Pulling Retirement Cash, but Not by Choice

Baby boomers’ mandatory withdrawals from 401(k)s, IRAs and other tax-deferred retirement accounts start in full force this year, touching off a massive shift of cash

By Vipal Monga and Sarah Krouse

Jack and Judy Weaver, both in their early 70s, have been retired for 13 years and are among a wave of baby boomers who are required to pull money from their 401(k) investments, resulting in unwanted taxes. Photo: Andrew Seng for the Wall Street Journal

The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades.

U.S. law requires anyone age 70 ½ or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay taxes on those distributions. The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.

The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.

Boomers hold roughly $10 trillion in tax-deferred savings accounts, according to an estimate by Edward Shane, a managing director at Bank of New York Mellon Corp. Over the next two decades, the number of people age 70 or older is expected to nearly double to 60 million—roughly the population of Italy.

Firms that manage 401(k) plans are trying to persuade clients to reinvest their withdrawals in other products rather than spending or donating the cash to charity. It’s another pain point for many traditional money managers already struggling to keep some clients from shifting into lower-cost index-tracking mutual funds.

Many hope to offset the required distributions with inflows from millennials, people in their 20s and 30s—who recently became the largest living generation, even though boomers, at their peak, were more populous.

Savers, meanwhile, are debating what to do with their cash as they wrestle with tax bills triggered by required distributions and worry about outliving their assets. On average, men and women who turned 65 in 2015 can expect to live another 19 and 21.5 years respectively, according to the U.S. Social Security Administration’s most recent life-expectancy estimates; those post-65 expectancies are up from 15.4 and 19 years for those who turned 65 in 1985.

Jack Weaver, a retired biopharmaceutical product developer, turned 70 in late 2015 and had to pay taxes on his first required payout of $31,000 last year. “It’s unwanted income,” he said. He reinvested the money, and says his wife plans to do the same when she takes her first distribution this year.

The rise of the 401(k) is inextricably linked with the surge in U.S. citizens born after the end of World War II. Boomers, defined by the U.S. Census Bureau as people born in the 18 years beginning in “mid 1946,” embraced tax-deferred retirement accounts and made them a widespread savings tool in the 1980s and 1990s. The plans largely replaced traditional pensions, and helped create a multi-trillion-dollar industry supporting hundreds of investment firms and financial planners.

Contributions to tax-deferred retirement plans outnumbered withdrawals through much of the 1990s and 2000s. That flow began to reverse as boomers entered their retirement years earlier this decade.

Investors pulled a net $9 billion from workplace retirement-savings plans in 2013, according to the Labor Department. In 2014 the withdrawals jumped to net $24.9 billion. Full-year information for 2015 from the Labor Department isn’t yet available, but large mutual-fund companies that manage the bulk of U.S. retirement assets say outflows continue to rise. Fidelity Investments expects 100,000 customers to take their first required distributions in 2017, up from 91,000 in 2016.

The withdrawals thus far are small when compared with the roughly $15 trillion parked in U.S. tax-deferred retirement plans, according to a September 2016 estimate by the trade group Investment Company Institute. Brian Reid, chief economist at ICI, said asset gains could help cover some of the amounts retirees would have to withdraw.

Still, distributions are expected to grow exponentially over the next two decades because of a 1986 change to federal law designed to prevent the loss of tax revenue. Congress said savers who turn 70 ½ have to start taking withdrawals from tax-deferred savings plans or face a penalty. Specifically, retirees who turn 70 ½ have until April of the following calendar year to pull roughly 3.65% from their IRA and 401(k) funds, subject to slight differences in the way the funds are treated by the Internal Revenue Service. Then they must withdraw an increasing portion of their assets every year based on IRS formulas. The rules don’t apply to defined-benefit pensions, where retirees get automatic distributions.

The penalty for not taking distributions on time is a 50% tax bill on funds the retiree failed to withdraw.

The required distributions could come as a surprise to many boomers, said Alicia Munnell, director at Boston College’s Center for Retirement Research. “Individuals look at the pile of savings and think that’s their whole nest egg, not that they’ll have to pay some amount of that to the government,” she said. “It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had.”

Bronwyn Shone, a financial adviser in Pleasanton, Calif., said many of her clients aren’t aware of their legal obligation to take distributions. “I think some people thought they could let the money grow tax-deferred forever,” she said.

The outflows aren’t a surprise to most asset management firms, but they could force some dramatic changes. Firms will have to lower fees and offer more services to convince retirees to keep their savings at the firms, said Walt Bettinger, chief executive of brokerage firm Charles Schwab Corp. That would lower a firm’s profitability by raising costs per customer, he added.

Charles Schwab, which manages some $208 billion in 401(k) assets, typically has to move 10% of those funds around in any given year due to retirement, death or job changes. Mr. Bettinger expects that number to rise to 15% because of required withdrawals. “A 5 point increment of trillions in assets is a big number,” Mr. Bettinger said. “What’s happening is providers are having to be more aggressive to fill the gap.”

A Schwab spokesman said the company lowered fees on 401(k) plans about two years ago, by offering more low-cost options in exchange-traded or target-date funds. “We have been anticipating fee competition in 401(k)s for quite some time,” he said.

