The Four Horseman

Dollars are still strong and the ruling Establishment can hand out trillions of them in giveaways, boondoggles, and bribes. The public can still be exploited. The elites can still be enriched.

Thursday, November 14th, 2024 

Bill Bonner, writing today from Baltimore, Maryland 

The plum falls from the tree when it is ready 

--A long-dead Chinese philosopher? 

We return to the question: What if Donald Trump really could turn things around? 

Recall that the Primary Political Trend in the US, at least since the end of the Carter Administration, has been toward more concentrated power in Washington, bigger deficits, more regulations, and more debt. More and more government led to less and less private economy — where real wealth is actually created — with generally lower GDP growth rates, a widening gap between rich and poor, and 90% of the population who have seen no real wage gains in half a century. 

We believe this is just a part of a larger pattern, common to most governments. The elites get more and more power and are gradually corrupted by it. They become parasitic, shifting wealth to themselves and their fellow insiders. 

Stanford professor Walter Scheidel studied the phenomenon. He concluded that once the elites were firmly in control, the rich got richer and the poor got poorer until some disturbing event happened. War, revolution, government collapse and pandemics were what he listed as the ‘four horsemen of leveling.’ 

These things don’t happen when the voters want them to happen, however. The plum only falls when it is ripe. Apparently, the fruit is ripe in Argentina, where the new president Milei has already fired 30,000 government employees and is eliminating dozens of agencies. It was ripe for the Soviet Union in 1989, too, where they simply abolished the entire government. In both cases, the bloodsuckers fell off... giving the host public a chance to recover.  

We’re not there yet... not in the US. We haven’t yet had the kind of runaway inflation that undermines the elites’ power. Dollars are still strong and the ruling Establishment can hand out trillions of them in giveaways, boondoggles, and bribes. The public can still be exploited, in other words; the elites can still be enriched. 

But wouldn’t ‘reshoring’ industry, for example, bring back growth and good-paying jobs? Well... no. Both Argentina and the Soviet Union stifled imports. And the record is clear; protecting native industries is just another way to exploit the masses. It leaves them with inferior (uncompetitive) products at higher prices. Already, blocking Chinese EVs costs US consumers thousands of dollars while preventing them from getting the best quality/price deals on the market. 

Herbert Hoover’s campaign manager, Reed Smoot, proved the point in the 1930s: protectionism doesn’t pay. Colleague Tom Dyson explains: “it’s a win for the special interests; a worldwide depression for everyone else.” Economist Thomas Sowell wrote the following on tariffs: 

At any given time, a protective tariff or other import restriction may provide immediate relief to a particular industry and thus gain the political and financial support of corporations and labor unions in that industry. But, like many political benefits, it comes at the expense of others who may not be as organized, visible, or as vocal...  

It is undoubtedly true that some industries will be adversely affected by competing imported products, just as they are adversely affected by every other source of cheaper or better products, whether domestic or foreign. These other sources of greater efficiency are at work all the time, forcing industries to modernize, downsize or go out of business.  

Yet, when this happens because of foreigners, it can be depicted politically as a case of our country versus theirs, when in fact it is the old story of domestic special interests versus consumers.   

And how about stopping the flow of money to the Ukraine and Israel? Mr. Trump promised an end to the Ukrainian war ‘within 24 hours’ of his victory. It’s now been more than 200 hours. What gives? 

And why can’t energy costs fall 30% to 50%? 

The Trump Team says it will make it easier to drill for oil. But how much easier would it have to be for the drillers to want to drill for half-priced oil? As the price goes down, so does the appetite for more holes. The only real reason to get rid of the regulations is to get an honest price, not necessarily a lower one. 

And why can’t regulations be cut, so that the economy grows at 4% to 6%? For that matter, even at low GDP growth, why can’t a nation as rich as the US pay its own way... so there’s no need to add more debt? 

Cut backs would definitely help GDP output. It’s obvious. But it was obvious 10... 20... 30 years ago too. And it never happened. Why? 

Because each rule... each job... each regulation... and each dollar of deficit is a pay-off to someone. And there’s nothing like the fear of losing it that focuses his attention. That’s what Elon Musk is about to discover: There is no ‘waste’ in Washington; the whole idea is to reshuffle money... not to spend it efficiently. 

In his first term, Mr. Trump stuck with the Primary Political Trend. He did not ‘turn the economy around.’ GDP growth rates were actually lower — even before the Covid hit — than they had been under Obama. Nor did he curb the growth of spending and debt... or drain the swamp. And then when the Covid virus sent people into a tizzy The Donald lost consciousness too. He was on watch as the Fed doubled its balance sheet (‘printing’ money to buy federal debt) — adding more debt in a few months than had been accumulated in the previous hundred years. 

Keep in mind, too, that Trump won by a small margin — only two out of every hundred voters. And many of those voters get ‘free stuff’ from the feds, too.  They won’t be happy to see it cut.  These people won’t be too sympathetic to the cause of ‘bringing manufacturing back home’ either, not after they see prices rise by 20%.  

The Argentine example shows us that a determined and disciplined ‘chainsaw’ candidate might turn things around.  But not until the plum drops, and the Primary Political Trend has run its course.  

Regards, 

Bill Bonner