$475 “FRINGED SNEAKERS”: WHAT A BARGAIN!!!

3/24/16

Loyal readers will recall one of my best-received pieces, 6/28/15’s WSJ:  THE MAGAZINE FOR PORTENTOUS POPINJAYS AND POLTROONS, in which I, er, reviewed the spending habits of those in charge of our nation’s money.   That now seminal post came to mind this morning as I noticed an ad on page A3 of today’s (i.e., Thursday, 3/24/16’s) Wall Street Journal for a $475 pair of “fringe sneakers” from an outfit called Tod’s. Presumably, these are for what can loosely be called males, but it’s hard to tell and the gender of the target customer doesn’t matter.   Further, perhaps that these monstrosities are, as Tod’s proudly proclaims, made in Italy can overcome their manifest ugliness, but I’m not here to argue aesthetics.   There is, as we who study, apply, and teach economics profess, no accounting for taste.

My point, as always, is to encourage my readers to stop and think for a minute.   The Wall Street Journal is read, or is pretended to be read, by those who are in charge of our nation’s financial fortunes, people to whom other people entrust their life savings to be managed in a prudent and circumspect manner.   Thus, advertisements in the Journal are directed toward those who are in charge of the nation’s money.    Presumably, such people are interested in such things as $475 fringed sneakers or advertisers would not spend money making them aware of the existence and availability of such, er, things.   So people to whom you have entrusted your money are paying $475 for footwear that is worn in casual situations and, judging from admittedly subjective aesthetics, in the dark.

Be afraid; be very afraid.

ONE REASON PEOPLE LIKE TRUMP: “IT’S NOT THE MONEY…IT’S THE MONEY”

3/24/16

People, especially the “better” people on Wall Street, in Washington, and the media wonder why the average, middle class person is so angry that s/he is willing to vote for a guy as flawed as Donald Trump.   To most of us, this matter doesn’t merit much consideration due to the answer’s being so obvious, but then most of us are not muckety-mucks on Wall Street, in Washington, or in the media.   However, some of us are given, perhaps too given, to contemplation of things of great import to the Republic.  

One, and only one, of the reasons that people are so angry that they embrace even Trump has its genesis in the financial bailouts that supposedly “solved” the problems that led to the market and economic debacle of 2008-’09.   The banks and other major financial institutions got into trouble due to the poor loans they had made, packaged, and purchased.   Rather than see them fail, the Fed, with the full backing and cooperation of the Bush/Obama Administration, engaged in a financial bailout that involved pouring a Niagara of liquidity into the economy, reducing short term interest rates to zero, and inflating the prices of debt instruments throughout the system, bringing longer term interest rates to historic lows.

If one cuts through all the clutter and the noise, borrowers got in over their heads, with the full complicity of the wizards of Wall Street, and couldn’t repay their loans.   Rather than let them suffer the consequences of their irresponsible behavior, the government effectively forced conservative savers to lend their lifetime savings to these financial miscreants at zero and near zero interest rates.   The financially responsible got, to use a technical financial term, screwed in order to bail out the financially irresponsible…or worse.

And the deep thinkers wonder why people are so angry with the establishment that dominates Wall Street, the media, and Washington.

Note:  I have to thank a long ago boss of mine, an unforgettable character named Doran Pessler (unless I’ve butchered the spelling) at the then National Bank of Detroit, for the expression used in the title of this missive.   Doran taught me long ago that, in business, it’s never not the money, as in “It’s not the money…it’s the money.”   So thanks, Doran, wherever you are!

THE TERRORIST ATTACKS IN BRUSSELS AND PARIS: IT’S THE KREMLIN’S FAULT!

3/24/16

The learned narrative in the wake of the horrific terrorist attacks in Paris and Brussels is that ISIS, having suffered massive setbacks on the battlefields of the Middle East, is now funneling its operatives back to Europe in search of success against softer targets.  

There is probably much to this explanation for this latest plague of terrorism infecting the Old World.  However, look for the U.S. political establishment of both parties, but especially of the GOP, which cannot abandon the Cold War mindset that has seemingly taken up residence its DNA, to somehow blame Russia and Vladimir Putin for Paris, Brussels, et. al.   After all, according to Republican, and Democratic, mythology, isn’t the real life Dr. Evil who currently inhabits the Kremlin behind everything that is malodorous in the world?

