"Overnight, The World Became The Twilight Zone" - Exodus From Cities Sparks Mountain-Dweller Greatest Fear

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"Overnight, The World Became The Twilight Zone" - Exodus From Cities Sparks Mountain-Dweller Greatest Fear

Social distancing is transforming society as we know it. City dwellers are packing up their bags and are heading for the mountains amid the virus crisis.  

"Overnight, the world took a sharp turn into the Twilight Zone," Gina Grande told the Los Angeles Times. "I had to get out of there. So, I made a beeline to my boss' office and said, 'Th

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is is awkward, but can I please telecommute from Southern California?'" 

Grande, terrified of the fast-spreading COVID-19 outbreak in San Francisco, which is where she works and lives, left the metro area for her second home on the outskirts of Joshua Tree National Park, a desert area located in southern California. 

As the pandemic sweeps across California's largest cities, residents are fleeing their urban settings to isolated communities in the Mojave Desert or the rugged Sierra Nevada. The hope is that a remote area can reduce their transmission risk. 

But for some, social distancing measures enforced by the government have not just limited their mobility to and from work and or even their ability to go outside, residents in Los Angeles last week were restricted from leaving the city to vacation homes. 

In Mammoth Lakes, a town in California's Sierra Nevada mountains, banned non-residents because infection risk in the small community would quickly overwhelm their hospital system. 

The flight from cities to rural communities during the outbreak, ignited by fear, could be the next hottest trend for real estate that revives dying suburbs. Families, who've been subjected to chaos at Costco stores of panic hoarding or forced quarantine in their tiny 550 square-foot studios, want the freedom of rural communities and the security of land that could power them through any crisis. 

In Joshua Tree, vacation rental companies have said concerned families from large metro areas are renting short-term rentals for weeks and or months at a time following the virus outbreak. 

"We just confirmed two rentals for long-term stays over three weeks," said Josh Sonntag, who operates several rental units in the area. "In both cases, social distancing and the ability to work remotely was important."

Bryan Wynwood, the owner of Joshua Tree Modern Real Estate, said, "Every call I get is related to the coronavirus. Some of them are from city dwellers worried about being stuck in the center of a metropolis that loses control of its basic public services."

Sam Steinman, 28, owns several short-term rentals in Joshua Tree, said he'd noticed the desperation in city dwellers' voices who are willing to pay double for his properties to escape the outbreak in large cities. 

"I've seen this kind of fear and desperation before in Israel during rocket attacks," Steinman said. "A friend recently asked if I had a gun he could borrow. I said absolutely not."

And maybe, just maybe, COVID-19 will have a long-lasting impact on choices made by city dwellers, who have just realized their entire lives can come crashing down in a public health crisis - though, some are making a mad dash to remote areas where life goes on as usual. 

A noticeable trend is developing: A revival of dying suburbs could be on the horizon as cities are just too dangerous when everything goes to sh*t. 

If you’re looking to flee a metro area, not just because of a virus crisis, but also because housing prices in cities are due for a major correction, here are some affordable suburbs in America that you might find interesting.

Tyler Durden

Wed, 03/25/2020 - 20:10

"I Couldn't Have Been More Wrong": Why Stan Druckenmiller Became A "Coward" In A Market That Makes No Sense

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"I Couldn't Have Been More Wrong": Why Stan Druckenmiller Became A "Coward" In A Market That Makes No Sense

For investors who are looking for some quality markets content to help distract them from the onslaught of impeachment day political news, Bloomberg TV released a lengthy interview with Stanley Druckenmiller, the macro legend who said last year that he had dumped all his stocks and piled into Treasuries because his economist friends feared "something wasn'

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t right". 

He definitely made money on that bond position, but any investing professionals who sat out this year's torrid equity rally are probably doing some soul searching. So, like many other investing luminaries have since trade skepticism played out in the markets over the summer and fall, Druck is switching gears, and tentatively embracing risk once again.

Despite (barely) managing a double-digit return in 2019, the billionaire investor fears he's becoming "too conservative" in his old age, according to an interview with Bloomberg's Eric Shatzker.

As a result, Druck now believes he was mistaken when he thought he saw "warning signs" in prices and believed a period of "low returns" was coming: "I couldn’t have been more wrong."

Indeed he couldn't because what caused things to turn around was a full blown capitulation by central banks who are now easing at the fastest rate since the 2008 financial crisis, even though there is no actual looming crisis this time.

As a result of his monetary generosity, he's opened several positions designed to take advantage of recovery in risk sentiment, i.e., central bank liquidity.