It's All About COMEX

By: Captain Hook

Why do gold and silver prices top overnight and come into New York cash market down significantly off the highs almost every day? Answer: The futures market that trades 24-hours a day, populated by the big gamblers and hedge funds that have the most profound effect in driving prices of all factors. These people place their bets and takes their chances and all physical market investors are taken along for the ride - good or bad. Unfortunately since 2011 it's been all bad for the most part because the consensus of this group is always bullish, removing any kind of 'worry wall' (think short squeeze) to climb. And the same thing can be said about the ETF and share markets as well. Instead of buying bullion or shares, the gamblers prefer calls on leveraged ETF's or the shares because they think they can 'make more' by doing so, sabotaging both their own outcome and that of conservative long-term investors who must suffer such volatile markets because of these greedy idiots.
And the thing is, this will not change until this negative behavior that's repeated every day changes, which will not happen easily, with collapsing prices likely the only cure. In the meantime, the totality of the buffoonery has turned the precious metal markets into the biggest clusterf*ck of all times, becoming increasingly detached from fundamentals as credit markets were allowed to grow (because precious metals are still traded against as barometers by status quo opportunities), increasingly becoming 'doomsday' in nature. (i.e. because when the next credit contraction arrives it will collapse the economy.) So again, this is why Wall Street machines are able to slap down precious metals overnight and keep them down during the day via ETF gamblers, because the machines grind the greedy bastards up time and time again, as documented on these pages for some 10-years now, beginning back in 2007 when I warned how this phenomenon would tank the broad markets at the time.
But people don't want to hear (and especially not read about it because that's work) about this kind of warning because it doesn't fit with their little self-centered view of the world, so they ignore them.
And it's this dynamic that keeps the gambling knuckleheads in precious metal derivatives markets coming back for more, this, and the fact most of the gamblers aren't even exercising their addictions with their own money, but yours, if you are dumb enough to be a voluntary structured money investor of any kind. (i.e. because all markets are tied together these days via derivatives / debt exposures.) And it's this dynamic (stupidity, greed, and laziness) that keep people listening to pod casters who talk 'pie in the sky' about precious metals, and that Chinese goat traders (what's a goat trader?) will be going on the internet some time later this year to buy Bitcoin even though they don't even own a computer.
Technical Note: Is this why it's crashing now, because people are figuring this out? Or because Bitcoin went 1:1 ratio with gold, like the gold target to the Dow? It's the latter of course, signaling gold needs to go up now in order for Bitcoin to rise further. It's simple numerics. Of course it needed a trigger to spark the selling, and it got one. If this is any indication of the mania building in Bitcoin as the Chinese population attempt to flee an increasingly oppressive government, it should go higher - believe it or not - a if it's three times is 'the charm' the next trip through $1,000 should have some staying power. Warning: A break below the round interval at $750 would take away from the bullish case considerably.
This is why I don't do that kind of thing because I don't wish to encourage that kind of thinking, or be included in the precious metals status quo. (i.e. the investors / speculators carried out on stretchers over the years are those who do not think independently.) Case in point, with the above understanding in mind, what should one think with paper gold speculators, which is what these guys are, being the most bullish in a year after the drubbing gold has taken over the past six-months? Is this the definition of insanity or what? So one needs to realize the size of the monster you are dealing with in the precious metals markets, where you not only have the status quo doing everything in its power to keep prices down (think rigged markets, information, etc.), but you also have the precious metals status quo that's attempting to exploit you as well, who will also say just about anything to trick you into signing up for their services - with selling you fake credibility the most common sham.
'Baffle their brains with bullsh*t' is the approach in throwing reams of useless information at you, which in the end has the effect of confusing as opposed to attempting to simplify things.
Case in point, again, based on all the empirical evidence available, any idiot can see that aside from countertrend moves sponsored by factors like the dollar($), which is why precious metals are rallying right now, history has proven that until the dumb asses that play in COMEX gold and silver have been sufficiently purged from their speculative positions, prices are going nowhere - evidenced in the latest meltdown in spite of 'bullish fundamentals'. Thing is, if gold was trading on 'fundamentals', it would already be trading thousands of dollars higher than it is today. This fact is unfortunately lost on the vast majority of market participants of course, who are only semiconscious apparently, where until COMEX traders are taken out of the larger pricing formula - prices are going nowhere.
As alluded to in our last commentary, thankfully, this might in fact finally be in the works as the status quo attempts to discredit Trump post the inauguration, where the next time gold and silver are heading higher, Da Boyz won't hold their collective finger on the sell button(s), allowing them to finally come out of the basement again. Combined with the understanding Trump's honeymoon should be burned off by debt ceiling negotiation time in March, although it might take precious metals more time to gain their footing due to deleveraging risk, another topic discussed at length on these pages, eventually they should be in position to make sustainable reversals as 2017 progresses, or 2018 at the latest. Thing is, if this does occur, and in the process COMEX is rendered redundant due to allowing gold and silver to get out of the bag, along with paradigm changes (global decentralization process accelerates, global economies collapse, credit collapses, international payments require gold backing, etc.) - things could change fundamentally in a hurry - we can only hope.
Again however - the key is COMEX must be taken out of the formula - or its just more banker price management in precious metals later on again.
Moving onto the charts now, it's important to note for those who go through the trouble to properly manage risk, that the Dow / XAU Ratio has now traced out a 38.2% retrace from the recent highs last month, which means although a more complex / profound (deeper) correction cannot be discounted, it doesn't need to correct further before making another impulse higher, which it's likely to do for reasons explained below. In stepping back and looking at the monthly plot below, and considering the factors that matter (true sentiment, technicals, etc.), and even fundamentals (which have not mattered for some time thanks to runaway gambling in derivatives and the machines), while further gains here are definitely possible, signaling relative weakness for precious metal shares, at the same time, it should be noted the minimum Fibonacci retrace off the July lows has also now occurred, which could be interpreted as bullish for precious metals under the proper circumstances. (i.e. if it were not for the fact the $ just started correcting lower this week, one would need be quite concerned about this condition.) (See Figure 1)
Figure 1
INDU/XAU Monthly Chart
Technical Note: As can be seen above, although it may prove true no further correction higher is necessary, with Fibonacci resonance related resistance a profound stopper, the totality of the technical picture does in fact still point to higher values, with unfinished business in the MACD at center. This of course means further broad market strength set against precious metals. If both were to start falling as a result of credit contraction and rising $, the result could be quite surprising to precious metals permabulls. Here's hoping for increasing macro hedge fund insolvencies - no?
Moving past this several weeks (month?) out, if it were not for the probability of liquidity concerns, stronger dollar($), and a larger degree corrective affair under way in the gold price (because of the other factors), a bullish posture would certainly be appropriate. Time and price considerations tell us we are not there yet, however the 'bigger picture' could fall into place quickly with a vexing of the $1,000 area for gold in coming months, where a truncated larger degree corrective pattern (see Figure 1) would not be surprising once a preponderance of the conditions / factors for higher prices fall into place. Therein, as the next phase of the larger credit crisis grips the macro at some point, perhaps later this year as the status quo engineers a 'system crash' to discredit Trump, people will start worrying more about return of capital as opposed to return on capital, and precious metals will go bonkers. With over $200 trillion in global debt to be defaulted on globally now, 2017 could mark the beginning of such a panic. (See Figure 2)
Figure 2
SPX/VIX Monthly Chart
In looking at the S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio as an indication of where we are in terms of the larger process, we can see that it has now reached the highest fan resistance rail, begging the question, is this the rally stopper? Believe it or not, in looking around at the other factors that matter, the answer is likely 'no'. Just look below at the NASDAQ (COMPQ) / NASDAQ Volatility Index (VXN) Ratio as a reflection of this sentiment, where it still needs to surge further in order to reach profound Fibonacci resonance related resistance. What's more, and supporting the view it will get there, we have the open interest put / call ratio (see here) or the PowerShares Trust (QQQ) surging higher as speculators are still willing to take a chance on the short side of tech shares because of Trump's attitude towards the power hungry giants in the sector. As a result, further squeezing is likely as the Commercial Bank liquidity being let out onto the system discussed last week continues to pour in. As a result tech stocks are heading higher, which will take the SPX / VIX Ratio above sinusoidal fan resistance, if only temporarily. (See Figure 3)
Figure 3
NASDAQ/VXN Monthly Chart
So how crazy can tech shares get in coming weeks (months)? Many think stocks will top out right at inauguration time in a few weeks, especially with debt ceiling negotiations approaching, which should be labored. And like the year 2000, this might be true for the Dow (it shouldn't get much past 20,000 before a more profound correction sets in), and more specifically financials, as the smart money heads for the hills. This leaves us with tech to consider again, with continued speculator betting practices in the options markets, along with the debt ceiling negotiation outcome. If Trump is able to pull off a good outcome and speculators remain short tech stocks, which would be evident in open interest put / call ratios (see here), then some variation of a year 2000 outcome is possible, perhaps even 1929 (stocks rise until summer), which could see the NASDAQ (COMPQ) / Dow Ratio run up and challenge the 50% retrace denoted on the monthly plot below. Who knows - maybe it's even exceeded if Trump is able to tame all the swamp creatures in Washington. (See Figure 4)
Figure 4
NASDAQ/DOW Monthly Chart
Of course such a view ignores not only the desire of the status quo to put Trump in his place, but also the ramifications of Trump's policies in an increasingly decentralizing world, which is the 'biggie' moving forward independent of what happens in this regard. Thing is, no matter how successful Trump is in coming years, it simply won't matter because the credit cycle is done, which will make radical change in the global political economy a necessity. And while this understanding is only understood by very few truly objective observers at present, it's not a good idea to be in this group in planning your life and finances moving forward, because not only will radical change be occurring internationally, at home seemingly 'crazy things' will be happening here too, such as sessions, which is a bigger risk than just about anybody thinks possible at the moment. How high do you think interest rates will go if Texas and California decide to go it on their own? Answer: A lot higher than now. And then we have the same concerns in Europe, which look very possible this year with key elections in both France and Germany. Perhaps the big story will not be America this year.
And then there's the debt bogy in a rising rate environment. It's difficult seeing Mr. Trump (and the rest of us) dodging this bullet for long despite the best laid plans.
We won't have to wait long to find out of course, because the SPX closed right on 2280 resistance Friday, where if it's able to break through, the wave structure will be altered triggering a 'buy signal' projecting significantly higher prices. Again, if it's able to surge past 2280, a move to touch the bottom of the long-term growth channel (seen here in Figure 3) is possible if failure does not occur somewhere along the way. Such an outcome would be consistent with the 1928 / 1929 analog, which would become a possibility if Trump gets all the credit he needs at debt ceiling negotiation time in March. So even if a break higher does occur, one would think that prices would back off post the inauguration no matter what is coming in deference to this risk. Of course if the speculators keep shorting tech like they are now, anything is possible with all the money sloshing around out there these days. So needless to say, the price action this week will quite telling.
That said, we know from the charts above (and attached) that tech stocks likely still have some unfinished business on the upside, so in terms of Figure 2, we could have a false break higher as Figure 3 extends up to the Fibonacci target, only to fail intra-month, again, around inauguration time, or possibly as late as early February if we get strong monthly closes as many are expecting this timing, meaning short sellers coming in could extend the sequence. So along this train of thought, naturally we will be watching the post expiry open interest put / call ratios to see if the speculators that play this group are finally broken post options expiry on the 20th, inauguration day. If not, like in precious metals, we may have a bunch of suicidal nut-bars on our hands to deal with, so again, we will be watching. Aside from the structural hedging that goes on in broad market measures, generally these guys are nowhere near as stubborn as precious metals speculators, so one should expect capitulation at some point.
Still however, short sellers should not attempt to front-run such an event, as this would make you as stupid as they are.
And you don't want to be counted in this group.

