Dana Blankenhorn

Government is a bank. Money is a verb.

Once you understand this you can understand the 21^st century economy and Federal Reserve policy. If you can’t, rich people will lead you to believe things against your interest, like government debt is your mortgage or a trade deficit is money we owe other countries.

What follows is a simplistic explanation. A longer one can be found here. 

The amount of money in circulation should approximate what’s needed to sustain economic activity. In a normal time, you can see how much you need by its price and what’s happening to prices in the economy.

When there’s not enough money, as was true in the Great Depression, the Great Recession and under COVID, economic activity grinds to a halt. People don’t buy stuff thus people can’t sell stuff. In the first two events, there was too much stuff for the money available. In the latest case, there wasn’t enough money to buy the stuff.

The Straight Ticket Election

Senate passage of the Inflation Reduction Act was the final act of political policy season. It was the opening of campaign season.

Midterms are usually a verdict on the President, a simple game of inside vs. outside. That’s not true this time. Both parties have done things and it makes both parties incumbents. Republicans hold most state houses and the courts. Democrats hold the Presidency and the Congress. It’s finely balanced.

Both parties are also more united than at any time in American history. There once were liberal Republicans. There once were conservative Democrats. This is a straight ticket election.

Side Effect

I should be dead. So should my wife. So should most Baby Boomers.

In my case, statins saved me. I have naturally high cholesterol, 373 when I got it checked in 2000. My dad (right) had a heart attack at age 47, a decade before this picture was taken.

Statins didn’t exist when  dad needed them, but today they’re generic, cheap. Same with my hypertension drug, an Angiotensin Reuptake Blocker (ARB). Without it my blood pressure was erratic in my 40s. In my late 60s it’s steady.

It’s not just my life. My mom went blind in her 50s, from retinal detachments. I just had my second retinal operation. It took 5 minutes. I was back at my desk the next day.

The good news is that Norman Lear and Mel Brooks are still alive. The bad news is, so are Rupert Murdoch and Donald Trump.

Loyalty

Loyalty is one of the most powerful forces in human nature.

But it can be broken, as anyone whose spouse has cheated on them knows.

Abandoning loyalty is painful. We avoid it even after it’s proven worth less. We defend it even when it’s proven worthless. Usually, we abandon it privately. Whoever or whatever abused our loyalty is often the last to know.

Getting and keeping loyalty is a big topic in business schools. So is getting it back. Not enough study is devoted to losing it. We just know it when it’s happened, when sales at Kmart, or Blackberry, fall off a cliff. When that happens, we usually look at Walmart, or Apple. We don’t study the loss of loyalty. In retrospect, it’s obvious.

While it’s happening, however, it’s not obvious. Loyalty dissipates slowly, then all at once.

Counterculture

Here is the most important point about Trump, his acolytes, and the Christianist forces allied with him.

They’re a counterculture.

They’re not the culture.

The dominant culture of the West is tolerant. It’s tolerant because that’s in the best interest of technology, where creativity is the gating factor to economic growth.

The economic facts aren’t changing. China isn’t going to beat us because you can’t get mass creativity from slaved minds. Russia remains tied to the old economy of resources, money coming out of the ground. Even the Middle East is liberalizing, because the Sauds and their fellow sheikhs can see the handwriting on the wall, can see Israel becoming more powerful than they can ever hope to be. They know they must get on the right side of the new economy. It’s where they’re investing their oil wealth.

Inflation and the Bear Market

Inflation has created a bear market in U.S. stocks.

Inflation this time is a global phenomenon. It’s caused by Russia’s war, China’s lockdown, and the impacts of climate change. The Administration can’t beat it. The Fed can’t beat it. Technology can fight it, the high dollar can offset its impact, and a little belt-tightening won’t go amiss either. But in the end we’re at the mercy of global events.

In a bear market, fear replaces greed. There is fear this morning that the Ukraine war will drag on and force concessions. There is fear that China will invade Taiwan.

I believe the fear is misplaced. American aid should let Ukraine go on the offensive next month. I don’t think China will invade Taiwan.

Why Democracy Works

Democracy works because people are stupid.

I’m stupid. You’re stupid. The smartest are stupid in some ways. Everyone is stupid (except Dolly Parton).

But in a democracy the stupid balances itself out. The collective stupid of every citizen yields enough intelligence that we get by. Even when stupid wins, as in 2016, the beauty of democracy is getting a chance to correct it.

I’ve seen on Twitter that most people think other people are stupid. They’re right. But so are the people making the accusation. We all have our blind spots, our prejudices, our absolutes. They’re different. In the end they balance out and we muddle through.

