The US Treasury’s unnecessary fight with the Fed

Removing monetary support should wait until fiscal stimulus is in place

The editorial board 

Outgoing US Treasury secretary Steven Mnuchin has decided to reduce some of the Fed’s crisis-fighting powers © Toni L. Sandys/The Washington Post/AP

Usually when the US Treasury clashes with the Federal Reserve it seeks looser monetary policy in the face of the central bank’s determination to choke off inflation. That these positions are reversed is not even the most extraordinary feature of outgoing Treasury secretary Steven Mnuchin’s decision to reduce the firepower behind some of the Fed’s crisis-fighting measures. Instead it appears an attempt to salt the earth before the inauguration of president-elect Joe Biden, by setting him up for a fight with a deadlocked Congress if these policies are needed again.

On Thursday, Mr Mnuchin, in a letter to Fed chair Jay Powell, called for the central bank to return $415bn of unused funds that Congress provided to backstop the Fed’s emergency lending facilities. This will bring to an end a set of policies designed to support corporate bond markets, lending to medium-sized business, state and local bonds and the asset-backed security market. Mr Mnuchin extended policies designed to help ease short-term funding for 90 days. The central bank replied, in a statement, that it would prefer having access to “the full suite of emergency facilities”.

There is a legitimate case that the extraordinary policies adopted by the Fed at short notice and a time of panic in dollar funding markets have run their course. While the pandemic is still raging unabated in the US, the state of the economy and financial markets is very different from what it was in March. The corporate winners and losers of the pandemic have become clear, reducing the argument for blanket financial support to all. A potential vaccine has made investors happier to buy riskier assets and there is less of a need for the Fed to act as a “dealer of last resort” providing liquidity for corporate borrowers. 

The announcement, too, of the size of the Fed’s commitment to supporting dollar liquidity appeared to have a greater effect on ending market dislocation during the initial wave of the pandemic than the direct effect of the policies. Uptake of the actual schemes has been limited. A more holistic approach to monetary and fiscal policy in the US is genuinely needed now that the pandemic is entering a new stage. 

Yet Mr Mnuchin’s argument that the schemes should end to free up funds for stimulus is made in bad faith. The US is not constrained in any way in its ability to finance new spending. Instead, the barrier to further fiscal support is congressional deadlock, with both Democrats and Republicans jostling for partisan advantage before Senate run-off elections in Georgia. 

The move appears a political tactic to set up the new US president for his own conflict with Congress. While Mr Biden will be able to restart the facilities without congressional approval by using the Treasury’s Exchange Stabilization Fund, this will cover only a fraction of their original size. There may be better ways of supporting the US economy that put more emphasis on fiscal policy and improving bankruptcy procedures, but ending monetary measures should wait until they are in place.

There have been successful presidential transitions at times of crisis. The administration of George W Bush worked with incoming president Barack Obama to stabilise the financial system during the 2007-08 financial crisis. That Mr Mnuchin, and President Donald Trump, are unable to put aside partisan point-scoring in the national interest is an example of why millions of Americans rejected Mr Trump’s bid for a second term.

Most importantly, however, it is a tragedy for the millions of US citizens and businesses who need their government’s support.


Why 2020 has been rotten for quant funds

Quants rely on history. This year has had few precedents

What is it like to lose to a machine? In 1997 the world’s best chess player, Garry Kasparov, was beaten by Deep Blue, a $10m super-computer made by ibm. Twenty years later he wrote “Deep Thinking”, a book about the experience. 

What comes across vividly is how exhausting each game was. Chess players, even great ones like Mr Kasparov, get tired and frustrated. Doubts begin to creep in. By contrast, Deep Blue just needed the occasional reboot.

Now turn the tables. What is it like to win against the machines? By New Year’s Eve the least smart buy-and-hold investor in an index fund might be able to boast of such a victory. For 2020 has been rotten for “quant” funds, which use powerful computers to sift market data for patterns that might predict future prices. 

“Long-short” momentum—buying recent winners and selling recent losers—had been one of quant’s better strategies this year. Yet on November 9th, when news broke of an effective vaccine for covid-19, it had its worst ever day.

Quants rely on history. If something happens that is without precedent, such as a vaccine in a pandemic, they have a problem. No doubt a few quant hedge funds are nursing heavy losses. 

And perhaps a few discretionary funds have made a killing. The terrain on which human traders can beat the machines is much diminished. But November 9th shows it is still possible. Chalk it up as a small victory for the species.