Trump’s Murder by Pharma Comment Should Be Taken Seriously

Patrick Cox


Dear Reader,

Last week, Donald Trump complained about drug prices in a press conference. Drug companies, he said, are “getting away with murder.” During that presser, pharma and biotech stocks lost over $20 billion in value. Investors should have learned an important lesson. They probably didn’t.

Trump’s targeting of drug sellers was not a fluke. Hillary Clinton’s “price gouging” tweet last September had a similar impact on markets. For those who understand the big picture, these two events offer clues about the future of the drug business.

The real problem isn’t drug prices

The big picture is relatively simple. Healthcare costs will continue to rise even if drug prices go down. At most, medicines account for about 15% of the national medical bill. They’re not the reason that costs are rising, but they are easier to attack than hospitals and doctors.

Here’s the real problem: America is broke. Worse than broke, actually. This is because of healthcare costs. These costs are the number one driver of federal spending (as well as the deficit and debt). As President Obama learned, those costs are hardcoded into the system.

Healthcare costs are rising not because of greed or inefficiency (though there are plenty of both).

They’re rising for demographic reasons. And they’re rising faster than our ability to repay the trillions we’ve already borrowed. The unfunded liabilities for future healthcare are even more of a problem.

As a result, our fiscal policy choices will be increasingly limited and ineffectual. Politicians and the public will demand that “something be done.” That something will include even greater government involvement in drug pricing.

Let me explain why this is inevitable. As the CBO has pointed out, age-related healthcare costs and the associated debt service are the only part of the federal budget that’s growing in proportion to the whole. (Increases of approximately 9% in these programs are mandatory and automatic.)

The graph above is quite sobering, but you should read the CBO’s explanation below it. Note that “growth in the major health care programs… and Social Security is projected to exceed the decline in other noninterest spending relative to GDP.”

Here’s why healthcare costs are rising

The CBO clearly points to age-related disease as the culprit. Simply put, people are living longer.

Healthcare costs rise exponentially with age, and the percentage of the population that is older is growing. This is simple arithmetic, but our leaders are largely in denial over this macroeconomic reality.

