40 Years of Voodoo Economics

40 Years of Voodoo Economics

The 40-year project to transfer the wealth of the nation to a new oligarchy is complete.

The coup de grâce was delivered unexpectedly by Covid-19, which stripped the façade from our Potemkin economy, revealing tens of millions of Americans on the brink of penury, even as the 1% reaped a Fed generated windfall.

Billionaire wealth gains during pandemic: Jeff Bezos +$81 billion, Elon Musk +$60 billion, Mark Zuckerberg +$41 billion, Daniel Gilbert +$38 billion, Bill Gates +$15 billion, Charles Koch +$6 billion.

Let me begin with a disclaimer:   I am NOT anti-business, or anti-capitalism. I love our free enterprise system (what’s left of it). I am entrepreneurial by nature, and I have been an independent businessman since I was tall enough to push a lawnmower and wield a snow shovel.

I am, however, anti-crime. In particular – white collar crime, corporate crime, political corruption – abuses of our free enterprise system. The notion that efforts to call out and reign in destructive, corrupt and outright criminal activity by corporations and super wealthy individuals is somehow anti-capitalist, or anti-business, is oligarchic propaganda, propagated by the Republican Party and right-wing media.

I find it especially offensive that Republicans portray themselves as the “real” Americans, standing for our traditions, for the common folk, and most shockingly, fiscal responsibility, even as they provide a conspiracy-laden smokescreen for their financiers while they strip-mine the nation and load up future generations with a mountain of debt.

As the charts below demonstrate, prior to 1980 the fruit of the U.S. economy was fairly equitably distributed between wage earners and the “rich,” going back to the ‘30’s. The disparity began to manifest in 1980 with the election of Ronald Reagan and the onset of Reaganomics, or supply-side economics, more properly known as voodoo economics (the term coined by George H.W. Bush). This is the latest iteration of an old con generally known as trickle-down economics. A previous version in the 1890’s was known as the Horse & Sparrow theory: ‘If you feed the horse enough oats, some will pass through to the road for the sparrows.’

This can become confusing for the uninitiated. So for the sake of clarity:

Reaganomics = supply-side economics = trickle-down economics = voodoo economics.

These terms are all synonymous. There are those who will try to mislead you on this. Those people I refer to David Stockman, Reagan’s economic advisor, budget director and the architect of “supply-side” economics.

It’s kind of hard to sell ‘trickle down,’ so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.

— David Stockman, The Atlantic

Trickle-down apologists will point to technology and globalization as the culprits in rising disparity. This is a convenient misdirection.

Technology and globalization are certainly factors in the rise of disparity, but they are not the cause. They are the disruptors that have been exploited by the oligarchs and their political enablers to fleece the masses in America. One need only look at the relative disparity in Europe during the same time frame to see that the response to the disruption created by technology and globalization could have been handled far more equitably in the U.S.

Ever since Ronald Reagan successfully sold voodoo economics to America, Republicans have been repeating the winning formula over and over: keep saying it long enough, with great certainty and righteousness, along with diversionary smears against the “liberal press” and divisive campaigns on social wedge issues, and enough of the people will follow. Why bother doing real analysis and offering honest solutions when a con is so easy to pull off?

A 2015 study conducted for the International Monetary Fund concluded that GDP growth actually declines over the medium term after trickle-down tax cuts, and that if you really want to use deficit financing (which is what the tax cuts are) to create growth, you would give money to the bottom tier, which needs things and has to spend the money, and not to the upper tier, which uses the money to create asset bubbles, not growth.

40 years later, Republicans are still following the Reagan playbook. The fact that this “theory” is demonstrably bogus has not stopped Republicans from continuing to promote tax cuts using the trickle-down rationale. They insisted that the 2017 tax cut would pay for itself by creating “so much” growth.

We have been like the proverbial frogs, not realizing until it is too late that it is we who are being served for dinner, because the heat has been turned up very gradually.

We are still collectively averting our eyes to this reality, wanting to call ourselves middle class, still believing in the American Dream, when in fact we’re (almost) all working class now, and that dream has become an historical artifact.

The great American middle class is no more. 80% of Americans are now living paycheck to paycheck. 70% have less than $1,000 in savings. 40% don’t have the ability to meet a $400 emergency expense. When you factor in student loans and the cost of housing in high income regions, even those we generally consider upper middle class are struggling.

All of this was pre-Covid!!!

The cumulative effect of decades of voodoo inspired policy and “favors” to the wealthy has had an especially devastating effect on young people trying to get established.

Education for example:

The cost of higher education is increasingly out of reach, and unless young people have family resources, those who go for it anyway find themselves saddled with crushing debt. 70% of students take out loans, and the average student loan debt for the class of 2019 was almost $30,000. Those pursuing graduate studies typically accumulate debt of $50,000 or more. MDs average $150,000 up to $300,000 by the time they finish their training.

What kind of society starts its young people off in life with a debilitating debt burden?

My answer: A society that has lost its moral compass.

And then there is healthcare:

Americans spend more on healthcare than any other nation – 18% of GNP, triple that of 50 years ago, and more than twice the OECD average. For all that spending, our health outcomes are near the bottom of all OECD nations – lowest life expectancy, highest chronic disease burden, highest rate of obesity, highest suicide rate.

This bloated system is the product of billions of dollars spent lobbying Congress by big pharma, insurance companies and hospitals, and the burden of it falls most heavily on young families.

The average health insurance premium for a young family in 2019 was $15,000 with a $5-10,000 deductible! Add on average childcare cost of $200 a day, almost $50,000 a year, student loan debt service, the high cost of housing and stagnant wages. Even with a good job, it’s increasingly difficult just to get by, let alone get ahead. Single parents face especially dire financial conditions. The U.S. leads the world in single parent households (23%).

Economic anxiety and downward mobility are the dominant economic themes for this generation of young Americans.

So how did our society become so imbalanced?

This situation didn’t just happen all by itself. It is the result of deliberate policy decisions, bought and paid for, year after year for the past 40 years, that steadily, incrementally, tilted the flow of economic gains to the upper tier, at the expense of wage earners and the general public.

This is not the picture of a prosperous society, or a society in balance, or one that has it’s values in the right place. It did not, and does not, have to be this way.

The primary driver of this disparity has been trickle-down tax cuts, especially the Bush tax cuts, which alone are responsible for approximately one-third of the entire national debt.

But it wasn’t just the tax cuts. The “government-is-bad, markets-solve-all-problems” philosophy that spawned voodoo economics created a vast network of tributaries feeding into the wealth transfer pipeline.

Scores (probably hundreds) of below-the-fold policies and special favors, tucked into footnotes on page 273 of this or that legislation, have spiked the gains for the upper tier at the expense of the general public.

These issues generally fall under the categories of arcane tax policies, exemptions, carve-outs, no-bid contracts, regulatory capture and neglect, unaccountable corporate malfeasance – tax fraud, accounting fraud, offshore headquarters, off-balance sheet expenses, executive compensation abuses, “carried interest,” financial engineering, high frequency trading, special purpose vehicles, and epic scale political corruption that has gradually, steadily, transferred the fruit of American labor to management and shareholders, while offloading the cost of “externalities” like pollution, environmental degradation and negative health outcomes onto the public.

These policies and special favors are shepherded through committees and into laws and regulations by an army of lobbyists, drawn from the ranks of corporate lawyers and executives, former representatives and staffers.

One of the most appalling features of the current state of affairs is that lobbying has become the single most popular career path for former lawmakers. Witness the sad case of Bob Dole, former Senator and Republican Presidential candidate, collecting a $140,000 paycheck from Taiwan for his “success” in getting newly elected and clueless President Trump to give a shout out to Taiwan, which immediately drew a threatening rebuke from China.

And then you have insider political “operators” like Paul Manafort, who often don’t even bother to register as lobbyists, representing the interests of warlords and kleptocrats in Washington.

How is this possible, you might ask?

For one thing, Congress thinks the public is way more conservative than it actually is. And the reason for this is that they are paid to think that way. It’s not that they don’t have access to polling data that tells them differently. The need for money trumps all other considerations in Washington.

A recent survey found that “45% of senior legislative staffers report having changed their opinion about legislation after a group gave their Member a campaign contribution.” Is anyone surprised? And those are just the ones who admitted it.

Due to the nature of our political system, politicians listen to those who remunerate them, not to the American people.

Not surprisingly, when only the affluent strongly support a proposed policy change, that policy is adopted 46 percent of the time; when only the middle-class strongly support a policy, that policy is adopted only 24 percent of the time.

Likewise, when a policy is strongly opposed by the affluent, but not strongly opposed by the middle-class, that policy is adopted only 4 percent of the time. But when a policy is strongly opposed by the middle-class but not by the affluent, the policy is adopted 40 percent of the time.

So what to do about this?

Guiding principle: The wealth of a nation is like the blood in the body; it needs to circulate everywhere.

Our current economic paradigm does just the opposite – concentrating the flow to the head and constricting the flow to the rest of the body.

Applying this guiding principle requires a service-oriented mindset, considerable creativity, and an environment of open inquiry and trust, supportive of nuanced discussion, and debate of policy objectives and options.

That sounds impossible given current conditions, but I think we’ve all had enough of the current degrading, profoundly dishonest, scorched-earth political paradigm, so this may be the time for change.

For at least 250 years, the prevalent economic debate has revolved around the binary notion of capitalism vs socialism. The recent iteration of this framing has been “pro-market” vs “pro-government.” This false dichotomy has served only to elevate factional partisans rather than genuine public servants, and to perpetuate endless class warfare that has seriously limited the upside potential of human civilization.

The reality is that in the U.S. we have had a mixed economy since the 30’s, and for 50 years it worked quite well for us, generating an unparalleled period of shared prosperity and growth, the envy of the world. That wave of prosperity began to flatten and then wane in the 80’s. The ensuing period of laissez-faire capitalism and rampant corruption it enabled has generated the imbalance and chronic disparity with which we are currently living.

Our advancing technology is offering us an unprecedented opportunity to transcend this state of perpetual conflict, and manage our affairs in an equitable way going forward.

Presently, our technology is not being implemented toward that end; it is being used to consolidate wealth and power in the hands of the few, and to deliberately create division, confusion and conflict among the many.

What we are currently lacking is the political will, courage, and the economic morality to put aside animosities, personal and factional priorities, and work together to make best use of the new tools and capabilities that are being delivered to us, to uplift all of humanity, not just the favored few.

We are not condemned to continue on the low road of endless conflict. I will follow up this letter soon with an outline of principles, policies and priorities needed to set things on the path to the high road.   The first step is the election. Then the real work begins.

###

Navigating Chaos

Navigating Chaos

It’s summertime. This was when the virus was supposed to back off for a while. That’s certainly not happening.

America’s response to this pandemic has been a tragedy, and a national embarrassment – the result of a catastrophic failure of leadership, and the deliberate politicization of recommended measures to limit the spread of the virus. The resulting “conservative” backlash against CDC guidelines for social distancing and mask wearing has made things worse, setting us up for a truly miserable winter, when it was already expected that things will get worse as most activities move inside and the virus double teams us with the flu.

The combined impact of the virus, and the nation-wide protests against police violence and racism, against the backdrop of historic polarization and economic disparity, has sent stress levels through the roof.

So what can one person do to improve the situation?

On the macro scale, not much. This destructive cycle has been building up a head of steam for a long time, and we are now in a blowoff phase. Like a fever, it is going to run its course until it finally breaks, or until the host dies. The double impact of the virus and the protests has been like pouring gasoline on an already raging fire.

