Dave Smith: Will Trump Be Able To End The War In Ukraine?
At a recent pre-election speaking and podcast event, comedian and Libertarian political commentator Dave Smith expressed his view that it is very realistic that the next President Donald Trump could successfully negotiate an end to the Ukraine war.
Smith’s view is optimistic, as he articulated that he believes Trump’s expressed desire to end wars in Ukraine and Gaza is genuine. But Smith also laid out that much depends on who Trump puts around him in top national security positions. Below is the hard-hitting segment featuring the prominent commentator addressing the question: will Trump be able to end the war in Ukraine?
PBD: Will Trump be able to end the war in Ukraine?
Dave Smith: Yes, If he listens to Tucker Carlson, Bobby Kennedy, and Vivek Ramaswamy, but not if he picks Mike Pompeo, Liz Cheney’s pick for Defense Secretary, or John Bolton, Hillary Clinton’s pick for National Security Advisor pic.twitter.com/1f5kQZQEW4
Below are Dave Smith’s words from the segment on Trump and Ukraine below [emphasis ZH]…
“Why the hell are we even expanding our military alliance to Ukraine? And listen, Donald Trump always says that the war ‘never would have happened if I was president, and I would negotiate an end to this.’
And I gotta say I think he’s right about that. I don’t think the war would have happened if he was president – I think he will negotiate an end to it.
I don’t think he’s right that Hamas wouldn’t have attacked Israel if he was president – that seems kind of ridiculous to me. But he’s right: the Ukraine war could be over tomorrow if American wanted to negotiated a peace to it.
Vladimir Putin has been trying to the entire time…
Well the question becomes who does Donald Trump put around him? If Donald Trump puts Mike Pompeo, aka Liz Cheney’s pick for Defense Secretary… if he puts John Bolton, aka Hillary Clinton’s pick for national security adviser – then maybe not, maybe it doesn’t happen.
But if he listens to Tucker Carlson, and ‘Bobby’ Kennedy, and Vivek Ramaswamy, and all the smart people around him – then yes, he could negotiate an end to that war.”
The reelection of Donald Trump represents, if not the single greatest comeback in political history, certainly the largest middle finger ever shown to the smug, self-centered, superior-minded elitists who think the rest of us are garbage.
Of course, we didn’t need President Biden to call us “garbage” for everyday Americans to know that what we care about means nothing to the establishment. But Biden obliged anyway, and put an exclamation point to the final sorry week of Kamala Harris’ galling campaign.
You just can’t get any worse than “garbage” – or can you? Isn’t Nazi worse? After all, the Nazis killed 17 million people. If you include all the victims of fascism, you can get that number up to 20 million. But for some reason, the legacy media didn’t care when Harris and her surrogates repeatedly called Trump and his supporters Nazis or fascists.
You almost get the feeling that the left-leaning press despises Republicans as much as Biden, Harris, and the rest of the Democrats do. If you had any doubt, the totally bogus claim that Trump said he wanted to execute Liz Cheney was the last straw. He was making a perfectly valid argument that the former congresswoman would be less inclined to support wars if she had to fight in them. But apparently that was too sophisticated an attack for the news professionals who decided to lie about it. Instead, they maliciously claimed that Trump literally wanted to put Cheney in front of a firing squad.
Overall, the past three weeks have been instructive in just how little the nation’s elites in the media and politics respect average citizens, and just how much they think they can manipulate us into believing their lies.
It’s nothing new, but the latest iteration started on Oct. 13 when Kamala Harris began peddling the “enemy within” hoax, which would have voters believe that Trump had said he planned to use the military against his political opponents.
In fact, that never happened. Fox News host Maria Bartiromo interviewed Trump and said that Joe Biden doesn’t expect a peaceful Election Day. She asked Trump if he was expecting chaos that day, but she specifically asked about the impact of outside agitators, bringing up the case of an Afghan who was charged with a terror plot, and also mentioning Chinese nationals and criminals who had crossed the border illegally.
It was in this context that Trump said he wasn’t worried about outside agitators, but rather “the enemy from within,” meaning American citizens who might riot following the election, just as happened in 2016. He continued:
I think the bigger problem are the people from within. We have some very bad people. We have some sick people, radical left lunatics, and … it should be very easily handled by, if necessary, by the National Guard, or if really necessary by the military, because they can’t let that happen.
