Month: November 2024

Yes indeed:

Whenever Trump says some outrageous thing—big tariffs until Canada and Mexico stop immigration and fentanyl!—I dither over whether to bother responding. Is he serious? Or just tossing out red meat for the rubes? I sure don't know. But I do have this regular image in my head of Trump cackling as a bunch of earnest pundits all rush off to write thumbsuckers about why his latest broadside is ridiculous and stupid.

But you never know. Maybe he's so stupid he didn't know Mexico was already slashing illegal immigration, and was therefore pleasantly surprised when Claudia Sheinbaum immediately "caved in" and agreed to slash illegal immigration. Who can divine the mind of Trump?

Either way, though, it accomplishes something Biden never did: making it loudly clear which side he's on. Even if your real-world ability to do something is limited—as it is with immigration, inflation, Afghanistan chaos, etc.—people still want to hear your outrage about it. They never really did with Biden but they sure do with Trump. That may involve a lot of phony stagecraft, but phony stagecraft has a long and illustrious history of working pretty well.

I went off in search of turkeys to photograph yesterday, but I had no luck. The ones I knew about seem to have disappeared. However, the neighborhood that formerly had the turkeys still has lots of horses, so how about a nice picture of a horse instead?

Here's a bit of a surprising thing:

When the pandemic hit, federal debt spiked up over 100%—partly because of huge spending and partly because GDP plunged. GDP recovered the next quarter and the debt level settled at 97%.

Since then we've spent tons of money and run huge annual deficits, and the debt level has increased by $6.5 trillion. But GDP has increased by $7.5 trillion and the national debt has declined to 95% of GDP.

In particular, take a look at the first quarter of 2021, when President Biden signed the $1.9 trillion ARP bill. There's not a hint of it. It stimulated growth so much that it completely swallowed the additional spending.

Of course, our next recession will put paid to all this and debt will again rise. But for the moment at least, we can all breathe easy.

My Twitter feed is full of a new right-wing grievance: Choke Point 2.0. Naturally I had to figure out what it was all about.

First, though, a tiny bit of background. Back in 2013 the Department of Justice started going after online payday lenders they suspected of fraud. They did this primarily by pressuring banks and third-party payment systems to cut them off, and eventually this was given a name: Operation Choke Point. It operated for four years until it was killed off in 2017.

OCP generated a small bit of controversy after it expanded to go after porn stars, gun shops, and a few other things, but not much. That's why you've probably never heard of it.

So what is OCP 2.0? Yesterday Marc Andreessen was on Joe Rogan's show and, after explaining the original OCP, unleashed this MAGA bombshell:

This administration extended that concept to apply it to tech founders, crypto founders, and then just generally political opponents.... Choke Point 1.0 was fifteen years ago against the pot and the guns. Choke Point 2.0 is primarily against their political enemies and then to their disfavored tech startups. It's hit the tech world—we've had like 30 founders debanked in the last four years.

Really?

Yeah yeah yeah, it's been a big recurring pattern.... By the way, no due process, none of this is written down, there's no rules, there's no courts, there's no decision process, there's no appeal. Who do you appeal to?

And that's it. Andreessen provided no evidence for this, no names of the debanked, and then Rogan moved on.

So is this for real? As a general conspiracy theory it's been around for a couple of years, mostly among crypto enthusiasts who claim that government action against certain crypto-friendly banks—Silicon Valley Bank, Signature Bank, and Silvergate Bank in particular—and certain crypto firms—Ripple Labs, Binance, Coinbase—is evidence of a wide-ranging effort to crush legal crypto activity.

Maybe. But as a few level-headed observers have pointed out, the crypto industry is not exactly sunshine and unicorns. Among many others, FTX, Terra/LUNA, Three Arrows, Genesis, Voyager, Celsius, and BlockFi have all failed, mostly due to fraud of various kinds. If there were any industry in the world the Department of Justice might take a keen interest in, crypto would be it. No conspiracy theory needed.

But even if this really were the fruit of anti-crypto sentiment, it still doesn't confirm Andreessen's sensational claim that 30 founders he personally knows (presumably because they were funded by Andreessen Horowitz) have been deliberately debanked. That's a whole different thing. So far I've been unable to find anyone else who's said anything remotely similar.

So that's where we are. If you hear about Operation Choke Point 2.0, it's usually a claim that government actions against crypto firms aren't just periodic regulatory busts against bad actors, but are part of a coordinated effort to kill off crypto. In other words, a garden variety conspiracy theory.

But if you hear the Andreessen version, it's about Joe Biden weaponizing the government to go after both his political enemies and "disfavored tech startups"—whatever those are. That's a whole different level of derangement.

The Washington Post has a story today that inspires two thoughts:

President-elect Donald Trump has chosen relatively conventional experts to lead his second administration’s economic policy, even as he pursues tariffs that could upend the international trade order and fills much of his Cabinet with ideologues and loyalists.

Trump tapped a former Fox News host to lead the Defense Department and a vaccine skeptic to run the Department of Health and Human Services; his choice for attorney general, former congressman Matt Gaetz (R-Florida), withdrew from consideration after even GOP senators said they doubted he could be confirmed.