This graph based on data from the HHS Administration on Aging makes the trend clear.

This aging of the population is only one half of a bigger change… often called the flipping of the demographic pyramid. It’s taking place throughout the world. But the trend is growing fastest in the West.

The effect of the baby bust

In the past, when birthrates were higher, longer life spans and a larger aged population wouldn’t have been a problem. Today though, birthrates are too low to provide the younger workers that we need to pay for our increase in medical costs.

In fact, CDC data show that the US fertility rate fell last year to its lowest since 1909 when tracking began. This puts our fertility rate at about 1.8 births per woman. At least 2.1 births are required to replace the existing population and maintain the old-age dependency ratio (OADR).

In other words, the pool of younger workers (contributors) is shrinking… while the aged population (dependents) is growing. Our already untenable OADR is getting worse.

Optimists predict that the birthrate will rise when the economy improves. It may to some degree, but US birthrates have been well below replacement rate since 1972. This is true even among immigrants. This interactive chart by the WHO shows just how dire the picture is.

Even if by some miracle, we could return to 1950s birthrates, it wouldn’t help. Why not? Babies born now won’t become working contributors for decades. Likewise, most immigrants don’t become net contributors for decades either.

The problem is that we don’t have decades to fix the problem.

The politics of the demographic shift

The political consequences of this change are huge and largely unrecognized. We can’t afford to pay the rising cost of healthcare for the aged. Nor is it possible (politically) to reduce their level of care.

We hear pundits talk a lot about the changes in political demographics. But most make the mistake of focusing on ethnicities. As such, they ignore the biggest demographic change in history—the growth of the most powerful of all political blocs… the aged. The proverbial third rail will not go quietly into the night. So politicians will try anything to put off the day of reckoning.

Most investors and politicians don’t get it. Many are in full denial. But it’s time to face facts; we’re entering the Trumpian age of the deal. Big pharma’s ability to set prices will give way to political pressures.

The future outlook for pharma

There are ways to deal with this situation… and even profit from it.

One is to shift from big pharma, ETFs, and companies that sell older existing drugs and invest in biotech startups. Big pharma will claim that reduced profits on widely used drugs will limit their ability to acquire new drugs. But it may, in fact, incentivize drug discovery.

Pharma tends to be slow to replace very profitable drugs with something newer and better. The Trump Administration could make new drug development more attractive by following through on its promise to reduce regulatory hurdles.

Though it’s counterintuitive, new and better drugs can reduce total healthcare spending, not just drug costs. A significantly superior cancer drug, for example, would cut hospital and physician costs.

Even more exciting is the work in geroprotectors. These are drugs that could prevent (rather than treat) cancers and other age-related diseases. But these drugs are particularly difficult to approve because prevention may take decades to prove with finality.

If I were Trump, I would reach out directly to the aged community. He could enlist their help to move the most promising and safest geroprotectors into the market. There are compounds, currently stalled by regulators, that have shown incredible efficacy in animals. I believe they will effectively rejuvenate older individuals and return some degree of health and vigor. Since most people are forced to retire due to their or their spouse’s health, this could repair the dependency ratio.

A more immediate solution has appeared, ironically, in the company that inspired the fateful Clinton tweet, KaloBio. You may recall that “pharma bro” Martin Shkreli acquired control of the company and then increased the price of KaloBio’s older antibiotic Daraprim by more than 5,000%. (Daraprim is a life saver for a few thousand Americans who suffer from the parasitic disease toxoplasmosis.)

After Shkreli destroyed the company, despoiled investors looked for help. They chose industry veteran Cameron Durrant PhD, a well-known critic of big pharma. Despite initial hesitance, Durrant has since turned the company around via regulatory jiu-jitsu.

Exploiting the bad press surrounding KaloBio and the biotech industry, he announced a bold new approach to drug pricing. Called the Responsible Pricing Model, it is a transparent process that involves help and advice from those who want affordable drugs. This includes regulators, insurers, researchers, and patients. In return, KaloBio has lower costs and risks.

This approach can shift traditionally risky biotech stocks into more bond-like instruments that could outperform ETFs. Bigger pharma players, including Allergan, are now emulating Durrant’s approach.

Clearly, the industry is starting to see the writing on the wall. Investors should as well.

Arnaud Montebourg sends tough message in French Socialist race
Former minister emerges as strongest opponent to Valls in presidential primaries

by: Anne-Sylvaine Chassany in Paris

Arnaud Montebourg, far left, with the other leftwing candidates last week © EPA

The clinking of the cutlery was gentle. Arnaud Montebourg’s judgment on the crisis facing France was not.

Addressing his country’s business elite over lunch at a Paris club, the French presidential hopeful said the EU faced collapse within seven years if it failed to rid itself of austerity-obsessed “Talibans” — ample time for Marine Le Pen of the National Front to reach the Elysée Palace. “I have come here to warn you,” Mr Montebourg said.

Eloquent and smooth though he is, Mr Montebourg is delivering a tough anti-establishment message that has turned him into a strong contender for the Socialist presidential nomination, with a radical plan for France that he defines as “economic patriotism”.

His proposals, which he admits others might label as “protectionist”, carry a hint of the policies that helped Donald Trump become US president-elect. Mr Montebourg would upend the EU’s postwar consensus by favouring French companies in public tenders, restoring border controls and threatening to wage a trading war with China.

On Sunday during a televised debate, he vowed to renege on France’s commitment to meeting EU deficit rules and “restart the hostilities against European conservatives”, which would put at risk the Franco-German relationship, a pillar of the EU.

With the Socialists facing annihilation in presidential elections in April after five years of François Hollande’s deeply unpopular presidency, Mr Montebourg has emerged as the strongest opponent in this month’s primary contest to former prime minister Manuel Valls, embodying the party rebellion that has impeded Mr Hollande’s efforts to reform the country.

Increasing support for Mr Montebourg’s ideas on the left of his party shows that the EU has remained one of the biggest bones of contention among French Socialists, more than a decade after the party tore itself apart over the EU constitution.

In 2005, French voters unexpectedly rejected the constitution in a referendum, dealing a blow to the establishment and European integration.

Among all the divisions, the fracture over Europe has become the big one within the party because it’s now also central to the economy — with those like Montebourg, who are in favour of fiscal stimulus, and others like Valls who defend France’s commitment to budget rules,” says Bruno Cautrès, a Sciences Po professor. “[Former president] François Mitterrand had managed to convince the left that being a leftwinger equated to being a Europhile. Since 2005, this assumption is no longer consensual.”

