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Submitted by Brian Cloughley via Strategic-Culture.org,

In the military a rearguard action is defined as ‘a defensive action carried out by a retreating army’ and it is an appropriate description of the desperate scrabbling by NATO to convince the rest of the world — and especially Donald Trump — that its existence is justified.

President-elect Trump has never said that the US should actually leave NATO. Certainly Hillary Clinton declared that he ‘wants to pull out of NATO’ but this was just another of her lies, and what he said back in April was that it is ‘obsolete’ which is a gentle way of indicating that it’s hopeless. He did, after all, tell a town hall meeting in Wisconsin: «Maybe Nato will dissolve and that’s OK, not the worst thing in the world», but although that may have sent shivers up the supple spine of NATO’s Secretary General Stoltenberg, it was by no means a definitive statement of intention.

The fact remains that The Donald is unhappy with NATO, and he’s perfectly right to consider that it’s a vastly expensive and largely ineffective military grouping that indeed should be disbanded. On the other hand, the massive propaganda campaign waged against Russia has convinced much of the world that Moscow has expansionist plans and that the only way to counter its supposed ambitions is to spend more money — lots and lots more money — and deploy troops and aircraft and ships all over the place to make it look as if gallant little NATO is defending the so-called Free World against the might of an illusory aggressor.

Trump may not have examined the minutiae of the NATO shambles, but in spite of being a bit of a blowhard whose knowledge of international affairs is modest, he’s not a fool, and even he can perceive that NATO has a record of catastrophe.

The Financial Times reported him as saying «Its possible that we're going to have to let Nato go. When we’re paying and nobody else is really paying, a couple of other countries are but nobody else is really paying, you feel like the jerk». He said that if elected president he would contact many of the other 27 Nato members and put pressure on them to make a larger financial contribution or leave. «I call up all of those countries… and say 'fellas you haven't paid for years, give us the money or get the hell out’», he said, to loud cheering.

This may have been populist rhetoric, but it played to the people who matter to him — to the people who elected him. When he becomes President he might well think that he owes them a lot more than he does to NATO.

In March Stoltenberg told NATO countries that «the time has come to invest more in defence» but his motives for doing so were not those of Mr Trump, because Trump, like any businessman, wants to look carefully at expenditure and go on to make a profit, while Stoltenberg wants to spend money — including a great deal of American money — to justify existence of the costly monolith that has grown larger, more expensive and less effective over the past twenty years.

Stoltenberg sought to vindicate NATO’s record by writing an article for Britain’s Observer newspaper to say that NATO had strongly supported the United States following the 9/11 atrocities by joining it in its war in Afghanistan. ‘This,’ he declared, ‘was more than just a symbol. Nato went on to take charge of the operation in Afghanistan. Hundreds of thousands of European soldiers have served in Afghanistan since. And more than 1,000 have paid the ultimate price in an operation that is a direct response to an attack against the United States.’

The truth differs from what Stoltenberg claims. He is correct in saying that NATO became heavily involved (and lost a thousand troops for no reason at all), but gives the impression that NATO was there, poised and ready to take the leap into action when the US and Britain invaded Afghanistan in October 2001. Certainly the forces of the US and the UK were joined by troops from other countries — but it wasn’t until August 2003 that NATO itself managed to become involved, when, as the BBC reported, it ‘assumed control of peacekeeping in Afghanistan – the alliance's first ever operational commitment outside Europe.’ And things went screaming downhill from that time.

There was no need for NATO, as such, to become involved, because there were plenty of alliance countries with contingents already in Afghanistan (for example, the Germans had been there since January 2002 and Canadians and Italians since December 2001). All that NATO added to the foreign military machine in Afghanistan was yet another layer of military bureaucracy. The result was described in, among other histories, ‘The Good War’, an excellent account of the catastrophe by Jack Fairweather who describes the reaction of President Bush’s National Security Adviser, General Douglas Lute, who saw the map of NATO operations in 2008 and was of the opinion that «each nation was fighting its own private war. Nobody was running the show, and there was no common purpose».

In present-day NATO there are far too many people «running the show» and the purpose of the show itself is far from clear. Stoltenberg and other champions of the continuing existence of the expensive farce claim that there’s a threat from Russia — but if they genuinely believe that Russia is going to invade a NATO member country they belong in a lunatic asylum.