This turned into the closing argument of the Harris campaign, claiming that Trump had promised to unleash the military on his political opponents. It was yet another hoax by Democrats and the media, which is either incredibly stupid or incredibly dishonest. CNN’s headline was typical: “Trump suggests using military against ‘enemy from within’ on Election Day.”
Notice that Trump didn’t “suggest” using the military; he said that chaos could be averted “if necessary” by the National Guard or “if really necessary” by the military. He never suggested this was his plan.
The most obvious part of the lies told by CNN, Harris, and all the Democratic Party machinery was that Trump could do anything, anything at all, about Election Day violence. NOTE TO CNN: On Election Day, Joe Biden will be the president, not Donald Trump. In saying that “they can’t let that happen,” Trump was actually crediting Biden with the common sense not to let violence disrupt our most sacred democratic ritual of voting.
Yet for more than a week, Harris and her allies peddled this nonsense to convince voters that Trump is “unhinged, unstable and unchecked.”
Then, almost as though on cue, just over one week later on Oct. 22, Atlantic magazine editor Jeffrey Goldberg wrote a scandalous article that quoted anonymous sources as saying Trump had insulted the family of Vanessa Guillén, a Mexican-American soldier who was murdered in Texas. The article included a quote from Guillén’s sister praising President Trump for his kindness to the family, but Goldberg essentially pretended the quote didn’t exist. Instead he smeared Trump as a heartless exploiter.
Later in the same article, Goldberg quoted Gen. John Kelly, Trump’s disgruntled former White House chief of staff, as saying Trump had told him, “I need the kind of generals that Hitler had.”
This dubious old quote was dusted off and included in the article for only one reason – to give Kamala Harris and the Democrats and the talking heads on CNN and MSNBC more fodder for their “Trump is a fascist” narrative. Lots of White House staffers were ready to deny the Kelly story, but that didn’t matter to Goldberg. Let ’er rip.
And as further evidence of media collusion with the Harris campaign, the New York Times on the same day, Oct. 22, revealed an interview with Gen. Kelly in which he said that Trump “falls into the general definition of fascist” and “certainly prefers the dictator approach to government.”
This double whammy of remarks by Kelly gave Harris permission to expand her attack on Trump as a fascist, and it quickly became apparent that her campaign was going to replace “joy” with “fear” as the closing argument.
The media ran with this as a willing partner in the attempt to keep Trump out of the White House. And even before Trump held a historic rally at Madison Square Garden on Oct. 27, many news outlets drew bizarre comparisons to a 1939 pro-Nazi rally held by the German American Bund in an earlier iteration of the world-famous arena. Yes, that 1939 rally was an offensive anti-American gathering, but it had nothing to do with Trump’s rally in a different building 85 years later.
Moreover, the Fake News historians somehow missed the fact that in 1933, shortly after Adolf Hitler was named chancellor of Germany, the American Jewish Congress held a National Day of Protest in the same venue. The National Park Service, in its history of Madison Square Garden, writes that “After a day of fasting and prayer, more than 55,000 people flooded MSG III and the streets surrounding it for the largest rally. Jewish leaders, union presidents, politicians, and Christian clergy addressed the crowd. They denounced the Nazis and compared the persecution of European Jews to the terror of the Ku Klux Klan.”
The media somehow also missed the fact that there were Israeli flags and Orthodox Jews at Trump’s rally, along with two former Democratic presidential candidates, the richest man in America, a black congressman, and a variety of Jewish advisers. All that mattered in the long run was that rally organizers had invited an obscure insult comedian named Tony Hinchcliffe to open the show. Turned out Hinchcliffe lived up to his title and insulted a variety of people and ethnic groups, including Puerto Ricans.
“I don’t know if you guys know this, but there’s literally a floating island of garbage in the middle of the ocean right now. I think it’s called Puerto Rico,” he joked.
The media went nuts, claiming that Trump was racist because the comedian had insulted Puerto Rico. But that never made any sense.
Yes, it was an uncomfortable joke, one that seemed inappropriate in the middle of a political campaign where former President Trump has been working hard to build up his share of the Hispanic vote. But it was a joke, and though most in the audience had no idea, it wasn’t a random insult, but a topical one.
Puerto Rico has a trash problem thanks to a variety of causes, and it’s something a future president of the United States should help to resolve.
But the current president can’t be bothered. Instead of using the tasteless joke to bring attention to the plight of our fellow citizens in Puerto Rico, President Biden deflected attention away from the island and provocatively said “The only garbage I see floating out there is his [Trump’s] supporters.”