On an individual level, you can vote, you can respect your neighbors, you can practice good pandemic social hygiene, you can take courses, gain skills, you can pray. If you are so inclined, you can phone or text bank for your favorite candidate. Most of all, you can take care of yourself and those close to you as best you can, and lend a hand where you can to those less fortunate.

Here are the best resources I have found for info on the virus:

Best I’ve seen on transmission risk:
The Risks – Know Them – Avoid Them by Erin Bromage.

A good explanation on confusion over “airborne” transmission:
The Debate Over “Airborne” Coronavirus Spread, Explained by Brian Resnick

A sobering article on the reality of vaccine development:
A Dangerous Link Between Our Search For a Coronavirus Cure and Bloodletting by Robert Pearl, M.D.

 

To help weather the storm, I have a few additional recommendations:

  1. Transcendental Meditation. TM is a simple practice and a fundamental benefic for all that ails you, but especially so now. I have been practicing TM for 40 years, and I have never been more grateful to be able to close my eyes and effortlessly let the day’s stress wash away. And don’t think that all meditations are the same. They’re not. Not even close. TM is unique and it is the gold standard.
  2. Astronomy Picture of the Day (APOD). This site features a new photo every day from Hubble and earthbound sources. I have it on my desktop and check in every day. It reminds me of the vast expanse of creation, our miraculous place in it, and the utter foolishness of our petty arguments. I find it calming, and uplifting. Despite the madness consuming our country, nature remains unperturbed. All is as is should be on the grand scale.
  3. The news. It’s hard not to be consumed by the daily news cycle. Many individuals and entities are working overtime to keep you obsessed with each new day’s scandal, outrage, calamity. The sky is always falling, and they will show you why you should be upset and who to blame. Even so, there are important developments, historic even, taking place affecting all of us, and it’s important to stay informed. So how best to be informed without being propagandized, manipulated and exhausted?
    • One – realize that you are being manipulated and propagandized. Try not to buy in. And don’t buy the notion that the manipulation and propaganda are only coming from one side. Media left and right make their money on ears and eyeballs. They are all playing the same game, at your expense.
    • Two – avoid cable news at all cost. They are all toxic. Avoid Twitter & Facebook. You’ll find yourself siloed, propagandized, and increasingly polarized.
    • Three – check in with dedicated non-partisan groups like Braver Angels and No Labels.
    • Four – select your source for news wisely. Probably the single best source for news is The Economist. Weekly, covers the world, in-depth, objective, no hype, no propaganda.
    • If you just have to follow the daily news cycle, Google News and Memeorandum give you the headlines from a spectrum of sources. And NPR news is very balanced.
    • If you want honest, responsible, left-leaning journalism and commentary – Talking Points Memo. If you want honest, responsible conservative commentary – The Bulwark. For the gold standard in polling – Nate Silver’s FiveThirtyEight. For in-depth legal and national security analysis – Lawfare.

The daily Trump show and the political warfare over the coming election was already consuming the nation. Add to that the Covid pandemic, and the nation-wide protests against racism and police violence ignited by the murder of George Floyd, and there is not much bandwidth left for anything else.

The pace of debt creation is not getting much attention – $3 trillion in pandemic relief so far, and the need for even more extends as far as the eye can see. $3 trillion fills in a lot of potholes in the short term, but this level of support is not remotely sustainable. Big changes are coming…a topic for the next letter.

The election is still 4 months away. Seems like a very long time with all that’s going on. Pray that this election yields inspired and dedicated servant leadership. We’re going to need it.

Good luck!

June 2020: New Beginnings

The inauguration of Donald Trump brought on a whirlwind of scandal-a-day chaos that has made it impossible for me to assemble the long form Risk & Opportunity newsletters that I have published since 2002. As a result, I have only published twice since the 2016 election: “Donald Trump – The Chaos President” in July of 2017, and “A Republic, If You Can Keep It – Part 1” this year.

These newsletters are labor intensive. It typically takes me at least several weeks and sometimes months to assemble a R&O newsletter. But the Trump strategy to “flood the zone with shit” has rendered my normal process unworkable. By the time I have finished a first draft, the ground has already shifted several times, and the initial framework seems no longer relevant.

At the same time, few have time to read anything long form anymore. So it seems to be time to try something different.

The most frequent comment I have received from readers of The Politics of Unity is appreciation for the delivery of my ideas in short chapters.

I have decided to try publishing shorter, more narrowly focused articles, rather than trying to assemble a comprehensive picture of the state-of-affairs.

This is an experiment. I hope that it will be useful for my readers in finding balanced and more meaningful insight into current affairs and their implications for the future – delivered in bite sized portions.

New issues will be forthcoming shortly. Comments and suggestions will be appreciated. Please, no rants! Send to: info@michaelcuddehe.com

Best regards,

MC

2020:   A Republic If You Can Keep It – Part 1

Steve Bannon once held forth that the agenda of the Trump Administration is the “deconstruction of the administrative state.” In its place he envisioned a no-holds-barred nationalistic capitalism, grounded in a medieval Christianity – waging war against secularism and Islam.

As time goes on, however, it has become clear that President Trump has something else in mind, which is more of a subordination of the administrative state, to impose an authoritarian regime in thrall to Dear Leader Donald Trump. Trump has made no bones about his admiration for autocrats and dictators, and his contempt for the limitations imposed by the rule of law. With William Barr running interference at the DOJ, Trump has aggressively embraced the notion of the unitary executive, declaring the Constitution gives him the “right to do whatever I want,” and insisting that he has “absolute immunity” from any constraints or oversight by Congress.

For an in-depth review of the systematic campaign to corrupt and subjugate our government to the personal whims of Dear Leader Trump, read George Packer’s brilliant article “The President is Winning His War on American Institutions.” The bottom line: Trump’s campaign to impose autocracy is producing a steady elimination of expertise across government, and the rise of incompetence.

The administration’s response to the coronavirus outbreak has been instructive. After having previously decimated the government’s pandemic response team, the administration’s response to the outbreak has been to first (and continuously) downplay the threat, then claim it’s a “hoax” perpetrated by Democrats to “take down” the President, threaten anyone who differs from this messaging, pressure the Fed for a rate cut (a rate cut!!), demand that health experts get approval from the White House for any public statements, and warn military commanders not to “surprise” Trump with virus guidance to the troops.

This fiasco has rendered the established pandemic containment protocol useless, with the inevitable result that the spread will be far worse than it could have been. At press time, 2 months after the first documented U.S. case, testing, essential to controlling the outbreak, is still not generally available.

To date, the damage done by Trump’s campaign for autocracy has been extensive, both to our democratic traditions and institutions, and to America’s reputation and standing in the world. Domestic matters might be repairable at this point, if Trump is held to one term. But if Trump is re-elected, I think the Republic is finished.

America’s place in the world, however, will never be the same. That is not entirely a bad thing. The end of Pax Americana was coming anyway, but it could have unfolded with some semblance of honor and respect for, and from, our allies.

The last Risk & Opportunity newsletter – Donald Trump: The Chaos President – has proven to be remarkably prescient, and is worth reviewing. As noted in that letter, Yale historian Timothy Snyder predicted that Trump would attempt a coup, and he appears to be doing just that.

The “Russia Thing”

From the first days of the Trump administration, and the revelation that Russia had been involved in efforts to help elect Donald Trump, the “Russia thing” has been the elephant in the room, hanging like an ominous cloud over Trump and his administration.

Trump’s firing of FBI Director James Comey, explicitly over “this Russia thing,” resulted in the appointment of Robert Mueller as a Special Counsel to investigate the matter.
Trump then spent the next two years making sure nobody forgot about it, daily attacking Mueller, the “deep state,” the FBI, and anyone involved with the investigation of Russia’s meddling in the 2016 election, insisting that they are “traitors” and “scum,” involved in an attempted “coup.” Update: The DOJ Inspector General has formally put a stake in the heart of all this nonsense.

Then there was the notorious Helsinki press conference where Trump emerged from a 2 hour one-on-one meeting with Vladimir Putin, from which he reportedly confiscated and destroyed his translator’s notes, and proceeded to take Putin’s side against U.S. intelligence agencies regarding Russia’s meddling in the election.

Trump’s actions, tweets and comments have continuously kept the issue lively, and have done nothing to allay suspicion that there is something more than fishy about his relationship with Vladimir Putin.

The unresolved question was, and remains: was Trump “colluding” with Russia in its efforts to help him get elected President?

The Mueller Report

Robert Mueller’s heart was clearly not in his task. You can’t really blame him. After all, what patriotic American wants to be the person trying to prove that the President of the United States is essentially a traitor?

For 2 years, Mueller conducted the investigation in near total secrecy, with only court filings for the press to divine what he was up to. Other than the report itself, there were no leaks, no press releases and no public statements whatsoever until the end, when he sent a letter to William Barr to take issue with Barr’s misrepresentation of The Report.

In the end, the Mueller Report threaded the needle, documenting all manner of unsavory and illegal activities by the Trump Campaign and the President himself, while refusing to pass judgment, thus giving the President the opportunity to put the “Russia thing” behind him.

Volume I of the Report focused on the question of “collusion,” or more precisely, “conspiracy” of the Campaign with the Russian government, documenting “numerous links between the Trump campaign and the Russian government,” and the mutual appreciation of each camp for the activities of the other.

The Introduction states: “[While] the investigation did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities…A statement that the investigation did not establish particular facts does not mean there was no evidence of those facts,” noting that inability to secure evidence and gain testimony from certain individuals, including the President, contributed to the final assessment.

Mueller allowed Trump to stiff-arm him on the request for testimony, deciding that it would be too much trouble and time consuming to try to force him to testify, ultimately accepting Trump’s rather laughable written answers to a negotiated set of questions. Trump responded “I do not remember” 3o times in his answers, with no follow up.

The investigation also “applied the framework of conspiracy law, not the concept of ‘collusion,’” and gave Donald Jr. a pass on that basis for organizing the notorious Trump Tower meeting to get dirt on Hillary Clinton from the Russian government. They decided Junior probably didn’t realize he was breaking the law (too dumb to prosecute?), and therefore they couldn’t prove “intent,” a central element of conspiracy.

So, off the hook on “collusion,” but not exactly a vindication either.

Volume II, which focused on obstruction of justice, reads like an indictment on 10 separate instances of obstruction, without actually making the charge. Handling the matter delicately, the Introduction states:

“If we had confidence after a thorough investigation of the facts that the President clearly did not commit obstruction of justice, we would so state. Based on the facts and the applicable legal standards, however, we are unable to reach that judgement…Accordingly, while this report does not conclude that the President committed a crime, it also does not exonerate him.”

The Mueller “witch hunt,” as the president calls it, filed 34 indictments and has so far secured seven convictions of Team Trumpers, including Trump’s Campaign Manager, Deputy Campaign Manager, National Security Advisor, and personal attorney; but Mueller refused to drive the case home, accepting the DOJ Office of Legal Counsel opinion that he was not allowed to indict a sitting president, and left it to Congress to pick up the case, which it has been unwilling to do.

Predictably, Trump claimed total vindication. “No collusion; no obstruction.” A total lie (just one of literally thousands). But again, Mueller refused to push back.

