The debasement of America’s grand old party

Trump’s capture of the Republicans is a problem for the world


Some Republicans have failed to stand up to Donald Trump (centre) including Paul Ryan (right), the outgoing speaker of the House of Representatives © Reuters


Even as he won its nomination for president, Donald Trump was an aberrant figure in the Republican movement. His mistrust of trade and old allies contravened its orthodoxies. His brute tactics were alien. He seemed destined to govern as an independent president in all but name, with Republicans in Congress either opposing him or tolerating him grudgingly.

What has transpired over the past 18 months is much more troubling. Republicans have journeyed from shock at Mr Trump’s rise, to forbearance, to complicity, to, in some cases, outright cheerleading. This is his party now. He has re-written the Republican platform: from trade to protectionism, from leadership of the west to disruption of it, from reverence for the intelligence services to insinuations against them. Very little of this is sincere ideological conversion on the part of eminent Republicans. It is partisanship. Whoever enrages (and defeats) the Democrats can count on adoration.

It is bad enough that some Republicans have failed to stand up to Mr Trump, such as Paul Ryan, the outgoing speaker of the House of Representatives. Others have done worse. Devin Nunes, who chairs the House intelligence committee, has worked to undermine special counsel Robert Mueller in his probe into Russian meddling in the 2016 election.

Some of his Republican colleagues have filed spurious articles of impeachment against Rod Rosenstein, the deputy attorney-general who oversees Mr Mueller. Although Mr Ryan has resisted such calls, these are elected servants of the American people behaving like personal aides to the president.

The dread is that things will worsen after the midterm elections in November. If the Republicans do well — holding the Senate, say, and either holding or narrowly ceding the House — credit will go to Mr Trump. If the party does badly, a siege mentality will take hold as emboldened Democrats move against the president, perhaps with their own articles of impeachment. Either way, Mr Trump and his party could continue to blend into each other until they are one and the same. The aberration will have become the norm.

The mutation of the Republicans is more than an internal matter. This is one of the two great parties in the world’s most important democracy. From Dwight Eisenhower to George HW Bush, its leaders have shored up the west in times of danger. If the Republicans turn into a nativist personality cult, the implications are for the world to reckon with. No other centre-right party in a rich nation, even Britain’s wayward Conservatives, has tipped so far into populism.

There are conscientious Republicans in Congress, such as those shouting down the Rosenstein impeachment resolution. Will Hurd, who represents a Texan district, is never mealy mouthed in his criticism of Mr Trump. Such criticism comes at a price, given that many Republican voters think the president infallible, and judge congressmen by their fealty to him. But Mr Hurd’s like are few and increasingly demoralised. Anti-Trump senators, such as Jeff Flake and Bob Corker, are retiring. Arizona’s John McCain is fighting illness. The hope must be that November returns more men and women of such independent mind, and fewer in the mould of Mr Nunes.

The trouble is moderate candidates struggle to win Republican primaries in the first place. This augurs badly for the composition of future Congresses. “The Republican party is kind of taking a nap somewhere,” said John Boehner, a predecessor of Mr Ryan’s, in May. It promises to be a long nap.


Does The Buck Still Stop With Xi Jinping?

By Nathaniel Taplin





Is Xi Jinpingstill the only man that matters in China?

Perhaps. But one of his top economic priorities, cutting China’s enormous debt burden, has become a victim of his power consolidation.  
July data released Tuesday painted a picture of a deepening downturn, particularly in investment, where growth hit another post-2000 low. As signs of economic distress have crystallized, hints of discontent among China’s political class have emerged. A spat between the Ministry of Finance and central bank over how best to manage growth and debt has spilled into the open—such disagreements are usually handled behind closed doors. China’s cabinet, which had all but conceded economic policy making to Mr. Xi, has been uncharacteristically assertive in calling for stronger growth. And China’s short-term borrowing rates have plunged back to mid-2016 levels: a clear sign of a shift toward monetary easing.


Mr. Xi’s relentless rise to power, culminating with the abolition of presidential terms limits in March, has enabled him to do what weaker predecessors could not: force insouciant local officials to toe Beijing’s line. Previously China’s most intractable problems, including its enormous debt buildup, were the result of Beijing’s inability to control local officials. These days, the opposite is true: the biggest problem is bureaucrats terrified to step out of line, even when dictates from “the core” don’t make sense.

