The Brexit delusion of taking back control

The UK is a large minnow, but still a minnow, in a very big lake

Martin Wolf



From Beijing, where I now am, the UK looks small. It also looks as if it has fallen into the hands of lunatics engaged in an astonishing act of national self-harm. But this, Brexiters will say, is an illusion. The UK is going to “take back control”. The slogan was brilliant. But it was the biggest delusion of all.

Control is different from sovereignty. As I argued during the referendum campaign, the UK was already sovereign: it could, if it wished, vote to leave the EU. It did so, but promptly discovered that, while it was sovereign, it was not very powerful. Yet control is about power.

In the post-referendum negotiations with the EU it has turned out, as informed people knew it would, that the EU was more powerful than the UK. This was so for a simple reason: it could impose far heavier penalties on the UK than the UK could on the EU. Britain sends 47 per cent of its exports of goods to the EU, while the rest of the EU sends 15 per cent of its exports to the UK. For the EU, the UK market is important. For the UK, the EU’s is vital.

Welcome to the harsh world of international relations. We have been frequently reminded that the UK is the fifth (soon to be sixth) largest economy. That is true, but misleading. The world contains three economic superpowers: the US, the EU (without the UK) and China. These generated about 60 per cent of global output last year. The UK’s contribution was 3 per cent. It is large for a minnow, but still a minnow.



So what might “control” mean for a small island country about to separate itself from its neighbours and closest economic partners? In some areas, it will be able to exercise control. But these are where it has always been able to do so. The UK’s net contribution to the EU was just 1.1 per cent of total public spending in the latest financial year. The EU has no significant influence over the UK’s spending on (or policies towards) health, education, housing, pensions, welfare, infrastructure, culture or, for that matter, defence and aid. In one rather intimate domestic area the UK does risk losing control: its own survival. The futures of Northern Ireland and Scotland within the UK have both been destabilised by Brexit.

So where might Britain gain the control it now lacks? Obvious examples are those economic regulations that have fallen within the ambit of the EU’s competition policy, rules on state aid and the bloc’s single market. It is correct that if the UK left the EU completely, it could abandon an active competition policy and waste large amounts of money in propping up failed companies. Why it should view either as attractive is a ­mystery.

The UK has largely unbridled control over its domestic affairs, for good or (too often) for ill. But it is an open, trading nation and, given its size and limited resources, has no future as anything else. It is a modest power in a big world: 2019 is not 1860. It depends on the behaviour of other sovereign countries.




The EU has significantly increased the influence of Britain in a host of negotiations, notably over trade and climate. That will be gone. So, too, will influence over the EU’s policies towards the UK, as the withdrawal negotiations have already shown. But, we are told, the country can open up markets all over the world, to compensate for the loss of favourable access to the market of 450m people on its doorstep. Unfortunately, that would not be true even if the rest of the world were to be obliging, because the EU markets are so crucial for the UK.

Moreover, the rest of the world is not going to be obliging. The US is in the process of demolishing the World Trade Organization, on which Britain will rely. In any bilateral bargaining with the US, the latter is going to impose very hard terms, the most distasteful of which are likely to relate to food standards and health. China is going to insist on the UK’s acceptance of its terms — as, by the way, is protectionist India. The old Commonwealth of Australia, Canada and New Zealand may be friendly, but these 65m people are neither here nor there for the UK, economically. In brief, outside the EU, the UK will not have greater control over its global environment. It will be on its own, and at the mercy of others, some far more potent than it is.

Nor is this all. Trade agreements are increasingly about regulatory standards, because these are ever more important domestically in all significant countries. If the UK wishes to trade freely with the EU, it will have to adopt EU standards, as it has done as a member. But the same will apply to trade with other countries, notably in the case of the US. But what is to be done when, as over data protection or food, standards clash? This is not so important for manufacturing, which can produce to different standards. But it does matter for services, data handling and food, where how things are done is crucial. In the end, the UK will often have to align itself with the standards of one of the blocs — usually, I predict, the EU’s.



