GUALFIN, ARGENTINA – “U.S. stocks fall on Trump talk…” began a headline at Bloomberg. Or it may be Trump action. We had already counted six major campaign promises – including no O’care repeal and no “America First” foreign policy – already buried (some for the better).
A bunch of campaign promises get the MOAB treatment… A great many theories have been proposed to explain Trump’s recent series of u-turns: 1. he is in thrall to the Deep State because he always was, or because he is blackmailed; 2. he plays a deep, Machiavellian game, and the strike on Syria and other policy reversals are just temporary reversals to get the media and the people promoting the story that he is a pawn of Putin off his back; 3. he simply reacts impulsively to situations as they develop, without even considering whether his actions are in line with his promises. Perhaps he was replaced by an android?
Cartoon by Nate Beeler
Then came four more major policy reversals on Wednesday. Seeking Alpha reports:
In a single day, President Trump appeared to reverse his positions on no fewer than four key pledges that arguably led to his election victory.
Trump told WSJ [The Wall Street Journal] yesterday that China is no longer a currency manipulator, he respects Janet Yellen and perhaps could nominate her to another term leading the Fed, he would support the Ex-Im [Export-Import] bank after previously saying he would shut it down (good news for the likes of GE and Boeing), and NATO was no longer obsolete since it is fighting terrorism.
In the same interview, Trump said he believed the dollar was “getting too strong,” sending the dollar lower and gold higher.
In a way, this is good news. “The Donald” is doing the same things, more or less, that anyone else in his position would have done. He is doing what the insiders want.
And now that Team Trump and the Deep State are lined up, we can get back to business. No need to focus anymore on day-to-day politics; the program is the same as it has been for the last 30 years.
Every government is a conspiracy of the few against the many. Call it communism, socialism, or liberalism… “divine right”… or “dictatorship of the proletariat”… or “Make America Great Again” – it hardly matters.
This quote (and variations thereof) has been ascribed to at least five different people, so it is not certain who actually said it first. It is the kind of idea that may have occurred to several people independently, mainly because it is so obvious. If one looks at historical political cartoons, one quickly realizes it has been a recurring complaint ever since elections were first held.
Photo credit: Jill Posener
The program is the same: Insiders use the government to take power, status, and money from the great mass of outsiders. What matters from the point of view of the average person is not what you call it, but how much of it there is.
The less the better. The government that governs best, as Jefferson put it, is the one that governs least.
The key difference between the insiders and outsiders is how they do business. Common folk do win-win deals with each other – trying as best they can to earn a living.
The insiders trade in win-lose deals… sweetheart contracts, taxes, wars, asset confiscations, financial repression. artificial interest rates, and restrictions and regulations that favor their industries. And all of it is backed, ultimately, by the power of the feds to do you harm if you don’t go along.
When we talk about win-win and win-lose deals, we’re not talking about the outcome. We can never know how a deal will turn out because we can never know the future. We’re talking about the deal at the outset.
When two people in the Main Street economy make a deal – it could be as complicated as a merchandising contract or as simple as buying a quart of milk – each party to the deal must believe he will come out ahead. Otherwise, he wouldn’t do the deal. Win-win.
Demonstration in favor of free trade in London in the 1840s. There were pro free trade demonstrations in Spain in the late 1860s as well. Apparently there were times when people actually understood that voluntary exchanges are always a win-win, and that this fact is not magically altered by the existence of national borders.
But when the feds impose a new tax, drop a bomb, or write a regulation, they are forcing a bad deal on people. The manufacturer of the bomb may make a profit, but the people on whom the bomb is dropped have no choice but to accept it. Win-lose.
The bomb takes time and resources to build – destroying wealth that could be used for other things. When it explodes, it destroys even more wealth.
The common, civilized man of the Main Street economy is a maker. He has to give in order to get. His boss, his customer, his client – he has to satisfy them or he will get nothing.
The insider is a taker. He may toil from sunup to sundown, too, but the fix is in. Like a TSA agent or an EPA inspector, he gets his money whether he does anything useful or not. No need to meet a payroll, provide a real service, or satisfy a demanding customer.
A cartoon from 1917 – there is nothing new under the sun…
Cartoon via vetfriends.com
So the measure of happiness (and wealth… though it doesn’t have to be financial wealth) in a society can be expressed simply as:
S (satisfaction) = RV (real value) of w-w – w-l
…all of which merely sets the stage for an observation.
Trump was right: The way to make America great again is to “drain the swamp” of all those win-lose deals imposed on them by the insiders. But now that we see that Mr. Trump is working with the insiders rather than against them – pumping in water, not pumping it out – we can see, faintly, what happens next.
Because the insiders never know when to stop. The feds control the system. And the insiders control the feds. They are like ticks on a dog. Collectively, they may know that if they keep draining the poor dog’s blood, the animal will drop dead, and they will all have to find a new home.
But individually, none of them has an incentive to stop sucking. They take, take, take… until something gives. Historically, the only way the insiders have been shaken off is by catastrophe. War, conquest, bankruptcy, revolution, or plague. Take your pick.
Image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.