Mr Valls is predicted to attract the most votes in the first round of the primary on Sunday. But recent surveys have suggested Mr Montebourg — ousted from government by Mr Valls in 2014 after publicly mocking Mr Hollande’s economic reforms — could win in the second round by a small margin.

In the second round on January 29 Mr Montebourg would get the backing of Benoît Hamon, a former education minister who also stepped down from Mr Valls’ government in 2014 and spurred the rebellion against the government’s business-friendly bills in parliament. Mr Hamon blames German economic policies for crippling the eurozone’s growth.

The outcome of the Socialist primary is unlikely to have a significant impact on the party’s slim chances in the presidential election. But it will determine whether the party shifts further left. Mr Montebourg or Mr Hamon would seek an alliance with far-left politician Jean-Luc Mélenchon, who is predicted to top the Socialist nominee in the presidential elections.

Whoever becomes the Socialist nominee also matters for the presidential chances of Emmanuel Macron, who succeeded Mr Montebourg as economy minister. Mr Macron is campaigning as an independent on a pro-EU platform and lies third in the race behind Ms Le Pen and centre-right candidate François Fillon. Pollsters say Mr Macron would attract more centre-left voters and could even qualify for the second-round run-off if he has Mr Montebourg as an opponent, not Mr Valls.

With Mr Hamon and Vincent Peillon, another primary contender, Mr Montebourg founded the New Socialist party in 2002 after prime minister Lionel Jospin’s failure in presidential elections. The three of them, and Mr Valls, campaigned against the EU constitution in 2005.

As economy minister, Mr Montebourg was colourful and unconventional. He used his Hollywood actor looks to spur consumers’ patriotic feelings towards French-made products, being featured on magazine covers wearing the typical Breton-striped top. After leaving office, he took a course at Insead, the business school, to become an “entrepreneur” and sat on the board of Habitat, the furniture maker.

He now wants to repeal Mr Valls’ jobs bill intended to make the labour market more flexible, advocates a new tax on banks’ profits, and wants to defend small companies against multinationals. Taking his inspiration from Charles de Gaulle, Mr Montebourg said he would embrace the former leader’s “empty chair policy” of not attending EU meetings and back a €30bn infrastructure plan to stimulate growth.

In the Parisian club last month, Mr Montebourg’s proposals were met coolly. Asked to clarify his political positioning, the 54-year-old said he was “made up of different elements”. He said: “I am a Socialist, I seek modernity in Gaullism. I am mysterious, unclassifiable.”

The Trump Déficit

Kenneth Rogoff
. Newsart for The Trump Deficit

CAMBRIDGE – It is a post-financial-crisis myth that austerity-minded conservative governments always favor fiscal prudence, while redistribution-oriented progressives view large deficits as the world’s biggest free lunch. This simplistic perspective, while perhaps containing a grain of truth, badly misses the true underlying political economy of deficits.
The fact is that whenever one party has firm control of government, it has a powerful incentive to borrow to finance its priorities, knowing that it won’t necessarily be the one to foot the bill.
So expect US President-elect Donald Trump’s administration, conservative or not, to make aggressive use of budget deficits to fund its priorities for taxes and spending.
The most accurate framework for thinking about government budget deficits in democracies was proposed in the late 1980s by the Italian scholars Alberto Alesina and Guido Tabellini, more or less simultaneously with two Swedes, Torsten Persson and Lars Svensson. While their approaches differ slightly in detail, the basic idea is the same: You give money to your friends while you can. If there is less money to go around later, when the opposition party gets its turn in power, well, that’s just too bad.
One only has to recall recent US economic history to confirm the insight of the Italian/Swedish model – and to see the absurdity of claims that Republicans always aim to balance the budget while Democrats always try to spend beyond the country’s means. Back in the 1980s, conservative hero Ronald Reagan was willing to tolerate enormous deficits to fund his ambitious tax-cutting plans, and he did so in an era when borrowing wasn’t cheap.
In the early 2000s, another Republican president, George W. Bush, essentially followed Reagan’s playbook, again slashing taxes and sending deficits soaring. In 2012, at the height of the standoff between the Republican-controlled Congress and Democratic President Barack Obama over deficits and the national debt, Republican presidential candidate Mitt Romney proffered an economic plan that featured eye-popping deficits to finance tax cuts and higher military spending.
On the other side of spectrum, Democratic President Bill Clinton, during what most academic economists consider to have been an extremely successful presidency, actually put the government into surplus. Indeed, at the end of the 1990s, some researchers actually wondered how international markets would function if the US government gradually retired all of its debt. Bush’s subsequent tax cuts and unfunded wars ensured that this never became a problem.
What, then, prevents deficits from spiraling upward as parties alternate power and borrow to help their supporters? In high-functioning democracies such as the United States or the United Kingdom, there is enough collective memory of the problems caused by high debt to allow some support for periodic reduction of debt/GDP ratios. But even in the US and the UK, budget deficits are not sterile and neutral forms of economic stimulus, as in the classroom Keynesian model. Instead, deficits are almost always the product of fierce political infighting over fiscal priorities.
Of course, in a constantly changing world, the costs of carrying a large debt burden can shift over time. After falling for decades, interest rates are suddenly starting to rise.
Different attitudes toward risk are a central factor in the perennial controversy over how much stimulus is optimal. Until recently, many left-leaning economic commentators have been arguing for massive fiscal stimulus in the US, though they seem to have changed their position overnight (the night Trump was elected, to be precise). No one quite knows what a reasonable middle ground between debt and stimulus would be.
The Nobel laureate economist Thomas Sargent and others recently argued that the optimal level of debt for the US is in fact very close to zero, though he does not recommend trying to get there anytime soon, given that US government debt is now over 100% of GDP. Sargent’s recommendation contradicts the view (espoused most recently in an Economist magazine leader) that instead of stabilizing debt, all advanced countries should be aiming to emulate Japan (where net debt is more than 140% of GDP, the highest ratio among the advanced economies).
What matters is not only the level of debt, but also how it is managed – a question I examined in a recent commentary focusing on the right mix of long-term and short-term government borrowing.
Some, including Robert Skidelsky, seem to think that discussion of how the maturity structure of government debt should be managed is somehow a stalking horse for tight budgets and austerity. But if interest rates shoot up in the Trump era (as well they could), the US government will wish that it had opted for less short-term borrowing and more long-term borrowing.
If a Trump presidency does entail massive borrowing – along with faster growth and higher inflation – a sharp rise in global interest rates could easily follow, putting massive pressure on weak points around the world (for example, Italian public borrowing) and on corporate borrowing in emerging markets. Many countries will benefit from US growth (if Trump does not simultaneously erect trade barriers). But anyone counting on interest rates staying low because conservative governments are averse to deficits needs a history lesson.

