We are seeing the shape of Trumpâs cabinet, and itâs clear that we will soon be working for idiots who used to be in sales. So, itâs time for some definitions: What are Kleptocracy and Kakistocracy?
Kleptocracy is a government where the rulers (kleptocrats) use their power to exploit the people and natural resources of their country in order to extend their personal wealth and power.
Kakistocracy means a state or country run by the worst, least qualified, or most unscrupulous citizens. The word comes from the Greek words kakistos (worst) and kratos (rule), with a literal meaning of government by the worst people.
Posted for your reference, in case something happens after January 20th that requires you to know about either term.
Trumpâs commitment to renewable energy was on display in his Boeing tweet:
His cabinet, er, his junta:
Weâve had high-ranking military men serve in high positions in our government since the beginning of the country, starting with George Washington through Andrew Jackson, Ulysses S. Grant, Dwight D. Eisenhower, through Colin Powell. But Trump is surrounding himself with an awful lot of them, and some of them have had issues with both their temperament and civil liberties. Just like the man hiring them.
Any issue with so many generals? The NYT offers this:
Man of the Year is questioned, but it is real my friends:
Trumpâs EPA will be his undoing in the next election:
Pearl Harbor is hardly remembered:
Itâs another Family of Trump voters having quality time at home. Never have so many known so little about so much.
I’m stepping through the door, and I’m floating in a most peculiar way…and the stars look very different today:
There are just three more weeks to go in this Trumptastic year, so you probably need a soother to get you relaxed enough to enjoy the weekend.
Since we are getting snow here at the Mansion of Wrong, try to stay warm and cozy as we remember Greg Lake of Emerson, Lake and Palmer who died on Wednesday. Greg was also a founding member of King Crimson. As Matty Karas said, being a founder of those two groups places Greg Lake near ground zero in the history of progressive rock. Did you know that progressive rock has not been recognized by the R&R Hall of Fame?
So, today we listen to Greg doing âI Believe in Father Christmasâ, which was released as a solo on 45 by Atlantic in October, 1975. Although most people think of it as a Christmas song, that was not Lake’s intention. He said that he wrote the song in protest at the commercialization of Christmas.
Here Lake performs it live at St. Bride’s Church, in the City of London, along with Jethro Tull’s Ian Anderson on flute, David Arch on keyboards, Florian Opahle on acoustic guitar, and the churchâs choir:
Kind of breathtaking with Ian Anderson on the flute, along with the church choir!
Those who read the Wrongologist in email can view the video here.
Sample lyrics:
I wish you a hopeful Christmas
I wish you a brave new year
All anguish pain and sadness
Leave your heart and let your road be clear
They said there’ll be snow at Christmas
They said there’ll be peace on earth
Hallelujah noel be it heaven or hell
The Christmas we get we deserve
Take a good look at this map. It shows which counties switched parties in the 2016 US Presidential election compared to 2012. Red counties switched from Democrat to Republican, blue counties switched from Republican to Democrat and the vast majority in grey did not switch parties:
Of course, it doesnât show vote margin or size of the total vote in each county. The main thing this map shows is the large number of counties in the North East and Midwest that flipped to Trump, after having been Democratic counties in the prior election. The effect was large enough to deliver the normally Democratic leaning states of Iowa, Michigan, Pennsylvania, and Wisconsin into the Republican camp.
Tim Duy has an article about how economists and most politicians get so wrapped up that they miss the human element in economic dislocations. Duy makes the point that they ignore two of the negative impacts of job losses. First, they say how lost jobs free up human capital for use elsewhere in the economy. Of course, as jobs are added to the economy, skill levels and training determine whether laid-off workers are part of that equation.
âHigh-skilledâ workers is what we need, but they are not always the kind of workers that were laid off.
Second, Duy reminds us that most workers have little ability to move to where better jobs might be found. Politicians tell us that the economy is shifting to urban and suburban areas; to higher skilled jobs; that workers must go and get retrained. That misses the point.