What’s most dangerous to democracy is the assumption, on the part of all elites, that everyone else is stupid. They are. But you are, too. It’s when elites achieve authority that they can be deluded about this. I don’t care if you’re in the media elite, the intellectual elite, the scientific elite, the business elite, or (God forbid) the political elite. Once you assume authority your stupidity will be laid bare.

Propaganda for Good

Russia thought it was attacking a Russian province.

Turned out it was attacking Europe.

Europe is a state of mind. It’s egalitarian, but it’s fractious. It’s united, but not entirely. It’s western civilization in microcosm – messy, slow to anger, but mighty when provoked.

The invasion revealed that Putin’s Russia wasn’t even a nation-state. It was a medieval Empire, gilded by 20^th century ideologies, wealth, and technologies.

What makes this Empire so dangerous is that it has used all it had to attack America. Until recently it was successful. Putin ran our government, through Trump. Had we not beaten Trump he would be sitting in Kiev right now.

The Putin threat to this nation is still alive. It can still win. That’s because Trump was never Putin’s most dangerous puppet.

Rupert Murdoch is.

Without Fox News, Trump would have gone nowhere. Without Fox News, racism could not still be rising. Putin is a King. He won’t be satisfied until he rules everything. Murdoch is an oligarch. Rich man wants to be King.

Find me three issues on which Murdoch and Putin fundamentally disagree. I’ll wait.

I’ve written this before. It is time for Americans to become Ukranian in the defense of our heritage and rights. I’m not talking about grabbing guns and heading for Kentucky. I am talking instead of using what Ukrainians have taught us, in their hour of need, about propaganda.

The video above teaches this lesson. The song is about mothers, how they grow gray but still treat us like children, protecting us. What we see are women soldiers rushing into the war zone to take children to safety.

Then note the twist. These aren’t their own children they’re saving, or not just their own. When the children are safe, the women go back to the war. They seek their faith. They go on. They are soldiers. Everyone is a soldier.

What America is going through is a struggle. It’s a struggle that can be won. But it will take every weapon at our disposal, including propaganda. We have 5 ½ months and, if we win this time, anything is possible. If we fail, nothing may be possible for a long, long, long time.

The Year of Clarity

This is the year the masks came off. This is the year the cold war became a hot one.

Russia’s attack on Ukraine was a mask coming off. The oligarchs who embraced Vladimir Putin for two decades, and all those who pretended he wasn’t the second coming of Hitler, were exposed. Some tried to back away. Others doubled down. It doesn’t matter. We know now who is on the side of freedom, and who isn’t.

It was a clarifying moment. It created clarity across Europe, and in much of America too. Lines have been drawn. On one side lies democracy, liberty, everything we’ve claimed to stand for over 230 years. On the other side lies evil. Yes, many of its ghosts are American, in genocide, in slavery, in racism and eugenics and the rest. But these are ghosts.

At least we pretended they were.

The leak on overturning Roe vs. Wade is a second clarifying moment. That’s not so obvious yet. Many still try to pretend it is politics as usual.

It’s not. It’s a declaration of war.

The Way to Wealth is Tolerance

There’s nothing wrong with wealth.

Wealth is supposed to create a sense of responsibility. Andrew Carnegie understood this after he sold his Carnegie Steel in 1901.  Thereafter he devoted himself to giving all his money away. MacKenzie Scott, formerly Mrs. Jeff Bezos, is doing that today. Bill Gates and Warren Buffett have promised to do that.

They do it to protect the system. In The Wealth of Nations, Adam Smith defended capitalism by positing that wealthy people would be inclined toward the common good. Some are. Others are not.

For every Carnegie there’s a Vanderbilt. The good news is that, after a few generations of profligacy, even a Vanderbilt fortune can run dry. Anderson Cooper is the son of Gloria Vanderbilt but he’s not a rich man. That’s a hopeful story.

The good news is that, so far, 2022 is giving me an 1898 feeling. David Traxel’s book on 1898  describes a nation facing a Populist uprising amid a progressive ferment. It describes a war that was blissfully short, a turning point because it brought to power a man who would get along with Wall Street.

The Progressive movement and Wall Street’s self-interest lined up perfectly. Few people understand this, even today. Utilities for electricity, telephony, for transport, for water and for natural gas, could only be created through regulated monopolies. The late 19^th century’s efforts to create them in other ways failed. J.P. Morgan portrayed the evil trust king in the popular imagination, and Theodore Roosevelt the benevolent trust-buster. But they were working toward the same end. The result was today’s American cities.