline that rapidly accelerated in 2022. Much has already been written about reporters Jake Tapper and Alex Thompson, well-sourced, albeit largely anonymously sourced book, so I will limit my comments here.

 

My sense is that had there not been the COVID pandemic in 2020, Biden would have lost. Why? He would not have been able to handle the stress of a national campaign. Because of COVID he ran from his basement and the public hardly saw him. Once elected he was placed in a cocoon by what Tapper and Thompson characterize as the politburo which consisted of four of his top aides. They included Mike Donilon, Steve Ricchetti, Anita Dunn, and Bruce Reed, all of whom had family members working in the administration. Those four along with wife Jill controlled access to Biden and controlled the flow of information to him. For example, Biden never saw polls in Spring 2024 showing how badly he was doing.

 

On many occasions Biden failed to remember the names of long-time acquaintances and because his cabinet and congressional leaders hardly saw him, they were shocked when he appeared distant and fragile at formal events. Indeed, Biden was forced to use a teleprompter at intimate fund-raising events. This all came home to roost when the whole country witnessed his disastrous performance at the June 27^th debate with Donald Trump.

 

In fact, we were forewarned with the Hur report on Biden’s unauthorized possession of classified documents. Robert Hur declined to prosecute because he though a jury would find Biden “a sympathetic well-meaning elderly man with a poor memory.” For that statement Hur was flamed by the politburo, while all of them knew it was true. To be sure, Biden and his inner circle were motivated by the fear that he and he alone could defeat Trump. At the end of the day, they ended up with the worst possible world; Trump being elected and Biden in disgrace.

 

Tapper and Thompson are especially good at describing an almost daily tick-tock of the post-debate events leading up to Biden’s withdrawal from the race. Along the way the politburo was kicking and screaming to keep Biden in the race, but ultimately, they were forced to accept the reality of a debacle in November.

 

Although I think Tapper and Thompson have written an important and very readable book, there are three failures that come to mind. First, far more blame should be put on the compliant press in covering up Biden’s cognitive decline. Second, Jill Biden’s role in this affair in this reading is limited. She knew, but my guess is that she loved the trappings of power. She loved being the first lady and being on the cover of Vogue magazine four times. Third, at a time when foreign policy crises were happening almost daily, there is no discussion as to what Biden’s foreign policy team thought of him. Biden might not have seen his cabinet that often, but he was in constant contact with Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. Different decisions might have been made had we a more alert president. 

Debt, Tariffs and Stocks

On Friday Donald “The Tariff Man” Trump struck again with his new 50% tariff on EU products scheduled to take effect on June 2^nd and a new 25% tariff on I-Phones.* (See: https://shulmaven.blogspot.com/2025/02/the-tariffman-strikes.html ) Earlier the House of Representatives passed its budget reconciliation bill that called for continuing the 2017 tax cuts plus further tax cuts along with spending cuts that would increase the national debt by about $3 trillion over the next ten years with the higher deficits front-loaded into the earlier years.

 

However, not counted in the budget calculations is the revenue coming from the tariffs. The current run rate is $250 billion/year, and a 10% universal tariff would yield in excess of $300 billion/year, which would totally offset the cumulative deficit of the reconciliation bill. Essentially Trump will be using tariffs to offset his tax cuts. Because there is little new stimulus in the tax bill and the drag from the tariffs is new, the economy will stall out. (See: https://shulmaven.blogspot.com/2025/03/the-recession-of-2025.html )

 

Nevertheless, the bond market evidenced its unhappiness by sending the yield on 30-year U.S Treasuries over 5% for the first time since 2007. The bond bear market is in full force. ( See: https://shulmaven.blogspot.com/2025/01/we-are-in-early-stages-of-bond-bear.html )                                                                                     Reflecting a run on U.S. assets, the dollar index declined 3% from just two weeks before and it stands 1% above its April low and down 11% from its January high.

 

Until last week stocks were enjoying a powerful 20% rally off the April lows. Even after last week’s decline, the S&P 500 was trading 22.3X the $260 earnings estimated for this year. That equates to an earnings yield of 4.48%, equal to the 4.51% yield on 10-year treasuries. Put simply, the equity risk premium has vanished.

 

A narrow equity premium might be justified if the economy were about to experience a growth spurt. On the contrary, we are now in the beginning of a stagflation era. Growth will be slow, and inflation will be higher than what we have been used to. (See: https://shulmaven.blogspot.com/2025/04/regime-change-end-of-economy-as-we-have.html ) Thus, if anything, we will soon be entering and era of high rather than low equity premiums and the S&P 500 will plumb new lows before the year it out. 