But the unfinished business of the Russia investigation, and the inability of the president to leave it alone, eventually brought us full circle to…

The “Russia Thing” Part II – Impeachment

On December 18, 2019 the House of Representatives voted to impeach Donald Trump on charges of abuse of power, and obstruction of Congress. It will be useful to set this historic event in context.

Republicans have complained that impeachment was a continuation of the Russia investigation. They are not wrong about that. The “high crimes and misdemeanors” that brought about the impeachment of the president were a direct continuation of his efforts to discredit the perception that he was the beneficiary of Russian efforts during the 2016 election. This Washington Post article summarizes how the Russia investigation led to the Ukraine pressure campaign, and impeachment.

Trump’s insistence on trying to spin Russian efforts on his behalf in 2016 into something other than what it was, led him to send Rudy Giuliani and his band of misfits off to Ukraine to promote a Russian propaganda campaign that it was Ukraine that interfered in the 2016 election, not Russia, and to pressure the Ukrainian president to announce an investigation targeting Joe Biden and his son Hunter, using $400 million in military aid as leverage until the investigation was announced. Russia experts in the State Department have made it clear that the notion that Ukraine, not Russia, interfered in our election is straight up Russian propaganda.

House Democrats, who had been reluctant to impeach Trump based on the abuses documented in the Mueller Report, were shocked by this blatant abuse of power and took up the cause. So Donald Trump, caught in the act of a shakedown by virtue of an alarmed whistleblower, became the third American president to be impeached.

One would think that status would be somewhat chastening, but one would be wrong. Since the Senate voted to acquit him, Trump has been on a tear, rage tweeting about the “Russia hoax” and the “deep state,” purging administration employees suspected of insufficient loyalty to the president and taking vengeance on those who testified in the impeachment hearings, issuing pardons to a who’s who of corrupt businessmen and politicians, and attacking DOJ prosecutors, the judge and even the jury foreman in the trial of his friend Roger Stone for obstruction of justice and witness tampering related to the Mueller investigation.

Is the President a Russian asset? Sadly, it’s a fair question. The NY Times published a piece titled, “With Trump, All Roads Lead to Moscow.” In an October, 2019 White House meeting, Nancy Pelosi famously pointed her finger at Trump, stating “All roads with you lead to Putin.” Rick Wilson, Republican strategist and author of “Running Against the Devil: The Plot to Save America From Trump – and Democrats From Themselves” believes that when all the facts come out, as they inevitably will, Donald Trump will replace Benedict Arnold as the greatest traitor in American history.

As if to make clear his fealty to Putin and drive the point home, in the midst of impeachment proceedings, Trump invited Russian Foreign Minister Sergey Lavrov to the Oval Office for an unprecedented photo-op in the Oval Office. Russia TV covered the meeting with a segment entitled “Puppet Master and ‘Agent’—How to Understand Lavrov’s Meeting With Trump,” featuring a photo of Trump sitting at the Resolute desk, with Lavrov at his right, as the “power behind the throne.” Among other disparaging comments, they joked about offering Trump asylum when Democrats come back to power.

It should be noted that Russian media would never publish such a provocative segment without Kremlin approval. Putin seems to take delight in periodically humiliating Trump. And yet the ever caustic tweeter-in-chief who so loves to “punch back” whenever he is challenged or criticized, has never uttered a negative word about Putin. One has to wonder, what compromat does Putin have on Trump that Trump allows Putin to humiliate him like this?

If you want to understand the phenomenon of compromat, read Bill Browder’s “Red Notice,” a well told true story of corruption and murder in Putin’s Russia.

Increasingly, loyalty is also a fair question regarding the Republican party. Their willingness during impeachment proceedings to knowingly promote Russian propaganda in support of the president is disturbing. See “The Russification of the Republican Party.” Subsequently, at the same time the president has launched an assault on the intelligence community over reports that Russia is again meddling in the 2020 election, Senate Republicans have blocked three election security bills.

Without Honor

Given Trump’s character and history, it’s not really a big surprise that he would put his own interests ahead of those of the country. It would have been more surprising if he didn’t. What has really been the big surprise, and disappointment, is how completely the Republican Party has fallen in behind Trump – an authoritarian demagogue who is the antithesis of traditional Republican values. And for what? Tax cuts and conservative judges? Really? Any Republican president with a Republican congress would have delivered those things.

Upon further reflection, however, especially in light of Republican efforts to suppress the vote during the 2018 election (e.g. Kansas & Georgia), and to nullify election losses in Wisconsin, Michigan, Ohio and North Carolina, it becomes clear that this subordination to Trump is of a piece with the trend of Republican behavior over the last 30 years, which has been increasingly anti-democratic, post-truth, and dedicated to maintaining power at any price. This Vice piece by Harry Cheadle sums it up.

If Obama had done any one of 100s of egregious things that Trump has done, Republicans would have been leading a civil insurrection. The hypocrisy has risen to a level where the term doesn’t do justice. Maybe betrayal is the right word.

As Max Boot put it, “I, too, am soul-weary and incredulous that so many Republicans who are “in many ways good people” could become imitators and enablers of the most dishonest and corrupt president in U.S. history.”

Many Republicans have just decided to retire rather than surrender to the cult of Trump. Charlie Dent stated the matter plainly upon his retirement from Congress in 2018: “The litmus test for being a Republican these days is not about any given set of ideals or principles; it’s about loyalty to the man, and I think that’s challenging.”

Jeff Flake gave an eloquent speech upon announcing his retirement, appealing to traditional Republican values, and lamenting the current state of the party. It’s a shame he couldn’t find it in himself to stand more firmly for those principles while in office. Here is a letter from a grieving Republican, and same from Time magazine.

Adam Schiff’s closing statement at the impeachment trial, and Mitt Romney’s statement explaining his vote to convict Trump of abuse of power, are eloquent expressions of the noble ideals of self-governance and public service that have guided America from the founding.

Contrast these high-minded appeals and lamentations with the utter nonsense on display from House Republicans in the impeachment hearings – shameful and embarrassing conflations of conspiracy theories and Russian propaganda, deliberate distractions which completely avoided the actual substance of the charges, followed by personal attacks on honorable, non-partisan public servants. They seemed to think that disrupting the proceedings by shouting and displaying contempt made their nonsense more relevant.

As for the substance of the charges against the president, take a moment to put yourself in the shoes of Volodymyr Zelensky, Ukraine’s new president, a political novice elected in a landslide to take on corruption and Russian influence. Imagine his disbelief and distress when his most important benefactor – the United States, the “essential nation,” the “shining city on a hill,” the inspiration and hope of oppressed people everywhere – demanded his complicity in a Russian disinformation campaign to support a corrupt American President in order to get promised and desperately needed military aid.

Read Franklin Foer’s Atlantic piece, “The Betrayal of Volodymyr Zelensky”: “Before Trump, oligarchs felt relatively defenseless in the face of American efforts to strip corruption from the Ukrainian judicial system…The new U.S. president presented the possibility of salvation for the corrupt. Here was an American leader who operated in the style of an oligarch, who wanted to use the legal system to wound his political rivals.”

Summing up, Ross Douthat – the conservative NY Time columnist – brings the issue into focus:

Fiona Hill…warned members of the House Intelligence Committee that they ran the risk of themselves falling victims to “politically driven falsehoods,” regarding a bogus theory about Ukrainian political interference, “that so clearly advance Russian interests.”

Yet the person who is both the principal consumer and purveyor of those falsehoods is the president of the United States, just as he has been a purveyor of so many other conspiracy theories.

Even now, this should astound us. It doesn’t, because we’ve been living in a country undergoing its own dismal process of Ukrainianization: of treating fictions as facts; and propaganda as journalism; and political opponents as criminals; and political offices as business ventures; and personal relatives as diplomatic representatives; and legal fixers as shadow cabinet members; and extortion as foreign policy; and toadyism as patriotism; and fellow citizens as “human scum”; and mortal enemies as long-lost friends — and then acting as if all this is perfectly normal. This is more than a high crime. It’s a clear and present danger to our security, institutions, and moral hygiene.

It’s to the immense credit of ordinary Ukrainians that, in fighting Russian aggression in the field and fighting for better governance in Kyiv, they have shown themselves worthy of the world’s support. And it’s to the enduring shame of the Republican Party that they have been willing to debase our political standards to the old Ukrainian level just when Ukrainians are trying to rise to our former level.

Republicans, having given Trump their full-throated approval for his abuses, are now all-in with him as he tramples on our values and traditions, and attempts to impose banana Republican autocratic rule.

I recently watched the History channel special “Washington – Father of His Country.” It was rather shocking to be confronted with the contrast with our current president, who is the polar opposite of George Washington in every way. Our heritage is at stake in this election.

###

2017:   Donald Trump – The Chaos President

This has been a difficult letter to write. The turbulence unleashed by the election of Donald Trump has continued unabated. The belligerent torrent of attack tweets and “alternative facts” emanating daily from the White House leaves one wondering how this could happen in America, and what will become of us. The news has become all Trump, all the time, and virtually all of it negative, creating an ongoing and pervasive sense of instability and crisis.

Unknown is how much of the spectacle is theater, how much is mental instability and/or incompetence, and how much is deliberate distraction. Setting aside the unsettling notion that our President is mentally incompetent, inquiring minds might want to take a careful look at plans being made for war, self-dealing, and/or tax and regulatory giveaways under cover of deliberately provoked chaos.

Or, given Trump’s open admiration for authoritarian leaders, is he deliberately ramping up division and conflict until violence erupts, giving him justification to declare martial law? It’s noteworthy that Yale historian Timothy Snyder believes it is “pretty much inevitable” that Trump will attempt a coup.

The Russia Connection

The Trump-Putin bromance has been a strange one from the beginning. It has caused Trump nothing but grief, and for no apparent good reason. He has consistently gone out of his way to avoid criticizing Vladimir Putin, despite being more than willing to insult other heads of state, has promoted a Russia friendly position regarding NATO and the Middle East, and has persistently pushed back aggressively on reports of Russian hacking and interference in the election, while openly contemptuous of U.S. intelligence agencies’ consensus on nefarious Russian actions and intent.

This strange behavior, while refusing to offer up any plausible explanation for such unswerving support of an enemy state, naturally leads to questions of motivation. It is certainly plausible that there are financial connections/dependencies that Trump does not want to become public. His refusal to release his tax returns would support that theory, and press reports document long term Russian investment in Trump properties.

A more alarming theory is that Trump is compromised, as suggested by Max Boot, in effect the Kremlin’s man in the White House. That’s a pretty shocking thought, but the absence of any real information and a persistent lack of candor – putting it nicely – from the President, naturally leads people to question what he is hiding, and to think the worst.

Reports that Trump’s son-in-law, Jared Kushner, attempted to set up a secret back-channel to the Russians using secure communications in the Russian embassy only supports the worst notions, as well as Trump’s fawning treatment of Putin at the G20 meeting, and the revelation of campaign connected meetings with Kremlin connected Russians uncovered by the press, after months of denial that there had been anycontacts with Russians by the Trump campaign.

Trump’s sacking of FBI Director James Comey, while openly admitting it was due to Comey’s investigation into “this Russia thing,” was a serious unforced error. It is a rather discouraging portrait of the state of our politics to see Republican leaders silently supporting Trump in this and other related matters that would otherwise send them into open revolt if a Democrat were involved.

The firing of Comey, and subsequent appointment of former FBI Director Robert Mueller as a Special Prosecutor to investigate the Trump-Russia connection signals that this is going to be a political cage match. At some point I think it is very likely that Trump will fire Mueller, and/or preemptively pardon everyone involved, including himself, and dare Congress to do anything about it. Then it will be up to the Republican leadership: save the republic, or save the party. I think we are going to find out how robust our institutions are, and how deep the rot in Washington goes.