It is no small irony that momentum trading takes advantage of human weaknesses. One of these is “conservatism bias”. Investors tend to stick to prior views too rigidly and change them only slowly in response to new information. 

They may give undue emphasis to the price paid for a stock as a marker of its true value and, as a consequence, sell winning stocks too soon and hang on to dud stocks for too long. 

There is also a contrasting tendency to extrapolate past success. So as well as under-reacting to news, people also over-react to it. Momentum trading seeks to exploit this.

A lot of long-short strategies, including momentum, rank stocks by a particular attribute and then buy the top decile (or quintile) of the group and sell the bottom one. This requires machines. Sorting through thousands of securities quickly is beyond the meagre talents of a living, breathing portfolio manager. 

It requires algorithms that first establish and then fine-tune the optimal period over which to do the sorting. And it needs speedy and seamless access to automatic trading platforms and market data. You would not want to do all this by hand and brain.

In chess, the brute force of computing power eventually wins out. In investing, the strength of synthetic traders is in dealing with reams of information that is machine-readable, such as tick-by-tick stock prices. The most powerful machines can make sense even of unstructured (“big”) data. But an event like the discovery of a vaccine can flummox even the smartest of them. 

Humans retain an edge. They are able to winnow down endless possibilities using mental shortcuts. 

They can imagine scenarios that the past has not thrown up—scenarios such as “a vaccine may become available soon, given the amount of money and effort being thrown at it”; and “news of such a vaccine might spark a sell-off in ‘stay-at-home’ shares and a rally in ‘get-out-of-the-house’ shares”.

But why were the moves in prices so dramatic? A good rule of thumb, says one quant guru, is that the faster you trade, the less capacity there is for your strategy. A speedy trading strategy, such as momentum, relies on liquid markets to keep turnover costs in check. The strategy can become crowded. 

And when the quants suffer losses, they may be forced by risk-management rules to close their positions. As everyone rushes to get out at the same time, it makes for extreme price movements. 

This is in part why sophisticated quant funds are constantly evolving. They look for unique datasets on which to train their machines. Or they try to come up with new ways to parse weaker signals that others cannot detect in the market noise.

The quants have had a rough time, but they are hardly in retreat. Their domain will only expand. The margin of advantage for discretionary trading—for human ingenuity, in other words—will shrink. It is worth remembering that the first time Mr Kasparov played against Deep Blue, in 1996, he won. 

Now, as he has pointed out, you can download free chess engines that are far more powerful. We should savour victories over the machines while we can.


Chris Vermeulen

Watching Gold fall to recent lows over the past few weeks has been heartbreaking for Goldbugs.  

We know the real value of Precious Metals has continued to be under-appreciated over the past 24+ months – even though Gold has rallied from $1165 to over $2085 (an incredible 79%).  

The recent 15% decline in Gold has shaken some investors away from the longer-term opportunities, so we wanted to share our research and highlight some simple Elliot Wave structures with you.

My research team and I believe the recent downward price trend in Gold is an ideal setup for an Intermediate Wave 4 pullback of a broader Wave 3 advance.  

In other words, we believe Gold is in the midst of a broad advance cycle that may eventually push price levels to $5000 and above.  

But, we’ll focus on right now and what we believe is setting up from a Technical Analysis perspective.

The first thing to remember about Elliot Wave Analysis is that we must consider the broad market trends, the intermediate market trends, and the short term wave formations.  

With almost all types of Technical Analysis, we focus on different time perspectives of price trends and setups to help us better determine opportunities and outcomes.


For those of you unfamiliar with Elliot Wave theory and structure, please pay attention to the example chart below. 

Generally, price advances or declines move in three basic shapes:

            (1) A straight rally or decline with no visible price corrections within it

            (2) An ABC wave formation – which consists of an Impulse wave, a moderate correction, then a final conclusion wave that reaches a new price high or low.

            (3) An ABCDE wave formation – which consists of an ABC wave formation followed by an additional moderate correction wave, then another final conclusion wave that reaches a new price high or low.

In the first example, above in black, you can see a very simple detail of the overall (ideal) five total waves that make up every major Elliot Wave structure.  In theory, every price advance or decline attempts to follow this structure, BUT, of course there are variances in this structure that often take place.

This is where the second example of a wave, the more detailed wave structure in blue and red, shows how Wave 1 was completed with an ABCDE wave structure and Wave 2 was completed with an ABC wave structure.  