Most new jobs for those who were laid off will only be found if workers are able to relocate, to move from rural or devastated urban locations to geographic areas where jobs are expanding. Duy notes it is particularly difficult for rural areas:
The speed of regional labor market adjustment to shocks is agonizingly slow in any area that lacks a critical mass of population…Relative to life spans, in many cases the shocks might as well be permanent.
We donât have answers for most of these communities. Rural and urban economic re-development is hard. The people living in these regions have experienced job losses (or no jobs growth) for decades; positive jobs growth has occurred elsewhere.
And the laid-off workforce isnât mobile. In effect, we have limited access to housing in our major cities by pushing housing costs beyond the reach of most middle class workers. This, from Kevin Erdmann:
If you lost your manufacturing job in Buffalo, and you’re thinking of moving to New York City because there are more jobs there, you might decide not to move because it is too expensive. It is the affordability that is keeping you out. But, even here, the affordability problem is just the messenger. It is the rationing mechanism for a housing stock that is relatively fixed for political reasons.
If you decide to move to the NYC area, you see that the housing supply is largely fixed. New buildings are hard to get through zoning. Construction costs in big cities are very high. Income taxes are rising rapidly.
Erdmann makes the point that housing in big cities doesnât move up with increased demand:
So, it doesn’t matter if Brooklyn apartments rent for $500, or $1,000, or $2,000, or $4,000. There isn’t one for you. Fixing this by fixing affordability isn’t going to change the supply curve. It’s simply substituting non-monetary rationing mechanisms for the monetary one.
Trumpâs message that US firms need to consider domestic jobs as much as their bottom line, also resonated with middle and upper-middle class households. OTOH, it’s not like Trump took on the Coal Industry on behalf of workers. He blamed federal environmental policy, but that isnât what caused the loss of coal industry jobs.
Trump doesnât really have any answers, but he pretends to care while pretending to have answers. Pretending to care and pretending to have answers gave him the switched counties on the electoral map above. People want work. They want secure jobs.
Trump might be running a “jobs” scam, but if it fails, what is the Democratsâ alternative?
We have four years until the next election, two if you are looking at Congress. What policies will work? Will we just trade Trumpâs scam for another one peddled by the establishment?
Business as usual hasnât delivered. The idea that economic growth creates jobs is a pipe dream for many: For the past 40 years, economic growth did not improve wages.
Trump’s promise swung the election. If he fails, what will be the Democratsâ response?
The new OPEC deal to cut oil output, the Cartelâs first since 2008, gives OPEC what it wanted: higher oil prices. It was difficult for the Cartel to achieve an agreement. Russia, a major oil producer that isnât even a member of OPEC, brokered a deal between Saudi Arabia and Iran. From Oil Price:
The interventions ahead of Wednesday’s OPEC meeting came…from Putin, Saudi Deputy Crown Prince Mohammed bin Salman and Iran’s Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani…According to Reuters, Putinâs role as intermediary between Riyadh and Tehran was pivotal, and is a “testament to the rising influence of Russia in the Middle East since its military intervention in the Syrian civil war just over a year ago.”
Prior OPEC meetings failed to deliver consensus, because nobody wanted to cut production. Tehran argued OPEC should not prevent it from restoring the output lost by years of Western sanctions, but the Saudis wouldnât agree. The animosity between them didnât help: Proxy wars in Syria and Yemen have exacerbated decades of tension between the Saudi Sunni kingdom and the Iranian Shi’ite Islamic republic.
The brokering started when Putin met Saudiâs Prince Mohammed on the sidelines of the G20 meeting in China. Both felt they could benefit from cooperating to push oil prices higher, and agreed to work together to cut excess production that had more than halved oil prices since 2014. Lower prices had created large budget deficits for both Russia and Saudi Arabia.
Financial pain made cooperation possible, despite the huge political differences between Russia and Saudi Arabia over the civil war in Syria. But Iran also had to agree. Prince Mohammed had repeatedly demanded that Iran participate in any production cuts. Saudi and Iranian OPEC negotiators had debated the point without compromise for months.
Putin stepped in: He established that the Saudis would shoulder the lion’s share of cuts, as long as Riyadh wasn’t seen as making concessions to Iran. A deal was possible if Iran didn’t celebrate a victory over the Saudis.
