By Charlie Johnston
Several times this last week I have gotten part way through writing a column, then abandoned it and deleted what I had already written. It has been a consequential week.
Some have emailed to ask me if Brexit is the beginning of downfall because of the effect on the markets. Brexit is important, but its economic consequences are vastly overblown. Britain has every bit of the productive capacity and infrastructure it did before Brexit – and now has the freedom to use that capacity without getting a by-your-leave from unaccountable bureaucrats in Brussels. That puts Britain in a stronger, not weaker, position, regardless of how much the “masters of the universe” try to punish her for refusing to continue to bend the knee before her ‘betters.’
That is not to say that the decline in markets is not real. It is actually one of the first real things that has happened in the markets for some years. I have long maintained that markets are hideously overvalued, perhaps by as much as a factor of three. When employment and productivity are both stagnant, you cannot have robust markets – or at least you can’t have markets that are actually robust, even if you can jury-rig it to look like they are. Though it is a significantly lagging indicator, when honest metrics are used, market charts follow productivity charts like a shadow. If productivity is flat and markets continue to boom, a crash is coming and the markets are overvalued.
In the decade leading up to the stock market crash of 1929, a host of paper corporations that did not produce anything sprang up. Investors mimicked economic health by furiously buying and selling these phantom corporations, using the velocity of money to simulate economic vigor. Ominously, though, charts showing gross national product (GNP) remained largely flat for nearly a decade. On Black Friday in 1929, reality punctured the illusion that traders had been so desperate to hide, and it all came tumbling down.
In the mid-90’s, when I was doing radio, whenever I had an economist or an investment banker on the show, I showed them my charts comparing flat GNP and robust stock markets and asked how they could reconcile that, when the only time I could find a similar pattern was in the lead-up to 1929. None could explain it. One economist from a prestigious Midwestern College understood immediately and said that if my charts were correct, we were sitting on a very large bubble that would eventually burst. (We talked several times after he confirmed my data). I chuckled and said I didn’t think this was big enough to trigger a great depression, but our national “surpluses” were going to vanish in a puff of smoke overnight sometime. In March of 2000 the dotcom bubble did, indeed, burst, bankrupting many speculators and erasing the illusion of surplus. This time it was not paper corporations, but Ethernet entities that produced nothing while frantically running in place to simulate the velocity of money.
Now we have sluggish productivity and employment, but robust markets. Who is kidding who? Even worse, officials have bowdlerized the way employment and productivity statistics are measured in order to understate the problem. That is like taking pain killers for a treatable cancer without addressing the underlying problem. The great mass of society feels the effects while the elites protect their ability to skim some money off the side as it comes whizzing around the track – but they need to hold onto all the levers of power in order to sustain the illusion of velocity and keep their profits without productivity rolling. Brexit forcibly pulled some of those levers back into the hands of the people that have been being forced to finance this fraud.
That is partly why some central banks, high-level bureaucrats and other elites have reacted with such rage at the decision. If the levers of power are forcibly taken by people back into self-governing hands, the elites cannot continue to perpetrate the fraud. It serves a dual purpose of trying to deter others from taking back the reins of self-government AND blaming those who took back the reins of national authority if the levers of power are taken from the elites and the fullness of the economic rot they have wrought is revealed.
Right now, the elites regularly rail against capitalism. Here’s a clue: crony capitalism as practiced in Europe and America is not capitalism at all; it is economic fascism – by the privileged, of the privileged and for the privileged. Opportunity is crushed and ordinary people are fleeced. Absolute power over those people must be maintained in order to sustain the con. Think a minute: we have a big regulatory infrastructure supposedly to protect the “people.” Elite politicians and bureaucrats rail against capitalist entities. Meanwhile the very industries they rail against keep getting fewer members, each of which gets monstrously big, with each of the remaining behemoths funding the careers of the very people who rail against them. The reality is that the regulations are neither to protect the people nor to control the corporate behemoths that remain, but to prevent those behemoths from being challenged by innovative new arrivals on the scene. Most modern regulations are just a barrier to entry, preventing little people from challenging the behemoths that feed the bureaucratic elites that “regulate” them.
I am not a fan of ‘too big to fail.’ All that means is that corporate elites get to keep all their profits while ordinary people must cover their losses. I did not support the GM bailout in America. It made no sense. Elites all talked of the economic devastation it would wreak on the American economy. Say what? Had GM truly gone bankrupt without taxpayer help, the productive capacity – its factories and machines – would have remained intact. There would have been a significant downturn as those assets were sold. Then there would have been new owners, hopefully who would have run that productive capacity better and more efficiently. Those new owners would know if they did, they would keep their profits and if they did not, they would suffer their losses. Life would have gone on – without dipping deeply into taxpayers pockets to prop up the crony capitalists who fund elite delusions of superiority and entitlement.