It’s not that Druckenmiller has sworn off taking risk. He owns copper and U.S. and Japanese equities, and he’s wagering on the Canadian and Australian dollars while shorting the yen and long-dated Treasuries - all positions that should profit in a stable-to-growing global economy.

And in recent weeks, anticipating a pro-Brexit vote in the U.K., he bought the pound and banks including Barclays Plc and Lloyds Banking Group Plc. Only he wishes he’d been bolder.

"I’m just too conservative in my old age," Druckenmiller, 66, said in an interview on Bloomberg Television. "I was well-positioned, but very timidly."

Setting aside whatever perceived negative signals Druck sees, and whether or not he agrees with the monetary policy espoused by central bankers (spoiler alert: he does not), the pragmatic billionaire points out that with the "unprecedented monetary stimulus" in place, "it’s hard to have anything other than a constructive view on the market’s risk", which is also why Druckenmiller has now turned bullish... but only slightly:

"We have negative real rates everywhere and negative absolute rates in a lot of places," he said. "With that kind of unprecedented monetary stimulus relative to the circumstances, it’s hard to have anything other than a constructive view on the market’s risk and the economy, intermediate term. So that’s what I have."

A lengthy segment of the interview seemed to focus - as most BBG TV interviews seem to do now, for some reason - on the Democratic contenders for president, particularly Elizabeth Warren. Asked if he saw an opportunity for a "Warren hedge" - it would make a catchy headline, no doubt - Druck almost chuckled.

"You can just short stocks," Druckenmiller responds. "It's not real complicated. You could probably sell the dollar."

And that's probably good for Druckenmiller. Because while Druckenmiller concedes that Warren would be bad for the market, in theory, she could be good for his asset-management business.

Meanwhile, the billionaire also noted that the upside down market, manipulated by central banks, in which tape bombs from the Trump admin can land at any minute, has made traditional investing virtually impossible: "For reasons even he doesn’t fully understand, Druckenmiller said he’s “become a coward” since closing the hedge fund in 2010.

He finds he doesn’t trust himself as much or feel compelled to put on trades as fearlessly as when he was competing with rival managers. Add to that the unpredictability of everything from trade policy to geopolitics in the Donald Trump era and Druckenmiller isn’t sure anymore what investments are safe or secure.

"This administration, with wondering about where the hell the next bomb is coming from, just doesn’t allow me to take some of the positions I’ve taken historically where I just thought it was a one-way bet," he said.

Druckenmiller has always outperformed during bear markets, so a Warren presidency would probably be "good for my business," he concedes. But that doesn't mean he's going to vote for her. 

Before affirming that he's a believer in free-market capitalism and deeply suspicious of the surge in socialist passions that has gripped the American public in recent years, Druck went on to say he's "a little offended" by a certain media narrative being pushed by leftists.

"All this complaining about failed capitalism and the need to improve capitalism and capitalism is a failure...I'm a dyed in the wool capitalist who believes in free markets, believes in creative destruction etc. and I'm a little offended by the narrative in the media, not that it's anti-capitalist, but on the facts."

He has a point: The media narrative is that wages are stagnating as the cost of living rises, supposedly guaranteeing that the millennial generation will be the first generation in modern history to enjoy a lower standard of living than their parents. And while there's certainly some basis to that, as Druck points out, all of the socialists' warnings about capitalism and endemic poverty simply have no basis in fact.

"I don't think most people are aware, let's just take poverty in the United States, it was 16% in the financial crisis, and it's at 13% now. Is a 13% poverty rate low enough? Absolutely not. But do you think 99% of Americans would guess too high or too low on the change in the poverty rate over the last five years or ten years?"

Since 1999, when you had 1.7 billion people in the world in extreme poverty...the number today is 700 million...one billion people have been lifted out of extreme poverty in the last 20 years. Why? Because China adopted a free market model."

But it's not just the leftists who are dragging America away from its capitalist ideals, Druck warned. President Trump isn't helping, the investor said, going so far as to compare his office to the Politburo. For the record, Druck would be okay with a measure of higher taxes. But he fears negative rates are killing capitalism.

"When you have a president of the United States who puts hundreds of billions in tariffs and then goes and picks and chooses individual economic actors who pay those tariffs and those who don’t, it might as well be the politburo,” Druckenmiller said. “When you have monetary policy around the world with negative rates, you cannot have capitalism if you don’t have a hurdle rate for investment."