There is something far bigger still. Since 2016, the challenges to liberal and democratic values have become far clearer. As Sigmar Gabriel, former German foreign minister, argues in a column for Project Syndicate, this is a dangerous and disheartening environment for the EU. But so, too, for the UK. Quite simply, the saga we are seeing unfold is a true tragedy. The UK has chosen a solitary path. But the EU should also reconsider. After all, as Mr Gabriel notes, even in Germany the view of immigration has changed somewhat.

It is not too late to halt an act of such folly. The UK will not gain control in any important respect by leaving the EU. On the contrary, it is more likely to lose it. In this increasingly hostile world, we Europeans need to stick together. It is time for sensible people to try to think again.


The Missing Chinese Bond Apocalypse

By Nathaniel Taplin



Chinese factory-gate inflation is threatening to turn negative, metals prices are in the dumps and industrial profits just logged their sharpest fall since 2009. Where then, are the big state-owned company bond defaults to rock the financial system, as in 2015?

Last time Chinese inflation and profits collapsed, state-owned steel, coal and aluminum companies defaulted in droves, spooking global investors. This time, despite state-controlled enterprise profits diving 24% on the year in January and February, there has been barely a blip: Just one state-owned firm has defaulted on a publicly issued onshore bond since third-quarter 2018, according to Wind. Private-sector companies in a range of industries have defaulted, but while that is terrible news for employment and growth, it matters less for financial-system stability: State-owned enterprises account for around two-thirds of corporate debt in China, according to Matthews Asia.

Part of the explanation is seasonality. The Lunar New Year holiday’s shifting dates probably means a weak February and a relatively strong March this year for most Chinese data. That doesn’t change the fact that SOE industrial-sector profits, after two years of outperformance, have been growing slower than private profits for the past couple months.

A more likely explanation is that the sectors getting hit are different this time, and mostly remain in better shape financially than during the last round of SOE defaults.

Industrial profits fell 14% on the year in January and February. But excluding autos, oil processing, nonferrous metals and chemicals—all heavily state-invested industries—overall profit growth would have been 0.2%, says Nomura. Those sectors that are in bad shape still aren’t in nearly as bad condition as steel and coal were in 2015 and 2016. Auto and chemical company profit margins have deteriorated since early 2018, but they still clock in at 4.5% and 5.2%, respectively. Only the nonferrous-metals sector, with a margin of just 1.4% in early 2019, looks in serious trouble.



Last time Chinese inflation and profits collapsed, state-owned steel, coal and aluminum companies defaulted in droves.
Last time Chinese inflation and profits collapsed, state-owned steel, coal and aluminum companies defaulted in droves. Photo: Qilai Shen/Bloomberg News


The other factor is borrowing costs. Profit growth for both SOEs and private-sector companies has deteriorated since 2017, but SOE borrowing costs have come down sharply. High-rated SOEs can borrow at around 3%-3.5% for one year in the bond market, down more than 1 percentage point from late 2017. Regulators’ crackdown on bond-backed wealth-management products, meanwhile, has largely locked private companies out of the bond market. They pay around 6% for bond or bank finance, the same as in 2017, even though the overall return on assets for private-sector industrial companies has shrunk from 9.8% to 7.4% since then. Many weaker private firms are therefore struggling to refinance.

For investors worried about an immediate financial crisis, this is relatively good news, since private firms in aggregate are still much less indebted than SOEs. For investors worried about China’s future growth, which depends on a dynamic private sector, it is far less reassuring.

Open Interest In Gold Falls - A Possible Sign That A Bottom Is Near

by: Andrew Hecht
Summary
 
- Gold falls to the lowest level of 2019.

- Open interest tells us about herd behavior.

- Gold open interest rose with the price and fell with the price.