*- Subsequent to this post Trump announced the deadline for the new 50% tariff on EU products was postponed to July 9th.  I guess someone in the White House read this blog. HaHaHa

Regime Change: The End of the Economy as we have Known it

 “There are decades where nothing happens: and there are weeks where decades happen.”

                       Attributed to V. I. Lenin

In the short span of twelve weeks, Donald Trump has undone the Bretton Woods monetary order established in 1944, the GATT free trade order of 1947, and the NATO collective security order of 1949. (See: https://shulmaven.blogspot.com/2018/02/my-amazon-review-of-benn-steils-marshal.html) As a result the world is now facing a simultaneous geopolitical and economic crisis and it is no surprise,  that stocks and especially treasury bonds and the dollar have sold off. (See: https://shulmaven.blogspot.com/2025/04/a-broken-stock-market-and-broken-trust.html) Simply put, the old world order is gone, an there is nothing, as of yet, to replace it. The transition will be painful.

Those who expect that the Trump tariffs are negotiating tactic will be sorely disappointed. Trump needs the revenue to finance his tax cuts, and the Democrats only differ with Trump as to the way his policy has been conducted. They still hope to reclaim their union support by being pro-tariff and they too need the revenue to finance an ever-larger welfare state. The era of free trade, as we have known it, is over.

Three years ago, I wrote that the United States was about to enter a new 13-year economic cycle. I noted:

“My guess is that we are at the very beginning of new thirteen-year cycle with unknown consequences. I would speculate that the next thirteen years will bring with it a much higher rate of inflation than we have been used to, a multi-year bond bear market and a partial deglobalization of the economy caused by local politics, supply chain issues and geopolitical tensions. To me the big question is whether this cycle will bring with it a stagflation or a high cap-ex/high inflation economy with a cap-ex boom coming from the in-shoring production and energy transition. As they say, time will tell.” ( See: https://shulmaven.blogspot.com/2022/05/the-useconomy-is-entering-new-thirteen.html)  

Although it has taken a bit longer to play out, we are now in the midst of it and perhaps something much more. We are likely entering an eighty-year super cycle in what Neil Howe has called a “fourth turning” which will involve economics, politics, values, and the way we relate to each other in society. (See: https://shulmaven.blogspot.com/2023/09/my-review-of-neil-howes-fourth-turning.html)  This is far bigger than my 13-year cycle in that it encompasses six 13-year cycles that began in, not coincidentally 1945.

If this is close to correct, then we are now entering unchartered waters. The stock market and economic histories that we have been used to over the past 80 years may no longer be relevant in understanding the future. Instead of ever rising share prices we may now be in an era where stocks go sideways for an extended period of time. I would note that between 1924-1949 the Dow Jones Industrial Average traded in a range of between 100-200 with the significant upside exception of 1928-30 and the significant downside exception of 1931-1933. For example, in 1927 the high in the Dow was 201 and which was nearly identical to that recorded in 1949 and the 1929 high was not exceeded until 1954. The equivalent going forward would be for the S&P 500 to trade in a broad 3500-6500 trading range over the next several years.

The recent action of the bond, currency and stock market is indicative of a sea change in the markets. Instead of rallying in a time of turmoil both the treasury bonds and the U.S. Dollar have sold off. Indeed, the dollar has declined 9% since the end of February. Simply put foreigners are losing trust in the U.S. Dollar and with 18% of U.S. stocks held by foreigners the selling is only now beginning. I would say the same thing for foreign holdings of U.S. real estate.

Over the weekend the Trump Administration announced that it would reduce the Chinese tariff of 145% to 20% on smart phones, computers, and other electronic products. That action has lifted the Sword of Damocles hanging over Apple. This suggests a major relief rally for Apple and the stock market as a whole, but what multiple can you put on company and the stock market as whole whose share prices are subject to the whim of one very unstable man? I would sell the rally.  

A Broken Stock Market and Broken Trust

 The headline read:

“Selling Swamps Exchange

Leading Issues Tumble

As Wall Street Assails

The New Tariff”

This is not from yesterday; it is from the front page of The New York Times dated June 17, 1930. The day before President Hoover announced he would sign the Smoot-Hawley Tariff Bill and stocks responded with an 8% decline in the Dow Jones Industrial Average. Responding to President Trump’s tariff announcement the S&P 500 declined by 9% last week, wiping out $6 trillion in market value. Simply put, just as in 1930, high tariffs are poison for the global economy. And to add insult to injury, the Trump tariffs are higher than Smoot Hawley.

