(2020-01-10) Hunt The Long Now Pt4 Snip

Ben Hunt: The Long Now, Pt. 4 - Snip! The Long Now is driven by the constant stimulus applied to our economy and the constant fear applied to our politics. Today’s note is on how we survive the Long Now. Because it won’t be easy.

This is war, and we fire these missiles all over the world, on the daily, both in countries we have officially invaded, like Afghanistan, and in countries we haven’t, like Pakistan and Yemen. 2019-10-17-HuntTheLongNowPt3IsThisNormalAskingForAFriend

But we have redefined war to NOT mean things like drone and cruise missile attacks, to NOT mean things like “observer” or “training” missions. We have redefined war to ONLY mean American troops being shot at.

The problem is that we have redefined capitalism to mean “the stock is up”. We have redefined capitalism to NOT mean Smith’s invisible hand or Schumpeter’s creative destruction or productivity-enhancing and risk-taking investments in the real economy. We have redefined capitalism to ONLY mean financial asset price inflation in the here and now.

The Long Now is the Fiat World of reality by declaration, where we are TOLD that inflation does not exist, where we are TOLD that wealth inequality and meager productivity and negative savings rates just “happen”, where we are TOLD that we must vote for ridiculous candidates to be a good Republican or a good Democrat, where we are TOLD that we must buy ridiculous securities to be a good investor, and where we are TOLD that we must borrow ridiculous sums to be a good parent or a good citizen.

Self-doubt is a biologically terrifying condition for a social animal like humans, and that’s why you see more and more of us becoming rhinoceroses. That’s why you see more and more well-meaning citizens willingly give over their autonomy of mind to the MAGA Train or the Bernie Bros … some sort of social Answer with a capital A … so that the torture of self-doubt can end.

the Answer is always totalitarian. Not merely authoritarian, but totalitarian. It brooks no dissent, in ANY aspect of your life. The Answer is a general closed-form solution, something we are hard-wired to want, but something that is impossible to find in a social system.

I believe that our common sense will become even more the heresy of heresies. Why? Because the Long Now has redefined the meaning of “taxes”. Because the tether between taxation and spending – the most important macroeconomic policy relationship for our lives as both investors and citizens – has been severed.

We’ve had a steady fraying of this cord for about two decades now, ever since Al Gore’s idea of a Social Security “lockbox” (where those taxes could ONLY be used for Social Security spending and paying down the existing debt) was met with derision rather than acclaim by both parties.

Destroying the relationship between taxation and spending is not a partisan thing. It’s a power thing. It’s a Management thing.

*divided government vanished with Donald Trump’s election, and as a result we got the 2017 Tax Cuts and (LOL) Jobs Act, which I think was the final cut.

What did the TCJA do? It lowered taxes by trillions without reducing spending by a dime. The TCJA levered up the United States of America.*

*In the Long Now, taxes are for … justice. In the Long Now, taxes are for … equity. In the Long Now, taxes are for … retribution. And what do those words mean?

Whatever Management says they mean.*

The primary beneficiaries of the TCJA are large public companies, particularly the multinationals that dominate the S&P 500.

How does this advance Donald Trump’s political power? Because the windfall tax benefits that the TCJA created for large public companies like Amazon and Apple and Microsoft translate directly into higher stock prices. Because in Trump’s own words, “the stock market is my report card”.

Similarly, Bernie Sanders and Elizabeth Warren and No Malarkey Joe and Mayor Pete and all the rest have a vision of how to use taxes for THEIR conception of justice, equity and retribution, a vision that – well, how about that! – advances their political power. None of the “wealth tax” proposals you hear from the Left are being proposed to pay for anything in a budgetary sense

In fact, when candidates make the mistake of expressing their wealth tax idea in a fiscal sense – as Elizabeth Warren did when she linked it to “paying for” Medicare-for-all – the narrative immediately shifts from “fairness” to “making the numbers add up” (Spoiler Alert: they don’t and they never will), and these candidates immediately take a hit in the polls.

Bernie gets it. He doesn’t even pretend to make this about budgets. He realizes that the political popularity of the wealth tax has nothing to do with making the rich pay for a government program, and everything to do with making the rich pay for their sins. And yes, Bernie believes that great wealth is a sin. He believes that great wealth should not be allowed, not because it’s a source of unaccountable political power (my beef with great wealth), but because he believes it is fundamentally unfair.

In the Long Now, spending is ALSO for justice and equity and retribution … ALSO in whatever mode or measure fits the regime goals of whatever Management is in power at the time.

I think that whoever is elected in 2020, we will see a $2 trillion spending plan enacted in 2021

In either case, I expect that the primary corporate beneficiaries of the spending will be exactly the same. Exactly the same.