Incidentally, after warning a year ago that the Fed had hiked rates too far, today he thinks they’ve gone too far in the other direction, and tells Bloomberg that "with more certainty over U.S. trade policy and Brexit, and the unemployment rate at a historic low, the Fed should be raising its overnight rate target."  Of course that won't happen, which assures that the current asset bubble - the biggest in history - will eventually pop with dire consequences:

"I will go to my grave believing that the financial crisis happened because of bubbles created by easy money," Druckenmiller said in the interview. “And then this crazy president saying we need negative rates to compete with negative rates in countries where they clearly aren’t working. It’s the most anti-capitalist idea I could ever dream up.”

So Druck admits what we have been saying all along: the kind of centrally planned monetary insanity on display in Europe, Japan and now the US is tantamount to communism, and predictably, it will all end in tears again. But what does one of the greatest investors in history know: after all, there is always some fintwit "expert" who, for lack of an actual job, is eager to advise anyone else who listens that those warning about bubbles are idiots (just remember to again bail out these "experts" after the next crash).

Despite his chronic anxiety, Druckenmiller remains an optimist, and hopes though philanthropies such as the Blue Meridian Partners organization he chairs, to create what he calls “economic mobility” for those less fortunate. As for stocks, he doesn’t think either Trump or Powell will do anything to upset the markets, in the near term.

"One of the reasons I’m pretty sanguine right now is I think we’re close enough to the election, at least we can breathe for a few months."

The problem is that with the S&P at all time highs, everyone agrees with him. And it's when everyone shares the same opinion, that the unexpected happens.

Tyler Durden

Wed, 12/18/2019 - 11:05


Business Finance


6 Reasons Why The 'Most-Hated Politician' In Latin America Became President Of Brazil

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6 Reasons Why The 'Most-Hated Politician' In Latin America Became President Of Brazil

Authored by Jean Vilbert via The Mises Institute,

Jair Bolsonaro is likely to be the most despised politician in Latin America.

At least among a certain portion of the population. Some say he is the “Trump of the tropics” - in a pejorative way, of course. Nonetheless, he was elected president of Brazil.

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So how could that happen? How could a “homophobic, misogynist and racist ‘thing’” (according to a piece published in The Guardian) become Brazil’s leader?

There are several reasons why.

One: He Has Good Timing

The 14 years of Brazilian Workers’ Party’s tenure (2003–2016) ended on a sour note. This was the time of Luiz Inácio “Lula” da Silva and Dilma Rousseff. Rousseff was found guilty of breaking budget laws and was removed from office (impeached) in 2016. Lula was convicted of money laundering and corruption and was sentence to jail time in 2018. As both Lula and Rousseff had been elected on the promise to clean up corruption, many Brazilians felt deceived.

To make things worse, the country plummeted into a financial crisis. The public debit reached an incredible 73.44 percent of GDP in 2016. Between 2014 and 2017, the unemployment rate rose sharply from 6.67 percent to 12.83 percent (and nearly 13 million people became unemployed). The crime rates increased to among the highest in the world — and no fewer than 63,880 Brazilians were killed in 2017.

A significant change seemed to be on the horizon.

Two: A Different Agenda

Around 2015, many Brazilians started to claim that the social-market model put into play by the Workers’ Party had failed. An uneasy feeling of economic hangover was felt — a kind of public-expenditure-spree aftermath. Here and there, voices begun to question the notion that government interventionism was responsible for the prosperity Brazil had enjoyed in the early-2000s. Some timidly began to make the case for capitalism, naming markets (the commodity boom, the growth of the industry and the increase in the service sector) as the real cause of the consequent reduction of poverty. 

Many agreed.

As a result, many voters turned to Jair Bolsonaro, a candidate with no money (with very modest campaign expenditures), no time on TV (just a couple of seconds), and no political capital (distance from the big parties). In short, no realistic chance of winning. At least, that is what the media and its specialists said at the time.

So, the country was eager for a swing toward the economically liberal end of the spectrum (for the motives outlined above) and Bolsonaro appeared to be the only one willing to do that. Many Brazilians decided to ignore his faults (even some serious ones) in the hopes of putting through true economic reform.

Is Bolsonaro the ideal politician? He is far from that. This feeling appears to be almost a consensus. Indeed, he leaves much to be desired. Most Brazilians who supported him do not appear to agree with his collection of harsh and controversial statements on a variety of issues.

But, why support him at all?

Regardless of all the controversies surrounding him, perhaps the main factor for Bolsonaro’s victory is quite straightforward: he was the only one who promised to bring back to life long-denounced policies (still unspeakable for some), such as less government intervention in the economy, reduction in taxes, and cuts in government spending. He also supported a sizable anti-crime package.

And the other candidates? They proposed nothing more than varying degrees of the usual welfare-state agenda.