My sense is that the decline in stock prices is not over. In the week leading up the October 19th,1987 20+% crash in stock prices, the S&P 500 witnessed a similar 9% decline. As we wrote last month, we believe that the recession of 2025 has now begun. ( See: https://shulmaven.blogspot.com/2025/03/the-recession-of-2025.html) In response to the tariff announcement and the wealth destruction that it caused, consumption and investment are freezing up and as a result of the DOGE cuts, government spending is heading lower. The recession is baked in the cake.

Adding to the unease is that in less than three months the Trump Administration has broken the trust in America with respect to our military alliances and our reliability as a trading partner. What has taken decades to build up has been destroyed in a few months. Further, even if Trump tries to repair the damage, his administration is staffed by D and F players who are incapable of playing on the global stage. Commerce Secretary Howard Lutnick, trade advisor Peter Navarro and Economic Council Director Kevin Hastett hardly inspire confidence. 

Although Scott Bessent is potentially a B or an A player, he was, according to Bloomberg News, not in the room when the tariff schedule was decided upon. Indeed, Secretary of State Marco Rubio has proved himself to be so much of a Trump sycophant that would be incapable of healing the breach with our allies and Secretary of Defense Pete Hegseth is clueless.

This is a far cry from the team Nixon had when he broke the dollar’s link to gold and devalued it. Nixon had Secretary of State William Rogers and Secretary of the Treasury John Connally, neither of whom were A players. In the background, however, were National Security Advisor Henry Kissinger and Under Secretary for Monetary Affairs Paul Volcker. ( See: https://shulmaven.blogspot.com/2021/07/my-amazon-review-of-jeffrey-gartens.html) During the 1987 stock market crash Ronald Reagan was guided by the expert advice of George Schultz and James Baker, both consummate A players. Thirty years later George W. Bush had the steadying hand of Secretary of the Treasury Hank Paulson during the financial crisis of 2008 and Obama benefitted from the advice of Tim Geithner his treasury secretary.

As a result. It is hard to see how we are going to get out of this mess with minimum damage. The easier way would be for Trump to take that advice of former Goldman Sachs CEO Lloyd Blankfein. He tweeted the other day:

Lloyd Blankfein

@lloydblankfein

“The switchboard at the WH must be burning up with gov’ts trying to surrender in this trade war. Why not give them a chance? Make the 10pct min tariff immediate but defer the “reciprocal” part 6 mos. Take the win! The Prez said he’d make us tired of winning…I’m there “

That would certainly give the markets some breathing space. The much harder way is for the Republicans in Congress to become so fearful of the midterm elections that they break with him on the tariff issue. To get there will require a lot of carnage in the markets. Similarly, a court action to declare Trump’s actions illegal will take time.

Finally, we have to remember that the Trump Administration needs the revenue from the tariffs to fund its tax cuts and to protect American industry.  A 10% tariff would raise $300 billion/year and a 20% tariff $600 billion/year. Tariffs aren’t going away. So, my guess is that when the markets open tomorrow, it won’t be pretty.

The Week the Wheels Started Falling Off the Trump Train

 Last week the wheels started falling off the Trump train. We learned from Atlantic editor Jeffrey Goldberg, who some how was patched into a national security call on the messaging Ap Signal where he listened into a haphazard discussion on the imminent attack on Houthi bases in Yemen. To have such a discussion on Signal was a clear breach of national security by the principals involved who included National Security Advisor Michael Waltz, Vice President J.D. Vance, and Secretary of Defense Pete Hegseth. To add insult to injury, the principals lied about their conversation, only to be shown up by Goldberg, who published a transcript of the call. 

Also on the call was Trump’s envoy to Ukraine and the Middle East, Steve Witkoff. Real estate lawyer Witkoff committed the cardinal sin by listening in on the call from Moscow, where every normal diplomat knows everything is bugged by the FSB. Witkoff is a complete amateur in diplomacy, and he is so far in over his head. Further, Putin and is Minister of Foreign Affairs Sergey Lavrov have been run rings around experienced American diplomats over the past two decades. Simply put, Witkoff is being taken to the cleaners. 

This affair, now called Signalgate, will have a lasting effect on the Trump Administration. If any the American people don’t forgive, it is incompetence. Joe Biden learned this the hard way with his chaotic withdrawal from Afghanistan.