To be blunt, had Russia wanted to invade Ukraine at the time of the US-engineered coup in 2014 (recollect Obama’s admission that the US ‘brokered a deal to transition power in Ukraine’), it could have done so with ease. It would have taken about three weeks to defeat the Ukrainian military and occupy the country right up to the border with Poland. But why on earth would it have wanted to do that?

Russia would have been extremely unwise to take such action, because once you invade a country you have to occupy and pacify it, which is extremely difficult — as US-NATO has found to its enormous cost in lives and money in the Afghanistan debacle.

Similarly, for what possible reason would Russia attempt to invade Estonia or Latvia, or any other country for that matter? It would be insane to do so, yet this totally imaginary threat is trotted out as the reason for NATO’s present posture of confrontation. There is never explanation for the US-NATO expansion up to Russia’s borders that took place from 1999 to 2009, which is rightly regarded as confrontational by the Russian people. (And remember that it’s not correct in the west to refer to ‘the Russian people’. Rather, it is mandatory to call the country ‘Putin’s Russia’.)

Stoltenberg’s message to President-elect Trump is that the US-NATO military grouping must continue to confront ‘Vladimir Putin’s Russia’, but Trump has other priorities, not the least being the appalling economic circumstances in regions where he received most support. He’s no fool, and he’s going to pay attention to these voices rather than the plaintive wailing of Stoltenberg who rests his case for US expenditure on the foundation that ‘our proud history is one of common challenges overcome together’.

One thing that Secretary General Stoltenberg had better bear in mind is that President-elect Donald Trump does not care about history, and most decidedly not the history of Europe. He cares about the hard facts of here and now. Not intellectually, but practically. He is devoid of sentiment. Europe and NATO mean nothing to him in terms of nostalgia and all that sob-stuff.

And he’s not going to forget the volume of insults delivered by European political leaders and media, such as ‘loudmouth’ and ‘hatemonger’. In the British parliament he was described as a ‘buffoon, demagogue and wazzock’. The British foreign minister, Boris Johnson (who really is a buffoon), said in June that ‘the only reason I wouldn't visit some parts of New York is the real risk of meeting Donald Trump’. French President Hollande (another fool) declared that Trump’s ‘excesses’ made him ‘want to retch’ and in one particularly amusing reaction to Trump’s election, Martin Schulz, President of the European Parliament, said ‘We hope that Donald Trump will respect the fundamental rights and rules of the European Union,’ in which, be assured, Mr Trump has not the slightest interest.

President-elect Donald Trump might not be the ideal person to enter the White House in January (although Clinton would have been a disaster), but he’s going to try to look after America. NATO’s wellbeing comes way down on his priorities. NATO Secretary General and confronter-in-chief Stoltenberg will continue fighting his rearguard action to keep his wobbly and mega-expensive military circus in existence, but it’s possible that Mr Trump might make the world a safer place by letting the whole thing collapse.

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As the public is told day after day by mainstream media, if stock prices are up in America, it is an indication that all is well in the economy… consumers can consume, investors can invest, and producers can produce as confident citizens gorge on ever more credit (because everything is awesome). So we wonder what the ‘CNBC’ of these two countries would be saying about their stock markets’ massive outperformance…

Venezuela’s “economy” must be roaring?

 

Of course the point is, it matters what the numeraire is and with Bolivars hyperinflating and ZimDollars on the verge of hyperinflating as Mugabe prints money once again, these ‘markets’ are merely reflecting the collapsing worth of local currency. But hey, don’t tell the global investing public, stocks up = good news, no matter what, right?!

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Total fertility rates, which can be defined as the average number of children born to a woman who survives her reproductive years (aged 15-49), have decreased globally by about half since 1960. This has drastically shaped today’s global economy, but as Visual Capitalist's Caitlin Cheadle explains, a continued decline could have much more severe long-term consequences.

If the world has too many elderly dependents and not enough workers, the burden on economic growth will be difficult to overcome.

Fertility Rates Start to Decline

First, it’s important to address some of the reasons for these falling fertility rates.

In developed nations the introduction of commercially available birth control has played a large role, but this also coincided with several major societal shifts. Changing religious values, the emancipation of women and their increasing participation in the workforce, and higher costs of childcare and education have all factored into declining fertility rates.

Birthrates Wane, Economy Gains

Initially, reduced child dependency rates were actually beneficial to economic growth.