Three: Left-Wing Missteps

If you want to convince someone of something, do not lambast and insult him for his existing position.

But this is what the Left did with Bolsonaro and his supporters.

Before his arising as the front-runner in the opinion polls, Bolsonaro was not more than a minor deputy — thought to be negligible as a president candidate. But his emergence as a potential winner engendered a strong reaction.

Celebrities (followed by their fans) posted the hashtag #NotHim (#EleNao) in their social media accounts. Mainstream media published furious analyzes, not even trying to sound neutral. Normal people got into daily harangues, upbraiding severely anyone who dared to admit he was considering supporting Bolsonaro.

This frenzy ended up triggering polarization. This hysterical overreaction allowed Bolsonaro to bring together several discontented heterogeneous groups (from conservatives to libertarians) and galvanized them in his favor.

In order to undermine Bolsonaro, his antagonists could have provided a narrative which made more sense than his. Instead, they focused all their efforts on a narrative in which Bolsonaro would represent a step away from democracy and pose a serious risk to the country. Even worse, the voters were told, Bolsonaro was allegedly emboldening his supporters who were mostly fascists or simply fools. The strategy backfired.

A lot of people understood these attacks as an attempt to impose a kind of moral and intellectual elitism. Moreover, it was feared the Left’s strategy was leading to a sort of “democratic certification” under which something (or someone) only could be said to be “democratic” if it conformed to what the cultural elite wanted. Obviously, the tactic of attacking so many Brazilians did not work well and turned out to bolster Bolsonaro’s candidacy as an outsider (anti-establishment). But according to many, that was exactly what Brazil needed.

Four: An Expanded Ideological Spectrum

Bolsonaro remains a pretty controversial figure, no doubt. A former Army captain, his political views were labeled as nationalist and populist, far-right and even fascist. Bolsonaro is anti-abortion, against gun control legislation, and against same-sex marriage. His motto was “Brazil above everything. God above everyone.”

Indeed, with this mindset (alongside a gauche behavior), made him something of a heretic in the context of Brazilian politics. But his support stemmed, at least in part, from the obstinacy of the Left, which tries to label as “far-right” anything that’s right of the center-left.

Indeed, the Brazilian political spectrum was long been constrained to only that which ranged from the far-left up to the center-left. Anything else was deemed “fascism.” By the time of the 2018 election, this limitation on allowable discussion fell apart. And here is the cause of a certain piece of drama: the stout criticism of Bolsonaro’s manners and ideas can be seen (partially) as smoke and mirrors. The real issue for the Left is this defeat of the rules governing the ideological paradigm.

Five: Pragmatism

Undeniably, Bolsonaro has many undesirable traits, including his stated his admiration for the military dictatorship. But the truth is that Brazilians were well aware of this and elected him anyway.

For instance, while the other candidates were addressing abstract and fanciful ideas of perfect equality, diversity, and fraternity, Bolsonaro was talking about ordinary (pedestrian) everyday problems, such as public safety, permanent jobs, better wages, etc. While the other candidates promised social programs (more of the same), Bolsonaro announced he was taking advice from renowned market-oriented economist Paulo Guedes and appointed him finance minister. While the other candidates used a soft tone on fighting crime, Bolsonaro promised strong measures. For example, he named Judge Sérgio Moro (taken as a hero by the people fed up with crime) as justice minister soon after the election.

Thus, Bolsonaro’s election represents, at the end of the day, a desperate effort of a country which had potential to be a great nation, but whose sustainable (long-term) development has been blocked by decades of systematic corruption, galloping crime, and an anti-capitalist mindset.

Six: Playing the Democratic Game

In spite of what many claim, Brazilian voters did not act irrationally by embracing Bolsonaro. They were not victims of seductive populism or mysterious ideological manipulation. They did not vote (unknowingly) against their own interests. They were quite rational. One could say they chose what they believed to be the least-bad candidate — the one they thought to be the best one for the country at the time.

And now? Only time will tell whether Brazil did well or not when it pinned its hopes on Bolsonaro.

Tyler Durden

Sat, 11/23/2019 - 22:30




How Democrats Became The Party Of Monopoly And Corruption

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How Democrats Became The Party Of Monopoly And Corruption

Authored by Matt Stoller via Vice.com,

The following is an excerpt from Goliath: The 100-Year War Between Monopoly Power and Democracy.

In 1985, the Dow Jones average jumped 27.66 percent. Making money in stocks, as a journalist put it, "was easy." With lower interest rates, low inflation, and "takeover fever," investors could throw a d

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art at a list of stocks and profit.

The next year was also very good. The average gain of a Big Board stock in 1986 was 14 percent, with equity market indexes closing at a record high.