Which brings us full circle to the disastrous last week of the Harris campaign. As she lectured her would-be constituents during a speech on the Ellipse in D.C., preaching peace, brotherhood, and unity, her boss Joe Biden was in the White House behind her, telling a Zoom call that Trump supporters are “garbage.” You can’t make this stuff up.
The Democratic Party has been unmasked once again as the party of hypocrisy, insincerity, and smugness. Just as in 2016 when the MAGA base embraced Hillary Clinton’s description of them as “deplorables,” so too did the Trump faithful now begin to greet each other as pieces of garbage. When Trump descended from his jet in Green Bay and entered a garbage truck wearing a sanitation worker’s orange vest, he closed the deal with millions of voters who are tired of being ignored.
Don’t ever underestimate how much the establishment hates Donald Trump, but also, don’t ever underestimate how much everyday Americans hate the establishment. End of story.
* * *
Frank Miele, the retired editor of the Daily Inter Lake in Kalispell, Mont., is a columnist for RealClearPolitics. His book “The Media Matrix: What If Everything You Know Is Fake” is available from his Amazon author page. Visit him at HeartlandDiaryUSA.com or follow him on Facebook @HeartlandDiaryUSA and on X/Gettr @HeartlandDiary.
‘Trump-Quake’ Sparks Market Euphoria; Gold Dips As Dollar Rips
Where to start?
The ‘Trump Trade’ in stocks was a big winner…
Source: Bloomberg
Other Election Themes exploded (or imploded) on the day with ‘Deregulation Gainers’ winning and ‘Renewables’ and ‘Tariff Risks’ losing…
Source: Bloomberg
Overall, all the majors were up bigly on the day led by a massive short-squeeze in Small Caps (up almost 6%). A little profit-taking at the cash-open was quickly met with BTFD algos…
Mega-Cap tech soared back near record highs…
Source: Bloomberg
TSLA shares soared 15% to their highest since July 2023
DJT is also up bigly after a lot of noise in the last few days…
And Most Shorted stocks exploded higher…
Source: Bloomberg
With ‘some’ of the uncertainty over (FOMC tomorrow), VIX was clubbed like a baby seal today…
Source: Bloomberg
Crypto loves Trump and Bitcoin exploded to a new record high of $76000…
Source: Bloomberg
…next stop $100k-plus?
Source: Bloomberg
Ethereum also soared back above $2700, but relative to Bitcoin remains a majoir laggard having erased the DeFi boom gains…
Source: Bloomberg
Treasury yields soared on the Trump victory with the long-end lagging notably (30Y +17bps, 2Y +9bps) pushing everything higher on the week…
Source: Bloomberg
UST Yields are now back at their highest since early July…
Source: Bloomberg
Inflation Breakevens smashed higher on Trump’s win – 2Y BEs at their highest since April…
Source: Bloomberg
Rate-cut expectations plunged with 2025 now pricing in just 57bps of cuts!!! The aggregate rate cut expectation from now until the end of the 2025 is less than 100bps (less than 4x25bp cuts)…
Source: Bloomberg
Tomorrow’s 25bps rate-cut appears to be a lock (95% odds implied by the market)… but after that who knows?
Source: Bloomberg
The dollar exploded higher, hitting 12-month highs at its peak overnight. This was the dollar’s biggest daily gain since Feb 2023..
Source: Bloomberg
The dollar strength was just too much for gold to handle and it was monkeyhammered lower. This was Gold’s worst day since June and pushed it down to test the 50DMA…
Source: Bloomberg
Despite the ‘drill, baby, drill’ fears of supply, crude prices ended higher on the day (economic growth) with WTI back above $72…
Source: Bloomberg
Finally, after the Biden exit and Harris endorsement, Goldman’s Republican policy pair (GSP24REP) underperformed by ~-7% until October 1st and attempted to recover after the VP debate. While today’s move is in line with expectations, Goldman’s trading desk expects further upside in their Republican Policy Pair (GSP24REP) through inauguration day…
Before President Joe Biden leaves office in January, he will seek to sign a bilateral security agreement with Saudi Arabia, according to a new report. The deal comes after the Biden administration failed to ink a normalization agreement between Israel and Saudi Arabia.
Barak Ravid of Axiosreported on Tuesday that “the US and Saudi Arabia are discussing a possible security agreement that wouldn’t involve a broader deal with Israel.”