Reuters reports that a phone call between Putin and Iranian President Rouhani smoothed the way. After the call, Rouhani and oil minister Bijan Zanganeh went to Iranâs supreme leader for approval. During the meeting, leader Khamenei approved the deal. He also agreed that Iran wouldnât take a victory lap once the deal was announced.
The deal is contingent on securing the agreement of non-OPEC producers to lower production by 600,000m barrels per day. Russia says it will contribute half of that, 300,000 bpd. Iran was allowed to slightly boost its output, while Iraq slightly lowered theirs.
Weâll see if the deal holds, and/or, who cheats.
Pundits like to chalk up winners and losers in this type of deal. Since OPEC now accounts for less than half of all energy output in the world, it is a weakened cartel, dependent on the kindness of outsiders (like Russia) to hold together.
Saudi Arabia looks like the biggest loser. First, it cut production by 500,000 bpd. Second, it has presided over a momentous shift in global power, one that is as stunning as Brexit or Trumpâs victory.
Saudiâs capitulation to Russia and Iran ends OPECâs domination of the worldâs energy market. The Saudis also made the US shale oil market more powerful in the global energy market, since US shale will produce more oil whenever oil prices are high. However, Saudi oil remains far cheaper to produce than American shale oil, since it requires far less energy to extract and refine.
Russia emerged as the biggest winner. Its economy did not buckle under the Saudi effort to drive oil prices down via increased production. Putin is now the indispensable power broker in the Middle East, something that was unthinkable even 12 months ago. The Syrian civil war will soon end with Russia winning, Assad staying in power, and Saudi Arabia as the regional loser.
And so, this year truly has seen the death of one world order, along with the birth of another. The US and Saudi now have very little to show for their 50+ year joint effort to dominate the Middle East. The EU looks far from stable as a force in Western Europe.
And Saudi Arabia has just become the third dinosaur to be felled by the asteroid called 2016.
What do you think when Trump appoints so many retired generals to cabinet-level posts in his administration? The positive side of the argument is that these are talented, well-educated individuals who bring a worldview and experience on the global stage that Trump himself lacks.
The other side of the argument is that the authoritarian president Trump risks making his government much more authoritarian than it needs to be. This from Roger Cohen in the NYT:
A quarter-century after the post-Cold War zenith of liberal democracies and neoliberal economics, illiberalism and authoritarianism are on the march. Itâs open season for anyoneâs inner bigot. Violence is in the air, awaiting a spark. The winning political card today, as Mr. Trump has shown…is to lead âthe peopleâ against a ârigged system,â…The postwar order â its military alliances, trade pacts, political integration and legal framework â feels flimsy, and the nature of the American power undergirding it all is suddenly unclear.
We sound like a nation that is ripe for political upheaval. Citizens are not only more critical of their political leaders, they have become more cynical about the value of democracy as a political system, less hopeful that anything they do might influence public policy, and more willing to express support for authoritarian alternatives.
Yascha Mounk, a lecturer in government at Harvard, has spent the past few years challenging one of the bedrock assumptions of Western politics: That once a country becomes a liberal democracy, it will stay that way. That bedrock assumption is called âdemocratic consolidationâ in political science, but Mounkâs research suggests that isnât correct anymore.
In fact, he suggests that liberal democracies around the world may be at serious risk of decline. Data from Freedom House, an organization that measures democracy and freedom around the world, showed that the number of countries classified as âfreeâ rose steadily from the mid-1970s to the early 2000s.
But since 2005, Freedom Houseâs index has shown a decline in global freedom each year. According to Mounk and his research partner Roberto Foa, who reviewed the data, early signs of democratic destabilization exist in the US and in other Western liberal democracies. They found that the percentage of people who say it is âessentialâ to live in a democracy has plummeted, and it is especially low among younger generations. The survey was based on 2014 data. Here is a graph from the Mounk-Foa study:
The graph shows responses by age cohort. Younger Americans have substantially less need to live in a democratic society than do older individuals. (The grey shaded part of graph is the 95% confidence limit for the responses to the survey). Remarkably, the trend toward acceptance of nondemocratic alternatives is especially strong among citizens who are both young and rich.