By delaying childbirth, men and women could gain an education before starting a family. This was important in a shifting labor market where smaller, family-run businesses were in decline and a more skilled and specialized labor force was in demand.

Men and women could also choose to start their careers before having families, while paying more in income taxes and enjoying the benefits of a higher disposable income. Increased spending power creates demand, which stimulates job growth – and the economy benefits in the short-term.

A Global Phenomenon

Worldwide fertility rates began to fall substantially in the mid-1960s. While each country has its own underlying causes for this, it is interesting that in developed and developing nations, the downward trend is similar.

Part of this is due to developing countries’ own efforts to rein in their rapidly expanding populations. In China, the One Child Policy was introduced in 1979, however fertility rates had already dropped significantly prior to this. India’s government was also active on this front, sterilizing an estimated 8.3 million people (mostly men) between 1975 and 1977 as a method of population control.

The Age Imbalance

So here we are now, with a global fertility rate of just 2.5 – roughly half of what it was 50 years ago.

Today, 46% of the world’s population lives in countries that are below the average global replacement rate of 2.1 children per woman.

Because these countries (59 to be exact, including BRIC nations Brazil, Russia, and China) are not repopulating quickly enough to sustain their current populations, we are beginning to see a substantial imbalance in the ratio of elderly dependents to working-age people, which will only intensify over the coming decades.

By 2100, the U.N. predicts that nearly 30% of the population will be made of people 60 years and older. Life expectancy also continues to increase steadily, which means those dependents will be living even longer. Between 2000 and 2015 the average global life expectancy at birth increased by around 5 years, reaching an average of 73.8 years for females and 69.1 years for males.

Economic Reversal

What does this mean for the economy?

As this large aging population exits the workforce, most of the positive trends that were spurred by declining fertility rates will be reversed, and economic growth will face a significant burden.

The global increase of elderly dependent populations will have serious economic consequences. Health care costs for the elderly will strain resources, while the smaller working population will struggle to produce enough income tax revenue to support these rising costs. It’s likely this will cause spending power to decrease, consumerism to decline, job production to slow – and the economy to stagnate.

Solutions

Immigration has been a source of short-term population sustenance for many nations, including the U.S. and Britain. However, aside from obvious societal tensions associated with this strategy, immigrants are often adults themselves when they relocate, meaning they too will be elderly dependents soon.

Several nations are already experiencing the effects of a large proportion of elderly dependents. Japan, with one-quarter of its total population currently over the age of 65, has been a pioneer in developing technologies, such as robotics, as a solution to ease strained health care resources. Many countries are restructuring health care programs with long-term solutions in mind, while others are attempting to lower the cost of childcare and education.

Source: Visual Capitalist

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How stable are the world’s democracies?  While there is a certain level of complacency among the citizens of most developed countries in the security of their freedom, at least one Harvard historian sees some glaring warning signs.  Citing a “freedom index” compiled by Freedom House, Harvard historian Yascha Mounk notes that after rising steadily from the mid-1970s through the early 2000s, the number of countries globally that are considered “free” have been on a steady decline ever since.

Political scientists have a theory called “democratic consolidation,” which holds that once countries develop democratic institutions, a robust civil society and a certain level of wealth, their democracy is secure.

 

For decades, global events seemed to support that idea. Data from Freedom House, a watchdog organization that measures democracy and freedom around the world, shows that the number of countries classified as “free” rose steadily from the mid-1970s to the early 2000s. Many Latin American countries transitioned from military rule to democracy; after the end of the Cold War, much of Eastern Europe followed suit. And longstanding liberal democracies in North America, Western Europe and Australia seemed more secure than ever.

 

But since 2005, Freedom House’s index has shown a decline in global freedom each year. Is that a statistical anomaly, a result of a few random events in a relatively short period of time? Or does it indicate a meaningful pattern?

 

In order to empirically test the stability the world’s democracies, Mounk developed a 3-part test based on the openness of citizens to non-democratic rule and the rise and influence of “anti-establishment” parties within those countries. 

Mr. Mounk and Mr. Foa developed a three-factor formula to answer that question. Mr. Mounk thinks of it as an early-warning system, and it works something like a medical test: a way to detect that a democracy is ill before it develops full-blown symptoms.

 

The first factor was public support: How important do citizens think it is for their country to remain democratic? The second was public openness to nondemocratic forms of government, such as military rule. And the third factor was whether “antisystem parties and movements” — political parties and other major players whose core message is that the current system is illegitimate — were gaining support.