Here’s how the explanation will go…

Yes, U.S. backed forces, especially the Kurds in Syria and, to a lesser extent, government forces in Iraq, have enjoyed some recent success against ISIS.   But most of the ISIS setbacks have been inflicted by Syrian government forces backed by massive Russian airpower and special forces.  Not bound by the Marquess of Queensberry rules that bind our military and those we back, the Russians have turned the tide of the war in favor of their clients in the Syrian government and have brought Syrian government forces to the gates of Palmyra.

No one thinks the Russians have done this out of altruism; they have an important client in the Assad regime and plenty of geographic and cultural reasons to be at least as concerned about ISIS as we and our European allies are.  Still, one would think that we would be grateful to the Russians for doing a large measure of the anti-ISIS dirty work for us.   But we’re not.  We keep hectoring the Russians to abandon their interests (i.e., the continuation of the Assad regime and safeguarding their territory from the horrendous designs of ISIS) and, instead, act like a good client state to us and join some vaguely defined international crusade for democracy or some such starry-eyed nonsense.   To the surprise of no one with even a vague understanding of Russian history, the Russian response has been a resounding “Nyet,” doubtless accompanied by some off the camera snickers about the naiveté and outright silliness of those in charge of American foreign policy.

Now, however, that the Russians have, to use a technical geopolitical term, kicked a lot of butt against ISIS, the terrorists are gravitating away from the path of strong resistance toward the path of little resistance, moving on to the soft targets of Europe and, maybe, the United States.   One can bet that the foreign policy establishment, and especially that of the Cold War reminiscence choir in the GOP, will blame the Russians.   After all, if the Russians had not been so tough on ISIS in Syria, the terrorists would not have migrated to the West to wreak their havoc.   If the Russians had only joined our international non-effort, things would doubtless be better.

Yep; it’s the Russians alright.

THE FREE TRADE KOOL-AID GETS WATERED DOWN

3/11/16

The long held American enthusiasm for free trade has taken a beating in this year’s presidential contest.   Democrats and Republicans, from Bernie Sanders to Donald Trump, are scoring points taking shots at the impact free trade has had on our economy.  Those candidates who have long stood for free trade either are doing poorly (John Kasich) or try to avoid the subject during the campaign (Hillary Clinton).   As one who had once ravenously imbibed the Kool-Aid of free trade as a panacea for our economic maladies and who has, for the last decade or so, questioned my unremitting thirst for this increasingly malodorous concoction, yours truly might be able to provide some insight into Americans’ waning enthusiasm for free trade.

It takes only a little background in economics, either academic or practical, to realize that free trade can only lead to a world wage or, rather, a series of world wages in those industries that produce goods and services that can be freely traded.   For example, if cars are traded freely across national borders, global competition will force auto producers to pay auto workers the same wages wherever they are located.   This can only be bad news for American workers, along with German and Japanese autoworkers, who are among the highest paid such laborers in the world.   How can an auto producer selling and producing across the globe to afford pay Americans, or Germans or Japanese, a premium simply because they of their nationality?   While the world wage toward which free trade is leading us is great news for workers in developing markets, it can only be bad news for American workers.

One can argue that Americans currently earn wages higher than those of workers in, say, Mexico, China or India, because U.S. workers are more productive than workers in those competing countries.   While this is true, how long can this situation last?  A car plant, or any manufacturing facility, in Mexico or China is virtually indistinguishable from a car plant in Lansing, MI or Lordstown, OH.   If anything, the plant in the emerging market country is more advanced because it is highly likely to be newer than its counterpart in the United States.   So how can American workers using the same, or even less advanced, tooling, methods, and other capital goods and processes be more productive than their counterparts in Mexico or China?

Some will argue that we have a technological edge because we are better educated.   While it’s true that the average American spends more years going to school than the average Chinese or Indian, both countries have more honor students than we have students.   Further, students in China or India have a greater propensity to study math, science, accounting, or engineering than do American students.   Chinese and Indians, for the most part, don’t spend four years in college nurturing grievances by majoring in subjects with titles that end in “Studies.”   They don’t spend four years in college trying to build self-esteem on shaky foundations by pursuing dreams that involve “creativity” but have great potential to wind up as nightmares that involve asking customers whether they would “like fries with that.”   While the Chinese and Indians pursue subjects that lead to employment, our students pursue subjects that lead to inflated expectations and senses of entitlement but provide scant preparation for anything useful. 