As you continue to explore how these waves set up and interlink with one another, you can start to imagine how many variations there are within each wave structure.  Every segment in each of these examples is considered a Wave Leg, thus every one of these could continue to generate multiple smaller wave structures as we dig deeper into the data.


In this first Quarterly Gold chart, below, we are focusing on the broader long-term trends in Gold.  This chart spans nearly 30 years of Gold price activity and the purpose of starting with this chart is to highlight the Elliot Wave setup showing the Wave 1, Wave 2, and new Wave 3 formations.  

Our research team believes the end of the DOT COM Equities appreciation cycle (near 2000) prompted a Gold appreciation cycle that lasted until 2009~10.  The Excess Phase (Blow Off Top) that took place between 2010 and 2013 represented the “unwinding” of the enthusiasm for Gold at that time.  

Then, Gold entered a depreciation phase that lasted from 2009 to 2018~19.  That is when we believe a new Gold Appreciation phase begun and is still currently a driving force in the continued rally in Precious Metals.

If our research is correct, we are in the midst of a longer-term Wave 3 upside price trend that has recently completed an Intermediate Term Wave 4 downside correction.  

This suggests that we are now setting up for an Intermediate Term Wave 5 rally that may be equal to the previous Wave 3 rally (roughly $920).  If this takes place, Gold will likely end the next rally phase near $2700 – where it will enter a new corrective price wave formation – completing the initial Intermediate-term Wave 1 leg.

Confirmation of this setup would come when a solid price bottom sets up above $1725 in Gold and when we see price levels rally above $1975 – establishing a recent new price high.  

As technical traders, we understand that Elliot Wave and Fibonacci Price theories inter-twine with one another.  

Elliot Wave theory is a process of attempting to mathematically illustrate Fibonacci Price theory at work – creating patterns in price.  

We believe there are underlying energy frequencies in each wave that prompt current and future price rotations and targets.  

We are still researching and learning about much of this technique as we further develop our Fibonacci Price Amplitude Arc theory and others.


The following Weekly Gold chart highlights where we believe a bottom in price must setup to efficiently confirm the Wave 4 correction structure and begin to prompt a new Wave 5 advance to $2700 or higher.  

Any future breakdown in Gold price levels on this chart below $1715.50 would potentially negate the Wave 4 structure and set up a potentially deeper price correction phase (possibly the end of the longer-term Wave 3 setting up for a deeper corrective wave).  

As long as Gold prices bottom and begin to rally anywhere above the $1715.50 level, we believe the Wave 4 corrective wave is validated – prompting the start of a new Wave 5 advance.

Given the foregoing, it is important that we watch that $1715.50 level as Gold prices continue to hammer out a potential bottom and this broad Elliot Wave pattern continues to unfold.  

If our research is accurate, then we will see a big upside price trend begin somewhere near December 7, 2020.  

Our Fibonacci Price Amplitude Arcs (visible on this Weekly chart) show where we believe energy frequencies align (see the starting point of the GREEN ARROW).  

These alignment areas in price energy typically result in potentially strong price impulse moves.

Any bottom forming near the MAGENTA drawn levels, before the GREEN & BLUE energy frequencies would align with our thinking that Gold has retraced nearly 50% of the recent trend (from the March 2020 COVID lows to the recent highs) and therefore may be setting up for a Wave 5 advance targeting $2700 or higher.

As exciting as this may seem, please remember this is a very long-term forecast for Gold.  This is not something that will happen in a few days or weeks – this trend will likely take place over weeks, months, and years.  

Still, if you consider the implications to the global market and potential trends, then you will begin to understand that a rally in Gold to levels above $2500 suggests that certain pressures and uncertainties will continue to unfold over the next 24+ months in the US and global markets.  Gold rallies when fear and uncertainty are present in the markets. 

In closing, it may be a very good Christmas rally in Gold to close out the end of 2020. 

There will be lots of great trading opportunities in Gold over the next few years as the price of Gold works through the different waves discussed above. 

As Trump Exits, Rifts in Europe Widen Again

The Trump presidency forced European countries to come together and stand more on their own. Officials in France and Germany are already tussling about life after he departs.

By Steven Erlanger

President Emmanuel Macron’s worry, French officials and analysts say, is that a Biden presidency will reduce the urgency of efforts to create a more forceful European voice in the world.Credit...Thibault Camus/Associated Press

BRUSSELS — Donald Trump’s presidency was marked by exceptional contempt for European allies and the NATO alliance. But it also forced European nations to consider whether they had become too dependent on the United States for leadership and their own security, and to ponder how far they were willing to go to defend themselves.

