Wasted Vote

             As a supporter of the Libertarian Party I have been accused of wasting my vote. Today the tables are turned with many Republicans regretting their 2016 vote for Donald Trump, particularly since the Libertarian Candidates at the time were two former successful Republican governors, Gary Johnson of New Mexico and William Weld of Massachusetts, of normally Democrat States. I believe Weld can be credited for turning back a Democrat rule run amuck, something that Connecticut never got.

This year our candidate for President is Jo Jorgenson, frankly not a credible candidate nevertheless a useful marker for Constitution loving conservatives who favor small government and market solutions unable to vote for Joe Biden. Post election the Libertarian Party may become the refuge for conservatives to resurrect the values of honor, prudence and good manners from the ashes Trump leaves behind and retrieve the moral authority to oppose Democrat overreach.

Shovel ready; A new tool for the Federal Reserve Bank now that it has exhausted QE

In the 2008 financial crisis The Federal Reserve Bank under Ben Bernanke developed a policy called Quantitative Easing (QE) which greatly expanded its portfolio of government bonds to release cash into an economy locked in fear. It was meant to give banks and other financial institutions time to clear in an orderly manner the bankrupt assets carried on their books.  But without the crisis forcing hard decisions the cash was not consumed. So it became excess cash looking for yield which drove down interest rates to near zero for safe securities and the not so safe ones as well. This global search for yield raised the value of financial assets to levels that in many cases were not warranted by the underlying economic conditions they represented. Unfortunately the Fed was casual about reloading its weapon so that when Chairman Jerome Powell used it again this Spring of 2020 but it was like shooting blanks. It exaggerated the stock market mania while doing nothing for Main Street looking into the jaws of a great depression.

Interest rates are a well understood pricing mechanism in financial markets but as rates approach zero there is less and less history to guide investors and regulators alike.  Zero is the event horizon below which the arcane formulas of bond traders don’t make sense. It can be argued that QE managed a long and gradual bull market on Wall Street which appeared to be good but its near zero interest rates created a funny money loop built mainly on hope. How else can one explain the high valuations private equity gave to their portfolios to satisfy their pension fund clients’ desperate need for high and otherwise impossible to achieve returns? For example Uber reached a $72 billion private valuation not seen since going public even in today’s frothy market. Most egregious was WeWork’s $47 billion private valuation which in the process of going public had the curtain pulled back from its Wizard of Oz and went to a nil value. An unfortunate characteristic of these private investments was how little of it was in durable assets, infrastructure assets in particular.

What the Fed needs is a new tool, one which in times of crisis puts a greater value on durable infrastructure investments and a lower value on those assets cooked up by Wall Street’s financial engineers. Infrastructure investments are recognized as productivity enhancing ones that promote growth and real job creation but because such investments have years-long lag times for a project to get shovel ready they are useless as a tool for the Fed in times of crisis. But what if they quickly refinanced existing bonded projects acting as an investment banker?

An investment banker who would select to buy a bond, for example California’s high speed rail project currently underway and expensively financed, for the entirety of a project. The proposition would be that the Fed would buy at $100 par value and then sell back at $80 ten years later. This refinance operation would free up resources California could use to direct toward its other obligations. As an investment banker the Fed should be free to ask for these bonding proposals from all public and private regulated authorities they deem suitable and of sufficient size to make a difference and only during the limited time it takes to get an economic recovery underway.

The net long term effect would be to reduce the cost of infrastructure projects in general as the market recognizes that the Fed could buy out already financed ones at a profit to investors when the next crisis comes. Today, with States losing tax revenues from the pandemic induced depression the Fed could refinance many municipal infrastructure bonds and give States a reset opportunity to handle today’s crisis while Congress dithers.      

Infrastructure investments aside, the Federal Reserve Bank would then be free to sop up liquidity and raise interest rates in general to balance out its portfolio with a positive average rate.  Higher rates to bring markets back to traditional well understood values.  Rates which give pension funds and insurance companies an opportunity to cover their future obligations with time tested valuations. And finally the Fed should tolerate failure, at least at the beginning of a crisis to re-acquaint financial engineers with risk and give Wall Street the clear message that it is not its Best Friend Forever.

 

January 20, 2021 Washington D.C.