 Lest I be attacked for favoring technical education over the liberal arts, I’ll add here that the traditional study of liberal arts would be fine; it not only gives one an appreciation for one’s culture and background, but also teaches people to think, write, figure, and learn.   But those traditional liberal arts have given way to majors that stress non-conformity, self-expression, and disdain for one’s culture and background and that eschew such now declared useless virtues as being able to think, write, analyze, and generally participate not only in the work force but also in society.   Meanwhile, our global competitors produce engineers.    But we comfort ourselves in the supposition that our superior access to “education” will forever give us a technological and productivity edge.   Good luck with that.   But even if we do somehow maintain our technological edge, if our superior technology is transferred, as it is now, to foreign venues in which it can be applied more cheaply, how does that benefit the American worker?  The only way the American worker can compete in a global free trade environment is by accepting a lower wage.

What proof is there for the common sense contention that a global marketplace leads to a world wage that can only force American incomes and prospects in a downward direction?   Real hourly wages in our country have been essentially stagnant since 1964.   This measurement includes, by the way, all those wonderful jobs that free trade true believers tell us have been created in exporting industries.   This stagnation only stands to reason; it is explained by simple supply and demand.   With all those emerging markets workers formerly shut out of the world markets suddenly flooding those markets, how can anyone with an ounce of economic literacy expect anything but severe downward pressure on wages?   Can anyone blame the typical worker and voter for not being overjoyed that free trade has made those in the C-suites astoundingly wealthy while s/he has seen little growth in the wages s/he earns or appreciation for the work s/he does?

Furthermore, there are societal costs to free trade.   I expounded on this point, almost as a side note, in my discussion of the U.S. Steel South Works in my seminal 7/9/14 post THOSE HORRIBLE SOUTH WORKS AND RAHM EMANUEL’S CORE CONSTITUENCY.  My point was that places like the South Works, long abandoned as a result of free trade orthodoxy, long provided that first rung on the climb to the middle class for immigrants and minorities.   A guy with little education could get a job that paid good money so that he could send his kid to, say, IIT to be an engineer so he in turn could send his kid to, say, the University of Illinois or that U of I of the East, Harvard, to become a lawyer, an investment banker, or a tech billionaire.   That rung has now been removed so now the guy in China can work at a steel plant and send his kid to Shanghai U to become an engineer and he can in turn send his kid to say, the University of Illinois or that U of I of the East, Harvard, to become lawyer, an investment banker, or a tech billionaire.  

What will replace the South Works?   For awhile, we thought maybe the Obama Library.  Now it looks like maybe the Lucas Museum, a gambling casino, or a huge park.  None will generate the types of jobs that paid the wages that gave people hope of a better life for themselves and their children.  And we wonder why we have so many drug, crime, familial, and other sociological disasters in both the inner cities and the countryside.   The choice for many people, and, increasingly, many educated people, is to work for Third World wages or pursue any number of nefarious enterprises that draw their customers from those facing the same prospects.

I’m not an opponent of trade; as one who makes his living studying, teaching, and applying economics, I know that free trade leads to efficient resource allocation and has myriad benefits for consumers here, producers “there,” and, yes, even certain producers here.   Doubtless, though, after the thoughts I have shared in this post, yours truly will be attacked by those who, as I once did, unreservedly and unquestionably still guzzle the Kool-Aid of free trade.  I will be ridiculed as one who wants to, as John Kasich put it in last night’s debate, shut the windows and lock the doors of our economy.  In the orthodoxy of free trade nirvana, those who don’t buy into the entire package, those who don’t buy the proposition that elimination of all barriers to imports will lead us to economic Valhalla and who thus propose negotiating better deals for American workers, or even who simply want to re-examine some of our assumptions, are castigated as heretics worthy of expulsion, ridicule, or both.   In that way, ardent proponents of the what has become the religion of free trade are not at all unlike ardent proponents of the most fundamentalist forms of any religion.   They close their ears to any fresh ideas, perhaps because doing so might shake their desperate hold on even the most untenable manifestations of their faith.