Politics

Republicans are now in control of both houses of Congress and the White House. They were hopeful that they would have an open field to push through their agenda, but it is not working out that way so far. This is primarily because they have no coherent governing agenda other than deregulation, tax cuts for the rich, and annihilation of all traces of Obama.

The Republican Party has long been an insurrectionist movement, and for the past eight years in particular their politics has been entirely negative and destructive, dedicated solely to obstruction and demonizing Obama. The resulting moral and intellectual decay of the Party has been on full display in the health care deliberations.

During the Obama years, House Republicans passed over 60 bills to repeal or undermine Obamacare, but never bothered to seriously consider – let alone propose – an alternative. The agenda all along was to undermine Obama, to deny him any achievements, and not in any way to improve the health care outcome for the American people. So now that they are in a position to put their stamp on healthcare policy, they have nothing to offer.

The American Health Care Act of 2017 (AHCA), passed by the House to great praise from Trump (who later called it “mean”), which is now in a zombie state in the Senate, took the axe to Medicaid, leaving over 20 million uninsured, while jacking up rates for the elderly and those with pre-existing conditions.

According to Paul Ryan, this bill would increase choice for consumers (read: the choice to buy insurance that doesn’t cover much, or to not buy insurance at all because it’s unaffordable). It might better have been called the Medical Bankruptcy Restoration Act.

Republicans’ lack of preparation to govern has been exacerbated by the fact that Trump is not really a Republican, and his interests are not necessarily aligned with theirs. He is a populist demagogue who took control of the Republican Party because the Party has failed its constituents, just as the Democrats have failed theirs.

Many Republican policy goals will be detrimental to the very people who elected Trump, especially the wholesale evisceration of Obamacare, and the Orwellian named Better Way agenda of Paul Ryan, otherwise rightly known as Voodoo II economics, the consequences of which have been clearly demonstrated in the final collapse of the Voodoo-inspired Kansas Experiment, which put the state’s finances into a deep hole.

Henry Ford famously realized that if he gave good wages to his employees instead of exploiting them, they would be able to buy his cars. That wisdom seems to have been forgotten by the Republican Party, and by corporate America, both of which seem intent on strip mining every last dollar of every possible vein of profit from our economy, while driving American workers into penury. I don’t see how you build a thriving economy based on downward mobility and plutocracy.

A positive surprise was Trump’s pick for the Supreme Court, Neil Gorsuch. Liberals are still upset over the outrageous sandbagging of Obama’s nominee, Merrick Garland. But Gorsuch is highly qualified and respected by both liberal and conservative legal scholars. The truth is that Democrats couldn’t have asked for better from any Republican administration. I don’t think anyone would have been totally surprised if Trump had picked Kellyanne Conway.

Going forward, hyper-partisanship on both sides will be the order of the day. This has long been the state on the right, but the election of Trump has ignited a rebirth of the long dormant left, which is going to be just as hard-nosed and unyielding as the right. Those who have bought into the notion that Barack Obama is a “far leftie” are going to be shocked at the emergence of a virulent left wing in American politics. They will soon be wishing for the sober centrism of Obama.

Our politics has become war by other means. And as in war, truth has been the first casualty. Facts have become partisan fluid, fashioned to suit the need of the moment. Thus we no longer have a shared reality upon which to debate issues and formulate policy. Everything is seen through a partisan lens, as demonstrated by this University of Michigan study on the dramatic 75 point partisan reversal of economic optimism coinciding with the election of Trump.

Geopolitics

Over a long period of time, Congress has ceded it’s authority over foreign policy, including war, to the Executive. We presently live in “The Age of Unilateral Rule,” wherein foreign policy is made entirely according to the whim of the President. That’s a sobering realization, given the belligerence and unpredictability of our current President.

The whipsaw between Obama’s low key approach and Trump’s aggressive and constantly vacillating positions has thrown world leaders into a state of confusion. The uncertainty over where the U.S. stands on any given issue is straining alliances and raising tensions globally.

Trump’s “America First” economic nationalism threatens to ignite a trade war by tearing down the existing basis of global economic cooperation. One of his first acts as President was to cancel the Trans-Pacific Partnership (TPP), and he continues to threaten to withdraw from NAFTA, recently announcing a 20% tariff on Canadian lumber imports, and threatening big tariffs on steel imports. He has rejected the Paris Climate Accord, leaving the U.S. the odd man out in a 19-1 affirmation of the accord at the G20.

Long forgotten, it seems, is that the current global order was spawned by the desire to create an interdependence of nations based on shared commerce, so as to avoid a repeat of the devastating wars of the 20th century, which were waged between self-sufficient competing empires.

It’s worth listening to the NPR interview with Jorge Castañeda, the former Mexican Foreign Minister, on the importance of maintaining friendly relations with your neighbors.

Aside from the degradation of American credibility and stature on the global scene resulting from Trump’s behavior, a big worry is that he will either blunder his way into a war, or given that the traditional remedy for domestic turmoil is to redirect it to a foreign enemy, deliberately provoke one to distract attention from his problems at home.

North Korea may look like a tempting target, and Trump has already been ratcheting up tensions on the Korean peninsula. It will be a big plus for him if he can pressure China into dealing with this problem, which they no doubt can if they wish to do so. But the saber rattling could easily spiral out of control, with catastrophic consequences for the Korean peninsula, for the thousands of American troops stationed there, and possibly even for the U.S. mainland.

Former CIA director James Woolsey posted a hair-raising article on The Hill that should give pause to those who think a war with North Korea is a good idea. Alternately, Politico posted a brilliant solution to this problem by Tom Molinowski, former Undersectretary of State under Obama, entitled “How to Take Down Kim Jong Un.”

Regarding Russian hacking and interference in the election, our open society and dependence on the Internet leaves us vulnerable to this kind of meddling. As Obama said – unfortunately after the election – he let Putin know that he was unhappy about their meddling and that “we can crash their backbone” (e.g. crash their communications, transportation and power grid) but “the problem is that they can do the same to us.” And there you have it. It’s Mutual Assured Destruction (MAD) all over again with cyber warfare, with nuclear MAD lurking in the background.

A disappointing footnote to all of this is that in March, China’s Trademark Office suddenly granted The Trump Organization 38 trademarks, at least some of which had been previously denied for a decade. Meanwhile foreign delegations are falling all over themselves to curry favor with the Administration by holding their events at Trump venues, including Mar-a-Lago, which has doubled its membership fee to $200,000 since the election.

Citizens for Responsibility and Ethics in Washington (CREW) has filed multiple lawsuits attempting to force Trump to divest from a long list of enterprises that create conflicts of interest with his duties as President. America has never seen such blatant, third world style self-dealing from a President.

Economy & Markets

Job creation has been steady, positive in 22 of the last 30 months, and the unemployment rate is 4.4%, considered to be full employment. Corporate profits are healthy, and capital spending is on the upswing. Overall, confidence is high. It might be categorized as complacent.

Investors and business interests clearly consider the political turmoil to be superfluous, and are enthusiastic for promised regulatory rollback and tax reform. The stock market reflects that enthusiasm, with all indices trading at all-time highs, although doubts are creeping in regarding the Trump administration’s ability to deliver.

Despite the optimism reflected in the stock market, all other markets – bonds, metals and commodities – have been stuck in trading ranges since the election, reflecting uncertainty over policy direction, rates and inflation.

It’s a mystery to economists that with the low unemployment rate, why pay isn’t rising. There is growing concern that the long expected inflation resulting from repeated QE campaigns might be overwhelmed by deflationary pressures from overcapacity and massive debt growth.

It’s noteworthy that Ray Dalio thinks what we are seeing is pretty much as good as it gets. The global economy is “at or near its best.” He doesn’t see any problems immediately ahead, but expects the next big downswing to be “epic.” Also, notable are recent interviews with hedge fund stars Paul Singer and Bill Gross endorsing similar themes.

Trump has committed to big tax cuts as well as deficit spending on the military and infrastructure, and has also promised not to cut Medicare and Social Security. Taken at face value, this agenda is hugely inflationary.

Republicans, desperate for the tax cuts, are trying to decide if they are still concerned about deficit spending now that Obama is out. If history is any guide, they will forget about fiscal responsibility and start spending.

Trump has also promised a big push for reduced regulation, which will be welcome everywhere in the business sector, from mom and pops to big corporate entities. We can only hope that there will be an intelligent elimination of unnecessary and burdensome regulation, while retaining that which is necessary.

One should keep in mind that the last time we had regulatory rollback for its own sake, without much thought for consequences, we got the biggest financial fraud in history and the subsequent financial meltdown, from which we are still trying to recover.

Summary

It’s very difficult to read the tea leaves in this environment. There has been a general assumption that Trump’s policies will be good for growth, and stock valuations reflect that optimism. That assumption, however, is predicated on the existence of something like a functional Trump administration that can deliver on those policies.

The investigation into Trump’s Russian connections, and his increasingly desperate efforts to derail it, are taking all the oxygen out of the room. At press time, indications are that Trump is preparing to try to discredit and then dismiss Mueller, and anyone else at Justice who stands in his way.

Six months into the Trump term, despite total control of Congress and a Republican in the White House, conflicts among Republicans have produced gridlock, and zero legislative accomplishments, raising the question – can this fractious Congress pass a healthcare plan, a budget, tax reform, or any other meaningful legislation?

As difficult and frustrating as things have been for victorious Republicans, if Trump goes after Mueller, the chaos unleashed by this act will make it very difficult if not impossible to move forward on any policy issues.

As consuming as the political drama is, this is also a time of extreme distortion and risk in our economy (see Dalio, Singer, Gross above), and geopolitical instability. The potential for economic meltdown and war is real. Yet all of these points of conflict offer opportunities for upward resolution and major progress.

For example: on healthcare, having come to impasse, Republicans now have the opportunity to drop the phony demonization of Obamacare, and work with Democrats to fashion a fiscally responsible national health care program. A simple, honest effort such as this would immediately change public opinion of Congress, and create an avenue for the resolution of many issues that have languished in the shadow of partisan warfare.

What we have been lacking is the leadership necessary to take advantage of these opportunities. I see the Trump phenomenon as a test of the American people. The leadership is a reflection of the collective consciousness of the people. If and when the people wake up and demand a more constructive politics, things will change.

There are many dedicated individuals and organizations working to bring about positive change, who have the needed expertise across the array of policy issues. Check out the resources I am following on Twitter @politicsofunity for a sampling.

Q3 ’16:   2016 Election Issue—The Politics of Destruction

As the 2016 presidential election mercifully draws to a close, the polls indicate that Hillary Clinton will handily defeat Donald Trump. There is great uncertainty, however, regarding control of Congress. The House is expected to remain in Republican hands, but the Senate is up for grabs. At the eleventh hour, an announcement by FBI Director Richard Comey that the Clinton emails are under review again has created turmoil, raising the specter of a Brexit-like shocker at the end.

Regardless of the final result, it will take quite some time for the American people to recover from the year-long outpouring of campaign venom and sleaze dumped on us daily by our corporate media. If you are not feeling slimed, you just haven’t been paying attention. Dean Baquet, Executive Editor of the New York Times, recently called out CNN and Fox News for their egregious coverage of the campaign.