But President Trump is leaving. And the prospect of his departure has reopened old fissures between key European allies over their defense relationships with the United States, with considerable doubts about what just months ago looked like a determined turn toward greater European ambition and integration.

The most immediate consequence has been a bitter squabble between France and Germany over the future of European defense and strategic autonomy, displaying the different anxieties of two countries central to the functioning of the European Union.

The spat has included an unusually personal attack by the French president, Emmanuel Macron, on the German defense minister, Annegret Kramp-Karrenbauer. 

He even suggested that she, a favorite of Chancellor Angela Merkel, was out of step with the chancellor, which German officials and analysts strongly deny.

The dispute is a measure of the raw feelings stirred by Mr. Trump’s presidency, which raised doubts about America’s long-term commitment to global leadership and European security that a Biden presidency is not likely to erase.

A marine standing outside the West Wing of the White House signaling that President Trump is inside. The prospect of Mr. Trump’s departure has reopened old fissures between key European allies.Credit...Erin Scott for The New York Times

Those attitudes helped Mr. Macron push the idea of European “strategic autonomy” from a changed United States, one it sees as no longer willing to bear the burdens of global leadership, no matter who is president.

Mr. Macron’s worry, French officials and analysts say, is that a friendly Biden presidency will put Europe — and more important Germany, its largest and richest nation — back to sleep, content to shelter under the American umbrella and reluctant to commit to a more forceful European voice in the world.

Yet it is Ms. Kramp-Karrenbauer, commonly known as A.K.K., who is the German official most vocal about the need for Germany and Europe to take military and security affairs more seriously, said Claudia Major, a senior defense analyst at Germany’s Institute for International and Security Affairs.

“To have this counterproductive and toxic debate doesn’t help us at all,” Ms. Major said. “Macron is focusing on the wrong issue. The question in Germany is not whether we’re Atlanticist or Europeanist, but whether we take on more responsibility for defense or not, and A.K.K. wants to do more.”

The debate is important, said François Heisbourg, a French security analyst, “because it displays in a naked fashion the discrepancies between French and German perceptions, as proxies for a broader European division.”

The two countries have very different starting points, he said, with different views of the centrality of trans-Atlantic dependency. “But in substance — the need to do more — there’s not so much difference.”

“Europeans will not be able to replace America’s crucial role as a security provider,” Germany’s defense minister, Annegret Kramp-Karrenbauer, wrote.Credit...Sameer Al-Doumy/Agence France-Presse — Getty Images

Wolfgang Ischinger, a former German ambassador to Washington who runs the Munich Security Conference, said: “This is the single most unnecessary quarrel I’ve witnessed between Germany and France in a decade.”

A moment’s thought, he said, “would tell you that A.K.K. is Macron’s closest ally in Germany in strengthening European capabilities, and whether you call it autonomy or a better partner of the U.S. in NATO, it’s just a quarrel about words, not about meaning.”

The argument was roughly the same as the one Charles de Gaulle and Konrad Adenauer had to handle after World War II, Mr. Ischinger said. “The French are challenging a bit the need to have America here, and Germans say, ‘I can’t live without the security of the Americans, so strengthen Europe to be a better partner.’”

Germany also considers the American security umbrella crucial for European balance, to keep Central and Eastern Europeans committed to NATO and the European Union itself, said Daniela Schwarzer, director of the German Council on Foreign Relations.

“The Germans want to frame increased European military efforts as part of trans-Atlantic cooperation, as a message to the U.S., but also to Central and East European countries” that only trust U.S. security guarantees against Russia, she said.

“Germany wants to be as inclusive as possible in Europe while the French are far more ready to move ahead with a smaller number of countries,” Ms. Schwarzer said. “You see this with defense but also with the coronavirus recovery fund.”

Jana Puglierin, director of the Berlin office of the European Council on Foreign Relations, notes that NATO and the European Union are fundamental to Germany in a way they are not to France, which maintains its own nuclear arsenal.

“If you take NATO or the E.U. away from France, the French could do coalitions of the willing. Take them away from Germany and we feel naked,” Ms. Puglierin said. “The idea that NATO collapses frightens us.”

The problem, she said, came when Mr. Macron insisted that he wanted to stay in NATO, but wanted strategic autonomy as well as good relations with the United States. “Germans are not sure how that would work and no one has explained it,” she said. “So we don’t really buy it.”