Mad As Hell

By: Chris Martenson

Pissed Off!
Why the public is so pissed off
Fair warning, my family just received a 61.5% increase in our healthcare insurance premium of 2017, on top of last year's 24.8% increase, so I am quite annoyed at the moment. For my non-US readers, perhaps what follows will interest you as a means of understanding how and why Donald Trump came to be elected President. I am going to be channeling some of my inner crank today.

If you want to understand why Trump won the recent US presidential election, you can't overlook the economic data. If you do, his victory may look mighty confusing, alarming even.

But once you understand the degree to which the average US family and the entire Gen-X and Millennial generations are being completely hosed economically, everything starts to take shape.

As most struggling Americans can tell you, real household income has gone nowhere for more than 20 years:

Real Median Household Income 1985-2015

This multi-decade burden of "running ever faster just to stay in the same place" is what led many US voters to reject Hillary Clinton, the establishment candidate, and instead roll the dice on the iconoclast promising to upend the system.

But if Trump's plan to "make America great again" means a return to the 1980s and 1990s when median real incomes climbed smartly, he's not going to be able to pull that rabbit out of the hat, I'm afraid. None of the conditions in place then are with us today including cheap, abundant energy (remember, oil was $10 a barrel in 1998); not to mention that we were riding the tailwinds produced by all of the gains from the early, explosive stage of the technology and internet revolutions.

Instead, we're at a stage where the pie is no longer expanding -- it's now a zero-sum game where those with power are using their advantage to continue to increase the size of their slice at the expense of the rest of us. The US now routinely subjects its citizens to racketeering, charging excessive prices that are increasingly cumbersome to avoid. One example among thousands; a Viagra pill that costs less than $1 in India, costs over $38 in the US:

Cell phone plans in the US are 2x to 3x more expensive (and more limited in terms of both data and speed) than any of the other countries I've traveled to in the past few years. A phone bill from AT&T in Hong Kong is a single page long and clearly explains how your unlimited high speed plan ended up costing you around $30/mo. In contrast, my bill from the same company in the US runs about 30 pages, and seems intentionally opaque in helping me understand why I'm spending over $100/mo for a limited data plan with much slower speeds.

There's no good reason for this except that in the US, companies have learned they can get away with predatory tactics by "wearing down" customers with gigantic, indecipherable billing statements.

This is pure racketeering. Your phone carrier is counting on your cable company to be running the same complexity scam. Ditto especially for all of your insurance providers whom you just know, in your heart, you'll have to battle ferociously with for what you're owed should you ever need to really use that coverage.

And it's not just corporations; the government is in on the action, too. The US tax code is now over 74,600 pages in length, and the IRS cannot even get close to answering questions accurately. Yet the citizen is on the hook for getting everything exactly right or else incurring stiff penalties, necessitating the use of expensive CPAs -- which is still no guarantee that an auditor's subjective judgment might go against you.

Fun fact: during the first 26 years of its existence, the US income tax code grew by 104 pages. Over the past 30 years, it has grown by 50,000 pages.

While our politicians to expand the tax code, as far as I know nobody from any US government agency has been at all interested in the obvious price collusion displayed in this chart:

Believe it or not, there are two price lines on this chart (one red, one blue) from supposedly independent companies who are allegedly competing with each other -- but most clearly are not.

Humalog and Novalog are both manufactures of injectable insulin.

Insulin is an absolutely vital, non-substitutable necessity for people with diabetes and these companies saw fit to collude and jack up the prices over 1000% in ten years, from $25 a vial to over $250.

Why would two separate companies maintain the exact same price for their competing products for 20 years? I don't have any other explanation except for collusion.

In any sane, rational and caring nation this wouldn't have happened. But under Bush, and then Obama, such predatory behavior went completely uninvestigated let alone punished.

So it's no wonder then that so many people looked at the 'status quo' candidacy of Hillary Clinton and said No thanks. Many families cannot afford more years of status quo predation by the unchecked rapaciousness of US cartels -- er, corporations -- and their government protectors.

Look, we all knew that the faux recovery seen over the past seven years had to end sometime, sooner or later. A "recovery", mind you, that never actually happened except in the fantasy press releases of the government's statistical fabricators, lovingly reproduced by unquestioning "journalists" working for corporate entities harboring deep conflicts of interest.

But the "little people" (hereby defined as those occupying the bottom 95% of the socioeconomic ladder) have long known they've been getting screwed. Sadly, it's just getting worse.

The Obamacare Disaster

Obamacare (a.k.a. the Affordable Care Act) is a disaster. We always knew it was going to be. Why? Because it represents the single largest give-away to the health insurance industry in our lifetime.

Obama and the DC politicians crafted the Affordable Care Act as a monstrously large bill. And they failed to take on the biggest source of fat in the entire system: the healthcare insurance companies themselves. Of course, these companies have very well-funded lobbyists and pushing back against them on would have required real leadership and possibly cost some political capital. So they were left entirely alone, with all of the massive increases in healthcare premium costs left to be borne by "somebody" other than them.

Well that "somebody" has turned out to be pretty much everybody:

Obamacare Benchmark Premiums to Rise 25% in Sharpest Jump Yet
Oct 24, 2017 
Monthly premiums for benchmark silver-level plans are going up by an average of 25 percent in the 38 states using the federal HealthCare.gov website, the U.S. Department of Health and Human Services said in a report today. 
Last year, premiums for the second-lowest-cost silver plans went up by 7.5 percent on average across 37 states. ~ Bloomberg
Now what's both fascinating and part of the electorate anger is that the same government that forced Obamacare on everyone is also the same government that swears that health care inflation is running at only 2.5% to 3.5% per year over the past few years. Here are the governments numbers:

I find myself wondering what country (or planet?) those numbers are for. Because for those who actually pay for their health insurance, the answer for sure isn't either "America" or "Earth".