Internationally, the U.S. brand has been badly tarnished. How can any developing nation be convinced that American style democracy is the best path for them, when our system has put on a campaign more suited to Honduras or The Democratic Republic of the Congo than to a country whose president is considered the leader of the free world?

The Republican Party has stood by Donald Trump even as he has taken the campaign into the sewer, with a shameful display of non-stop lies, nonsense and bigotry, while claiming the system is “rigged” against him, and threatening violence against opponents.

As President Obama recently noted, “This didn’t start with Trump.” Republicans have been cultivating the lunatic fringe for decades, with their anti-science, fact-free conspiracy theories and scorched earth politics—all spin all the time—undermining our (Democrat) presidents, our government, and our democratic traditions, by sowing division, mistrust and hatred.

The Trump phenomenon is like a malignant tumor that has burst open and is now devouring its host.

As a result, the polarization of the country has reached levels not seen since the Civil War. We now have two Americas; they don’t talk to each other and don’t trust each other. They don’t understand each other’s core values and desires, and don’t care to learn. David Brooks recently posted an excellent summary of the damage done to our civic institutions and public morality in this piece entitled, “How to Repair Moral Capital.

As the embarrassing spectacle draws to an end, it’s useful to take a perspective from outside our borders. The Economist says it all in “Debasing American Democracy.”

The Silver Lining

The meltdown in the Republican Party may well be the best thing to happen for America in decades. Republicans have been practicing the politics of division and destruction since Ronald Reagan succeeded in selling “voodoo economics” to America.

This could be the opportunity for honorable Republicans, people like Michael Bloomberg and Mitt Romney, to take control of the party, or start a new one, and re-dedicate themselves to traditional Republican values. We need the balance provided by those values.

Democrats also need to pay heed. The struggle by down-ballot Democrats to capitalize on the disaster at the top of the Republican ticket tells us that the American people are just as weary of the Democrats as they are of the Republicans, if not more so.

Economy

Economic recovery following the 2008 financial panic has been anemic, but it has been steady. The structural headwinds of debt and technology-driven unemployment have been substantial, and they are not going to go away.

Taxes are also likely to increase, no matter who wins the election or what they promise in the campaign. The question is who will pay, the general public or the upper tier? Under normal circumstances, rising taxes would produce a drag on growth, and might even produce capital flight.

As far as rising taxes creating a drag on growth, universal overcapacity, low yields, and global instability have made investors so risk-averse that they already don’t want to invest in much of anything other than non-productive rent-seeking opportunities. A modest loss of private sector capital to taxes might actually produce more growth than would leaving it where it is. If that money were invested in education and infrastructure, it would yield growth and long term returns for everyone.

Regarding capital flight—where would capital go? Capital is flowing into the U.S. from around the world. Financial and geopolitical instability elsewhere make it likely that the U.S. will continue to be the safe haven for years to come.

Markets

Markets across the board are in limbo at least until after the election, and maybe even until the 1st or 2nd quarter of 2017. The stock market has been in a broad trading range for two years, creeping ever so gradually higher on continued Fed support, with traders aggressively buying the occasional correction. The refusal of the market to go down for so long, despite persistent pessimism among traders, raises the possibility of a melt up rather than a crash.

Deflation has been the dominant macro force since 2008, but inflation has been picking up a bit lately, giving some buoyancy to commodities, but threatening big losses in bonds. Given the massive pile of kindling the Fed has created, inflation could erupt into a conflagration at any time. Hard assets should be on everyone’s menu. Gold has entered into a buy zone, and an important cycle low.

Big volatility will be coming at some point, but when? No-one knows. The biggest risk is in bonds of any kind, especially sovereign and high yield, and the most upside potential is in physical assets and stocks, although the ride could be “gut wrenching” as they say in the business. One should be cautious with the banks. When the day of reckoning comes, the banks will probably be pressured into a Cyprus style bail-in. Depositors will get the grain elevator treatment—x percent of their deposits converted to 40 year Government Reconstruction Bonds or some such fancy name for confiscation.

Geopolitics

The global temperature keeps rising. Syria keeps going from bad to worse. North Korea is threatening nuclear holocaust against South Korea, and Russia is menacing Eastern Europe. The whole of Europe is in turmoil over immigrant disruption, the meltdown of Deutsche Bank, the rise of right wing parties, Brexit and the prospect of upcoming votes on EU in Greece, Italy, Spain, and probably France.

War cycles point to continued conflicts until at least 2020. Tensions with Russia in Syria and Eastern Europe, and China in the South China Sea could escalate into outright hostilities at any time. The Philippines President, Rodrigo Duterte, has been unleashing profanity laden tirades against the U.S, and has recently announced alliance with China, declaring “The U.S. has lost,” and demanding that U.S. troops get out of the Philippines in 2 years. The balance of global power is shifting rapidly. It is a dangerous time.

Summary

Our next president is going to have her/his hands full from day one. On every front, financial and political, domestic and global, instability is the status quo. Donald Trump is not going to go quietly into the night, and Republicans are promising to block anynominations to the Supreme Court If Hillary wins the White House and they retain the Senate. Relief from the stress of the election could be brief, even nonexistent.

Q2 ’16:   Artificial Intelligence – Blessing or Curse?

2016 has already been an outlier for unexpected events. Political turbulence and violent outbursts globally are on the rise. At home, the ambush murders of police officers in Dallas and Little Rock have shocked the nation. Politically, the ascendance of Donald Trump as the Republican nominee for President is enough to let us know that we’re not in Kansas any more.

But behind the turbulence and media driven distractions, the big trends continue to unfold. Chief among them is the transformation of our society by technology, especially the emergence of artificial intelligence (AI).

Definition

John McCarthy, who coined the term “artificial intelligence” in 1956, defined it as “the science and engineering of making intelligent machines.”

“Basically, we’re talking about computer systems and algorithms that can form conclusions and determine their actions without direct human intervention. That doesn’t mean that they have human-like minds, but they may be capable of equaling—and often exceeding—human cognitive capacities with regard to specific tasks. In the broadest sense, Google Maps is employing A.I. when it helps you find a route to your destination. And the self-driving cars that might soon carry us along those routes are using A.I. to evaluate road conditions and otherwise keep us safe.” —Jacob Brogan

Applications/Impact

AI is opening virtually every field to new possibilities. Medical technology is transforming the practice of medicine—giving hearing to the deaf, sight to the blind, replacement body parts, cures for previously untreatable diseases. Engineering, robotics, education, financial management, manufacturing, publishing, communications, entertainment are all being impacted.

AI expert systems are providing medical diagnosis, strategic planning, voice recognition, face recognition, market analysis, real-time process control for space missions, developing plans for clean energy solutions and environmental clean-up, and support for education such as test assessment and AI tutors.

As the technology continues to mature, there are no fields of human activity that will not be transformed. Ultimately, the very nature of what it means to be human will be changed as we enter into the predicted Singularity, when humans merge with their technology, creating a new life form with extraordinary powers and indefinite lifespan. For the latest on the Singularity, Ray Kurzweil, the oracle of technology development, has published a new title, “The Singularity is Near.”

The Problem

One after another, some of our brightest and most successful citizens have been raising the alarm about the potential dangers of artificial intelligence (AI).

“When it (evolved AI) eventually does occur, it’s likely to be either the best or worst thing ever to happen to humanity, so there’s huge value in getting it right.”
Stephen Hawking

“I think we should be very careful about artificial intelligence. If I were to guess what our biggest existential threat is, it’s probably that.
Elon Musk

“I am in the camp that is concerned about super intelligence… I agree with Elon Musk and some others on this and don’t understand why some people are not concerned.”
Bill Gates

“This is the first moment in the history of our planet when any species, by its own voluntary actions, has become a danger to itself – as well as to vast numbers of others.”
Bill Joy

Those quoted above are the “high priests” of our machine culture: premier scientists and tech entrepreneurs—the people who are most intimately familiar with technology. If they are concerned that there is a problem with AI, we should probably listen to their concerns.

But what are the specific concerns of our techno-elites? Given the vague, yet existential nature of the threat, we can conjure up some pretty terrifying images…Terminator, Matrix, Ex Machina. Hollywood has taken the concept to the bank.

Are they actually worried about sentient killing machines rising up to wipe out humanity? Not really. Not in the near term anyway.

The Future of Life Institute, an Elon Musk initiative, published a letter in 2015 co-signed by thousands of researchers and scientists and other tech savvy citizens raising their concern about “autonomous weapons.” The letter is really a plea to world governments to forego the development of autonomous weapons systems, and the AI arms race that would inevitably result.

In other words, the issue raised is not about what the machines will do to humans; it’s about what humans will do to each other with the machines, and about the misdirection of resources away from the development of benefic applications.

Longer term, if there is something that gives the high priests of machine culture bad dreams, it IS the prospect of their creations becoming self-aware and rising up against humanity. Why would they think this is even possible?

For the most part, the creators of AI are steeped in a materialistic world view holding that life emerged from the primordial void by spontaneous combustion, and that all life forms and the human brain evolved over eons from that first spark of life, and most importantly, that intelligence and consciousness are emergent features of the computational complexity of the brain. (It is notable that this world view also holds that if you were to give a chimp a keyboard and enough iterations, it would eventually pound out “War and Peace.”)

Given their world view, it is not so surprising that our elite technologists have bad dreams about their creations becoming sentient beings that might consider biological humans a threat.

But is this a scientific world view? Or is it a belief system? Is it any more or less scientific than the belief that all creation—from the void of interstellar space to star systems to human life—is one great whole that is life, and is inherently conscious?…or even the Creationist notion that there is a deity somewhere in the heavens who created the world by his (His!) will, fully formed, in 6 Earth days?

We all adopt beliefs regarding the origins of life and our place in the universe to give us some sense of comfort about the great mystery of our very existence in this incomprehensibly vast universe. The technologists are no different in this regard.

Even so, opinion on this matter in the tech sector is not monolithic. See “The Myth of Sentient Machines” by Bobby Azarian in Psychology Today, which points out that even “a perfectly accurate computer simulation of a brain would not have consciousness like a real brain, just as a simulation of a black hole won’t cause your computer and room to implode.” Also, see “The Fascinating Truth About Why Artificial Intelligence Won’t Take Over the World” by Sean Miller. Miller’s takedown of the “cult of scientism…practicing algorythmancy” is a classic.

If, however, the machines were to become superintelligent, autonomous, sentient beings, when would this be likely to happen? The following chart shows the trajectory of computing power. By 2030 a single $1,000 computer will exceed the computing power of the human brain. By 2050 that single computer will exceed the computing capacity of ALL human brains combined.

This is the time frame in which Kurzweil is predicting the Singularity. Alternately, this is when machines might become self-aware and decide to strike out on their own.

Economic and Political Implications

AI is giving us the means to create the world we choose…IF we step up to the responsibility.

If humans achieve the Singularity, war will be unthinkable. It’s not likely humanity would survive the destructive power available to combatants. But can we survive the transition?

Presently, our society is enamored of the machines, so much so that we have lost the broader sense of life. Our culture has come to be all about machine values; repeatability, reliability, certainty, efficiency…efficiency above all.

We normal humans exhaust ourselves trying to compete with the machines, to become machine-like, while our civilization is careening off into chaos as a result of the economic disparity created by our primitive economic system running on the steroids of advanced technology.