- The long-term trend in gold is bullish in all currencies, but the dollar is currently pushing the price lower.

- A higher low is in the cards for the yellow metal - a golden opportunity to buy gold mining stocks.
 
 
Since attempting to stage a recovery and rising to a high at $1314.70 on the June COMEX futures contract on April 10, the price of gold has moved lower and below the $1300 level. The last time the yellow metal was over $1300 was on April 11, and after falling to a low at $1267.90 on April 23, June futures were at the $1279 level on Wednesday, April 24, not far off the recent low.
 
Gold is a metal that tends to move higher during periods of uncertainty, and lower when market participants are feeling good about other asset classes. The recent rebound in the stock market that put the leading indices above their 2018 peaks has taken some of the shine off of the price of gold. At the same time, higher interest rates in the US, and a dollar that is sitting just below its mid-December high on the dollar index have weighed on the price of the precious metal.
 
I have been trading in the gold market since 1981. In the late 1980s and 1990s, I ran one of the world's leading precious metals businesses with offices in New York, London, Hong Kong, and other cities in Asia. Even though the price of gold traded at a much lower price level in those days, one thing has remained the same. When gold looks its best, it is usually time to sell, and when it looks like it is going to explode to the upside, it is typically a great time to sell.
 
The most direct route for a trade or investment position in the gold market is via the physical bars and coins available from dealers around the world. The allocated and unallocated gold market in London is the most liquid physical choice which attracts the world's producers, consumers, central banks, governments, and monetary authorities who buy and sell the yellow metal in significant quantities.
 
The COMEX division of the CME offers futures and futures options in gold with a physical delivery mechanism. The ability to make or take delivery of gold bars allows for the smooth convergence between the prices of the futures and physical during delivery periods. Many ETF and ETN products that are both unleveraged and leverages do an excellent job replication the price of the yellow metal. Shares in gold mining stocks typically act as leveraged tools in the gold market as the share prices often outperform the price action in gold on the upside and underperform on the downside.
 
Each mining company has idiosyncratic risks such as their management and the locations of mines around the world. Aside from the political risk of producing gold in a myriad of countries, mining companies also run the risk of property specific issues such as floods in mines, inconsistencies between proven and probable reserves and output, and others. A bundle or diversified portfolio of mining stocks can mitigate some of the idiosyncratic risks, and the VanEck Vectors Gold Miners ETF product (GDX) or the VanEck Vectors Junior Gold Miners ETF product (GDXJ) tend to provide leveraged returns in a rising and falling gold market. As they hold a portfolio of mining shares, the products temper some of the risks when it comes to holding a position in a specific mining company.
 
Gold falls to the lowest level of 2019
 
Gold continued to fall to new lows for 2019 on Tuesday, April 23 when the price reached $1267.90 per ounce on the nearby June COMEX futures contract.
 
Source: CQG
 
 
As the daily chart shows, gold looks awful as it has made a new low for 2019 over the past four out of six trading sessions. On April 23, the yellow metal fell to its lowest level since December 20 on the June contract. The next level of technical support is at the December 19 low at $1249 per ounce.
 
Open interest tells us about herd behavior
 
Open interest is the total number of open long and short positions in a futures market. The metric tends to rise when trends develop and fall when speculators and investors exit risk positions. In the world of precious metals where sentiment is a primary force that drives prices, open interest can be an effective indicator of what market participants are doing. With the price of gold falling, the metric is telling us that they have moved to other markets that offer more opportunity since March.
 
Source: CQG
 
 
The daily chart with volume and open interest metrics show that after rising to a high at 541,737 contracts on March 14, the metric declined to 440,048 contracts on April 23, a drop of 101,689 contracts or just under 19%. Gold rose to a high at $1330.80 on March 25 and fell to $1267.90 on April 23, which was $62.90 or 4.7% lower.
 
As the price of gold, the open interest metric is at its lowest level of 2019 and has not been this low since late December of last year. Falling price and declining open interest is typically not a validation of an emerging bearish trend in a futures market.
 