The deleveraging campaign is a perfect example. 


   Chinese President Xi Jinping, center, in Beijing in June. Photo: andy wong/Agence France-Presse/Getty Images 







Everyone agrees that China needs to borrow less and invest more efficiently. Still, clamping down on the bond market and shadow banking at the same time was always going to be risky, given the effect on small private firms who have trouble getting bank loans.

Local officials watching this year’s damage unfold were presumably too terrified to speak up.

The result: a brutal lending crunch for private companies, which are now defaulting in unprecedented numbers. Outstanding nonbank credit—including corporate bonds and shadow banking—has fallen by more than 1.5 trillion yuan ($218 billion) since April alone, easily the sharpest decline of the past 10 years. Now, policy makers have little choice but to loosen monetary and fiscal policy, undoing much of the progress on debt reduction over the past two years.

It seems likely that misjudging the U.S.’s resolve on trade—while simultaneously overdoing the debt crackdown at home—has damaged Mr. Xi politically. What isn’t clear is how deep that damage cuts.

Regardless, a period of political horse trading now seems likely, as Mr. Xi’s emboldened opponents reassert themselves. That could hamper policy makers’ ability to respond effectively to a coming downturn. Some analysts are now making buy calls on Chinese stocks as the tilt back toward easing gets clearer. Given the current uncertainty at the top, that process could be bumpier than expected.


Spain’s Dictator Is Dead, but His Popularity Lives On

Francisco Franco ran Spain with an iron fist for decades—and created myths about his rule that are only now starting to come undone.

By Omar G. Encarnación

People make the fascist salute at La Basilica The Valley of Fallen in San Lorenzo del Escorial near Madrid on July 15, 2018, as they protest against the removal of Franco's remains from The Valley of Fallen. (JAVIER SORIANO / AFP)
 People make the fascist salute at La Basilica The Valley of Fallen in San Lorenzo del Escorial near Madrid on July 15, 2018, as they protest against the removal of Franco's remains from The Valley of Fallen. (JAVIER SORIANO / AFP) 


Last month, within days of taking office, Spanish Prime Minister Pedro Sánchez announced his government’s intention to exhume the remains of Francisco Franco, the strongman who ruled Spain from the end of the Spanish Civil War in 1939 until his death of natural causes in 1975. Expected to take place before the end of the summer, the exhumation plan calls for transferring Franco’s remains to a location yet to be determined. Just as controversial is Sánchez’s proposal to transform the remains’ current resting place, the Valle de los Caídos (the Valley of the Fallen), into a memorial for the victims of the Civil War and Franco’s dictatorship.

El Valle, one of Europe’s largest and most imposing public monuments (the entire complex, often derided for its fascist theatricality, includes a basilica, a Benedictine abbey, and a cross rising some 500 feet that is visible from over 30 miles away), was inaugurated by Franco himself in 1959 to mark the 20th anniversary of his victory in the Civil War. Virtually untouched since Franco’s embalmed body was interred there, the monument is a veritable shrine to Francoism and an obligatory pilgrimage for Franco’s defenders. In recent weeks, the most devout of these defenders have taken to the streets of Madrid chanting, “El Valle no se toca” (Don’t touch the valley). 
To outside observers, the news of Franco’s exhumation and the controversy around it give rise to obvious questions: Why was Franco spared the popular infamy at home accorded to fellow fascist leaders Adolf Hitler and Benito Mussolini? And why is the status quo about how Franco has been memorialized since his death getting upended now? Answering these questions requires delving into the peculiarities of how Spain became a democracy in the late 1970s and the unusual choices about the country’s dark and painful history made by the politicians and the public as part of the democratic transition.



Much about Franco’s fate, both materially and figuratively, in the period after his death is due to the fact that the transition to democracy in Spain left very little room for justice and accountability toward the old regime. Unlike its sister dictatorship in Portugal—the António de Oliveira Salazar regime—which was uprooted by a popular uprising, the Franco regime was reinvented from the inside out as a democracy by a process of political reform spearheaded by a young King Juan Carlos. Although the king had promised Franco to carry on with “Francoism without Franco,” after the death of the dictator—and responding to the popular clamoring for democracy—he went back on his word and put Spain on the path to democracy by calling for free elections in 1977.