Mounk and Foa found that support for autocratic alternatives is also rising. Drawing on data from the European and World Values Surveys, they found that the share of Americans who say that authoritarianism would be a âgoodâ or âvery goodâ thing had risen from 18% in 1995 to 35% of rich Americans:
While citizen support for authoritarian rule remains in the minority, it can no longer be dismissed as a fringe group. They support âa strong leader who doesnât have to bother with parliament and electionsâ and they want âexpertsâ rather than the government to âtake decisionsâ for the country. (In the study, âUpper incomeâ is defined as the top 20% of income. âLower Incomeâ was defined as the bottom 50% of income.)
Overall, the rich are also now more likely than lower income citizens to express approval for âhaving the army rule.â While 43% of older Americans, including those born between the world wars and their baby-boomer children, do not believe that it is legitimate in a democracy for the military to take over when the government is incompetent or failing to do its job, the figure among millennials is much lower at 19%. In the US, only 5% of upper-income citizens thought that army rule was a âgoodâ or âvery goodâ idea in 1995. That figure has since risen to 16%, so the young rich are much more autocratic than their rich elders.
The clear message is that our democracy is now vulnerable. What was once unthinkable should no longer be considered outside the realm of possibility. This is partially the result of an educational system that does not teach even basic civics, much less the meaning of the Constitution.
Generations have grown up believing that they can casually read the document and understand what constitutional law is. Young Americans have never known the threat of an undemocratic system, so their fear of autocracy is far less than it is in the minds of their elders.
Trump is the prime example of this. And according to Mounkâs findings, he has a receptive audience in the young and the wealthy.
Would that be enough to undermine democracy in the US?
Weâve entered uncharted territory. Trump had a phone call with the president of Taiwan. Why is that such an issue? Presidents speak to other world leaders all the time, but American presidents have not spoken to the president of Taiwan since 1979. This studied form of non-recognition is at the core of the One-China Policy.
That policy states that there is only one state called “China”, despite the existence of two governments claiming to be China. This diplomatic dance works precisely because everybody agrees to abide by rules that don’t make complete sense.
We learned from experience in Korea and Vietnam, where we acted with hostility to both âtwo countryâ standoffs between a communist and a non-communist government. We learned, and then changed the game when it came to the two Chinas. That is, until President-Elect Trump was lured into the Taiwan call by his advisors, John Bolton and Stephen Yates. This from the Guardian: (strike out and brackets by the Wrongologist)
Bolton wrote in the Wall Street Journal in January: âThe new US administration could start with receiving Taiwanese diplomats officially at the State Department; upgrading the status of US representation in Taipei from a private âinstituteâ to an official diplomatic mission; inviting Taiwanâs president to travel officially to America; allowing the most senior US officials to visit Taiwan to transact government business; and ultimately restoring full diplomatic recognition.â
Stephen Yates, a former White House aide to Dick Cheney now advising the Trump transition was in Taiwan at the time of [Trumpâs] the call. âItâs great to have a leader willing to ignore those who say he cannot take a simple call from another democratically elected leader,â Yates tweeted.
China reacted by saying Trump needs to be educated about the world. Scott Adams, Trump butt-boy, puts it in about the most favorable light possible:
Trump is âsetting the tableâ for future negotiations with China. He just subtracted something from Chinaâs brand that they value, and later he will negotiate with them to maybe give it back in some fashion. Probably in return for some trade concessions.
It didnât end there. Trump apparently has invited Philippine President Duterte to the White House. Figuring out how to resolve Duterteâs issues with the US, his embrace of China, and his demonstrated abuse of human rights in the Philippines should be high on the new administrationâs list of issues. It would have been smart to have the outline of an agreed joint solution in place before rewarding Duterte with a state visit.
And there was Trumpâs phone call with the Prime Minister of Pakistan. According to the Pakistani account of the conversation, Trump told Nawaz Sharif that Pakistan is a âfantasticâ country full of âfantasticâ people that he âwould loveâ to visit as president.