Gold open interest rose with the price and fell with the Price
 
The open interest metric displays a pattern of rising with the price of gold and falling during corrective periods. Market participants tend to hop on board of the gold market when the price is appreciating and jump off when the price moves to the downside. From late November 2018 through late January when gold was moving to the upside, the metric rose from 390,899 to 537,605 contracts.
 
Open interest remained between 470,000 and 541,737 contracts until late March, but the move to new lows for this year in April drove the metric lower. The falling open interest metric may not validate a continuation of lower lows in gold because the decline could mean that the futures market is coming close to a level where it will run out of selling.
 
Early in my career, a boss who ran the precious metals trading business for a leading world trading company told me that gold and silver move higher when there are more buyers than sellers and lower when sellers outnumber buyers. At the time, the lesson seemed almost too simplistic, but what he was attempting to convey was that the two precious metals move on sentiment and herd behavior is the primary force when it comes to trends. While the metric can continue to decline with the price, at under 400,000 contracts, a bottom could be in the cards for the yellow metal on a short to medium-term basis.
 
The long-term trend in gold is bullish in all currencies, but the dollar is currently pushing the price lower
 
The latest correction in the gold market is coming as the yellow metal is taking cues from the dollar index which has risen back over the 97 level as of April 24.
 
Source: CQG
 
 
As the weekly chart of the dollar index futures contract shows, the critical level on the upside for the dollar is at the mid-December 2018 peak at 97.705. Since then, the dollar has made multiple attempts to climb to a new high, but on each occasion, it failed. At 97.670 on April 24, another attempt to conquer the resistance level is currently underway. The inverse historical relationship between the dollar and the price of gold is currently weighing on the price of the precious metal as it is at the lows of 2019. However, a look at longer-term charts of gold in dollar terms and gold in the other leading reserve currencies of the world shows that the trend for at least a decade is higher.
 
Source: CQG
 
 
The quarterly chart of gold in dollar terms displays a bullish trend that has been in place since the price reached a low at $252.50 per ounce in 1999 when the Bank of England decided to liquidate half of their reserves.
 
Source: CQG
 
The monthly chart of gold in euros shows that gold has appreciated dramatically since the turn of this century.
 
Source: CQG
 
 
Meanwhile, the price of gold in Japanese yen shows that it has also rallied since the turn of the century, and in yen, gold is not far off its all-time peak.
 
The price action in gold when it comes to the three leading reserve currencies of the world provides a reason to pause during the current price correction as the long-term trend is telling us that gold continues to gain value versus the world's leading fiat currencies.
 
While the Bank of England was selling their gold reserves at the start of this century, central banks have been net buyers of the yellow metal over recent years. China and Russia have built reserves by absorbing domestic output and occasionally purchasing gold on the international market. There have been very few official sector sales of gold which is a sign that central banks and governments still believe that gold is the ultimate means of exchange, a store of value, and is an effective reserve asset.
 
Even though they do not talk about gold often, the action of the world's monetary authorities speaks a lot louder than their silence on the subject.
 
A higher low is in the cards for the yellow metal - a golden opportunity to buy gold mining stocks
 
I am not a gold bug who always believes the price gold is going to move higher, but I do think that the yellow metal is the ultimate means of exchange. As a student of history, the metal has played a leading role as an asset for a lot longer than any currency currently in circulation. For thousands of years, gold has remained a constant symbol of wealth, and it continues to receive validation from governments who hold the metal as part of their foreign exchange reserve assets.
 
Gold currently looks like it is heading lower which, in my experience, has always been the perfect time to begin accumulating the yellow metal. While most market participants tend to purchase gold as it is moving higher, I have found that a scale-down buying approach has optimized my results. I prefer to sell gold on a scale-up basis when the market becomes overpopulated with buyers. The open interest metric has been a great monitor of the behavior of the herd of investors and speculators in the precious metal. The recent decline in open interest is a sign that the gold futures market is going to run out of selling sooner, rather than later.
 