Market economics was not designed to allow you to run a business badly and spread the losses among unwilling people who have no stake in your venture. It certainly was not intended to allow you to run your venture as badly, irresponsibly, and greedily as you want while facing no consequences so long as you pony up your hefty financial tribute to the elite bureaucrats – elected and unelected – who ‘regulate’ you.
Brexit, combined with various elections around the globe over the last three or so years, has sent a chill of terror up the necks of elites throughout the world. They long ago lost the power of rational argument and have relied on the power of sneers, ridicule and strong-arming to maintain their control. Upset that employment is stagnant? That’s the new normal, you stupid bigot. Worried that it keeps getting harder to stretch a dollar despite official assurances that the economy is purring along? It’s the new normal, you stupid bigot. Thinking we shouldn’t have imposed gay marriage without the people’s consent? Ignorant bigot. Think it’s wrong to force nuns to provide for abortions? Neanderthal bigot. Worried about aggressive, murderous Jihadists? Stinking bigot.
The insult and smear effort to maintain control has worked for a good long time for elite classes, even as it has gotten more unhinged from reality. Denouncing anyone who thought it a bad idea to force little girls to share public washrooms and showers with grown men as bigoted troglodytes gave the game away to even some who had put the tactic to good use before.
Here is what is so fearsome about Brexit for elite classes. A few years back, polls showed Israeli Prime Minister Benjamin Netanyahu losing in a close election. He won handily. Polls showed the same with British Prime Minister David Cameron a few years back. He won handily. In 2014, Democrats expected no more than small losses to Republicans in Congressional and Gubernatorial elections. It was a bloodbath of historic proportions (though the Republicans did little but cower before Democrats with their new super-majorities. Few, besides me, thought they would do so little with so much). When polls showed Brexit losing by four or five points and instead it won by four points (a swing of eight to nine points) it finally dawned on the elite that the folksies were routinely lying to pollsters – and that calling those folksies ignorant bigots every time they disagreed with elites was losing its impact. For the first time in a very long time, elites face the real fear that their favorite tactic of the sneering putdown might not be working to keep the folksies in line – and could actually be fueling populist rage.
That does not mean they will change their tactics. I don’t know that they can. The power of rational discourse has long since atrophied in elite circles. They ARE the narrow, unimaginative, fearful bigots they accuse their opponents of being. So I expect them to double down on the only tactic they really know well. Already in Britain the privileged classes are demanding a do-over on the referendum until the folksies “get it right.” Cooler heads among the elite have counseled that there is no better way to spark a real revolution, so I think that effort will fail for the time being. Yet the elitist left is a dull-witted one-trick-pony…and when times get desperate, one can expect they will desperately and furiously repeat the one trick their poor minds can conceive, no matter how self-destructive.
So is Brexit a trigger? You bet. But it is a trigger involving ordinary people taking up the mantle of self-government again, determined to be masters of their own destiny rather than cowering before an ignorant, but smug, credentialed elite. There will be turmoil, for that elite will not go quietly into the night. This new dynamic threatens their power, their privilege and their wealth. Most importantly, it threatens their sense of entitlement and superiority. They will fight furiously to regain the whip hand.
Confusion will continue to grow for a time, perhaps devolving into real chaos for a while. But the current cadre of elite classes are already doomed to obscurity. There will come a time, sooner than most anyone thinks, when the tables are turned dramatically. The elites have treated ordinary people with brutal, sneering, malice; with callous contempt. When a great people have been subject to that, the temptation to return the same can be overwhelming – sometimes just to vent the frustration of having been so ill-used for so long. We do not want to merely trade their thugs and bums for our thugs and bums.
Even as we enter a period of greater confusion, my thoughts turn to how we should love without sentimentality and fight without malice, how to govern justly. I think a lot about St. Joan of Arc and of Abraham Lincoln, two world figures who fought with unflagging vigor but did so to establish authentic justice, to bring real peace to all. I contemplate how to exhort people not to flag in the effort to take back the reins of self-determination, to make all elites, new and old, fully accountable to those they are called to serve (never to rule), to neither leave old oppressors without consequence for their offenses, nor to visit them with the vicious malice with which they have visited their imagined subjects.
Things will be reversed soon enough. I call you to hold the old to account, but to do so with malice towards none and charity for all. The truth is the ruling elite live empty internal lives of misery and despair. It is largely what fuels their mindless, controlling rage. As we act, I want us to act so as to govern ourselves; to put faith, family and freedom at the forefront of our work; and to act so as to open up the hope and the joy that is in those priorities to enliven the lives in the very people who have oppressed and disfigured our culture, to offer them a new dawn of peace.
Tomorrow I will speak in Las Vegas:
Las Vegas, Nevada
Tuesday, June 28, 2016
6:00 pm: Sun City McDonald Ranch Community Center (Zion Room), 2020 W Horizon Ridge Pkwy, Henderson, NV 89012 702-270-7044
Contact: Margie at email@example.com