“The agreement wouldn’t be the full defense treaty the U.S. and Saudi Arabia were discussing but Saudi Crown Prince Mohammed Bin Salman (MBS) and the White House still want to reach a security agreement before President Biden leaves office in January,” the report continues.
As a candidate, Biden ran on a platform of holding the Gulf Kingdom responsible for the killing of Washington Post journalist Jamal Khashoggi and the Saudi slaughter in Yemen that claimed around 400,000 lives.
While the Biden administration announced some restrictions on weapon sales to Saudi Arabia, which were later lifted, top US officials sought to expand the Donald Trump-era Abraham Accords with Riyadh.
The Accords are a series of agreements where the US promised arms and other benefits to Muslim nations that normalized their relationship with Israel.
Prior to the October 7 Hamas attack on Israel and Tel Aviv’s onslaught in Gaza, Washington was nearing a pact with Tel Aviv and Riyadh that would see Saudi Arabia receive weapons, a mutual defense treaty, and nuclear technology from the US.
The Israeli genocide against Gaza has made any deal impossible. Over the past year, the White House has sought to expand the Israel-Saudi normalization pact to include the rebuilding of Gaza.
However, Israeli Prime Minister Benjamin Netanyahu has refused any ceasefire in Gaza, scuttling the changes of any deal with the Kingdom.
It’s unclear why the Biden administration would seek to strengthen bilateral security ties with Riyadh with the president’s short time left in office. Saudi Arabia has an abysmal human rights record.
Donald #Trump, who has emerged triumphant in the US presidential election, is likely to “double down” on the Abraham Accords, and “will probably continue to support #Netanyahu in his fights in #Gaza and in #Lebanon and probably in #Syria without allowing him to go into a… pic.twitter.com/LfTlPh5mPl
While Biden has been so far unable to get a deal done between Israel and Saudi Arabia, Beijing was able to broker an agreement between Tehran and Riyadh. Recently, the Saudi and Iranian military conducted bilateral drills in the Gulf of Oman.
Polymarket Whale Profits Top $48 Million From Trump Victory
The French trader, known as Théo, who wagered heavily on Trump winning the Electoral College (and the popular vote) made almost $50 million from his bets on Polymarket.
Combining that with his other accounts means ‘Theo’ made around $47.6 Million…
During October, 10 whale addresses spent a combined $70.6 million worth of USD Coin to place bets on Trump winning the 2024 US election.
As CoinTelegraph reports, considering Trump’s projected victory, the profitable payday may be close for the Polymarket whales, since the “market resolves when the Associated Press, Fox and NBC all call the election for the same candidate,” according to Polymarket’s disclaimer.
Over 50% of Trump “Yes” shares are controlled by five whales on Polymarket
As of Nov. 4, a day ahead of election day, over 50% of Donald Trump’s “Yes” votes on Polymarket were controlled by five mysterious whales.
Top Trump-betting accounts. Source: Polymarket
This could result in a payday exceeding $81 million for the whales, pseudonymous political bettorDomer wrote in an Oct. 31 X post:
“Trump Yes shares are very highly concentrated. 5 fat cat accounts own 50% of the 162 million shares — including the Le Giga Whale with nearly 1/3rd by himself. Those 5 will be paid out $81 million if Trump wins.”
Trump “Yes” shareholders on Polymarket. Source: Domer
In contrast, shares for Vice President Kamala Harris were more distributed, with the top five shareholders holding 18% of her “Yes” votes. Harris’ largest shareholder ha only 4.4% of her shares, while Trump’s top shareholder controlled 29.1%, Domer added.
At least four of the top six Trump bettors, including accounts “zxgngl” and “Fredi9999,” may be controlled by one entity with high confidence in a Trump victory, Domer told Cointelegraph:
“My guess is it is a true believer who is very rich and trying to make a big bet. He is getting more confident as the price goes higher and is in a confirmation bias loop where new information keeps increasing his confidence.”
Decentralized prediction markets may offer more accurate predictions than traditional polling systems, as investors are voting with their savings, according to billionaire Elon Musk.
What does Trump’s victory mean for crypto in the US?
California voters may not fully appreciate yet that they voted to toss marriage into the wood chipper on Election Day, but at least they were sentient enough to vote against crime. Baby steps.