For the top performers, the amounts of money involved were staggering.

In 1987, Michael Milken awarded himself $550 million in compensation. In New York City, spending by bankers—a million dollars for curtains for a Fifth Avenue apartment, a thousand dollars for a vase of precious roses for a party—was obscene. A major financier announced in the Hamptons one night that "if you have less than 750 million, you have no hedge against inflation." In Paris, a jeweler "dazzled his society guests when topless models displayed the merchandise between courses." In west Los Angeles, the average price of a house in Bel Air rose to $4.6 million. There was so much money it was nicknamed "green smog."

Ambitious men now wanted to change the world through finance. Bruce Wasserstein had been a "Nader's Raider" consumer advocate; he now worked at First Boston as one of the most successful mergers and acquisitions bankers of the 1980s. Michael Lewis wrote his best-seller Liar's Poker as a warning of what unfettered greed in finance meant, but instead of learning the lesson, students deluged him with letters asking if he "had any other secrets to share about Wall Street." To them, the book was a "how-to manual."

Finance was the center, but its power reached outward everywhere. The stock market was minting millionaires in a collection of formerly sleepy towns in California. Sunnyvale, Mountain View, Los Altos, Cupertino, Santa Clara, and San Jose in the 1960s had been covered with "apricot, cherry and plum orchards," and young people there often took summer jobs at local canneries. Immediately after Reagan's election, in December of 1980, Apple Computer went public, instantly creating 300 millionaires, and raising more money in the stock market than any company since Ford Motor had in its initial public offering of shares in 1956. A young Steve Jobs was instantly worth $217 million.

Meanwhile, the family farmer had lots of people who said they were friends at election time - even the glamorous music industry put on a giant "Farm Aid" concert in 1985 to raise money for bankrupt growers. But there was no populist leader like Congressman Wright Patman had been during the New Deal in the Democratic Party anymore. On the contrary, "new" Democrats like Dale Bumpers and Bill Clinton of Arkansas worked to rid their state of the usury caps meant to protect the "plain people" from the banker and financier. And the main contender for the Democratic nomination in 1988, the handsome Gary Hart, with his flowing—and carefully blow-dried—chestnut brown hair, spoke a lot about "sunrise" industries like semiconductors and high-tech, but had little in his vision incorporating the family farm.

It wasn't just the family farmer who suffered. On the South Side of Chicago, U.S. Steel, having started mass layoffs in 1979, continued into the next decade, laying off more than 6,000 workers in that community alone. Youngstown, Johnson, Gary—all the old industrial cities were going, in the words of the writer Studs Terkel, from "Steel Town" to "Ghost Town." And the headlines kept on coming. John Deere idled 1,500 workers, GE's turbine division cut 1,500 jobs, AT&T laid off 2,900 in its Shreveport plant, Eastern Air Lines fired 1,010 flight attendants, and docked pay by 20 percent. "You keep saying it can't get worse, but it does," said a United Autoworker member.

And all the time, whether in farm country or steel country, the closed independent shop and the collapsed bank were as much monuments to the new political order as the sprouting number of Walmarts and the blizzard of junk-mail credit cards from Citibank. As Terkel put it, "In the thirties, an Administration recognized a need and lent a hand. Today, an Administration recognizes an image and lends a smile."

Regional inequality widened, as airlines cut routes to rural, small, and even medium-sized cities. So did income inequality, the emptying farm towns, the hollowing of manufacturing as executives began searching for any way to be in any business but one that made things in America. It wasn't just the smog and the poverty, the consumerism, the debt, and the shop-till-you-drop ethos. It was the profound hopelessness.

Within academic and political institutions, Americans were taught to believe their longing for freedom was immoral. Power was re-centralizing on Wall Street, in corporate monopolies, in shopping malls, in the way they paid for the new consumer goods made abroad, in where they worked and shopped. Yet policymakers, reading from the scripts prepared by Chicago School of Economics "experts," spoke of these changes as natural, "scientific," a result of consumer preferences, not the concentration of power.

By the time of the 1992 election, there was a sullen mood among the voters, similar to that of 1974. "People are outraged at what is going on in Washington. Part of it had to do with pay raises, part of it has to do with banks and S&Ls and other things that are affecting my life as a voter," said a pollster. That year, billionaire businessman Ross Perot ran the strongest third-party challenge in American history, capitalizing on anger among white working-class voters, the Democrats who had switched over to Reagan in the 1980s. He did so by pledging straightforward protectionism for U.S. industry, attacking the proposed North American Free Trade Agreement (NAFTA), and political corruption. Despite a bizarre campaign in which he withdrew and then reentered the race, Perot did so well he shattered the Republican coalition, helping throw the election to the Democrats. There would be one last opportunity for the Democrats to rebuild their New Deal coalition of working-class voters.