The lack of balance in life is reflected in our leadership and public policy across the board, highlighted by the following post at the Bulletin of the Atomic Scientists, which maintains the Doomsday Clock, presently set at 3 minutes to midnight:

“Unchecked climate change, global nuclear weapons modernizations, and outsized nuclear weapons arsenals pose extraordinary and undeniable threats to the continued existence of humanity, and world leaders have failed to act with the speed or on the scale required to protect citizens from potential catastrophe. These failures of political leadership endanger every person on Earth.”

The real challenge of AI is economic and political. It is not autonomous killing machines, as frightening as they are. We are quite capable of wiping ourselves out without such tools. The atom bomb will do just fine. If we continue in our primitive ways, the machines will just make the killing more efficient.

We have been raised on the false premise of binary choices…management OR labor, Capitalism OR Socialism, conservative OR liberal, this religion OR that religion. These are false choices—primitive models that divide us and lead to endless conflict. The truth of the matter is that we need both management AND labor, Capitalism AND Socialism, conservatives AND liberals. And we need the essence of ALL religions.

Like our primitive politics, our economic system is a vestige of a world that is no more. When emerging from a more primitive world, it made sense that the fruit of economy should accrue to those who had the means and knowledge to organize society and put capital to productive use. Today the means and knowledge are ubiquitous, but capital is still aggregating to the few, who increasingly don’t know what to do with it.

Excessive concentrations of capital are creating asset bubbles ($100 million NY penthouse) and turning to non-productive rent seeking while our infrastructure is crumbling and our schools are graduating students unprepared for the world they are entering. (The tools and processes required to build a house are not the same as those required to operate and maintain a house.)

Big corporations are deploying big data and advanced algorithms to know our every interest and tendency more intimately than we know ourselves, and using that information to front run our every move, at the same time shifting assets and loyalties around the world to minimize taxes and responsibilities, thus vacuuming up the fruit of economy for the benefit of a relatively small number of families, to the detriment of the remaining billions who compete for the leftover crumbs.

Our technology driven winner-take-all, “creative destruction” casino economy has enabled early adapters to suck the general wealth out of the economy, and destroy the great American middle class in a single generation.

However, just applying stale Socialist thinking to this problem is not going to solve our dilemma. Take a good look at Russia, or Venezuela, or Cuba, to see where that kind of thinking gets you. We need to transcend the old left/right, liberal/conservative paradigm. Our technology is enabling us to transcend the limitations of the physical world; it can also enable us to transcend the limitations of this stifling old binary political theology. The truth of the matter is that left/right, conservative/liberal are the left and right legs of the body politic. They are both needed to move forward.

We have a choice: we can use our rapidly expanding technology to create a better world for everyone, or we can descend into a techno-dystopia (think Elysium), where elites live in luxurious walled off compounds and the vast majority live in soul crushing poverty. That world will eventually erupt into revolution, or worse, and, given the destructive capabilities bestowed by our advancing technology, quite possibly hasten the end of human civilization on Earth.

Seems like a pretty obvious choice. And it is. But presently we are headed in precisely the wrong direction. We need a global awakening and a transformation of our politics to meet this challenge and fashion a positive outcome. See my upcoming book, The Politics of Unity.

Predicting the Future

Those who were present in the late 50’s and 60’s might remember the projections of the impact that developing technology would have on humans, often featured in the cartoon section of the Sunday paper. Chief among the benefits was…wait for it…leisure time…Hahahahaha! Hahahahaha!!!

As Yogi Berra put it: “It’s tough to make predictions, especially about the future.”

The future never works out the way we think it will. But problems are mitigated first by our awareness of them, followed by action to solve the problem. The fact that we are increasingly aware of the potential danger from AI is a positive sign in itself, and gives us hope that the dangers presented will be met and mitigated, although we don’t yet know just how, because we don’t really know yet how or in what form the greatest threats will present themselves, or the kinds of tools that AI will provide us to do so.

In the real world, the greater danger lies not in sentient, autonomous AI coming into conflict with biological humans, but in malefic actors, human actors, applying the vast problem solving ability and potentially planet destroying power bestowed by AI within the context of our primitive, tribal, violent politics. In other words, WE are the real existential threat to ourselves, not the technology.

As Albert Einstein noted, “The splitting of the atom changed everything, except our thinking.” I say it’s long past time to complete the change.

I’ll give Ray Kurzweil the last word:

“Ultimately, the most important approach we can take to keep AI safe is to work on our human governance and social institutions. We are already a human machine civilization…The best way to avoid destructive conflict in the future is to continue the advance of our social ideals, which has already greatly reduced violence.”

###

Q1 ’16:   WMD Proliferation: India-Pakistan Edition

The border of India and Pakistan has been a toxic zone of conflict for decades, but the situation there has taken a turn for the worse. Pakistan has recently deployed tactical nukes on their border, under the control of local commanders. This hair-trigger situation is such that the slightest miscalculation could set off a nuclear conflagration.

The deployment of tactical nukes and the devolution of central control over these weapons demonstrates the inevitable trajectory of WMD proliferation. This trend will accelerate with the availability of newer, equally lethal technologies not requiring the huge investment and infrastructure of nuclear technology.

Global leadership is seriously behind the eight ball on this matter, and U.S. “modernization” of its nuclear arsenal to include lower yield “precision guided atom bombs” is radically worsening the situation.

Greater awareness and attention to the situation at the India-Pakistan border may help to bring pressure on these nations to back away from the brink, and perhaps wake up global leadership to the urgency of dealing with WMD proliferation. Please distribute widely.

Dilip Hiro recently posted “The Most Dangerous Place on Earth” detailing the alarming situation on the India-Pakistan border. Reprinted below with permission from TomDispatch.com.

The Most Dangerous Place on Earth

A Nuclear Armageddon in the Making in South Asia

By Dilip Hiro

Undoubtedly, for nearly two decades, the most dangerous place on Earth has been the Indian-Pakistani border in Kashmir. It’s possible that a small spark from artillery and rocket exchanges across that border might — given the known military doctrines of the two nuclear-armed neighbors — lead inexorably to an all-out nuclear conflagration. In that case the result would be catastrophic. Besides causing the deaths of millions of Indians and Pakistanis, such a war might bring on “nuclear winter” on a planetary scale, leading to levels of suffering and death that would be beyond our comprehension.

Alarmingly, the nuclear competition between India and Pakistan has now entered a spine-chilling phase. That danger stems from Islamabad’s decision to deploy low-yield tactical nuclear arms at its forward operating military bases along its entire frontier with India to deter possible aggression by tank-led invading forces. Most ominously, the decision to fire such a nuclear-armed missile with a range of 35 to 60 miles is to rest with local commanders. This is a perilous departure from the universal practice of investing such authority in the highest official of the nation. Such a situation has no parallel in the Washington-Moscow nuclear arms race of the Cold War era.

When it comes to Pakistan’s strategic nuclear weapons, their parts are stored in different locations to be assembled only upon an order from the country’s leader. By contrast, tactical nukes are pre-assembled at a nuclear facility and shipped to a forward base for instant use. In addition to the perils inherent in this policy, such weapons would be vulnerable to misuse by a rogue base commander or theft by one of the many militant groups in the country.

In the nuclear standoff between the two neighbors, the stakes are constantly rising as Aizaz Chaudhry, the highest bureaucrat in Pakistan’s foreign ministry, recently made clear. The deployment of tactical nukes, he explained, was meant to act as a form of “deterrence,” given India’s “Cold Start” military doctrine — a reputed contingency plan aimed at punishing Pakistan in a major way for any unacceptable provocations like a mass-casualty terrorist strike against India.

New Delhi refuses to acknowledge the existence of Cold Start. Its denials are hollow. As early as 2004, it was discussing this doctrine, which involved the formation of eight division-size Integrated Battle Groups (IBGs). These were to consist of infantry, artillery, armor, and air support, and each would be able to operate independently on the battlefield. In the case of major terrorist attacks by any Pakistan-based group, these IBGs would evidently respond by rapidly penetrating Pakistani territory at unexpected points along the border and advancing no more than 30 miles inland, disrupting military command and control networks while endeavoring to stay away from locations likely to trigger nuclear retaliation. In other words, India has long been planning to respond to major terror attacks with a swift and devastating conventional military action that would inflict only limited damage and so — in a best-case scenario — deny Pakistan justification for a nuclear response.

Islamabad, in turn, has been planning ways to deter the Indians from implementing a Cold-Start-style blitzkrieg on their territory. After much internal debate, its top officials opted for tactical nukes. In 2011, the Pakistanis tested one successfully. Since then, according to Rajesh Rajagopalan, the New Delhi-based co-author of Nuclear South Asia: Keywords and Concepts, Pakistan seems to have been assembling four to five of these annually.

All of this has been happening in the context of populations that view each other unfavorably. A typical survey in this period by the Pew Research Center found that 72% of Pakistanis had an unfavorable view of India, with 57% considering it as a serious threat, while on the other side 59% of Indians saw Pakistan in an unfavorable light.

This is the background against which Indian leaders have said that a tactical nuclear attack on their forces, even on Pakistani territory, would be treated as a full-scale nuclear attack on India, and that they reserved the right to respond accordingly. Since India does not have tactical nukes, it could only retaliate with far more devastating strategic nuclear arms, possibly targeting Pakistani cities.

According to a 2002 estimate by the U.S. Defense Intelligence Agency (DIA), a worst-case scenario in an Indo-Pakistani nuclear war could result in eight to 12 million fatalities initially, followed by many millions later from radiation poisoning. More recent studies have shown that up to a billion people worldwide might be put in danger of famine and starvation by the smoke and soot thrown into the troposphere in a major nuclear exchange in South Asia. The resulting “nuclear winter” and ensuing crop loss would functionally add up to a slowly developing global nuclear holocaust.

Last November, to reduce the chances of such a catastrophic exchange happening, senior Obama administration officials met in Washington with Pakistan’s army chief, General Raheel Sharif, the final arbiter of that country’s national security policies, and urged him to stop the production of tactical nuclear arms. In return, they offered a pledge to end Islamabad’s pariah status in the nuclear field by supporting its entry into the 48-member Nuclear Suppliers Group to which India already belongs. Although no formal communiqué was issued after Sharif’s trip, it became widely known that he had rejected the offer.

This failure was implicit in the testimony that DIA Director Lieutenant General Vincent Stewart gave to the Armed Services Committee this February. “Pakistan’s nuclear weapons continue to grow,” he said. “We are concerned that this growth, as well as the evolving doctrine associated with tactical [nuclear] weapons, increases the risk of an incident or accident.”

Strategic Nuclear Warheads

Since that DIA estimate of human fatalities in a South Asian nuclear war, the strategic nuclear arsenals of India and Pakistan have continued to grow. In January 2016, according to a U.S. congressional report, Pakistan’s arsenal probably consisted of 110 to 130 nuclear warheads. According to the Stockholm International Peace Research Institute, India has 90 to 110 of these. (China, the other regional actor, has approximately 260 warheads.)

As the 1990s ended, with both India and Pakistan testing their new weaponry, their governments made public their nuclear doctrines. The National Security Advisory Board on Indian Nuclear Doctrine, for example, stated in August 1999 that “India will not be the first to initiate a nuclear strike, but will respond with punitive retaliation should deterrence fail.” India’s foreign minister explained at the time that the “minimum credible deterrence” mentioned in the doctrine was a question of “adequacy,” not numbers of warheads. In subsequent years, however, that yardstick of “minimum credible deterrence” has been regularly recalibrated as India’s policymakers went on to commit themselves to upgrade the country’s nuclear arms program with a new generation of more powerful hydrogen bombs designed to be city-busters.