Crime has been bad in the Golden State since those same voters passed Proposition 47. Voters were told that retributive justice meted out against criminals for doing drugs and stealing stuff was simply too harsh. Have a heart, the Democrats said. So in 2014, voters took the word of then-San Francisco DA George Gascon and California Attorney General Kamala Harris and passed Prop 47. What voters didn’t know was that Kamala, George, and all their Soros-inspired chaos agents had their fingers crossed behind their backs.
George Soros’s Open Society Foundation and the Ford Foundation had suckered voters again.
Prop 47 magically redefined felonies, making them misdemeanors. And instead of spending money on prisons for the state’s ever-increasing number of criminals, the state reckoned it would save money by not building prisons and fast-tracking criminals back into polite society. Crime spiked, but the researchers, in on the joke, told the increasing number of crime victims to settle down, the crime rate was going down.
Entire chains of stores have left San Francisco because the law allows people to walk in and steal $950 worth of goods without punishment. Organized gangs of thieves walk into stores and steal thousands of dollars worth of goods because they know no one will stop them.
This set of laws unleashed a flood of retail theft gangs, knockouts on the streets of Chinatown in San Francisco, and luxury store lootings, and the laws transformed stores into museums of food. Don’t smudge the glass.
NEW: The Walgreens at 16th/Geary in San Francisco has chained up the freezer section ⛓️
Workers said normally shoplifters clean out all the pizza and ice cream every night. They’re usually hit 20x a day. The whole store is virtually locked up. @KPIXtv
Now it’s ten years later. It has taken millions of dollars and thousands of man-hours in multiple attempts to exterminate this ridiculous set of laws.
Through those years, choruses of “something must be done!” echoed from city council chambers in every major city. Chaos peaked during the “Criminals’ Lives Matter but Yours Don’t” movement in California.
On Tuesday, voters took a decisive step towards sanity by passing Proposition 36. Under this change, crime will start being illegal again. Acts of theft will be combined to reach the threshold requiring punishment, and addicts will be “incentivized” at drug court to go into treatment. It’s a start.
Los Angeles voters also made a big move on Tuesday.
After George Gascon left the San Francisco DA’s office, the woke grifter brought his act to LA and voters there made him their district attorney.
But on Tuesday, voters took out the trash.
Gascon was voted out by 61% of the voters. And Kamala lost her race, too.
Yields Slide After Stellar 30Y Auction, But Then Blow Out Again
With global markets in chaos in the aftermath of the Trump victory – and what appears to be a Republican sweep – and bond yields soaring by the most since the covid crisis, some were worried that today’s 30Y auction would be a historic disaster and may even fail, as technically improbable as that may be. In the end, with 30Y yields blowing out by more than 20bps, the biggest rout since 2020, such fair proved to be groundless because today’s sale of $25BN in 30Y paper ended up being very solid for the most part.
The auction, the last of the quarterly refunding trio, priced at a high yield of 4.608%, up from 4.389% last month and the highest since May’s 4.635%, but stopped through the When Issued 4.638% by 2.2bps, the biggest stop through since Dec 2020, although a lot of that has to do with the massive concession into today’s auction.
The bid to cover was a remarkable 2.642, up huge from 2.495 in October, above the 2.40 recent average, and the highest since Jan 2018.
The internals however were more problematic, with Indirects awarded 62.7%, down from 80.5% last month and the lowest since July. To fill the gap, Direct Bidders ended up taking a whopping 27.1%, up almost 4x from 7.4% in October and the third highest on record. This left just 10.2% for Dealers, who took down the lowest amount since June 2023.
Overall, this was a very solid auction and clearly one which had plenty of demand at a clearing yield well inside the stop through, which is also why yields dropped almost 5bps on the auction. However, since nothing has really changed fundamentally and since the market will now focus very closely on the budget deficit, the grind higher in yields has resumed and the entire rates complex is back near session wides.
Kamala Concedes In Phone Call To Trump, Campaign Manager Says “Unfathomably Painful”
Vice President Kamala Harris has called President-Elect Donald Trump to concede the election and congratulate him on beating her like Doug Emhoff’s ex-girlfriend.
A crestfallen Wolf Blitzer delivers the news:
JUST IN: Kamala Harris has called President Donald Trump to congratulate him and concede the 2024 election.
Harris campaign manager, meanwhile, sent a letter to staff in which she said “losing is unfathomably painful. It is hard. This will take a long time to process. But the work of protecting America from the impacts of a Trump Presidency starts now.”