Just awesome, except for Trump ignoring that India, our real partner in that part of Asia, is Pakistanâs enemy. Trump risks appearing to reward Pakistan at the expense of our relationship with India. Again, the US has maintained a balancing act between these two countries, who have a history of war and skirmishes over their disputed border.
The jury is out on what Trump is trying to do, and whether it is based on strategy, or ideology. Speaking with Taiwan’s and Pakistanâs leaders are potentially dangerous moves, as is his engagement with Duterte.
They are also potentially revolutionary. Every out-of-the-box move by Trump challenges norms and potentially blows up longstanding ways of doing things. If you are gonna shake things up, it’s all-important that you understand exactly why we have done things the way we have, and what the implications are of change. We know Trump is an instinctive guy, and not a willing student. The danger is his willingness to overturn complex situations where governmental institutions have had very good reasons for the policy they support.
This is the dark underbelly of Trumpâs populism. He was elected to shake things up by voters who dismiss facts, if presented by journalists.
You start by discrediting what came before. You call it elite failure. You shake things up because you can.
Time to wake up, America! Think about Michael Mooreâs calling Trump a human Molotov cocktail on NBCâs âMeet the Pressâ:
Across the Midwest, across the Rustbelt, I understand why a lot of people are angry. And they see Donald Trump as their human Molotov cocktail…I think they love the idea of blowing up the system.
So, letâs wake up today with the Billy Joel song, âWe Didn’t Start the Fireâ. The lyrics to this song catalog both personalities and historic events from 1949 until 1989:
We didnât start Trumpâs fire, but get ready, we may very well have to put it out.
Those who read the Wrongologist in email can view the video here.
Sample lyrics: Harry Truman, Doris Day, Red China, Johnnie Ray
South Pacific, Walter Winchell, Joe DiMaggio
Joe McCarthy, Richard Nixon, Studebaker, Television
North Korea, South Korea, Marilyn Monroe
Rosenbergs, H-Bomb, Sugar Ray, Panmunjom Brando, The King And I, and The Catcher In The Rye Eisenhower, Vaccine, England’s got a new queen Marciano, Liberace, Santayana goodbye
We didn’t start the fire It was always burning Since the world’s been turning We didn’t start the fire No we didn’t light it But we tried to fight it
Quite the week. Trump makes Cabinet appointments, he tweets about taking citizenship away from US flag burners exercising freedom of speech, he takes a call from the president of Taiwan, and gets a formal protest from China.
That wasnât all. You missed it, but Congress passed HR 5732, the âCaesar Syria Civilian Protection Actâ. The bill sets the stage for the implementation of a no-fly zone (NFZ) over Syria. It requires the administration to submit to the appropriate congressional committees a report:
That assesses the potential effectiveness, risks and operational requirements of the establishment and maintenance of a no-fly zone over part of all of Syria.
These Congressional chicken hawks may not realize that NFZs are a form of limited war. Politicians are usually the first to forget that limited wars only stay limited by mutual agreement. The military will tell you to never declare an NFZ unless you are entirely willing to fight a real air and ground war to enforce it. In the case of Syria, a No-Fly Zone would require the destruction of Syrian aircraft and missile systems from Day 1, probably leading to the death of Russians shortly thereafter. We could have a shooting war with Russia by the end of the first week.
Syria has over 130 air defense systems. A dozen or so are in the Aleppo area. Syria also has over 4,000 air defense artillery pieces and a few thousand portable infrared-guided missile systems. Russia has also located its advanced S-400 anti-aircraft missiles into Syria to protect their bases in Latakia Province. Those missile systems effectively give Russia control over Syriaâs airspace, and for the US to impose a no-fly zone would require an air battle with Russia, which would all but guarantee the loss of a large number of US warplanes.
Over the last 25 years, there has been an evolving political infatuation with two pillars of âpolitical airpowerâ: airstrikes and no-fly zones. Did we get the results our politicians promised?
Onward to cartoons. Trump goes to Indiana, gives Carrier tax breaks:
It was great political theater, but it is a standard âsocialize the lossesâ GOP play: tax breaks for jobs. The taxes earned from keeping the jobs never pay the cost of the tax credits.