In Pakistan in February 2000, President General Pervez Musharraf, who was also the army chief, established the Strategic Plan Division in the National Command Authority, appointing Lieutenant General Khalid Kidwai as its director general. In October 2001, Kidwai offered an outline of the country’s updated nuclear doctrine in relation to its far more militarily and economically powerful neighbor, saying, “It is well known that Pakistan does not have a ‘no-first-use policy.’” He then laid out the “thresholds” for the use of nukes. The country’s nuclear weapons, he pointed out, were aimed solely at India and would be available for use not just in response to a nuclear attack from that country, but should it conquer a large part of Pakistan’s territory (the space threshold), or destroy a significant part of its land or air forces (the military threshold), or start to strangle Pakistan economically (the economic threshold), or politically destabilize the country through large-scale internal subversion (the domestic destabilization threshold).

Of these, the space threshold was the most likely trigger. New Delhi as well as Washington speculated as to where the red line for this threshold might lie, though there was no unanimity among defense experts. Many surmised that it would be the impending loss of Lahore, the capital of Punjab, only 15 miles from the Indian border. Others put the red line at Pakistan’s sprawling Indus River basin.

Within seven months of this debate, Indian-Pakistani tensions escalated steeply in the wake of an attack on an Indian military base in Kashmir by Pakistani terrorists in May 2002. At that time, Musharraf reiterated that he would not renounce his country’s right to use nuclear weapons first. The prospect of New Delhi being hit by an atom bomb became so plausible that U.S. Ambassador Robert Blackwill investigated building a hardened bunker in the Embassy compound to survive a nuclear strike. Only when he and his staff realized that those in the bunker would be killed by the aftereffects of the nuclear blast did they abandon the idea.

Unsurprisingly, the leaders of the two countries found themselves staring into the nuclear abyss because of a violent act in Kashmir, a disputed territory which had led to three conventional wars between the South Asian neighbors since 1947, the founding year of an independent India and Pakistan. As a result of the first of these in 1947 and 1948, India acquired about half of Kashmir, with Pakistan getting a third, and the rest occupied later by China.

Kashmir, the Root Cause of Enduring Enmity

The Kashmir dispute dates back to the time when the British-ruled Indian subcontinent was divided into Hindu-majority India and Muslim-majority Pakistan, and indirectly ruled princely states were given the option of joining either one. In October 1947, the Hindu maharaja of Muslim-majority Kashmir signed an “instrument of accession” with India after Muslim tribal raiders from Pakistan invaded his realm. The speedy arrival of Indian troops deprived the invaders of the capital city, Srinagar. Later, they battled regular Pakistani troops until a United Nations-brokered ceasefire on January 1, 1949. The accession document required that Kashmiris be given an opportunity to choose between India and Pakistan once peace was restored. This has not happened yet, and there is no credible prospect of it taking place.

Fearing a defeat in such a plebiscite, given the pro-Pakistani sentiments prevalent among the territory’s majority Muslims, India found severalways of blocking U.N. attempts to hold one. New Delhi then conferred a special status on the part of Kashmir it controlled and held elections for its legislature, while Pakistan watched with trepidation.

In September 1965, when its verbal protests proved futile, Pakistan attempted to change the status quo through military force. It launched a war that once again ended in stalemate and another U.N.-sponsored truce, which required the warring parties to return to the 1949 ceasefire line.

A third armed conflict between the two neighbors followed in December 1971, resulting in Pakistan’s loss of its eastern wing, which became an independent Bangladesh. Soon after, Indian Prime Minister Indira Gandhi tried to convince Pakistani President Zulfikar Ali Bhutto to agree to transform the 460-mile-long ceasefire line in Kashmir (renamed the “Line of Control”) into an international border. Unwilling to give up his country’s demand for a plebiscite in all of pre-1947 Kashmir, Bhutto refused. So the stalemate continued.

During the military rule of General Zia al Haq (1977-1988), Pakistan initiated a policy of bleeding India with a thousand cuts by sponsoring terrorist actions both inside Indian Kashmir and elsewhere in the country. Delhi responded by bolstering its military presence in Kashmir and brutally repressing those of its inhabitants demanding a plebiscite or advocating separation from India, committing in the process large-scale human rights violations.

In order to stop infiltration by militants from Pakistani Kashmir, India built a double barrier of fencing 12-feet high with the space between planted with hundreds of land mines. Later, that barrier would be equipped as well with thermal imaging devices and motion sensors to help detect infiltrators. By the late 1990s, on one side of the Line of Control were 400,000 Indian soldiers and on the other 300,000 Pakistani troops. No wonder President Bill Clinton called that border “the most dangerous place in the world.” Today, with the addition of tactical nuclear weapons to the mix, it is far more so.

Kashmir, the Toxic Bone of Contention

Even before Pakistan’s introduction of tactical nukes, tensions between the two neighbors were perilously high. Then suddenly, at the end of 2015, a flicker of a chance for the normalization of relations appeared. Indian Prime Minister Narendra Modi had a cordial meeting with his Pakistani counterpart, Nawaz Sharif, on the latter’s birthday, December 25th, in Lahore. But that hope was dashed when, in the early hours of January 2nd, four heavily armed Pakistani terrorists managed to cross the international border in Punjab, wearing Indian Army fatigues, and attacked an air force base in Pathankot. A daylong gun battle followed. By the time order was restored on January 5th, all the terrorists were dead, but so were seven Indian security personnel and one civilian. The United Jihad Council, an umbrella organization of separatist militant groups in Kashmir, claimed credit for the attack. The Indian government, however, insisted that the operation had been masterminded by Masood Azhar, leader of the Pakistan-based Jaish-e Muhammad (Army of Muhammad).

As before, Kashmir was the motivating drive for the anti-India militants. Mercifully, the attack in Pathankot turned out to be a minor event, insufficient to heighten the prospect of war, though it dissipated any goodwill generated by the Modi-Sharif meeting.

There is little doubt, however, that a repeat of the atrocity committed by Pakistani infiltrators in Mumbai in November 2008, leading to the death of 166 people and the burning of that city’s landmark Taj Mahal Hotel, could have consequences that would be dire indeed. The Indian doctrine calling for massive retaliation in response to a successful terrorist strike on that scale could mean the almost instantaneous implementation of its Cold Start strategy. That, in turn, would likely lead to Pakistan’s use of tactical nuclear weapons, thus opening up the real possibility of a full-blown nuclear holocaust with global consequences.

Beyond the long-running Kashmiri conundrum lies Pakistan’s primal fear of the much larger and more powerful India, and its loathing of India’s ambition to become the hegemonic power in South Asia. Irrespective of party labels, governments in New Delhi have pursued a muscular path on national security aimed at bolstering the country’s defense profile.

Overall, Indian leaders are resolved to prove that their country is entering what they fondly call “the age of aspiration.” When, in July 2009, Prime Minister Manmohan Singh officially launched a domestically built nuclear-powered ballistic missile submarine, the INS Arihant, it was hailed as a dramatic step in that direction. According to defense experts, that vessel was the first of its kind not to be built by one of the five recognized nuclear powers: the United States, Britain, China, France, and Russia.

India’s Two Secret Nuclear Sites

On the nuclear front in India, there was more to come. Last December, an investigation by the Washington-based Center for Public Integrity revealed that the Indian government was investing $100 million to build a top secret nuclear city spread over 13 square miles near the village of Challakere, 160 miles north of the southern city of Mysore. When completed, possibly as early as 2017, it will be “the subcontinent’s largest military-run complex of nuclear centrifuges, atomic-research laboratories, and weapons- and aircraft-testing facilities.” Among the project’s aims is to expand the government’s nuclear research, to produce fuel for the country’s nuclear reactors, and to help power its expanding fleet of nuclear submarines. It will be protected by a ring of garrisons, making the site a virtual military facility.

Another secret project, the Indian Rare Materials Plant, near Mysore is already in operation. It is a new nuclear enrichment complex that is feeding the country’s nuclear weapons programs, while laying the foundation for an ambitious project to create an arsenal of hydrogen (thermonuclear) bombs.

The overarching aim of these projects is to give India an extra stockpile of enriched uranium fuel that could be used in such future bombs. As a military site, the project at Challakere will not be open to inspection by the International Atomic Energy Agency or by Washington, since India’s 2008 nuclear agreement with the U.S. excludes access to military-related facilities. These enterprises are directed by the office of the prime minister, who is charged with overseeing all atomic energy projects. India’s Atomic Energy Act and its Official Secrets Act place everything connected to the country’s nuclear program under wraps. In the past, those who tried to obtain a fuller picture of the Indian arsenal and the facilities that feed it have been bludgeoned to silence.

Little wonder then that a senior White House official was recently quoted as saying, “Even for us, details of the Indian program are always sketchy and hard facts thin on the ground.” He added, “Mysore is being constantly monitored, and we are constantly monitoring progress in Challakere.” However, according to Gary Samore, a former Obama administration coordinator for arms control and weapons of mass destruction, “India intends to build thermonuclear weapons as part of its strategic deterrent against China. It is unclear, when India will realize this goal of a larger and more powerful arsenal, but they will.”

Once manufactured, there is nothing to stop India from deploying such weapons against Pakistan. “India is now developing very big bombs, hydrogen bombs that are city-busters,” said Pervez Hoodbhoy, a leading Pakistani nuclear and national security analyst. “It is not interested in… nuclear weapons for use on the battlefield; it is developing nuclear weapons for eliminating population centers.”

In other words, as the Kashmir dispute continues to fester, inducing periodic terrorist attacks on India and fueling the competition between New Delhi and Islamabad to outpace each other in the variety and size of their nuclear arsenals, the peril to South Asia in particular and the world at large only grows.

Dilip Hiro, a TomDispatch regular, is the author, among many other works, of The Longest August: The Unflinching Rivalry between India and Pakistan (Nation Books). His 36th and latest book is The Age of Aspiration: Money, Power, and Conflict in Globalizing India (The New Press).

Copyright 2016 Dilip Hiro

###

Q4 ’15:   Uncertainty

The world is in a state of confusion, reflected in markets across the board, which went nowhere for all of 2015 (see BloombergThe Year Nothing Worked”). The new year started off with a sharp, but historically normal, selloff in stocks (Dow -13%, S&P -11%). Market fundamentals suggest more downside but the selloff precipitated a level of pessimism usually only seen at significant market bottoms.

Some good things are happening…notably the global climate agreement and the nuclear deal with Iran. At the same time there is plenty to be concerned about.

Global deaths from terrorist activity rose 80% in 2015 to the highest level ever. And the long running conflicts in the Middle East have boiled over into a geopolitical bar fight. Refugees from the conflict have thrown the European Union into chaos. The long overdue correction in China threatens to swamp the global economy. Disputes over the South China Sea and North Korean provocations are simmering in the background.

In the U.S., mass shootings (4 or more casualties) occurred on a daily basis in 2015. Black communities (Black Lives Matter) are venting their anger at aggressive police tactics that leave too many of their young men dead. A victim cult is roiling campuses with demands for “safe spaces” where they won’t be subjected to anything that offends them (see “The Real Victims of Victimhood”). And in this presidential election year the usual hyperbolic political rhetoric has ramped into outright hysteria.

If you’re not confused, you’re not paying attention.

Is this the calm before the storm? Or is this an ugly but relatively stable transition to a new normal? Stay tuned.