The democratic reinvention of the Franco regime meant that the losing side of the Civil War—the Republicans, a mostly leftist coalition of liberals, communists, socialists, and anarchists that resisted Franco’s assault on the popularly elected Second Republic—never got the chance to make Franco pay for his political sins. In what historians have referred to as the “Spanish Holocaust,” as many as 200,000 political dissidents were executed by Franco’s militias; an additional 400,000 were imprisoned in jails and concentration camps established by Franco after the end of the Civil War, where many died of malnutrition and starvation. An unknown number of prisoners were forced into virtual slavery to aid in the postwar reconstruction effort, including building El Valle. Some 500,000 people fled Spain as political refugees.

As part of the political negotiations that allowed for a swift and orderly transition to democracy, politicians from across the ideological spectrum agreed to a “pact of forgetting” that was institutionalized with a broad amnesty law, enacted just before the 1977 elections. This was “amnesty for everyone” as one politician put it, since it included anyone who had ever committed a political offense prior to 1977. Despite bearing the brunt of Franco’s repression, the left was eager to support this pact. It helped conceal the left’s political sins, especially the so-called Red Terror, the wave of killings that left anywhere from 20,000 to 70,000 Francoist supporters dead, including some 2,000 clergy, many of them later beatified by the Pope as Civil War martyrs.

An important reason why the politicians were able to let bygones be bygones was the complicity of the public. At the heart of this complicity is the ambivalence that many Spaniards feel toward the Franco regime. Polling data gathered in 2008 by Madrid’s Center for Sociological Research, a government research center, showed that a majority of the public acknowledged that Franco did “both good and bad things.” This data also showed the public opposed to the prosecution of former Franco officials and lukewarm about a truth commission to assign responsibility for the Civil War. And no national organization demanding accountability against the old regime emerged until the movement for the recovery of the historical memory began to gain steam in the early 2000s.

Spanish society’s complicity in silencing the past did not develop in a vacuum. In the wake of Franco’s death, fears of another civil conflict and another dictatorship were widespread. Less apparent is the intense process of political socialization that the public endured under the dictatorship. The Franco regime encouraged silence about the Civil War, which accounts for why Spaniards who lived through the war have very few recollections of this event being discussed at home, in schools, or in the workplace. After the end of the Civil War, Franco and his allies also began to promote numerous myths about the war and the regime—aided by a vast propaganda machine, including press reports, films and documentaries, and school textbooks—that in the post-transition period have done wonders to discourage any revisiting of the past.

Among the popular myths of the Civil War is that of shared responsibility, which holds both sides of the conflict equally at fault. It conveniently overlooks the fact that in 1936, Franco overthrew a popularly elected government. Another popular myth is “collective madness,” which absurdly theorizes that Spaniards lost their minds and began killing each other for no logical reason. Yet another popular narrative is to blame foreign ideological influences, especially anarchism. In this view, Spain is cast as a victim of outside forces. Nothing, however, trumps the salvation theory, the view that Franco’s uprising in 1936 saved Spain from the chaos and violence of the Second Republic. This outrageously cynical reading of history ignores both the chaos and violence that Franco inflicted on Spain, and that whatever degree of peace Franco was able to bring to the country was purchased with the lives of close to 1 million people.

The salvation theory was boosted by the political stability that Spain enjoyed after 1959—after all those in opposition to Franco had been either killed or forced into exile—and by an economic “miracle” that began to unfold in the early 1960s and lifted millions of Spaniards from abject poverty to the ranks of the middle class. Paradoxically, this very success undermined the salvation theory by blurring the memory of the Civil War and the misery of the postwar years. Thus, by the 1960s, the notion of the Franco dictatorship as a modernizing regime was born, with socioeconomic progress as the regime’s new rationale for its existence. In the post-transition era, this last regime reinvention has allowed Franco’s defenders to claim that the dictatorship paved the way for the successful democracy that Spain is today.