 

If support for democracy was falling while the other two measures were rising, the researchers marked that country “deconsolidating.” And they found that deconsolidation was the political equivalent of a low-grade fever that arrives the day before a full-blown case of the flu.

While we’re all quite familiar with the rise of anti-establishment parties all over the world, the most startling takeaway from Mounk’s research was, even for developed democracies like the U.S., the staggering percentage of millennials who were seemingly indifferent to living in a democratic society.  According to Mounk’s research, while the majority of Americans born before 1960 felt it was “essential to live in a democracy,” only around 25% of millennials held the same viewpoint. 

Across numerous countries, including Australia, Britain, the Netherlands, New Zealand, Sweden and the United States, the percentage of people who say it is “essential” to live in a democracy has plummeted, and it is especially low among younger generations.

 

Support for autocratic alternatives is rising, too. Drawing on data from the European and World Values Surveys, the researchers found that the share of Americans who say that army rule would be a “good” or “very good” thing had risen to 1 in 6 in 2014, compared with 1 in 16 in 1995.

 

That trend is particularly strong among young people. For instance, in a previously published paper, the researchers calculated that 43 percent of older Americans believed it was illegitimate for the military to take over if the government were incompetent or failing to do its job, but only 19 percent of millennials agreed. The same generational divide showed up in Europe, where 53 percent of older people thought a military takeover would be illegitimate, while only 36 percent of millennials agreed.

Moreover, the indifference among millennials to democracy was consistent in countries all around the world.

 

Perhaps our precious snowflakes, who have all been so quick to lavish praise upon Fidel Castro, should spend a little time in Cuba to rediscover just how “essential” free and democratic societies are.

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Submitted by Kelli Sladick via Tenth Amendment Center,

During the last eight years, the Obama administration failed to live up to its promise reverse the Bush era’s mass surveillance of American citizens. In fact, it was expanded and justified. If you were silent, the sweeping power controlled by the president may not be on your radar for the right reasons. While there is a deep fear resonating, at least half looked the other way when “their guy” held the powers of the presidency. 

So let’s put aside the distractions roaring through the media, and let’s walk down memory lane.

The Fourth Amendment was assaulted relentlessly under Bush and it continued through both of Obama’s presidential terms. The hits came from two sides, one by mass surveillance and the other by undermining data security. Now, as my focus may just be on progressives for the moment, the truth remains that neither party, Republican nor Democratic has limited its power, especially in regards to surveillance. Know full well, I have no illusion that Trump will set a new trend of limitations.

Has the federal government moved because of its love of the Constitution, or rule of law? No, but it should at least be motivated to protect the Fourth Amendment because if there is one thing that we have seen in the past few years, it is that DC is not untouchable. Whether that is the silver lining for progressives or disdain for Republicans, we have seen just in the past few years how mass surveillance and the undermining security affects everyone, including the federal government – maybe even your dear leader. While the Fourth Amendment was assaulted relentlessly under Bush and Obama’s presidential, the hope is to end that trend during the Trump years.

Here are some of the highlights (or lowlights) over the last few years.

MASS SURVEILLANCE

Metadata

In 2013, Edward Snowden warned of the powers he had when it came to the surveillance state.

“Now increasingly we see that it’s happening domestically and to do that they, the NSA specifically, targets the communications of everyone. It ingests them by default. It collects them in its system and it filters them and it analyses them and it measures them and it stores them for periods of time simply because that’s the easiest, most efficient, and most valuable way to achieve these ends. So while they may be intending to target someone associated with a foreign government or someone they suspect of terrorism, they’re collecting you’re communications to do so.”

 

Any analyst at any time can target anyone, any selector, anywhere. Where those communications will be picked up depends on the range of the sensor networks and the authorities that analyst is empowered with. Not all analysts have the ability to target everything. But I sitting at my desk certainly had the authorities to wiretap anyone from you or your accountant to a Federal judge to even the President if I had a personal e-mail.”

Selectors,from metadata resulted in possible roving wiretaps. Now, while roving wiretaps were removed with the USA Freedom Act, the metadata collection continues more efficiently and at a fuller scale than under Section 215 of the Patriot Act.

CIA Spied on Congress

Senate staffers were spied on by the CIA during an investigation into the torture program. Senator Feinstein, felt the backlash of mass surveillance even though she was an ardent supporter.