DON’T KID, OR REASSURE, YOURSELF; DONALD TRUMP CAN BECOME OUR NEXT PRESIDENT

3/4/16

Yours truly has been on top of this Trump phenomenon, movement, or whatever

people are currently calling it, from just about the beginning.   In December, I discussed, or maybe I introduced, the concept of the “Reverse Bradley Effect,” predicted a loss by Trump in Iowa, and wondered what such a loss would do for the Trumpian effort:

TRUMP, THE “REVERSE BRADLEY EFFECT,” AND THE MAN’S UPCOMINGLOSS IN IOWA

A few days later, yours truly produced his best work on Trump, explaining, in a letter to the Chicago Tribune quoted on WGN Radio, why Mr. Trump was doing so well in what was considered a Quixotic quest for the Oval Office:

WHY TRUMP IS SO POPULAR WITH THEMIDDLE CLASS

Now people who get paid outrageous amounts of money to do what I do for free are finally picking up on the secret to Trump, elucidated in that December post, i.e., it’s not Trump.   People aren’t idiots and they realize the man is veritable patchwork of flaws, but they are so tired of being treated like sociological curiosities and being either patronized or disdained that they are willing to embrace a man whose behavior in many instances appalls them.

Then on the dawn of the Iowa caucuses, I hedged just a bit on my prediction of a Trump loss and revisited both the “Reverse Bradley Effect” and my long held theory that the overwhelming share of apathetic voters are not yearning and pining for a “mainstream centrist” but, instead, don’t vote because they see that “mainstream centrists” are taking us on a dystopian cruise down a very malodorous river:

IF TRUMP WINS TONIGHT IN IOWA…

So far, things have been working out just about as I had predicted, if indeed I were in the habit of predicting things.   In the wake of Trump’s nearly stunning victories on Super Tuesday and the debate last night that reminded me of the pro wrestling matches and interviews that were such a fascination of my youth, I have a few more thoughts to share with my readers.

First, despite what you hear from the people who somehow managed to get good paying gigs spewing nonsense on cable TV, it is still early in the campaign.    There is a lot of time, a lot of states, and a lot of delegates between now and the conventions.   Note that, of the five largest states, only one has held a primary or caucus.  Nobody, not Mr. Trump, not Hillary Clinton, is inevitable at this stage.   The now proclaimed non-existent path to the nomination of a challenger to either of the front runners could suddenly clear with a big state victory, an indictment, a gaffe of outrageous proportions, or simply the public’s growing tired of the acts of either of the front-runners.   There remains plenty of fun to be had this election season.

Second, many Republicans are opposing Mr. Trump on principle and/or personality.   Some GOPers are opposing Mr. Trump because they fear there is no way he can beat Mrs. Clinton.   Many Democrats are cheering on Mr. Trump, thinking, like their mainstream Republican colleagues, that he will be easy pickings for Mrs. Clinton.   Yours truly completely understands the opposition of the first of the above groups.  But the second should calm down and the third should be careful what they wish for.   Donald Trump can certainly win a general election against Hillary Clinton.

There are at least three reasons for my confidence that, despite the conventional, largely unchallenged, wisdom, Mr. Trump can defeat Mrs. Clinton.  First, those of us of a certain age remember the 1980 Republican contest when we were told that the “nuclear cowboy” Ronald Reagan could never win a general election; he was, we were assured by the pundits, you guessed it, “too far out of the mainstream.”   Some might argue that Mr. Reagan was not as far outside the sphere of respectability and acceptability as is Mr. Trump.   While there might be something to this argument, those who make it display not so much a surfeit of political insight as a lack of experience and sense of history.

Mr. Reagan was using language that Mr. Trump would not consider, or at least has not so far not employed.   In his 1976 campaign, Mr. Reagan was railing against welfare queens.   In the 1980 campaign, he called the man he would later make his running mate “a Yalie, a preppie, a sissy,” despite the fact that George H.W. Bush was a genuine war hero.  Yes, it was a different, more tolerant, time (due to the pervasive and increasingly jack-booted political correctness that is making Mr. Trump viable), but, still, Mr. Reagan’s rhetorical outrages were at or near a par with those of Mr. Trump.

Remember the other knock on Reagan, other than that he was “outside the mainstream,” a dangerous radical right-winger?   He was also a policy lightweight, according to the intelligentsia.    He just didn’t have the knowledge, or the intellect, to be president.   And his assurances that he would find the right people to help in his administration (Sound familiar?), as he did as governor of California, rang hollow to his betters in the salons of Georgetown.

None of these obvious points of disqualification stopped Mr. Reagan from defeating an incumbent president, winning a second term by a landslide, and putting a nearly despondent post-Nixon GOP on the path to not only relevance but dominance.