“Half The US Is In Ecstasy, Half In Despair: This *IS* A Political Revolution”
By Michael Every of Rabobank
The best of times, the worst of times
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way–in short, the period was so far like the present period that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
At time of writing, bar a truly unknown unknown that defies all possible electoral logic, Trump has won the 2024 presidential election (according to Decision Desk), and the Republicans also control the Senate, with the House perhaps slightly Democrat. Trump becomes the first person to win, lose, then win the presidency again since 1892, when Cleveland defeated Harrison. He did it with legal cases round his neck, most mainstream media against him, and parts of his own party, and with vastly lower election funding than Harris. Such an anti-establishment election victory is certainly notable at the very least, whatever else one can all it.
The good news is no unwanted waiting, lawyers, crisis, or protests – yet. However, half the US is in ecstasy, half in despair, and all the world as polarized. Bloomberg and The Economist will be wearing black for the rest of the week, based on their support for Harris, but recall however you feel, someone else feels the opposite, and that tale of two cities is in one country and on one planet.
The pundits who called this a “close” race or made methodologically questionable calls for Harris didn’t flag the huge shift rightwards. Trump won Iowa by 13, rather than losing it by 3, and won the national popular vote – and Republicans even took the governorship in Puerto Rico.
Narratives will have to be constructed to explain ‘how this was possible’. Don’t expect much focus on policy, based on recent history. However, as it’ll be hard to blame the result on Russia when it’s coast-to-coast and north-to-south in America, perhaps it will put on Biden for not stepping down, Harris for not stepping up, or X as Steppenwolf.
Yet ultimately this was down to some people not being able to think how others do: “Who would vote for tariffs when all the Nobel prize winners and The Economist say they are wrong?!” – perhaps the people who lost, or fear losing, their jobs from the free trade by advised those prize-winners and that we-always-give-ourselves-the-prize newspaper? Exhibit A: pollsters vs. the Republican voters who wouldn’t respond to those they don’t trust, and the professionals –again– not properly accounting for that trend, or for the low-propensity voters who decided this was the year that they would turn up.
Yet should anyone really be surprised at an ‘out-of-the-norm’ electoral outcome that: 1) we were told was 50-50; and 2) at a time when the current president has a voter approval rating of just 41%; three quarters of the country feel it’s on the wrong track; we had such recent high inflation – which many people (apart from RBA Governor Bullock) clearly do not feel is “over”; and cultural and geopolitical wars rage? Did this all go away because of recent ra-ra media positivity and “rate cuts”? (As long bond yields have gone higher, by the way.)
For an example of the political mood, the CNN exit poll answers to “How do you feel about how things are going in the US?” were “Angry” (29%), “Dissatisfied” (43%), “Satisfied” (19%), and “Enthusiastic” (7%). The AP VoteCast poll showed 10% of voters want “small” change, 50% want “substantial change”, and 25% want “complete and total upheaval.”
Look at the voting data, Trump won the majority of independents; he didn’t see the suburbs shift left; he didn’t suffer (unduly) from the loss of Liz Cheney Republicans; he made most of the white working class Republican, and the Hispanic and part of the Black working class; and as Hispanic voters were a larger share of the vote than Blacks for the first time in US election history, he saw a staggering shift in their votes towards him.
This *is* a political realignment in many senses. That doesn’t mean it’s all for Trump, according to many voters interviewed that was the case, but it’s certainly against “this kind of thing”, which covers a great many things, in terms of policy that Trump may want to explore as president. Like tariffs, for example, which we had of course already incorporated into our base case scenario. On fiscal matters, even if one assumes a slight Blue house, there may well be some bipartisan support for some of what Trump would like to do, especially if the popular vote is heading that way.
Note well, Mr. Market: but of course, it already has: at time of writing, US 10-year yields were +15bp; the dollar was up the most since 2020, with USD/JPY was -1.5% to 154, EUR/USD was -1.7% at 1.0743, USD/CNY was -1.1% at 7.18; Bitcoin was up over 7% to a new record of $72,893; andthe Nikkei was +2.4% and the Hang Seng -1.8%. In short, not so much ‘vibes’, ‘joy’ and “Keep Kamala and Carry on-ala” as ‘angry/dissatisfied substantial change/complete and total upheaval’ and “Keep Trump-ala and Dump and Pump-ala”.