The winner of the election, Bill Clinton, looked like he might do so. He had run a populist campaign using the slogan "Putting People First." He attacked the failed economic theory of Reagan, criticized tax cuts for the rich and factory closings, and pledged to protect Americans from foreign and domestic threats. "For too long, those who play by the rules and keep the faith have gotten the shaft," Clinton said. "And those who cut corners and cut deals have been rewarded." His campaign's internal slogan was "It's the economy, stupid," and the 1992 Democratic platform used the word "revolution" 14 times.

As a candidate, Clinton’s Democratic platform called for a "Revolution of 1992," capturing the anger of the moment. But the platform was written by centrist Democratic Leadership Council boss Al From, and for the first time since 1880 there was no mention of antitrust or corporate power, despite a decade with the worst financial manipulation America had seen since the 1920s. This revolution would be against government, in government, around government. In 1993, a book came out on lobbying in Washington. Wayne Thevenot, a Clinton donor, laid out the new theme of the modern Democratic Party: "I gave up the idea of changing the world. I set out to get rich."

Like Reagan, Clinton went after restrictions on banking. Reagan sought to free restrictions on finance by allowing banks and non-banks to enter new lines of business. Clinton continued this policy, but over the course of his eight years attacked restrictions on banks themselves. In 1994, the Clinton administration and a Democratic Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act, which allowed banks to open up branches across state lines. Clinton appointed Robert Rubin as his treasury secretary, super-lawyer Eugene Ludwig to run the Office of the Comptroller of the Currency, and reappointed Alan Greenspan as the chairman of the Federal Reserve.

All three men worked hard through regulatory rulemaking to allow unfettered trading in derivatives, to break down the New Deal restrictions prohibiting commercial banks from entering the trading business, and to let banks take more risks with less of a cushion. Citigroup finally got an insurance arm, merging with financial conglomerate Travelers Group, approved by Greenspan, who granted the authority for the acquisition under the Bank Holding Company Act. In 1999, Clinton and a now-Republican Congress passed the Gramm-Leach-Bliley Act, which fully repealed the Glass-Steagall Act that had shattered the Houses of J.P. Morgan and Andrew Mellon. The very last bill Clinton signed was the Commodity Futures Modernization Act of 2000, which removed public rules limiting the use of exotic gambling instruments known as derivatives by now-enormous banks.

Clinton signed the Telecommunications Act of 1996, which he touted as "truly revolutionary legislation," and this began the process of reconsolidating the old AT&T as the "Baby Bells" merged. At the signing ceremony, actress Lily Tomlin reprised her role as a Ma Bell operator. Huge pieces of the AT&T network came back together, as Baby Bells merged from seven to three. Clear Channel grew from 40 radio stations to 1,240. In 1996, the Communications Decency Act was signed, with Section 230 of the Act protecting certain internet businesses from being liable for wrongdoing that occurred on their platform. While not well understood at the time, Section 230 was one policy lever that would enable a powerful set of internet monopolies to emerge in the next decade.

Clinton also sped up the corporate takeover of rural America by allowing a merger wave in farm country. Food companies had always had some power in America, but before the Reagan era, big agribusinesses were confined to one or two stages of the food system. In the 1990s, the agricultural sector consolidated under a small number of sprawling conglomerates that organized the entire supply chain. Cargill, an agricultural conglomerate that was the largest privately owned company in America, embarked on a series of mergers and joint ventures, buying the grain-trading operations of its rival, Continental Grain Inc., as well as Azko Salt, thus becoming one of the largest salt production and marketing operations in the world.

Monsanto consolidated the specialty chemicals and seed markets, buying up DeKalb Genetics and cotton-seed maker Delta & Pine Land. ConAgra, marketing itself as selling at every link of the supply chain from "farm gate to dinner plate," bought International Home Foods (the producer of Chef Boyardee pasta and Gulden's mustard), Knott’s Berry Farm Foods, Gilroy Foods, Hester Industries, and Signature Foods. As William Heffernan, a rural sociologist at the University of Missouri, put it in 1999, a host of formal and informal alliances such as joint ventures, partnerships, contracts, agreements, and side agreements ended up concentrating power even further into "clusters of firms." He identified three such clusters—Cargill/Monsanto, ConAgra, and Novartis/ADM—as controlling the global food supply.