A NATO exercise in Norway in 2018. The trans-Atlantic alliance is fundamental for Germany in a way it isn’t for France, analysts say.Credit...Laetitia Vancon for The New York Times

Mr. Macron, criticized for his handling of the pandemic, is feeling unsupported by his allies, Mr. Heisbourg suggested. Mr. Macron sees France as in a war with radical Islamists, both at home and in North Africa, and has been attacked for his responses by Muslim nations, especially by President Recep Tayyip Erdogan of Turkey.

Mr. Erdogan has insulted Mr. Macron, claiming to speak in the name of Islam, and is exercising military power in the eastern Mediterranean at the expense of Greece and Cyprus, and in Libya and Azerbaijan, against French allies.

Yet Germany has been trying to mediate between Turkey and the E.U. members Greece and Cyprus, “as if they are equal,” Mr. Heisbourg said, which has infuriated Mr. Macron.

France and Germany are also fighting about the future of a joint military project, a new fighter jet, which is not going well, according to Ms. Major and Christian Mölling, writing in Le Monde.

The project is intended to show “that European sovereignty is possible, and that Paris and Berlin are carriers of this ambition,” they write. “This also means that if this flagship project fails, the greatest damage will be political, not economic.”

The larger rift began when Ms. Kramp-Karrenbauer sparked Mr. Macron’s ire in a speech, which she followed with an op-ed piece in Politico, in which she stated bluntly: “Europe still needs America.”

“Illusions of European strategic autonomy must come to an end: Europeans will not be able to replace America’s crucial role as a security provider,” she wrote.

Mr. Macron clearly took that as a direct rebuttal of his own arguments for strategic autonomy, and therefore of his efforts to position himself at the center of European leadership in the waning days of Ms. Merkel’s time in office.

He responded in a lengthy interview 10 days later. “The question, if we are straightforward, is the following: Is the change in the American administration going to see Europeans letting up?” he said.

Then he singled out Ms. Kramp-Karrenbauer for special criticism, saying he “profoundly” disagreed with her opinion piece. “I think that it is a historical misinterpretation,” Mr. Macron said. “Fortunately, if I understood things correctly, the chancellor does not share this point of view.”

The United States, Mr. Macron continued, without ever mentioning Mr. Biden’s name, “will only respect us as allies if we are earnest, and if we are sovereign with respect to our defense.” A new administration, he added, was an opportunity for Europe “to continue to build our independence.”

President-elect Joseph R. Biden Jr., Mr. Macron has argued, would respect Europe only if it was “sovereign with respect to our defense.”Credit...Ruth Fremson/The New York Times

Ms. Kramp-Karrenbauer then gave another speech last week to students at Germany’s military academy in which she again argued that the best way to maintain America’s security commitment to Europe was “to do more for our own security.”

“The French President has recently made that same observation — and I agree,” she said. But she did not back down, adding that “relying exclusively on the E.U. would create a divide in Europe.”

On Tuesday, asked directly whether Ms. Merkel and Mr. Macron were in agreement, Ms. Kramp-Karrenbauer said bluntly: “I did not hear the chancellor say that NATO was superfluous.”

Ms. Puglierin said it was time to move on from “this very stupid debate.”

“The Americans expect us to come up with something,” she said, “and not wait like children.” 

Reckoning with American Democracy’s Enemies Within

Though it has not come as a surprise, the attack on the credibility of the 2020 election by US President Donald Trump and his Republican Party cannot simply by brushed under the rug of history. Once the norms that underpin constitutional democracy have been tossed aside, there is little left to fight for.

Katharina Pistor

WASHINGTON, DC – With Donald Trump and the Republican establishment refusing to accept defeat in the face of a clear election result, democracy in the United States is under unprecedented attack. 

If Americans had confidence in their democratic institutions, there would be little reason for concern. Trump’s behavior could be dismissed as a temper tantrum, and that of Republican leaders as a cynical exercise in humoring a narcissist adored by their party’s voters.

US President-elect Joe Biden's pledge to make diplomacy "the first instrument of American power” represents a welcome departure from President Donald Trump’s transactional approach to the world. But crafting a diplomacy-first US foreign policy will require revamping America's foreign-policy institutions. 

Yet Trump’s machinations, and GOP leaders’ complicity in them, cannot be dismissed so easily. Deep anxiety is justified, because the political threat stems not from the misbehavior of a single person or his cronies, but from the realization that even a well-established democracy is defenseless against nihilism.

Democracy rests on certain principles that are now under relentless attack in the US. 