In total, US health care premiums have fully tripled since 1999.

But for fun, using the government's own CPI-Med data from the table above, if healthcare premiums had tracked the government's stated rate of inflation between 2006 and 2015 then they would be some $2500 less today than they actually are:

Worker and Employer Contributions to Premiums

People are angry because they are being lied to. Or more accurately: lied to while being robbed.

Even worse, while the rate of health care inflation is being understated at the individual premium level shown above, it's also wildly understated in the larger inflation statistic used to level-set everything from cost-of-living adjustments (COLA) to pay raises across the country.

As explained in the Fuzzy Numbers chapter of The Crash Course, even though healthcare spending is nearly 18% of GDP, for some reason healthcare comprises only 5.85% of the CPI basket:

[C]urrently CPI-MED accounts for 5.825% of the overall CPI. Increases in the share of medical expense paid by individuals (as opposed to their insurers), will not affect CPI levels. ~ soberlook.com
U.S. health care spending grew 5.8 percent in 2015, reaching $3.2 trillion or $9,990 per person. As a share of the nation's Gross Domestic Product, health spending accounted for 17.8 percent. ~ cms.gov

Does it make any sense to record something that's nearly 18% of GDP as only 5.8% of your inflationary experience? Nope, it sure doesn't. Unless your desire is to mask the actual rate of inflation.

In simple terms, just healthcare's share of inflation alone comes to (0.25)*(0.18) = 4.5%. That's more than twice the rate of the supposed total inflation we are experiencing all by itself. Throw in rising rents, car prices, and energy and it's far more likely that an urban consumer is experiencing total price inflation closer to 6% or more per year.

Now, if you were a government bean-counter who want to mask the impact of a rapidly-rising factor within the nation's inflation rate, presumably to blunt the statistical damage and make things look rosier than they actually are, all you need do is weight that item less in the basket used to calculate inflation.

For example, if the vegetables making up 18% of the cost of your shopping cart have gone up in price by a whopping 25%, that's going to leave a mark.

But what the government does is pretend that your shopping cart only has 6% vegetables, and is increasing at a much lower annual rate -- say 3.2%. Voila! Reported price inflation for carrots and celery is now much lower: (0.06)*(0.032) = 0.12%.

Even though you're forking out 4.5% more at the grocery counter, the government is loudly telling everyone you're only seeing an increase of 0.12%

This is infuriating, of course.

Here's what this looks like in chart form. Total inflation is being sold to us as low - "too low" and "dangerously low" even. But I've helpfully included where the chart would show the total rate if were only what we're seeing with health care costs:

Change in Core CPI and Core PCE Indexes

Imagine how much higher it would be if we added in the actual inflation observed in other costly sectors like food, housing and education. Obviously there's something desperately wrong going on here.

This is statistical lying and weaseling of the worst sort, which of course everyone can see through because it gets harder and harder each year to balance the family budget. If you're alarmed by fake news, perhaps you should be more alarmed by fake data, something the US government has perfected and continues to perpetuate.

All of this is deeply unfair. And -- surprise! -- people really get annoyed when they're constantly lied to. Eventually their trust goes right out the window. Is it any wonder that a profoundly status quo candidate (HRC) could not sway the voters in rural America, where these trends and insults are even more acutely felt than in urban areas? The status quo is figuratively and literally killing these people.

As mentioned earlier, my family's health care plan premium went up over 60% in cash costs alone this year. The rate of increase is an even larger when the plans' reduced benefits and increased deductibles are factored in. The out-of-pocket amount for my family will be pretty close to $30,000 this year before any insurance actually kicks in.

In other words, I'm subsidizing somebody.

Unfortunately, that somebody is probably not a lower-income person up the street who badly needs coverage, but rather someone in the C-suite at one of the major heath companies.

Check out the 2013 compensation packages for the CEOs of the major US health insureres.

They're truly breathtaking:

Health Insurance Company CEO's Total Compensation 2013

Maybe 2013 was a standout year, and is an errant data point. Maybe things moderated in 2014?

Nope. Everybody apparently deserved an even more massively large payout:

Health Insurance Company CEO's Total Compensation 2014

You have to wonder how much care was denied to patients in order to afford those executive salaries. It also bears mentioning, that some of these CEOs 'earned' more by 10:30 a.m. on the first day of 2014 than the median household did during that entire year.

Put a different way, in order to pay out the compensation for Stephen Hemsley, the United Health CEO for 2014, nearly 4,000 families had to pay the full $16,351 amount for healthcare that year. In what sort of world should 4,000 families have to pay close to a third of their total income to a single individual simply for the pleasure of having health insurance?

Greedy doesn't begin to cover what's going on here. If ever there was any sort of 'social contract' between these companies and the public, it's now utterly broken by the rewarding their upper management with tens of millions of dollars - each! - and then jacking up healthcare premiums on families simply because they can. And now, thanks to the "Affordable" Care Act, you can now be fined for not forking over whatever insane price increases the healthcare cartel decides to dream up from their government protected boardrooms.

Bizarrely, the healthcare insurance options in many states have been vastly reduced as carriers claiming losses, while massive premium increases have been justified also on the basis of losses and reduced profits. I say "bizarrely" because you'd imagine, being a regular person, that such losses should show up in actual profit declines for the insurers.

Making a killing under Obamacare: The ACA gets blamed for rising premiums, while insurance companies are reaping massive profits 
Oct 28, 2016 
While Americans continue to be hammered by rising health care costs, and while congressional lawmakers (with their taxpayer-subsidized health care) do nothing to lower the cost of pharmaceuticals and medical care, one group is reaping a windfall in profit: health insurance companies and their investors. 
On Thursday, Aetna reported $734 million in profit on $15.8 billion in revenue for the three months that ended Sept. 30. The nation's third-largest health insurer by revenue handily beat Wall Street estimates for the quarter. 
Aetna's earnings report came a week after UnitedHealth reported a 12 percent jump in revenue to $46.3 billion for the three months that ended Sept. 30 compared with the same period the previous year. The company collected $36.1 billion in insurance premiums, a sum 11 percent higher than for the year-ago quarter, while profits increased 29 percent to $1.98 billion. 
A Salon analysis of regulatory filings found that the top five health insurers   - UnitedHealth, Anthem, Aetna, Humana and Cigna - have doled out nearly $30 billion in stock buybacks and dividends from 2013 to 2015.The Supreme Court ruled in favor of the Affordable Care Act in 2012.) ~ Salon
Similar strong results were noted for Humana in their last earnings reléase. So how can it be that all these companies are both reporting the need for massively higher premiums while also booking higher and higher profits?