Gold mining shares provide a leveraged return on the up and the downside compared to the price of gold. While buying specific mining companies involves idiosyncratic risk, I prefer to use the VanEck Vectors Gold Miners ETF product for a leveraged position in gold or the VanEck Vectors Junior Gold Miners ETF product for even more gearing as the juniors tend to move more on a percentage basis that the leading gold mining companies. With open interest falling, this could be the perfect time to begin building long positions in GDX and GDXJ for the time when the selling stops and gold finds a bottom. The price of gold has declined from a high in 2019 at $1344 on the continuous futures contract to a low at $1266 on April 23, a drop of 5.8%.
 
Source: Barchart
 
 
As the chart of GDX shows, the mining ETF dropped from $23.70 to $20.67 over the same period, a decline of 12.8% which was reflected the leverage on the downside. The top holdings of GDX include Newmont, Barrick, Newcrest, Franco-Nevada, and Wheaton which as of April 22 accounted for over 41% of the ETF's holdings. GDX has net assets of $10.29 billion and trades an average of over 43 million shares each day.
 
 
Source: Barchart
 
 
Over the same period, GDXJ dropped from $35.04 to $28.61 or 18.4% which was a leveraged moved compared to both gold and the GDX ETF. GDXJ's top holdings include Kinross, Cia De Minas Buenaventura SAA, Northern Star Resources, Evolution Mining, Gold Filed Ltd, Pan American Silver, and Yamana Gold which account for over 30% of the ETF's holdings. GDXJ has net assets of $3.9 billion and trades an average of over 13 million shares each day.
 
A higher low may be in the cards for the gold market as it looks ugly enough to buy these days. GDX and GDXJ provided leveraged performance on the downside and are likely to do the same on the upside. Buying the mining ETFs on a scale-down basis could be the optimal strategy as gold searches for a low when open interest falls to a level where the market runs dry of selling.


The Second Phase of American Geopolitics

By George Friedman

I began this series with discussions of geopolitics and philosophy. I think it is useful now to attempt to show the practical impact of geography on politics and to continue using geography to explain the evolution of the United States. 
Last week, I showed how geography shaped America’s founding, both in terms of its foreign relations and its internal dynamics. A long coast and poor internal communications made the United States vulnerable to invasion from the sea. The Appalachians helped create two radically different social and economic systems, one based on plantations and slavery, the other based on small farms, crafts and finance that did not require nor support slavery. (Several readers have commented that slavery was not illegal in the North, which is true. But neither was it viable on the scale of the South.) I tried to explain the United States’ strategic problem facing the United States, which crystallized in the War of 1812, and the country’s social and economic divide, which exploded into the Civil War. Both wars obviously had other causes, but both were driven by geography.

It was the Appalachians that had protected the Colonies from the French and Indian alliance, but it was now the Appalachians that threatened to strangle the United States. The country continued to lack strategic depth and could still be overwhelmed from the sea. The danger from the French and Indian alliance continued as well, west of the Appalachians. The United States feared that if Britain lost its ongoing wars with France, for example, the French could attack from both directions and overwhelm the country.

Therefore, the geopolitical imperative was to provide the United States with both strategic depth and a new source of wealth. This necessitated crossing the Appalachians. The U.S. held some land to the west, in the Northwest Territory around the Ohio River. But the Ohio flowed into the Mississippi River, and the Mississippi Valley was held by the French. Since trans-Appalachian movement was difficult, and the Ohio River was blocked, the defensibility of the Northwest Territory was limited; it was not the solution the U.S. needed.