Facts are routinely proclaimed “fake” and supplanted by “alternative facts.” Courts are being mobilized not to consider evidence of wrongdoing, but to obstruct, or to maintain a politically advantageous narrative. 

Institutional checks and balances have been used to turn Congress into a theater for high-pitched inaction. The judicial appointment process has been blatantly politicized. The most basic principles of constitutional democracy have been abandoned.

Under these conditions, striving for governance “of the people, by the people, for the people,” as President Abraham Lincoln famously put it, becomes demonstrably pointless. When the implicit norms underpinning democratic self-governance have all been destroyed, there is hardly anything left to defend.

Perhaps the US Constitution’s advanced age has brought us to this point, because any update through the formal amendment process has become impossible. Perhaps independent institutions like the Supreme Court and the Federal Reserve have become too powerful in the face of a Congress that has incapacitated itself.

Even so, history suggests that this may be only part of the story. Germany’s Weimar Republic (1919-1933) did not fail because of the age of its constitution, but because, like in the US, the constitution’s own tools (namely, its emergency powers) could so easily be used against it. While unrestricted proportional voting rules ensured broad representation in the Weimar parliament, they also produced party fragmentation and political ineffectiveness. 

With elected authorities incapable of addressing the country’s urgent needs, anti-democrats happily labeled the parliament a “twaddle shack” (Schwatzbude) and moved to seize power for themselves.

After the Weimar Republic’s collapse, the depravations of Hitler’s regime, the horrors of the Holocaust, and the devastation of another world war, West Germany sought to rebuild its constitutional order as a fortified democracy (streitbare Demokratie) capable of defending itself against enemies from within. 

The new Bundesrepublik enshrined human dignity as its core value, and declared sacrosanct the principles of democracy, federalism, the rule of law, and the division of power.

In theory, no amendment – not even a unanimous vote to amend the constitution – can touch these institutions. But, of course, matters are more complicated in practice, because drawing clear lines is never easy in the open-ended language of constitutional law. In fact, there simply is no institutional device that cannot be turned into a tool against the very norms and principles it is supposed to protect.

Equally problematic, historical lessons rarely endure. After all, the European Union is also currently being attacked from within. The governments of Poland and Hungary – countries that emerged from authoritarian rule not too long ago – are blocking the EU’s €750 billion ($890 billion) recovery fund that is meant to mitigate the long-term economic damage wrought by COVID-19. 

Their motive is not budgetary prudence, but rather retaliation for the EU’s efforts to make its funding conditional on compliance with the rule of law. Absent a compromise, the EU will have to accept inaction or find a solution outside the EU treaty framework.

Such maneuvers would not be illegal, but they would violate the spirit of a union governed by consensus, and thus would smack of hypocrisy. Hungarian Prime Minister Viktor Orbán and Poland’s de facto leader, Deputy Prime Minister Jarosław Kaczyński, would be quick to point this out. 

These two aspiring authoritarians are following the same script as congressional Republicans, who have refused to adopt another pandemic-relief package even though the previous one has largely run its course. 

In each case, anti-democratic forces representing a minority are holding hostage millions of households and businesses in dire need of support – and for no reason other than obstruction or personal gain.

In responding to strategic actors who are willing to use the constitution to subvert constitutionalism, principled arguments don’t help, because one cannot shame the shameless. This implies a fundamental dilemma. 

Acceding to their demands is a slippery slope that might well end with the collapse of the democratic order. Yet failing to compromise will harm the people whom government is supposed to serve, potentially driving them into the arms of the nihilists (who doubtless hope for, if not intend, that outcome).

Still, appeasement is the worst response of all. Too often, politicians who come to power in democracies have turned a blind eye to their predecessors’ transgressions, hoping that one can craft a better future only by letting bygones be bygones. Yet without a reckoning for past deeds committed against the system itself, democratic constitutionalism eventually will crumble.

That is why we cannot simply move on from the Republican Party’s attempt to undermine the credibility of the election – the ultimate mechanism of democratic accountability. 

Indeed, America’s failures to address past injustices – including the subjugation of indigenous peoples, slavery, racism, and the deprivations of the poor, immigrants, and the incarcerated – helps to explain why trust in democratic institutions has been so corroded in the first place. 

Having been made brittle, America’s institutions have long been vulnerable to attack.

Trump and his helpers may not succeed in destroying democracy this time around; but if they are not held accountable, they will have plenty of opportunities to try again.

Katharina Pistor, Professor of Comparative Law at Columbia Law School, is the author of The Code of Capital: How the Law Creates Wealth and Inequality.