The increase in power of these trading corporations meant that profit would increasingly flow to middlemen, not farmers themselves. Montana senator Conrad Burns complained his state's farmers were "getting less for our products on the farm now than we did during the Great Depression." The Montana state legislature passed a resolution demanding vigorous antitrust investigations into the meatpacking, grain-handling, and food retail industries, and the state farmer's union asked for a special unit at the Department of Justice to review proposed agricultural mergers. There was so little interest in the Clinton antitrust division that when Burns held a Senate Commerce Committee hearing on concentration in the agricultural sector, the assistant attorney general for antitrust, Joel Klein, didn't bother to show up. "Their failure to be here to explain their policies to rural America," said Burns, "speaks volumes about what their real agenda is."

In the Reagan era, Walmart had already become the most important chain store in America, surpassing the importance of A&P at the height of its power. But it was during the Clinton administration that the company became a trading giant. First, the corporation jumped in size, replacing the auto giant GM as the top private employer in America, growing to 825,000 employees in 1998 while planting a store in every state. The end of antitrust enforcement in the retail space meant that Walmart could wield its buying power to restructure swaths of industries and companies, from pickle producers to Procter & Gamble. Clinton allowed Walmart to reorder world trade itself. Even in the mid-1990s, only a small percentage of its products were made abroad. But the passage of NAFTA—which eliminated tariffs on Mexican imports—as well as Clinton's embrace of Chinese imports, allowed Walmart to force its suppliers to produce where labor and environmental costs were lowest. From 1992 to 2000, America's trade deficit with China jumped from $18 billion to $84 billion, while it went from a small trade surplus to a $25 billion trade deficit with Mexico. And Walmart led the way. By 2003, consulting firm Retail Forward estimated more than half of Walmart merchandise was made abroad.

Clinton administration officials were proud of Walmart, and this new generation of American trading monopolies, dubbing them part of a wondrous "New Economy" underpinned by information technology. "And if you think about what this new economy means," said Clinton deputy treasury secretary Larry Summers in 1998 at a conference for investment bankers focusing on high-tech, "whether it is AIG in insurance, McDonald's in fast-food, Walmart in retailing, Microsoft in software, Harvard University in education, CNN in television news—the leading enterprises are American."

It was also under Clinton that the last bastion of the New Deal coalition—a congressional majority held by the Democrats since the late 1940s—fell apart as the last few holdout southern Democrats were finally driven from office or switched to the Republican Party. And it was under Clinton that the language of politics shifted from that of equity, justice, and potholes to the finance-speak of redistribution, growth and investment, and infrastructure decay.

The Democratic Party embraced not just the tactics, but the ideology of the Chicago School. As one memo from Clinton’s Council of Economic Advisors put it, "Large size is not the same as monopoly power. For example, an ice cream vendor at the beach on a hot day probably has more market power than many multi-billion-dollar companies in competitive industries."

  • During the 12 years of the Reagan and Bush administrations, there were 85,064 mergers valued at $3.5 trillion.

  • Under just seven years of Clinton, there were 166,310 deals valued at $9.8 trillion.

This merger wave was larger than that of the Reagan era, and larger even than any since the turn of the twentieth century, when the original trusts were created. Hotels, hospitals, banks, investment banks, defense contractors, technology, oil—everything was merging.

The Clinton administration organized this new concentrated American economy through regulatory appointments and through non-enforcement of antitrust laws. Sometimes it even seemed they had put antitrust enforcement itself up for sale. In 1996, Thomson Corporation bought West Publishing, creating a monopoly in digital access to court opinions and legal publishing; the owner of West had given a half a million dollars to the Democratic Party and personally lobbied Clinton to allow the deal. The DOJ even approved the $81 billion Exxon and Mobil merger, restoring a chunk of the Rockefeller empire.

Clinton advisor James Carville very early on in Clinton's first term noted what was happening.

"I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter," he said.

"But now I want to come back as the bond market. You can intimidate everybody."

Toward the end of Clinton's second term, with a transcendent stock market, bars in the United States began switching their television sets from sports scores to CNBC, to watch the trading in real time.

In the 1990s, it wouldn't be Herbert Hoover overseeing a bubble, it would be a Democrat.

* * *

Finally, Matt pointed out on Twitter that:  "This chapter is about Clinton. But there are two chapters before about how Reagan facilitated the merger boom of the 1980s. Our problems came through both parties. Both. That is crystal clear."