“A Democrat from hyper-liberal San Francisco, she has persistently defended government surveillance programs and targeted killings by drones, and she has been one of the C.I.A.’s most faithful supporters. Last year, after President Obama called to move authority for drone strikes from the C.I.A. to the Defense Department, Feinstein placed a classified amendment in a spending bill that helped keep the program where it was.”

 

She was outraged to see that the tables were indeed turned on her, instead of being sheltered from it. It was not a quick war between her and CIA director John Brennan. It was explosive and full of intimidation by the CIA that resulted in no punishment for the hack.

UNDERMINING SECURITY

Hillary Clinton’s Email Server.

OMG! I know, we are back to this. However, this was an illegal act that had incredible consequences. An unsecure server storing classified content had the potential to be accessed by any adversary whether a state or a lone hacker. Peter Van Buren illuminates what this information could mean in the hands of an intel officer.

So let’s think like intelligence officers. How do you get to that kind of stuff?

 

How the great game of intelligence gathering works is in the end very basic: who has access to the information you want, what are their vulnerabilities, and how do you exploit those vulnerabilities to get to the information. What do they want and how can you give it to them?

 

Hillary Clinton as Secretary of State had access to extraordinarily sensitive information, both classified and unclassified. Huma Abedin is arguably the most powerful person in Clinton’s circle, and had access to much or all of that pool of information. What Huma knows would be of great interest to Moscow.

 

How to get the info? Huma’s husband is a publicly outed sexual predator. Everyone in the world knows he sexts, trolls online message boards, and seemingly does little to hide his identity while doing it all. He is a target, the kind of dream package of vulnerabilities an intelligence officer waits a whole career to have fall into their lap.

OPM Hack
The federal government isn’t the biggest fan of encryption. The FBI/Apple hearing showed us there are some in the federal government who believe the common folk should be able to encrypt their own devices. At least they are kind of consistent, because meanwhile, the government has a lackadaisical approach to to encrypting sensitive information that it stores. As seen in the Office of Personnel Management (OPM) Hack.

The U.S. agency burglarized by suspected Chinese hackers has completed its long-awaited damage assessment and more than 22 million people inside and outside government likely had their personal information stolen, officials announced today.

 

 

That number is more than five times larger than what the Office of Personnel Management announced a month ago when first acknowledging a major breach had occurred. At the time, OPM only disclosed that the personnel records of 4.2 million current and former federal employees had been compromised.

Trump talks a lot about “Making America Great Again.” But what does that mean?  Maybe it’s something we haven’t seen, like a federal government restrained by the Constitution. If Trump really wants a return to greatness, he will roll back the federal surveillance state and reassert the Fourth Amendment.

One thing is for sure; we are here to be a check on the federal government every step. No matter what Trump does, states can and should push back against Big Brother. It’s not parroting a slogan, but living up to its constitutional principles that makes America great!

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Submitted by Paul Craig Roberts,

Vladimir Putin
President of Russia
Moscow
28 November 2016

Dear President Putin,

Now that CIA agent Craig Timberg posing as a Washington Post reporter has blown my cover and exposed me as a Russian agent, I was wondering if I might ask you for a Russian passport and a bit of diplomatic cover, perhaps assistant press officer at the Russian embassy in Washington, until I can get out of the country. I saw that you gave a passport to Steven Seagal, so I am hopeful that being a Russian agent is as important as teaching martial arts to Russians.

I don’t know what the pay scale for Russian agents is, but whatever I have coming to me please deposit in a Russian bank. The Swiss banks are no longer useful as the Swiss government allowed Washington to write its banking laws. Perhaps also you could line me up with a publisher for my memoirs—“My Life As A Putin Stooge.”

We need to get on with this ASAP as the Washington Post has the FBI on my tail. They will be very angry at me for deceiving them all those years when I held top secret and higher security clearances while I was a Russian agent. Any day now the Washington Post might discover that my fellow KGB agent Ronald Reagan and I cut taxes on the rich in order to make capitalism so oppressive that the American people would rise up and overthrow it. Boy did we fool the left-wing!

I regret that the Washington Post got wise to me being a Russian agent, but it wasn’t my fault. I think the leak came from one of those Atlanticist Integrationists you are stuck with in your government. Better check up on it as 200 of the Russian financed websites have already been exposed.