Between the Appalachians and the Rockies, however, lay a vast valley, drained by numerous rivers, including the Ohio and Missouri. These rivers had an extraordinary set of characteristics. First, they covered a great deal of territory within the valley. Second, many of them were navigable. Third, they all flowed into a single river, the Mississippi, which emerged as a small stream in northern Minnesota and swelled into a huge highway to the ocean as other rivers emptied into it. Settlers who built farms and ranches between the Rockies and Appalachians, therefore, could ship their produce to the East Coast and even Europe by floating their goods downriver on flatboats to the point where oceangoing vessels could come up the Mississippi. The meeting point of the flatboats and oceangoing vessels was the port city of New Orleans.

 
 

 

The Americans needed the valley for strategic and economic reasons. The U.S. strategy was to attract immigrants, and for that, it needed land, but the Eastern Seaboard’s economy could not support a vast population. The land it needed was west of the Appalachians, its value augmented by its plentiful rivers. The French, unlike the Americans, had no desire to settle the Rocky-Appalachian valley. The French were constantly fighting wars in Europe and could not spare manpower from defending the motherland.

France was fighting for its life and needed money, not land in North America. The United States needed that land urgently, so it could grow and develop exports. So the French sold the land to the United States. George Washington, in his Farewell Address, had divided the U.S. into three regions: North, South and West. He argued that, without the West, there would not be enough wealth to build a navy, and without a navy, the U.S. could not survive. His successor, Thomas Jefferson, made the deal to secure the West. The Louisiana Purchase was a geopolitical imperative for the United States.

What it created was something rare, with global implications: a class of smallholder farmers who could produce more than they could consume, and who had the ability to take the surplus to markets as far away as Europe. This made the Industrial Revolution in Britain possible. With food coming in from the United States, British farm workers could take work in factories without triggering a famine.

Washington needed to make sure that an attack on the East Coast would not by itself crush the United States. Settlers were encouraged to move west, and quickly. The first wave of settlers was led by the Scotch-Irish, who were regarded by English settlers as unassimilable because of their drunken brawling and lack of respect for law and social proprieties. The attraction of cheap land transformed a vast area, making it inhabited and productive in less than two generations. It also set a key American dynamic in motion: the use of immigrants as a labor base that would drive the American economy.

The key to all of this productivity, however, was New Orleans. If New Orleans were in hostile hands, the river transport system would not function, and the exports that were generating surplus capital to help fuel America’s Industrial Revolution would not get past the mouth of the Mississippi. So, for the United States, the defense of New Orleans became a key strategic imperative. (That imperative continues today; the Port of South Louisiana still moves more tonnage per year than any other port in the United States.)

It is no surprise, then, that in the War of 1812 the British moved on New Orleans (even if the Treaty of Ghent had already been signed when they attacked). Andrew Jackson was able to defeat the British there. Jackson, a settler himself, was obsessed with New Orleans and wanted Mexico pushed back, so when he became president, he sent the former governor of Tennessee, Sam Houston, to Texas to foment a pro-American rising. The eastern border of Texas was on the Sabine River, just a few hundred miles from New Orleans. There is no evidence for this, but it seems possible to me that when Gen. Antonio Lopez de Santa Anna came north to crush the Texan rising and swung east toward San Jacinto, he was heading to New Orleans. Had Santa Anna won at the Battle of San Jacinto, the road to New Orleans might have been forced open. Control over New Orleans is closely related to control over Cuba; holding the island means you can close access to New Orleans. The U.S. wanted Spain out of Cuba (and it would later want the Russians out as well). The U.S. obsession with Cuba is not as strange as it may seem.

Geography creates a logical framework for American history, dictating the imperatives the U.S. must achieve. This is not a simple or mechanistic concept, as I tried to show in the opening pieces, and this story is far more complex than what I have written here. Still, the logic of American geography is powerful; when you go to New Orleans, look at the vast grain elevators, still very much in use, across the river. Consider how that city built the American economy. Washington was right, and Jefferson did what he had to do.