Second, for years we have been told by the wise men (er, sorry, wise people) on the tube that the GOP must broaden its base, that it is doomed to failure if it doesn’t bring new blood into the party.    Though I am sure that this is not what our clear superiors have in mind when they tut that the GOP must broaden itself, who, pray tell, is broadening the Party?   It isn’t Marco Rubio, the man who proclaims that he is the only one who can beat Hillary while going 1 for 20 or so in the contests so far.   It isn’t Ted Cruz, who can’t seem to win outside his home state, bordering states, or states dominated by people who share his narrow vision of social conservatism.  It is Mr. Trump who is broadening the party.   Does anyone think that participation in Republican caucuses and primaries is 60% higher than it was in 2016 because people are clamoring to vote for the John Kasich, the preferred candidate of the New York Times?   If the Republican Party wants to attract new voters to the polls, people who are NOT going to vote for Hillary Clinton, it is Mr. Trump who will do so for them.

Third, yours truly is starting to think that the Republicans can beat Hillary Clinton with just about anybody at the top of the GOP ticket.   Yes, there are the issues of Benghazi, Libya and the Arab Spring in general.   Yes, there is the family money laundering operation called the Clinton Foundation.   And of course there are those nagging e-mails that, though I think won’t amount to much, could be as big as the brown-nosers in Washington fear they could be.  But there is also that blatant Hillary hypocrisy, the disingenuousness, the real or perceived too clever by half dishonesty, and that annoying screech of a voice that wears on even her most ardent supporters.   There is her taking the American people for a bunch of idiots, best exemplified by Mrs. Clinton’s protestations that her political difficulties arise from her ability to advocate for other people but her inability to advocate for herself.   There is her card-carrying membership in, indeed her decades of leadership in, the Washington insider club that American voters so despise.   There is the continuing fear, or confidence, that, given enough rope, Mrs. Clinton will surely hang herself on her own rhetoric and stone faced, sneering, smirking personality, or lack thereof, that if she is only allowed to talk long enough, she will say something, or a collection of things, that will sink her presidential hopes.  She’s blown it before and surely she’ll blow it again.  She is not Bill, the political natural who lights up a room.   She is Hillary, the policy wonk who is certain that she is the smartest person in the room yet is too desperate to prove it.

If you don’t want Mr. Trump to become the next president, I completely understand.   Though I am fascinated by the man, and surely am party to the anger and frustration he reflects, I, too, am not sure I would want him to be president.   But just because Mr. Trump’s election is not an outcome you would want, don’t register that disinclination, or outright horror, by denying that his election is something that cannot happen.   It surely can…and I have just told you why.

DONALD TRUMP OUGHT TO SEND MITT ROMNEY A THANK YOU CARD

3/3/16

There is much to write about the Trump phenomenon, the Trump movement, or whatever you want to call it, and I have gone so far as to outline a lengthier and more cerebral post on this topic.   Unfortunately, I haven’t had time to sit down and complete the tome (I can hear the sighs of relief from some quarters, to be sure.), but it’s coming.

For now, though, failed candidate Mitt Romney’s latest bout of self-serving disingenuousness has prompted two comments from yours truly.

First, while Mr. Romney hasn’t quite sealed the nomination for Mr. Trump, he surely has given Mr. Trump’s efforts a not all that needed shot of adrenaline.   Mr. Romney did so by exposing how completely out of touch he and his ilk are.   Mr. Trump, for all his, er, imperfections, has consistently symbolized the justifiable anger of the great silent majority, the middle class that, given the treatment it gets from the elites on the left and the nominal right, now probably wishes it could be called the “forgotten” middle class; being forgotten is better than being patronized or overtly disdained.    Mr. Romney is certain he knows what is good for the middle class, which only shows how little he knows about the average guy he and his compatriots treat as some sort of sociological curiosity.

Second, did Mr. Romney somehow think it was smart to attack Mr. Trump for his business failures?   How many companies did Mr. Romney’s Bain & Company take into Chapter 11?   Is this a topic of discussion for a guy who made his living leveraging the heck out of businesses and hoping for the best while taking little risk?   Trump failed several times; Bain and Company, using the same definition, failed on more occasions.   That’s okay; as someone once said, capitalism without failure is like Christianity without hell.   However, since Mr. Romney chose to make Mr. Trump’s business failures a focal point of his feigned outrage, I’m surprised Mr. Trump didn’t bring up Mr. Romney’s business record in his counter-speech to Mr. Romney’s pathetic attempt at relevance.