Tyler Durden

Tue, 10/22/2019 - 22:05


Business Finance


How A Leftist Echo Chamber Became The New Norm On Campus

zerohedge News leftist echo chamber became norm campus All https://www.zerohedge.com   Discuss    Share

Authored by Phillip Magness via The American Institute for Economic Research,

A pronounced and growing hostility to free markets has turned the academic humanities into an ideological echo chamber. Over the past 20 years, faculty in English, history, foreign languages, and philosophy have shifted sharply to the political left, resulting in a nearly complete exclusion of dissenting perspectives from these fields.

My previous investigation of this trend found that the most biased majors on campus are now struggli

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ng to attract new students, whereas disciplines with greater balance are seeing their majors increase. Ideological homogeneity may comfort faculty and students who already share in a common set of beliefs, but it’s also off-putting to the nearly two-thirds of incoming college freshmen who do not hail from the political left.

A new study of student attitudes about socialism and capitalism provides strong confirmation of the echo chamber effect taking hold of these same disciplines.

College students as a whole have a roughly even divide in their political beliefs, with a clear plurality classifying themselves as moderates and smaller groups identifying on both the left and right of center. In the humanities, however, the political left overwhelmingly dominates the student landscape as well as the faculty.

According to a recent survey by College Pulse, 78 percent of philosophy majors, 64 percent of anthropology majors, and 58 percent of English majors state that they hold the economic and political system of socialism in a favorable light. Unfavorable opinions of socialism account for only 21 percent of philosophy, 20 percent of anthropology, and 24 percent of English majors, with the remainder undecided.

When measured as a whole, 51 percent of humanities majors have a positive opinion of socialism while only 27 percent view it critically. On the flip side, 54 percent of students in the same humanities majors have a negative view of capitalism compared to only 32 percent in support.

Source: College Pulse Student Survey, 2019

The leftward skew of students in the humanities stands in sharp contrast with other academic disciplines, and particularly those with actual competency in economic matters. Only 26 percent of economics majors view socialism favorably, while 61 percent have a negative outlook. The further one strays from actually studying and specializing in the analysis of economic behavior, the more positive their outlook on centrally planned economic systems becomes.

Perhaps not surprising, socialist sympathizers among the student body also appear to have an extremely superficial and often muddled understanding of the concept. Although they are remiss to concede the point, such confusion likely extends to socialism’s faculty sympathizers as well. Scholars in these disciplines tend to form their opinions of socialism from an intellectual affinity for its abstract idealization as found in Marxism, critical theory, and other like-minded schools of philosophical thought on the far left. Social scientific analysis of economic behavior, and specifically socialism’s abysmal track record, seldom enters into the equation.

Philosopher Jason Brennan has made this point at length, noting that academic advocates of socialism usually present the system in its abstract ideal. They then deploy that unrealistic standard to critique “failings” of capitalism as it actually exists in the real-world, while neglecting the dismal parallel real-world track record of socialism. When one ideal form is compared the other, or alternatively their non-ideal performances are considered, capitalism consistently outperforms the socialist alternative on both economic and ethical grounds. Standard reference material on socialism from the academic humanities nonetheless remains curiously neglectful of the vast literature on its abysmal performance in practice, and particularly critiques from social scientists who work in this area.

An economist who studies prices, scarcity, and trade-offs has a direct professional awareness of economic policy making, and with it the untenable nature of socialist economic planning. A political scientist who studies comparative government would similarly know the immiserating and often deadly history of socialist economic systems in the countries that have attempted to implement them.

But what training does a literature professor have that permits him or her to competently opine on economic regulation, on tax policy, on public finance and budgeting, or on centrally planned resource allocation by the state? How about the creative-writing professor? Or the fine arts professor? The Spanish or German professor?

Far too often, faculty in these and other humanistic disciplines venture well beyond their own training and expertise to offer highly ideological pronouncements on social scientific matters that they are ill-equipped to even address. As each of these disciplines drifts deeper into a politically homogeneous echo chamber, such opinions are increasingly isolated from both internal and external scrutiny by scholars who do possess the requisite expertise.

While hostility to free markets and capitalism has clearly taken root among both the faculty and students who work in the humanistic sectors of the academy, there is some hope for an eventual course correction that either restores some balance or sees these fields wither and decline. Ideological echo chambers may be comforting to those within them, but they are also a self-defeating strategy for attracting new customers from beyond that echo chamber’s walls.

By only catering to students on the far left of the political spectrum, the humanities have adopted an exclusionary attitude toward other political viewpoints — including those that still comprise a clear majority of the student body. That almost assuredly means an increased concentration of socialist sympathizers among the majors that they do attract, but it also means the much larger and excluded remainder will vote with their feet and head over to the STEM fields, to the business school, and to pre-professional degrees that offer both greater ideological balance and less of an emphasis upon politicizing their course content. 

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