 


The Fed Board Unmoored

Over the course of his presidency, Donald Trump has consistently prized sycophancy above expertise in his selection of advisers and political appointees. But by nominating the right-wing talking head Stephen Moore to the US Federal Reserve Board of Governors, Trump is taking his war on expertise to a new level.

J. Bradford DeLong




BERKELEY – In December 2015, the right-wing commentator Stephen Moore, US President Donald Trump’s pick to fill a vacancy on the US Federal Reserve Board of Governors, savagely attacked then-Fed Chair Janet Yellen and her predecessor, Ben Bernanke, for maintaining loose monetary policies in the years following the “Great Recession.”

According to Moore, who is not a professional economist, investors had “become hyper-dependent” on the Fed’s “zero-interest-rate policy … just as an addict craves crack cocaine.” This “money creation,” he surmised, had yielded “nada” in terms of “helping juice the economy, creating jobs, or giving the American worker a pay raise.” Worse, the United States had already “tried this before – twice – and both times the story ended badly with a pop of the bubble … in 1999-2000 and ... in 2008-09.” The lesson, he concluded, is that, “Micromanaging the economy through the lever of money creation at the grand fiefdom within the Fed doesn’t work.”

Or does it? Moore himself is probably not the most reliable judge. On December 26, 2018, he savagely attacked Yellen’s successor, Jerome Powell, for raising interest rates to unwind the very approach that he had condemned three years earlier. “If you cut engine power too far on a jetliner,” he warned, “it will stall and drop out of the sky.” Moore complained that after having “risen by 382 points on hopes that the Fed would listen to Trump and stop cutting power,” the Dow Jones Industrial Average had “plunged by 895 points” on the news of another interest-rate hike. This, he concluded, was evidence that “the Fed’s monetary policy has come unhinged.”

Moore called on Powell to “do the honorable thing … and resign.” But, failing that, he hoped that Trump would simply fire the Fed chair. “The law says he can replace the Federal Reserve Chairman for cause,” Moore observed in an interview that same week. “Well, the cause is that he’s wrecking our economy.”

If Moore’s approach to legal reasoning seems deficient, one must wonder how he would approach monetary policymaking. Judging by his own statements, a three-month Treasury rate of 0.26% driving a ten-year rate of 2.3% was far too low in December 2015, whereas a three-month rate of 2.42% driving a ten-year rate of 2.55% is far too high today.

What should we make of this? A generous interpretation is that Moore’s view of the economy has not changed, and that he has consistently offered his analyses in good faith. In that case, he must genuinely believe that any deviation from a ten-year rate of around 2.4% poses an unacceptable risk – either of creating addicts or of wrecking the economy.

Another generous interpretation is that Moore has consistently offered his analyses in good faith, but has changed his view of the economy. If so, he must be very sorry for having misled people. And presumably, he would be willing to apologize personally to Bernanke, Yellen, and anyone who may have heeded his bad advice between 2010 and 2016.

Of course, a less generous interpretation is that Moore has not changed his view of the economy, and was acting in bad faith during the years of the Obama administration. Or, less likely, he is acting in bad faith now, after having conducted himself in an honest manner up until 2016.

As it happens, none of these interpretations applies, because they are all predicated on the false assumption that Moore actually has an informed perspective of the economy. To my mind, he does not.

True, Moore has consistently advocated low government spending and opposed progressive taxation. He might even support more open immigration policies, as one would expect from a self-proclaimed free-market conservative. Then again, his views may have changed since he started advising Trump in 2016. After all, he already seems to have abandoned his previous commitment to free trade.

That comes as no surprise. Throughout his career as a partisan talking head, Moore’s economic analysis has never had any basis in empirical reality. To the contrary, he has repeatedly shown that he will say whatever needs to be said to please his political master.

Needless to say, Moore is wholly unfit to serve in the office to which he is being nominated. He has absolutely no business overseeing US monetary policy. The same is true of any president who would appoint him and any senator who would vote to confirm him.


J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.