My first thought is this: Why is it that when reporters run down all the crazy people Trump has picked to staff his administration, they never mention Tulsi Gabbard? She strikes me as the craziest of all—which is really saying something considering that Team Trump contains RFK Jr., Elon Musk, and (for a while) Matt Gaetz. But she seems to be mostly staying under the radar even though Trump has nominated her for a deeply sensitive post (head of intelligence).

My second thought is: This piece is completely right. MAGA folks were basically all on board with crazy-is-good except for the Treasury Department. The Wall Street Journal just came right out and said it:

Disrupt away, the editorial said, "disruption is needed in many places." But not in economic policy. So we got the conventional Scott Bessent as treasury secretary, Kevin Hassett heading the CEA, and Robert Lighthizer reprising his role as "trade czar."

The same was true during Trump's first term. Steve Mnuchin was a no-drama treasury secretary, Jerome Powell was a nice safe Fed chair, Jay Clayton stayed in his lane at the SEC, and so forth.

The thing that surprises me is that the Defense Department hasn't gotten the same treatment. I would have thought that Republicans in Congress, who take defense seriously, would insist on a serious candidate. Instead they got Pete Hegseth, a Fox News talking head whose only qualification is writing a book about how he holds the military in contempt. Why are Republicans insisting that Trump take Treasury seriously but apparently don't care if Defense is run by an amateur demagogue?

Here are a couple more boring economic charts. I'm almost done for the day, I promise.

(Almost.)

The first is new orders per capita for capital goods from manufacturers. It just keeps going down and down. Manufacturing is not going to save us.

But here's something a little cheerier:

We've all seen the charts showing that semiconductor companies are spending a lot of money on new construction, but when are they going to actually start producing more stuff? The answer seems to be that they already have. In the middle of 2023 the growth rate of semiconductor output abruptly jogged upward. It's been rising at a 9% annual rate since April of last year.

Winter on Mount Baldy a couple of years ago.

Here's another economic chart. The hook is that October sales of new cars were released today, but that's just an excuse. What I really want to show you is the long-term trend:

Look at the trendline since that smooths out volatility. On a per capita basis, new car sales have dropped from 57 per thousand people to 44 per thousand. That's a decline of nearly a quarter in 25 years.

Why? There are two likely explanations. First, we're just not as car crazy as we used to be, especially among the young. Second, cars last a lot longer than they used to so we don't buy new ones as often.

Or maybe both.

Donald Trump's playbook appears to be pretty simple. Internationally, he threatens big tariff increases if countries don't do what he wants. Domestically, he threatens to cut off federal spending if states and cities don't do what he wants.

This is of dubious effectiveness in the case of tariffs and of dubious legality in both cases. In any case, his latest attempt at extortion is aimed at sanctuary cities:

President-elect Donald Trump’s advisers are discussing how to unilaterally strip federal resources from Chicago and other Democratic-run cities if they refuse to participate in deportations of undocumented immigrants next year, according to three people familiar with the conversations.

....Trump vowed mass deportations during his campaign — eliciting fierce pushback from some Democratic mayors in “sanctuary cities” and governors in blue states, some of whom are already promising to defy the president-elect’s pledges. He tried to slash funds to those jurisdictions in his first term, but with only limited success, and any similar effort in his second term could also run into roadblocks.

"Not a cent," said Vivek Ramaswamy over the weekend. That's unlikely in the extreme, but Trump could make states and cities waste hundreds of millions of dollars in legal fees along the way.

If we were dealing with someone more rational, you might figure a compromise could be worked out. Maybe the funds at risk could be limited to those related to immigration. And perhaps Trump could agree that the most important thing is for cities to turn over violent criminals for deportation, not the poor schlubs who just happen to be in the wrong place at the wrong time.

That would make a big difference. Most sanctuary cities refuse to use local police to do the federal government's bidding, but they don't withhold every speck of cooperation. In particular, they generally hand over violent criminals to ICE for deportation when their sentences are up. You can see this in the results of a study from the National Academy of Sciences:

The top panel shows what happens to illegal immigrants with no criminal convictions. When a city adopts sanctuary policies, deportations go down significantly.

But the story is entirely different for violent criminals: There's no change before and after. Woke or not, everyone agrees it's a good idea to deport genuine bad guys.

It's also worth noting that most places don't adopt sanctuary policies just to thumb their noses at Donald Trump. They do it because maintaining law and order is easier if illegal immigrants aren't afraid to talk to the police. A highly public sanctuary policy assures everyone that they can call for help or answer questions without fear that a cop will decide to haul them in and turn them over to ICE. You may disagree on balance, but there really is a reason for this stuff.

More charts! And there are more to come. Today was busy. First up is disposable income, which is basically income minus taxes:

Adjusted for inflation, DPI was up a healthy 4.5% last month on an annualized basis. For the entire past year it was up 1.9%. We're still below our pre-pandemic growth rate, but maybe starting to catch up?

Anyway, for you and me this is good news. For the Fed, maybe not.