Markets

Financial markets are now all about the Fed, which finally began raising the Fed Funds rate for the first time in 7 years (1/4% in December). Market commentators are endlessly opining on what the Fed did, might do, might not do, should do, must do, must not do…”how could they; it’s madness,” “how could they not; it would be catastrophic.”

Market participants are equally confused. Credit Suisse recently posted a piece based on a survey of clients in the U.S., Asia and Europe entitled “Client perspectives: lost and bearish.” The bottom line…”Never have we seen so many clients who just do not know what is happening…” This pretty much sums up the state of the marketplace.

Economy

Fed confidence notwithstanding, the economy is pretty uninspiring. Job growth has been steady but the economic value of the jobs created is a fraction of the value of jobs lost. The result is stagnant growth in wages along with steady increases in cost of living…persistent, low-grade stagflation for wage earners!

Investors increasingly need to take a global view of economic developments. Monty Guild, President of Los Angeles based Guild Investment Advisors, offers an expanded and generally upbeat perspective on the global economy.

“Many market participants look at manufacturing data to get a picture of the economy…So when manufacturing data is slowing in the U.S., Europe, and China, some uninformed and shallow researchers begin to panic.

Of course it is slowing down and it can slow more in coming years. Why? Because China especially, and the developed world as well, are not on a manufacturing trajectory to economic growth. Software, services, consumer spending, and technology are all the drivers of these economies. China is in the midst of an epochal transition from an economy driven by manufacturing to one driven by the domestic consumer…

Accordingly growth is in these areas, and there is no problem with the economy if it shifts partly from metal fabrication to services and software. The changes require investors to decipher which metrics to follow in order to understand the new economy.

Political

America was treated to a rare example of balance and honesty in a public figure when Pope Francis descended on the mad state of American public life, sending a breath of fresh air across the toxic landscape, and a brief pause in the relentless focus of our media on dysfunction and catastrophe.

The enlightened Pope gave American politicians an example of honorable public discourse. He demonstrated a combination of balance, compassion and integrity along with a deft political sensibility that communicated readily across the political spectrum to all but the rabid ideologues on the extremes. His well considered positions on divisive social issues demonstrated compassion and inclusiveness without compromising his core beliefs.

I hope that some among our political elite actually took note of the Pope’s demonstration and committed themselves to a higher path.

Beltway “wisdom” is that this is a naïve and foolish sentiment. I think the American people are weary of beltway “wisdom” and hungry for some integrity in our political process.

In fact, it is the virtually universal disdain for the corrupt and inbred beltway culture that has resulted in the election of two consecutive unqualified candidates as President, in a desperate attempt by the American people to choose a leader who will bring real change to Washington. Frustration has now turned to anger, manifest in the popularity of Fascist leaning Donald Trump on the right and Socialist Bernie Sanders on the left.

Meanwhile, actions in Washington continue to erode any remaining semblance of our government as a representative democracy. E.g. After several failed attempts (due to widespread bi-partisan opposition) to extend and expand the profoundly un-American Patriot Act, the deed was accomplished by slipping the Cybersecurity Information Sharing Act (CISA) into the must-pass 2,000 page year end Omnibus spending bill so it could become law without debate.

So who is benefiting from our national dis-integration? For a clear and concise picture of what is really happening behind the scenes, read Bill Moyers’ recent essay “The Plutocrats Are Winning.”

Geopolitical

The “Arab Spring” inspired civil war in Syria along with the dismantling of neighboring Iraq created the perfect environment for the rise of ISIS, a medieval Islamic cult with 21st Century social media skills. ISIS is eager to provoke another U.S. invasion of the region so as to usher in The Day of Judgement (Armageddon) and the Final Victory of Islam. This of course has Republicans clamoring for…you guessed it…another U.S. invasion in the Middle East!

President Obama is trying to keep the U.S. out of it, but at the same time has ordered Special Forces “advisors” into Syria after repeatedly stating unequivocally “no American troops in Syria.” For those with memory of Vietnam, this will sound very familiar.

Ironically, the U.S. is huddling with Iran and Russia to coordinate a campaign against ISIS, even as both of those nations continue to pursue multiple agendas in opposition to the U.S. And President Obama’s nuclear deal with Iran is now a done deal, freeing up $100 billion in frozen assets for Iran. Our allies in the region, the Saudi’s in particular, are extremely unhappy over both of these developments, and are trying to galvanize opposition to Iran by inflaming regional sectarian conflicts. And for the icing on the Mideast FUBAR cake…U.S. ally Turkey’s President Erdogan recently praised Hitler’s Third Reich as “an example of effective government.”

Opportunity

The best opportunity these days, as it has been for quite some time, is to play defense and try to avoid losses. Continuous central bank intervention has rendered market fundamentals irrelevant, so it is difficult to take a position in anything with any degree of confidence. Bonds of all stripes are the most important area to avoid. The U.S. dollar and the U.S. stock market, especially stock in large cap global companies that can move assets globally and are in a position to take advantage of the massive growth in Asian markets, are generally seen as the preferred safe haven. These assets are currently in a correction and may soon offer a buying opportunity.

Precious metals, a traditional safe haven, have been constrained by deflationary pressures but when that cycle completes, which could be very soon — even as soon as right now — precious metals will provide excellent safety and value.

With no reliable fundamental drivers and so many potential triggers for turmoil, expect volatility and BE CAUTIOUS. Lost opportunity is far easier to endure and recoup than lost capital.

###

Q2 ’15:   Green Shoots

“Two things have always been true about human beings. One, the world is always getting better. Two, the people living at that time think it’s getting worse.” Penn Jillette

Political, economic and technological changes are rapidly changing the face of human civilization on planet Earth. At such a time it is easy to become overshadowed by the destruction of the old and miss the “green shoots” of the new, manifesting simultaneously.

I recently had a takeout lunch from Chipotle and to my amazement I discovered a short essay on the bag by one of my favorite public intellectuals, Steven Pinker, who frames the situation perfectly. Kudos to Chipotle management! The piece follows:

“It’s easy to get discouraged by the ceaseless news of violence, poverty, and disease. But the news presents a distorted view of the world. News is about things that happen, not things that don’t happen. You never see a TV crew reporting that a country isn’t at war, or that a city hasn’t had a mass shooting that day, or that millions of 80 year-olds are alive and well.

“The only way to appreciate the state of the world is to count. How many incidents of violence, or starvation, or disease are there as a proportion of the number of people in the world? And the only way to know whether things are getting better or worse is to compare those numbers at different times: over the centuries and decades, do the trend lines go up or down?

“As it happens, the numbers tell a surprisingly happy story. Violent crime has fallen by half since 1992, and fiftyfold since the Middle Ages. Over the past 60 years the number of wars and number of people killed in wars have plummeted. Worldwide, fewer babies die, more children go to school, more people live in democracies, more can afford simple luxuries, fewer get sick, and more live to old age.

““Better” does not mean “perfect.” Too many people still live in misery and die prematurely, and new challenges, such as climate change, confront us. But measuring the progress we’ve made in the past emboldens us to strive for more in the future. Problems that look hopeless may not be; human ingenuity can chip away at them. We will never have a perfect world, but it’s not romantic or naïve to work toward a better one.”

Following are links to inspiring developments toward the creation of a better world.

Environment

The Rodale Institute has been quietly conducting research into what they call “regenerative agriculture.” Not just organic and healthy for the consumer; this is systemically organic and healthy for the entire planet.

Rodale has conducted a 30 year test of regenerative vs chemical farming and demonstrated that regenerative agriculture not only revitalizes the soil and eliminates toxic chemicals from our food, air, water and land; it produces better yields than chemical agriculture, and restores balance to the general ecology in the process.

But according to Rodale, the big surprise is that if adopted widely, regenerative agriculture will solve the problem of carbon pollution, a major contributor to global warming…as a side effect!

“Simply put, we could sequester more than 100% of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term “regenerative organic agriculture.”

This research has been incorporated into The Carbon Underground to promote the adoption of broad-scale regenerative agriculture.

Meanwhile, alternative energy has been making steady gains in market share, efficiency and cost. 32% of all new electric generating capacity in the U.S. in 2014 came from solar. Lots of interesting data on the growth of solar at SEIA and Clean Technica. It is noteworthy that the U.S. Department of Defense is a leader in alternative energy development and deployment. Keep up to date with the latest developments in alternative energy at Alternative Energy News and E2 Environmental Entrepreneurs.

Technology

Geometrically expanding computing power is generating change much faster than we can grasp. The nature and variety of future applications are difficult — if not impossible — to predict, as leapfrogging technologies and the intersections of various technologies create new realities, from which even newer technologies and applications will spring. Following are a few items providing some insight into the magnitude of changes on the horizon.

  • Researchers in the U.S. and Germany have made major progress on a “brain to text” system that converts speech brainwave patterns to text, opening up direct mind to computer communications.
  • Researchers at Stanford have created an inexpensive water splitter that operates 24/7. Conventional water splitters require precious metals that make the process too costly. The new splitter uses inexpensive base metals, raising the prospect of a cheap and virtually unlimited supply of locally generated hydrogen fuel.
  • Recent advances in 3D printing are bringing real efficiencies and innovation to major industries, offering the promise of distributed economy and bringing manufacturing back home. See recent trade articles here and here, including a video of a 3D printed Shelby Cobra. “Print Thyself,” in the November 24, 2014 issue of The New Yorker, highlights the amazing array of applications already spawned by 3D printing.

Medicine

Driven by technology, the field of medicine is being transformed through research and new tools and tactics. Following are a few amazing stories from the cutting edge of medical research and practice.

  • Heart attack treatment. The 6/21/15 New York Times featured “A Sea Change in Treating Heart Attacks” resulting in a 38% reduction in the death rate from coronary heart attacks.
  • Cancer treatment. 60 Minutes dedicated two segments to an amazing cancer treatment using the polio virus engineered to make it harmless to normal cells but deadly for cancer cells. Immunotherapy has become a hot area of cancer research, utilizing a variety of viruses.
  • “Electrocutical” drugs could induce growth of new brain tissue, addressing birth defects or brain injury. Early clinical trials have also demonstrated positive results for pain management and insulin regulation.
  • Australian researchers have created a non-invasive ultrasound treatment for Alzheimers that restores memory function.
  • General good news to set your mind at ease…cell phones do not cause brain cancer.

Fresh Thinking

The pace and scope of change is creating a need for fresh thinking about how we organize our affairs and interact with each other. Following are some fresh ideas on a number of fronts.

“Everyone is looking for a purpose in life…We are always wondering why we’re here. But I’ve learned that we have to create that purpose for ourselves. My purpose, which I finally found thanks to social media, is helping all of these people find their purpose.”

  • And for those obsessing over inevitable annihilation into a black hole, a new theory proposes that black holes create a carbon copy hologram of anything they touch. So rest easy. Your other self will survive. In fact, you may already have numerous other selves from previous contact with black holes.

If the daily news is getting you down, you can always log on to SunnySkyz.com for regular confirmation that the better angels of human nature have not gone away. Or you can go to KurzweilAI.net to check in on the latest amazing developments at the cutting edge of technology.

There is no arguing that we are living in challenging times. The pace of change is beyond the comfort level for most humans. You may find it useful to print the quotes above by Penn Jillette and Steven Pinker and tape them to your refrigerator, and heed the advice of Lao Tzu…

“Life is a series of natural and spontaneous changes. Don’t resist them – that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.”

###