President elect Amy Klobuchar was sworn into office in a subdued ceremony of a nation in crisis with a war in Iran and a Dow Jones average below 10,000 and a determination to bring practical and prompt solutions to the malaise at hand. Her electoral sweep was a repudiation of Donald Trump's ruinous tariff wars to his rural agricultural and manufacturing base. Her agenda is to renounce every one of his executive orders and mend business and foreign relation with our allies in Europe and Canada. Stand down in Iran, reinstate the Nuclear Deal and withdraw sanctions. Introduce competition in healthcare by dismantling Pharma and Hospital's system of raised barriers to entry through legislative and judicial means. 

China in a position to counter Trump's madness by purchasing Iranian oil with its RMB currency

Shameful to call Trump President of the United States as his madness provokes a war with Iran.  By using Dollar transaction sanctions as a weapon to punish it’s economy he has put China in a position to counter as well as make Chairman Xi Jinping the peacemaker and leader with a steady hand the world can look up to.  By purchasing Iranian oil with its RMB currency China could truly incentivize Iran to stay within its JCPOA limits. It could use its fleet of tankers, if they don’t have one then they could buy one, also free from Dollar sanctions control to transport Iran oil owned by the China National Petroleum Corp (CNPC) for sale to Total, the French petroleum company.  These RMB oil transactions would greatly relieve and improve Iran’s economy and for China break the U.S. dollar’s monopoly of petroleum transactions and promote the RMB as a reserve currency of influence. Also the oil trade could further expand China’s Belt and Road initiative into Iran and more importantly Europe beyond the investments in Greek and Italian ports they already have.  For example France contrarily went against George W. Bush and his invasion of Iraq but with Mr. Trump they timidly took back investments in Iran by Total Petroleum, Peugeot Automobile Company and Airbus because of Dollar controls. China’s oil money could buy back the Total and Pegeuot investments. With regard to Airbus, China could start a joint venture to unlink Amercian hardware and avionics from its fleet as a matter of national sovereignty. One suffered by a Norwegian 737 Max that made an emergency landing in Iran and was stuck there for months because of an inability to get sanctioned spare parts.  If that had been a Chinese owned and operated Boeing aircraft then the humiliation of an arbitrary denial to freely operate its property would have been hard for a proud and up and coming superpower to endure. Can’t believe it went unnoticed.

Forced to steal what they can’t buy makes possible even cheaper Huawei pricing.

Trump’s decision to ban China’s Huawei from transacting with any U.S. company signals the end of trade negotiations and the commencement of war. The Bard's “all is fair in love and war” means they are free to steal the intellectual property they can’t buy. How difficult can it be to reverse engineer product over which they already have a close familiarity of both design and production. Also China Tech leads in the management of data rich environments promised by 5g networks so that it might be the perfect time for China to wean itself away from Silicon Valley and self develop their own. There is a credibility gap in the security concerns over Huawei voiced by Mike Pompeo. One suspects the real security concern is that the NSA and CIA won’t have the back doors to telecommunications that Bell Labs use to give them. Banning Huawei and thereby cutting American ties will make their future offerings all the more opaque to our intelligence services as China self develops in unique eastern directions never considered by western minds and its sheer idiocy to believe Huawei’s inroads into World’s telecommunication network with inexpensive gear will be stopped by a ban that forces them to steal and thereby make possible there offering even cheaper pricing.

Sending carrier strike group to Iran generates a laugh with a retort of yeah and now what that diminishes our might to that of a clown

      Teddy Roosevelt famously described his foreign policy was to walk softly and carry a big stick. It appears Trump practices the reverse with both his Secretary of State Mike Pompeo and National Security Adviser John Bolton speaking boldly with the belief that the threat of military action carries the fear that it used to before North Vietnam showed revolutionaries to the contrary, that their will could outlast our political will to continue. Instead of fear sending the Abraham Lincoln carrier strike group to Iran generates a laugh with a retort of yeah and now what that diminishes our might to that of a clown.
      Where are the French? They resisted George W. Bush’s foray into Iraq why not Donald J. Trump’s renunciation of the Iran Nuclear Deal? It makes no sense they obey our U.S. Dollar sanctions against them when it was us that broke the deal not them. It makes no sense that they tolerate Trump’s trade war as if they were enemy and does not lead Europe in a negotiation with China over trade and Iran’s sanctions with a unified approach which uses the Euro to replace the Dollar and Airbus to replace Boeing.

Submarines built to generate electric power is an opportunity for Electric Boat and a realistic carbon free power alternative