Well, when you live in a country that routinely subjects its citizens to racketeering, this is exactly the sort of disconnect you have to live with. They say one thing; but you see with your own eyes, or experience with your own wallet, something completely different.


Obama's main failing in the ACA was in not going directly after the powerful insurance industry and forcing its players to participate in the reduction of waste, and sharing in the costs. Instead, they got more than a free pass: they got millions of new enrollees with the right to 'withdraw' from any markets and exchanges where they felt their massive profits might take a ding.

And withdraw they did, with 2 million people losing their coverage for 2017 due to major carriers pulling out of state exchanges.

Just looking at the cost of healthcare alone, we can detect massive fraud and deceit being foisted on the American public today. What emerges from these many rackets is a corrosion of the social contract. In a word, these arrangements are abusive.

The enormous pressures we see across the globe, with the rise of what the mainstream news outlets (aka "largest purveyors of fake news") are trying to label as 'nationalism,' are really in large measure simply a reaction to the economic oxygen having been sucked away from the populace of various countries and delivered into the hands of a very tiny elite.

Yes, that elite still controls the 'news' and therefore the narrative; but increasingly people are waking up and deciding for themselves that 'something is wrong'. Not unlike a person slowly becoming aware that they have somehow fallen into and been the victim of an abusive relationship.

Let me be clear: if we do not somehow find the courage and appropriate leadership to begin righting these wrongs, this trajectory ends in tears. And it shouldn't be up to a government body to have to regulate proper action; the insurance companies themselves should have nobody but themselves to blame if they fail to self-regulate.

Ditto for every major corporation that is running various rackets using a combination of predatory pricing, overly complex practices, and regulatory capture to operate as a cartel.

If the elites don't manage to figure out how to contain their greed, then an angry electorate is just the beginning of their troubles. Anybody seeking to understand the political landscape really just needs to spend a little time on the eroding prosperity of the bottom 99% over the past 20 years.

In Part 2: How To Fix The Future we lay out how a critical movement is arising at this time in history. Each of us can assume a role to play in its formation and development, and therefore its eventual success or failure. It's my personal belief that we are past the time where we can avoid major disruption, so each of us must be personally prepared as best we can for upheaval, while also working towards building a new and better narrative to live by.

Do you have the courage to participate?

Making the Chicken Run, Part II

Editor's note: America is headed for something much more serious than any past crisis…

As Casey Research founder Doug Casey said yesterday, it will be economic bankruptcy accompanied by financial chaos. Today, we're sharing part two of this important essay, where Doug takes a closer look at the big picture

By Doug Casey, founder, Casey Research

Everybody gets hurt in a serious depression, but if you understand what’s going on and prepare for it, you can do well enough. Of course, political and social change always follow economic and financial upheaval, but I think it’s going to be much more drastic this time because the U.S. has been on the road to becoming a police state for quite a while. The trend was supercharged by the so-called War on Terror, starting in 2001. And it’s likely to go into hyperdrive in the months to come as the economy emerges from the eye of the storm. I know it seems asynchronous to think of a police state in a suburban country dotted with shopping malls. But not really.

Think in terms of science fiction, a genre that has far more predictive value than the work of any futurist or think tank.

Reality is mimicking art. In 1932, Aldous Huxley described a highly controlled utopia in Brave New World, where drugs made everybody think (actually feel, because thinking could only make you unhappy) that they were happy. The U.S. has pretty much done that drill, consuming massive quantities of everything on credit, watching American Idol and its clones in every spare moment, and using plenty of Ritalin and Prozac along the way.

Sixteen years later, George Orwell described an even more tightly controlled dystopia in 1984.

Everybody knows that story, even if they haven’t read the book.

Interestingly, like good sci-fi writers, both authors were just a generation or so ahead of events.

What we’re likely to see in the next few years is elements of both their worlds.

Actually, we’re seeing it right now, or at least a preview. Whenever I return to the U.S., dealing with Immigration and Customs makes my skin crawl. And they’re no longer just at airports and the border; they now range many miles inland and make random stops to see if your papers are in order.

They’re almost as objectionable as the TSA, which has developed a highly dangerous corporate culture, even as it’s grown in numbers and power, now reaching into buses, trains, and soon the highways. The FBI, the CIA, the DEA, the ATF, the Secret Service, the Federal Marshals, FEMA, and literally scores of other national law enforcement agencies are all expanding rapidly.

They’ve long constituted a veritable Praetorian Guard, but now truly have lives of their own.

Homeland Security is completing its new 400-acre campus in Washington, D.C. Police forces all over the country are increasingly militarized in both equipment and attitude. And the military itself, bloated on a budget of hundreds of billions a year, has come a long way from the slapstick world of Beetle Bailey, full of steroid-pumped Black Ops wannabes who’ve picked up plenty of bad habits in the government's numerous undeclared wars. All these types endorse the dozens of “fusion centers” that have been created across the U.S. to collect and correlate information from every source imaginable, for some purpose.

All these organizations are bureaucracies. They serve themselves first. Their prime impulse is to grow and increase their budgets. They tend to attract the wrong kind of person and drive out people of good will. And it’s reached a stage where even if John Galt were elected president, he’d find them not just impossible to uproot but dangerous to confront.

So, here’s another prediction. Riding the economic and social disorder, these new Praetorians, oriented as they are toward professional paranoia and the “national security” state, are going to become truly virulent. They’re going to use the continuing economic crisis to increase their power, like it or not. The American people will demand it, since they are so degraded that they really do prefer the appearance of security to the prospect of having to take personal responsibility.

If I’m right (and I feel as sure about this as I ever have about anything), then it’s not going to go well for libertarians, classical liberals, old-line conservatives, individualists, freethinkers, non-conformists, people who subscribe to letters like this or cruise suspicious websites, or gamma rats, generally. It was a dangerous environment for these types (not to mention those of Japanese or German descent and members of various religious groups) during America’s past crises. When the chimpanzees are hooting and panting, you’d better join them, or they’ll start wondering why not.

I expect what we’re looking at is going to be much more serious than any past crisis, partly because America has already evaporated, like the morning haze on a hot summer's day. You're not in Kansas anymore. Kansas isn't in Kansas anymore.