Paul Krugman had a good observation:
Fidel Castro dies:
Free speech isnât well understood by the Orange Overlord:
Nancy Pelosi is reelected as Minority Leader. Many are pleased:
Mitt wants work, will say anything:
Trump still has lots of posts to fill. Word is that former vice presidential candidate and Tina Fey impersonator Sarah Palin is on the list of possible Cabinet appointments.
Trump has two towers in Istanbul. In December 2015, his local partner explored legal means to take Trumpâs name off the towers after the Orange Overlord called for a ban on Muslims entering the US. In June, Turkish President Erdogan reportedly called for the removal of the Trump name from the towers.
Mr. Erdogan appears to have changed his mind, both about the towers and about the man whose name appears on them. Although polls show that most Turks would have preferred to see Hillary Clinton as Americaâs new president, Mr. Trumpâs election has been greeted in Ankara with a mix of schadenfreude and hope.
In fact, Erdogan has called US protests against Mr. Trumpâs election âa disrespect to democracyâ. The Economist says that Trump reportedly told Mr. Erdogan over the phone that his daughter, Ivanka, admired him, and flattery works all over the world.
Erdogan thinks that our Orange Overlord may be more amenable to extradite Fethullah Gulen, the Pennsylvania-based preacher whom Turkey accuses of orchestrating the coup attempt in July. Since July, Turkey has pressed the Obama administration to extradite Mr. Gulen. The Turks felt sure that Hillary Clinton would not extradite him, since her campaign accepted donations from his followers.
In November, Trumpâs National Security Advisor, former General Michael Flynn, strongly supported Turkish President Erdogan in an op-ed at The Hill, suggesting that Erdogan is under siege by âradical Islamâ and desperately needs our help. Flynn said:
The forces of radical Islam derive their ideology from radical clerics like GĂźlen, who is running a scam. We should not provide him safe haven. In this crisis, it is imperative that we remember who our real friends are.
Flynn also seemed to dismiss Erdoganâs crackdown on political dissidents and the dubious circumstances of the attempted coup which allowed Erdogan to solidify his power. So letâs review Erdoganâs actions since July:
Turkey now has outstripped China as the worldâs biggest jailer of journalists. In addition, 150 news outlets have been closed, ranging from TV stations to online enterprises.
Erdogan has suspended or fired 110,000 civil servants, judges, teachers, journalists and soldiers. This has gutted the educated middle class of Turkey.
He has restarted an internal war with Kurds in Eastern Turkey, and has arrested the leadership of the Kurdish minority HDP party, which got more than 10% of seats in the last election.
The EU has suspended negotiations for Turkish membership for civil rights backsliding, but not before they gave Turkey âŹ6 billion to stop sending refugees into the EU.
Erdogan has threatened to reopen the flow of refugees if the EU doesnât agree to further Turkeyâs application to join. Opening the refugee flow is an existential threat to the EU, and thus, to NATO.
Trump is holding a tough hand while playing poker with Turkey. As a NATO member with the largest standing army in Europe, Turkey occupies an important place in NATOâs strategy. Trump has to balance Turkeyâs support for the mutual defense of Europe against Turkeyâs intentions to go one-on-one against Syria.
He has to balance the shaky EU refugee deal with Turkey against Erdoganâs effort to engage militarily against the PKK, a Kurdish group in Iraq and Syria who are allied with the US against ISIS.
Erdogan has made an overture towards Russia and China. A link with them would destabilize NATO even further. Erdogan seems to be testing Trump’s resolve and his commitment to NATO at the same time. Perhaps he sees an opportunity to garner some good old American baksheesh, so he’s putting a foot in the water to see if it’s comfortable enough to dive in.
That may be a poor play, since while Trump may be sympathetic to Turkish concerns about Mr. Gulen, the clericâs fate rests with Americaâs courts. Meanwhile, The Economist reports that Trumpâs team wants to list the Muslim Brotherhood as a terror group, roll back the nuclear deal with Iran, and continue arming the PKKâs Syrian wing against ISIS.