A Trump victory will also mean geopolitical realignments – and some are front-running that trade. Israeli PM Netanyahu shocked his country overnight by firing popular Defence Minister Gallant, ostensibly for being too dovish, just hours ahead of what some warn could be a window for Iran to attack it from multiple locations. (He apparently also wants to replace the head of the IDF, and the Attorney General.) The firing was of course about domestic politics: the drafting of the ultra-orthodox, on whom the government relies, and a new major national security/corruption scandal swirling round Netanyahu.
Ukraine, Europe, the Middle East, Africa, Asia, Oceania, Latin America – everyone will be thinking about the best of times and the worst of times ahead. Again, this won’t be done with joy in most places, or even keeping calm-ala, but more likely with a combination of both dumping and pumping.
The illusion created by the initial success of central planning is that it can continue indefinitely, when the reality is it’s unavoidably self-liquidating as the distortions unravel the entire economy.
China offers a real-time case study of the upsides and downsides of central planning, broadly defined as the central state establishing the goals, financing, incentives and regulatory structure for various sectors of the nation’s economy.
In the U.S., examples include the transformation of the American economy to wartime production in World War II, and the razing of inner city neighborhoods to build freeways in the 1960s. A swath wasn’t just bulldozed in one or two cities; it happened everywhere because the federal government established the funding and incentives.
Turning to China: those of us who were fortunate enough to visit China just before the “China miracle” took off recall the decrepit state of China’s housing stock, much of which was unchanged from the 19th century except for electrical wires strung haphazardly through dimly lit common areas.
Starting in the 1990s, China’s central government began selling land leases to households, retaining ownership but granting lessor ownership rights to those living in the homes, in effect transferring ownership from the state to households. The idea wasn’t to create an asset that households could sell, and so after-market sales were non-existent. The idea was to shift the cost of housing from the state to the private sector, freeing up state funding for industrialization and infrastructure.
As China’s economy shifted from rural agriculture to urban industrialization, the need for urban housing became a priority. As tens of millions of people left rural villages for factory jobs in cities, a new centrally planned model emerged that from the perspective of the central government was a win-win-win:
1. Local governments were given the right to sell land to housing developers, and the revenue from these sales eventually made up between a third and half of local governments’ budgets. In effect, a third or more of the costs of local government were shifted from Beijing to the private sector.
2. Construction of housing–much of it in high-rises–created millions of jobs, so roughly 10% of the workforce was employed in construction. This employment boosted the nation’s economy, a key goal of central planners in Beijing.
3. As China’s economy boomed, central planners prioritized bank lending for housing, enabling households to deploy their accumulated savings to buy a home (or later, an investment flat), a culturally favored “safe” asset to invest in.
Note that housing was funded by private capital in this model: developers pre-sold homes to households, who used their savings as the down payment and borrowed the rest from banks (often closely tied to the government). The buyers paid for the home in full, so developers had all the money upfront, and the temptation to use these funds to buy more land leases for future development and pre-sell more to-be-built-later homes was Irresistible.
Since the sale of existing units would compete with new construction, there was no resale housing market as in the West. The value of existing units was set by new housing being sold/built in the area. So if a household bought a unit for $100,000, and the new development next door was selling for $150,000, then the existing homeowners reckoned their home was now worth $150,000 as well.
This artificial valuation generated a wealth effect–our homes are rising in value–that was entirely illusory, an illusion that has burst as the actual resale value of homes was never tested in an open, transparent marketplace.
As a result, this artificial wealth effect has flipped into a reverse wealth effect: households are awakening to the grim reality that their real estate-based wealth has evaporated, and given the extreme oversupply of housing and the declining population, it’s never coming back.
With few other investment opportunities available, households poured their savings into investment homes, usually leaving them empty, as homes that had been rented to tenants were considered of lower value.
As a result of this model, housing now comprises 70%+ of all household wealth, a percentage more than double that in the U.S. (30%):
But central planning’s initial successes generate a blindness to its fatal flaws, a reality now playing out in China’s housing sector. The model described above created “winners”–banks, developers and local governments–who have every incentive to continue building more developments, whether they fill a real need or not, and no incentives to recognize the diminishing returns and soaring risks generated by the model.
Without an unfettered, open resale market for homes, the actual value of existing housing is unknown. Since the model only wants buyers of new (and as yet unbuilt) homes, the resale of older homes is suppressed. As a result, there is no feedback as to whether more developments actually fill a need for housing, or if they are nothing more than stupendous mal-investments, black holes sucking in capital, resources and labor that could have been productively deployed elsewhere in the economy.