It was not until 2007, with the enacting of the Historical Memory Law by the Socialist administration of José Luis Rodríguez Zapatero, that the Civil War myths promoted by the Franco regime began to be seriously questioned. The law declared the Franco government illegitimate; called for the removal from public view of public monuments honoring the Franco regime, save for those with historical significance; provided financial compensation to those victimized by the Franco regime; restored Spanish citizenship to the Republican exile community; and created a center for the study of the Civil War in the city of Salamanca. Propelling the law was a new generation of Spaniards curious about the Civil War and no longer traumatized by the memories of the past, including Zapatero, the grandson of a military captain executed by a Francoist brigade for refusing to join the rebellion against the Republican government.


How Inflation Destroys Civilization

By Nick Giambruno


Yesterday I told you about the unstoppable trend towards more socialism in the US.

I think inflation is the primary factor driving this trend. Americans feel squeezed because the cost of rent, medical insurance, and tuition, as well as other basic living expenses, is rising much faster than their wages.

This creates very real problems for ordinary people. In response, more and more turn to Santa Claus politicians that promise supposed freebies, like a $15 minimum wage or universal basic income.

Why the Cost of Living Has Exploded

This is all a predictable consequence of the US abandoning sound money.

By every measure—including stagnating wages and rising costs—things have been going downhill for the American middle class since the early 1970s.

August 15, 1971, to be exact. This is the date President Nixon killed the last remnants of the gold standard.

Since then, the dollar has been a pure fiat currency. This allows the Fed to print as many dollars as it pleases. And—without the discipline imposed by some form of a gold standard—it does precisely that. The US money supply has exploded 2,106% higher since 1971.

The rejection of sound money is the primary reason inflation has eaten up wage growth since the early 1970s—and the primary reason the cost of living has exploded.

The next chart illustrates this dynamic. It measures US hourly wages priced in gold grams (the number of gold grams the average person’s hourly income could buy).

Measured in gold, wages in the US have fallen over 84% since 1971. That’s an astounding drop.




The next chart measures the federal mínimum wage in terms of gold grams. Priced in gold, the minimum wage has fallen 87% since 1968.




Note that the federal minimum wage was $1.60 in 1968. It’s $7.25 today, or 353% higher in dollar terms.

But that $7.25 buys 87% less than $1.60 did back in 1968. That’s the story you won’t hear from the mainstream press.

This is why millennials and millions of others are gravitating toward socialism.

They feel the economic pain of inflation every day. They know it’s becoming harder and harder to maintain a middle-class lifestyle. They just don’t understand why. So, they succumb to the siren’s call of freebies.

Perverse as it is, the policies demanded by people suffering from inflation create even more inflation.

Inflation has a way of perpetuating itself. The more inflation reduces living standards, the more people push for programs that create even more inflation. This includes things like universal basic income and a higher minimum wage… which in turn creates a cycle of inflation.

It’s only a matter of time before “fight for $15,” the rallying cry for a $15 minimum wage, becomes “fight for $20.” Then it’s “fight for $50,” “fight for $100,” and so forth.

What people should really fight for is a return to sound money. It’s the only way to end this insidious cycle. But that’s not going to happen. 
Inflation follows a clear pattern of corruption:

1. In a fiat currency system, the government will invariably print an ever-increasing amount of currency.

2. This makes prices and the cost of living rise faster than wages.

3. The average person feels the pain but doesn’t understand what’s happening.

4. More people support politicians who promise freebies.

5. In order to pay for the “freebies,” the government prints more money.

6. This creates even more inflation, and the cycle repeats.

Most of America Lives Off the Government

At this point, we have to ask ourselves whether the political situation in the US will improve. Unfortunately, the data points to a troubling, but inevitable, answer… “no.”

The reason is simple: a growing majority of US voters are addicted to the heroin of government welfare.

An estimated 47% or so of Americans already receive some form of government benefit. But I don’t think that accurately reflects the situation. At least, not when you consider all the government employees, along with those in the nominally private sector who feed off the warfare state. This includes defense and other government contractors who win huge, no-bid contracts.

People involved in the military-industrial complex live off government slops as much or more than those who collect food stamps and other traditional forms of welfare. Yet they aren’t counted in the statistics. Any honest account of who depends on the government needs to include them.

When you count everyone who lives off of political dollars, we’re already well north of 50% of the US population.

In other words, the US has already crossed the Rubicon. There’s no going back.

The growing majority of people who depend on the government guarantee that socialist policies will continue and likely accelerate. It’s why Bernie Sanders and his ilk are growing in popularity.