Erdogan opposes all of these measures vehemently.
Some of Trumpâs new team are not fans of Erdogan. In a tweet, Trumpâs CIA-designate, Mike Pompeo, called Turkey an âIslamist dictatorshipâ.
Mr. Erdogan and Mr. Trump show certain similarities. Both are busy recasting and ruining their countries at the same time.
Do you trust the banks and brokerage houses to govern themselves? Do you think that reducing banking regulations will help the economy, or your personal financial situation? Before you answer:
Remember that the economic meltdown of 2008 was caused by overreach by the financial industry.
Remember that it took the next eight years to climb out of the Great Recession and return to pre-2008 employment levels.
Dave Dayen in the Fiscal Times points out that there will be a vote this week in the Congress that will say a lot about how willing the Democrats in Congress will be to fight the deregulation avalanche that’s about to come crashing down on We the People. From Dayen: (brackets and emphasis by the Wrongologist)
As early as Wednesday, the House will take up H.R. 6392, the Systemic Risk Designation Improvement Act. This bill would lift mandatory Dodd-Frank regulatory supervision for all banks with more than $50 billion in assets, meaning those financial giants would no longer be subject to blanket requirements regarding capital and leverage, public disclosures and the production of âliving willsâ to map out how to unwind [the bank] during a crisis.
The intent of the new regulation authored by Blaine Leutkemeyer (R-MO), isnât about helping the biggest banks, but the relatively smaller regional players, firms like PNC Bank, Capital One and SunTrust. An estimated 28 institutions would be affected. The eight âglobal systemically important banksâ would remain subject to the standards: Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street Bank.
But the so-called regional banks are not small operations. These 28 regionals have combined assets of about $4.5 trillion. It is useful to remember that in the 2008 crisis, regional banks like Washington Mutual and Wachovia also came crashing down.
The American Banker says that the Financial Stability Oversight Council (FSOC), the new super-regulator charged with monitoring systemic risk, will be gutted by the Trump administration: (brackets and emphasis by the Wrongologist)
Because the FSOC is headed by the Treasury secretary…[a cabinet post selected]…by the White House, a Trump administration is unlikely to continue any of the council’s…priorities, including the designation of nonbanks or continued regulation of those firms already designated.
It is obvious that if this bill passes and is signed by President Trump, financial regulation will be relaxed, not by repeal, but through atrophy. Republicans want to replace any mandatory rules for regulation with discretionary ones. That way they can claim that theyâre merely improving the system by putting the decisions in the hands of the experts instead of members of Congress.
A next step will be to hire regulators dedicated to turning a blind eye to what the financial industry does. The chair of FSOC is the Treasury Secretary. Trumpâs candidates for Treasury Secretary include Steven Mnuchin, Trumpâs national finance chair and the most likely choice for Treasury, who sits on the board of directors of CIT, a financial services company with more than $50 billion in assets. The Treasury Secretary will ensure that the rest of the FSOC board is made up of regulators and presidential appointees who share Trumpâs laissez-faire philosophy.
President Obama will veto this bill if it passes the Senate before January 20th. But the Republicans plan to roll it out this week, instead of waiting for Trump to enter the Oval Office. They want to gauge just how much backbone Democrats have after their thumping in the election. More from Dayen:
This is really a moment of truth for those Democrats. If Republicans put up a big bipartisan vote in the House for this, the Senate will be more inclined to try to pass it down the road. And it will serve as a test case for Democratic resolve more generally.
Wall Street-friendly Dems have already endorsed tailoring Dodd-Frank rules to eliminate smaller regionals from the rules. This bill is a big change, and the question is whether Democrats play ball with Trumpâs deregulation agenda, or will they recognize the harm it will cause?
This is an early test for those Dems whose seats are at-risk in 2018 and 2020.
Financial deregulation has rarely been a partisan political matter. Democrats and Republicans have typically worked together to roll back rules and loosen up the Wall Street casino.
HR 6392 could represent a return to those times, or it could be the moment when Democrats join together and say ânoâ, forcing Republicans to support the banking industry agenda on their own.