Better have someone bring me the passport and diplomatic appointment. I would be nabbed by TSA if I fly to Washington to collect the documents. A diplomatic appointment is better than asylum, because Washington, like the old Soviet Union, doesn’t recognize political asylum. Just ask Julian Assange.

Don’t let the Atlanticist Integrationists convince you that my exposure as a Russian agent is just a CIA ruse to plant an agent on you. My criticism of Washington’s policy of raising tensions between nuclear powers and support of your policy of reducing tensions is not spy cover. I really do prefer that the world not be blown up in thermo-nuclear war. This is a suspect view in the US, but I hope it is an acceptable one in Russia.

Looking forward to that passport.

Paul Craig Roberts

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Trump selected Steve Mnuchin to be the next Treasury Secretary. Steve is a Goldman man. What else is new? Let’s have a look at the recent men who’ve filled this role in government and their affiliations.

Steve Mnuchin: Parter at Goldman Sachs, Yale, Dad worked for Goldman for three decades, brief gig at Soros hedge fund, Hollywood producer.
Jack Lew: COO of Citi prop trading unit that correctly bet on housing collapse in 2008, Harvard, Council on Foreign Relations.
Hank Paulson: Former CEO of Goldman Sachs, Dartmouth, worked at Pentagon and in Nixon administration.
John Snow: Former CEO of CSX, Chairman Cerberus Capital Management, served under several administrations and shilled on a sundry of boards.
Paul O’Neil: Former CEO of Alcoa, Member of Carnegie Mellon University’s dean’s advisory council.
Larry Summers: Former President of Harvard, managing partner at DE Shaw, Chief Economist at the World Bank.
Robert Rubin: 26 Years at Goldman Sachs, London School of Economics, Yale, Co-Chair of the Council on Foreign Relations, Chair of Citi
Lloyd Bentsen: University of Texas, WW2 Vet, promoted to Lt. Col and discharged in 1947, wanted to Nuke N. Korea, served on board of Lockheed Martin, helped convince republicans to pass NAFTA while serving under Clinton.

Nice group of guys.

Content originally generated at iBankCoin.com

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Having exposed the deepening liquidity crisis in China previously, tonight's action across AsiaPac money-markets suggests – despite US equity record highs – all is very much not well below the surface of the global financial system. Short-term China repo rates have exploded to 20-month highs, Hong Kong Dollar money-market rates have jumped to the highest since May 2009, and Yen basis swaps are showing the most extreme demand for dollars since Lehman…

China liquidty conditions have gone from bad to worse with 14-day repo spiking to 6.00% – the highest in 20 months…

To be clear this means a Chinese bank was willing to pay 6% to ensure liquidty for the next 2 weeks (compared to 2.5% yesterday!)

Also notable is the upward pressure this has put in Offshore Yuan versus the dollar…

 

Pushing Hong Kong Dollar HIBOR up to its highest since May 2009…

 

It appears that Japan is suffering too as USD-JPY basis swaps have crashed to record lows – the most desperate demand for USDollar liquidity since Lehman…

 

Finally, it's not just AsiaPac as our index of global dollar liquidity (BIS' new 'fear' index) is in grave trouble, trumbling to 4-month lows…

 

 

As we noted previously, quoted by Bloomberg, Wu Sijie, bond trader at China Merchants Bank said "tightening interbank liquidity and the expectation of even higher short-term borrowing costs are driving up swap costs and affecting sentiment on the cash bond market."

Meanwhile, signalling no change at all in its posture, overnight the PBOC drained funds in open-market operations for the fourth consecutive day, bringing the total withdrawal to 130 billion yuan.

Why is all of the above relevant? Because while so far the global capital markets have been immune to the substantial tightening in financial conditions resulting from the sharp rise in the US Dollar and US interest rates, a similar tightening in China – which is now clearly taking place – will be far more difficult for global risk assets to ignore.

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Authored by Bonner & Partners' Bill Bonner, annotated by Acting-Man's Pater Tenebrarum,

Free Money!

Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.

 

Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won the presidential election? That would have confounded expectations as well. Also, the S&P 500 declined for nine days in a row (even if not by much) just before the election – at the time Clinton was still widely expected to win. it remains to be seen whether and for how long the recent discounting of Nirvana will last – click to enlarge.

Just a few months later, the dot-com bubble burst and the tech-heavy Nasdaq lost 80% of its value. And the U.S. stock market, overall, lost about 50%. But investors are bullish. They believe President-elect Trump will be good for stocks.