Two recent reports outline the malaise once the central planning “miracle” becomes a blind machine enriching entrenched interests, grinding on even as the vast asset bubble the “miracle” created is popping:
Since there were no feedback mechanisms allowed in the model, it continued expanding regardless of actual conditions. The net result is a massive debt bubble and an equally massive oversupply of housing: thought official statistics are not published (for the obvious reason that they reflect poorly on central planning), it’s estimated that there are 94 million empty homes in China and an astounding 120 million paid-in-full homes that are unfinished or not yet started. That’s an oversupply / overproduction of 214 million homes.
Whether the actual number is 160 million, 180 million or 220 million doesn’t really matter at this point: the oversupply, losses and distortions are so vast that there are no pain-free policy tweaks that will fix what’s broken or reverse the catastrophic losses.
Since the developers used the buyers’ funds to buy more land leases, they no longer have the means to complete the 100+ million units promised / under construction. The central government is now on the hook to fund the completion of these millions of homes–many of which were investments, not intended for sheltering a family–and to clear up the enormous debts left by insolvent developers.
Who suffers the most is obvious: the hapless home buyers who are paying mortgages for half-finished homes that may never be completed. The net result is some of the homeowners are living in their half-completed high-rise homes, as shown in the video from BBC News, in which the filming was cut off by local police, as this tragic reality doesn’t reflect well on central planners:
Given the enormous over-supply and collapsing demand, what’s known as a bidless market, the actual market value of older homes may well be near-zero in Tier 2 and 3 cities, as the costs of ownership exceed the return on the investment. Without paying renters or appreciation generated by scarcity, the value of an existing home is a negative number.
What lessons can we extract from the success and failure of this model?
1. When an economy has untapped productive capacity and is starved for credit, central planning can open the floodgates of credit and direct the productive capacity into specific sectors, creating rapid growth and “winners”: in China’s real estate boom, the “winners” were banks, developers and local governments, as well as the central government freed of the immense burdens of funding the construction of hundreds of millions of new homes.
2. The “winners” quickly become entrenched in the system, rewarding each other with kickbacks, insider trading, etc., and as their wealth grew, so did their political muscle, which they used to protect their sector from oversight or feedback from the real world.
3. China’s central planners reckoned they’d discovered the financial equivalent of the perpetual motion machine, that housing would continue to provide 10% of the nation’s jobs, fill the coffers of local government and enrich insiders indefinitely, all paid for with private capital saved up by households.
4. There were no effective safeguards in the system to protect homeowners from paying in full for a never-built or half-finished home. Central planning incentivizes insiders and entrenched interests to play fast and loose to maximize their private gains, without regard for the distortions and systemic risks their wheeling and dealing generates.
5. Since market mechanisms were eliminated or restricted, there are no structural mechanisms in either the private sector or the central government to fix the machine once it implodes. The immense losses piling up under the surface eventually must be paid by someone, and so central planners, faced with insiders’ outsized influence, end up distributing the losses to the powerless, i.e. households, workers, children, retirees, etc.
This eventually generates social malaise, and the decay of the consent of the governed (a.k.a. Mandate of Heaven).
The inherent weaknesses of central planning are on display in every economy. It’s tempting to use central planning to kickstart a sector or industrialize / re-industrialize, but there are no mechanisms in central planning to recognize or respond to the fact that you can only funnel private capital into a blind machine of entrenched interests for so long before the machine consumes not only all the gains of central planning but the entire economy, as the distortions become so profound that there are no fixes other than the extreme pain of absorbing catastrophic losses.
The illusion created by the initial success of central planning is that it can continue indefinitely, when the reality is it’s unavoidably self-liquidating as the distortions unravel the entire economy. As I explained in my weekend post for subscribers, TINS and the Global Economy’s Cliff Dive: There Is No Substitute, once the central planning model reaches its inevitable point of failure, there is no substitute available, as the economy has been optimized to reward the “winners”, effectively hollowing out other sectors of the economy.
I was invited to discuss the upsides and downsides of central planning on two recent podcasts: there is quite a lot of ground covered in each discussion, please give them a listen:
Charles Hugh Smith – The failure(s) of central planning across the globe by The Contrarian Capitalist
Sometimes the correct thing to do is the hardest thing to do