Party line resistance by Democrats could be in their longer-term best interest.
When we think of entrepreneurs involved in renewable energy, usually just one name comes to mind, Elon Musk, a smart guy who has given Tesla a new meaning. He just merged Tesla with Solar City.
But smart entrepreneurs in solar are emerging. The NYT wrote yesterday about Nicholas Beatty, a former banker who has covered about 25 acres of his farm in England with solar panels. This isn’t a new phenomenon, lots of farms have solar arrays both in the UK and elsewhere, most of which also use Rooftop Solar Forecast software to plan and manage energy use around solar intermittency:
What’s new in Mr. Beatty’s field is a hulking 40-foot-long shipping container. Stacked inside, in what look like drawers, are about 200 lithium-ion cells that make up a battery large enough to store a substantial portion of the electricity the solar farm puts out.
The battery and its smart software give Mr. Beatty an advantage over other solar panel farmers. Power prices rise and fall depending on the supply and demand. The spread between the high and low price can be dramatic. By storing power in the battery, Mr. Beatty can feed it into the grid when prices are high:
The battery effectively takes power off the line when there is too much and puts it on when there is too little…
Farmers, business owners, and homeowners looking to install a solar power system for their own energy needs and uses may want to consider the services of Gietzen Solar to help set this up.
Improved industrial-sized batteries are a way of achieving that flexibility. Mr. Beatty’s battery storage system cost about $1 million, but could increase revenue for his solar farm by as much as $250k per year. Beatty is one of many entrepreneurs and businesses trying to play the fast-shifting electric power landscape. This is a capital-intensive business:
With about a dozen friends and family members…he spent ÂŁ6.5 million ($8 .1 million) to build the solar farm in 2014. The solar panels…generate about ÂŁ650,000 ($810k) in revenue a year…
Improved battery storage and its smart controlling software has been one of the two pillars required to make solar power competitive with non-renewable energy sources, you could definitely say that this is a case where the question Deep Cycle Versus Shallow Cycle Solar Batteries comes into play. The other is the cost of solar panels. Tesla has been working on both axis. They have built a solar demonstration project on the island of Ta’u in American Samoa that generates 1.4 megawatts of energy. The microgrid has 60 Tesla Powerpacks, the company’s large commercial battery with 6 megawatt hours of battery storage. These batteries can be fully charged with only 7 hours of daylight from 5,300 solar panels.
The microgrid facility can fully power the island of 600 residents for 3 days on battery power. It is expected to save the island 109,500 gallons of diesel per year or $8 million in fuel costs. Ta’u previously relied on diesel fueled generators for power.
Cost of solar energy per kilowatt or megawatt hour has been uncompetitive for a long time, but that is changing. And most countries and most US states now are willing to purchase power from independent generators, like Mr. Beatty in the UK. Many in the UK, including in locations like derby, are following suit and investigating how they can benefit from installing solar panels to their properties and harness the renewable power of the sun for themselves. The Economisthas this chart of the relative costs of sources of energy:
All of this means that American farmers could open a new revenue stream by becoming smart solar power generators. Farmers own large acreage in sunny locations. They have a deep understanding of farming, another capital-intensive business. They understand that farming is a climate-dependent enterprise, another factor in common with solar power generation.
A key factor is whether their state allows interconnection with the power grid, and whether the state’s program to pay the independent power generator for power sent to the grid at an economic rate.
Let’s hope that Donald Trump’s fascination with coal doesn’t lead to bad policy. The Economist reports that Trump has promised to make more public land available to miners; but access to coal reserves isn’t their problem. Coal employment peaked in the 1920s, and today, fewer electric utilities want to use coal. If he intervenes on behalf of coal, he will be actively handicapping renewables and natural gas. If Trump’s energy policy is focused on a few unprofitable coal-mines, China will take a commanding lead in batteries, solar panels and wind turbines. That wouldn’t be so smart.
We are at a time when the cost of solar energy has dropped dramatically, and with greater economies of scale, it will fall even further.
It is past time for a few smart entrepreneurs to take up the disruption of the fossil fuel industry and its fellow travelers, the electric utilities.