Later in the week Trump announced 25% tariffs on imported automobiles and trucks with its obvious inflationary consequences. In my largely Latino gym, the leading topic of conversation were the auto tariffs, and their imposition is obviously feeding into inflationary psychology.

The week closed out with new data on the deflator for personal consumption expenditures, which for core goods and services in February came in at a higher than expected 0.4%. Inflation has not gone away, and my guess is that market hopes for rate cuts later this year will be quashed. Not surprisingly, consumer confidence in March plummeted to a three year low. 

Further unnerving the public’s mood was Trump’s attacks on Big Law. Two big law firms (Paul Weiss and Skadden Arps) caved into his threats of pulling security clearances and access to Federal buildings. Apparently, they were guilty of supporting anti-Trump efforts. Fortunately, three firms (Perkins Coie, WilmerHale and Jenner Block) successfully filed suit to halt his efforts at intimidation. I am sure that this did not go unnoticed by Chief Justice John Roberts, a veteran of Big Law firm Hogan and Hartson. This will not augur well for the administration when their appeals hit the Supreme Court.

The already weak stock market took notice of these events and declined 1.5% on week and it is now down 5% on the year. Remember Tariff Day is set for next week on Wednesday April 2nd. To close I would note that the day before Herbert Hoover signed the Smoot-Hawley Tariff Act of 1930, the Dow Jones Industrial Average declined by 8%.

Powell Gives Trump Tariffs the Benefit of the Doubt

 The stock market initially interpreted the Fed's actions this week as dovish in that despite the prospect of tariffs on April 2, the Open Market Committee maintained its guidance for two rate cuts later this year. Although Fed Chair Powell couldn't say it, what is going on is that he is giving the Trump's tariff policy the benefit of the doubt by calling the inflationary impact "transitory." 

What we witnessed is Powell at his political best. In effect he is saying the Fed will wait and see how the tariffs play out. If instead, he were more hostile to the tariffs, Trump would have come down hard on the Fed triggering a political fight Powell does not want. This way the Fed will wait to see how inflationary the tariffs will be and if they turn out to be malign the Fed will have the political ability to react to them.

Thus, in my opinion, the stock market's enthusiasm for the Fed's move is misplaced.

The Recession of 2025

This coming December the Business Cycle Dating Committee of the National Bureau of Economic Research will find that a recession began in the second quarter. Although there are clear signs that the economy is weakening, most observers believe that we are in a temporary growth slowdown. Moreover, you can’t see a recession in the most recent economic data. Therein lies the point I am trying to make. When a recession is in the data, it is too late to make a credible forecast, because the whole world would already know it. The task of a forecaster is to make a call when the data is ambiguous, not when it is clear. Of course, I along with many who called for a recession 2022 and 2023 were dead wrong.* Obviously, the forecasting community is gun shy.

My argument for a recession is based on the recent 10% decline in stock prices that will dampen consumer spending, the friction caused by the Trump tariffs that will raise prices, stall capital spending, and disrupt supply chains and government spending will decline making it pro-cyclical. It looks like we are about to relearn the very hard lessons of the 1930 Smoot-Hawley Tariff Act.  

At the start of the year the value of an expensive U.S. stock market was more that two times nominal GDP. As Keynes noted, “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

Moreover, I would suggest that the stock market decline is far from over. On March 5th I posted on LinkedIn that the high for the stock market was in. Steve Blitz of Lombard came back to me with the comment, “More critical is where is the low.” My sense is that the stock market and the recession will feed off each other that will send the S&P 500 down to the 4900-5000 level, making for a bear market-like 20% decline. We closed to today at 5600. 

Although it is hard to prove statistically my guess is that with 50% of consumption accounted for by the top 10% of income earners, the decline in stock prices will have a negative effect on consumer spending via the wealth effect. Consumption spending as a share labor income is very stable, not so for wealth.  Early signs of weakening consumption was highlighted by several airline executives mentioning a slowdown in air travel.

As far as supply chains go just think about the amount of steel and aluminum, now subject to a 25% tariff, which is used by the Ford F-150 truck and the Boeing 737 airplane. There may be domestic substitutes for steel, but not aluminum. The electric grid is troubled enough that it would be hard pressed to supply electricity to a new aluminum smelter.

Net Net. President Trump’s speculation that the transition to his “golden age” could be marked by a recession.

* I operate under the slogan "Often wrong, never in doubt."