He is supposed to arrive in Washington for his inauguration and march directly over to the Capitol to demand a tax cut. This will return over $6 trillion to the private sector over the next 10 years… not to mention a proposed $1 trillion splurge on “infrastructure.”

As Trump’s chief adviser (and former Goldman alum), Stephen Bannon, explained to Michael Wolff of The Hollywood Reporter last week:

“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Shipyards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks.”

Whew!

Everybody’s talking about the feds’ opportunity to “invest” free money.   It makes us nervous; we know how hard it is to get a good return on investment – especially when you don’t know what you’re doing.

The government pays just over 2% on 10-year loans. If inflation over the next decade is anywhere near its long-term average, the real cost of funds is roughly zero.  The money, say the Big Spenders in Washington, will be free.

 

And henceforth it will be getting fed for free!

 

All Aboard!

In the pages of the Financial Times is another voice for investing money that doesn’t exist. Here’s Fed Vice Chairman Stanley Fischer speaking to the Council on Foreign Relations think tank:

“Macroeconomic policy does not have to be confined to monetary policy,” said Mr. Fischer…

 

“Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy,” he said.

This is a train that’s going to sell out fast. Everyone is going to want to board. Free money. Jobs. Inflation. Infrastructure. What’s not to like? Who will not want to be a passenger on this express train to Fantasyland?

Already on board, near the head of the train, is our friend Richard Duncan at Macro Watch. Richard, a specialist in credit analysis who has worked with the World Bank, shares our view: The world economy is a giant bubble waiting to pop.

But his prescription is different. We would happily get out a pin and give the bubble a prick. Not that we like to see innocent people suffer. But we hate to see guilty people not suffer.

Richard, on the other hand, is a kind-hearted soul, an optimist with a warm and uplifting view of human nature. He can’t bear thinking about the widows and orphans stuck in “another Great Depression,” which he believes would result if the credit bubble bursts.

All it would take is a big enough increase in interest rates. With so much debt in the world, he says, higher rates would be catastrophic. How to avoid it? Richard:

“Very large-scale government investment in the industries and technologies of the future will lift America’s poor out of poverty. It will save the middle class. And it will make the most prosperous segments of our society wealthy – and healthy – beyond their wildest dreams.”

In an open video-letter to Donald Trump, he proposes that the feds should identify 10,000 of America’s “most promising entrepreneurs.” They should all have good ideas for the future – biotech, nanotech, green tech, whatever – but it should have a “tech” at the end. Then the feds should invest in their businesses, forming public-private partnerships.

 

Allocation of scarce resources by government bureaucrats – what could possibly go wrong?

 

Hell Train

Our cynical heart stops for a second. All that money up for grabs. All those cost-plus contracts! Architects’ phones must be ringing already; insiders are planning new wings for their Aspen vacation pads. These are government “investments” – no need to ever satisfy a customer or ever show a profit.

And we’re talking 10 times more money than the $100 billion in Corn Belt giveaways… or the penny-candy subsidies to sugar tycoons, the Fanjul brothers (who, taking no chances, put on Miami campaign fundraisers for both Clinton and Trump). But Richard is already in the observation car, enjoying the sun on his face, dreaming.

“Imagine what that would do,” he suggests, adding helpfully, “It would really Make America Great Again.”

Our imagination is not up to the challenge. We close our eyes. We scrunch up our face. We just can’t do it. We can’t imagine a group of hacks, has-beens, and bureaucratic chair warmers capable of identifying the “industries of the future.”

 

Richard Duncan probably figures that they will be helped by experts… and miracles will occur as well! It’s almost fool-proof…

 

No one else has been able to foresee the future. How could they? Venture capitalists, even when their own money is at stake, are notoriously bad at backing successful futuristic enterprises. The feds, “investing” other people’s money, are bound to bet on the wrong ones.

But wait –  our imagination has finally rebooted. And what’s this?  No train to the future? What we see is a runaway locomotive. Incompetence at the throttle, flimflam stoking the engine, and impossible, pie-in-the-sky hocus-pocus putting on a show for the passengers.

A hellish train, in other words – loaded with trillions of dollars of looted resources – misallocated, stolen, and frittered away.

 

The express train to hell. It is possible that tickets for the train to the future were sold out. Better luck next time.

via http://ift.tt/2fP1RqE Tyler Durden