I think this trend is unstoppable. There’s no way a meaningful number of these people would ever vote to stop their government benefits. No one voluntarily breaks his own rice bowl.

The notion that a significant number of people living off of government largesse will come around to a libertarian way of thinking is a pipe dream.

Even the Libertarian Party has become a crude parody of a real libertarian, free market, voluntaryist philosophy.

There is simply no hope for positive change from the political system. That means one thing is certain: an ever-increasing amount of money printing to pay for all these government programs.

How to Protect Your Wealth

Unfortunately, most people have no idea how bad things can get when socialist government policies spin completely out of control, let alone how to prepare.

Owning some physical gold is step one. This is something everyone should do.

Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.

The price of gold tends to be inversely related to the value of the dollar.

I expect gold to soar in the years ahead as the political inflation cycle plays out.

In addition to physical gold, you’ll also want leveraged upside to grow your wealth. For that, I suggest looking to companies that produce precious metals.


How to Increase America’s Saving Rate

Martin Feldstein




CAMBRIDGE – The United States needs new policies to raise the household saving rate. From 1960 to 1980, the household saving rate ranged between 10-13% of after-tax income, providing funds for investment in plant and equipment. Since then, levels of household saving have declined sharply. The comparable average saving rate in the past decade averaged only 5.5% and is now just 3.4%.

The cause for the decline is unclear. One plausible explanation is that working-age households may no longer feel the need to provide for their retirement years because of their greater confidence in the Social Security retirement program. Although Social Security was created in the 1930s, there was widespread fear in the 1960s and 1970s that the program would not survive politically because of conservative opposition. But when the Social Security program was about to run out of funds in 1982, a very conservative president, Ronald Reagan, rescued it. After that, it was reasonable to assume that Social Security benefits would continue to be available. Saving for health care in old age was also not necessary, thanks to the Medicare and Medicaid programs.

Whatever the cause of the current low household saving rate, it is a serious problem that requires political action. Fortunately, attitudes in the US Congress have been changing over time. In the early post-World War II years, when the Great Depression was still in recent memory, a Keynesian fear of economic slumps caused politicians to favor a decline in the saving rate. A lower saving rate, it was believed, would mean more consumer spending and therefore stronger demand and higher employment. But as policymakers came to realize that a high level of saving would actually mean more investment and faster growth, Congress passed legislation to encourage more personal saving.

The most important such response was the creation of so-called 401k accounts, which allow employers to contribute funds to retirement accounts for their employees. These 401k plans are employer-sponsored and employer-managed. Congress also created tax-favored Individual Retirement Accounts that now allow individuals to set aside up to $5,500 a year and manage their IRA in whatever way they see fit. Contributions to IRAs, up to the limit, may be deducted from taxable income, and the return on the investment in the IRA accumulates tax-free until the funds are withdrawn. Both the 401k accounts and the IRAs therefore provide a higher after-tax real return, strengthening the incentive to save.

Although both of these programs have been successful in encouraging increased saving, the cumulative effect still leaves the overall saving rate very low. One reason is that millions of small firms did not create 401k plans, owing to the cost of establishing and managing them. And firms have been reluctant to force employees, who know that the funds will not be available until they reach retirement age, to reduce their wages by contributing to such plans.

Congress is now proposing to change the rules to get around these problems. Small firms would be able to join with others to establish 401k plans, thereby benefiting from lower administration costs. And the government would give small firms a grant to defray the cost of establishing a new plan.

Perhaps more important would be to give small businesses the opportunity to create “automatic enrollment plans,” which experience shows is very effective in getting employees to join and sustain saving in 401k plans. In this scenario, employees are automatically enrolled in a 401k plan with the understanding that they may withdraw funds when they want them – that is, without waiting until they reach retirement age.

Here’s why automatic enrollment is so important. When new employees are offered the opportunity to have 5% of their salary deposited in a 401k plan, a relatively small share of them choose to participate. But if the same employees are told that the company will automatically enroll them in a 401k plan with the same 5% salary reduction and that they may withdraw those funds at will, most accept the salary reduction and do not withdraw the funds.

It is not clear whether this legislation will pass in the current Congress. What is clear is that the US household saving rate is too low, and that legislative changes of this type are needed to begin moving itles back to its earlier level.


Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.