Saturday, June 16, 2018

Is there a New Classical Liberal Movement?

Dan Klein forwarded this Politico piece by Phillipe Huguen/Getty.  It suggests that there is a new, emerging  "classical liberal" (as opposed to "conservative,"  "libertarian," "progressive,"  or 1940s "liberal") movement.  Classical liberals favor free speech and limited government. Sounds good to me.  Huguen/Getty suggests that the classical liberal movement may  parallel the conservative movement of the 1950s, which spawned Barry Goldwater's candidacy only a few years after its founding.  

Gold and VIX Fall in Response to Trump Tariffs

Gold broke down on Friday, falling to 1279 from about 1300.  Some technicians were calling 1280 critical support. What puzzles me is that it fell on the same day that Trump announced $50 billion in new tariffs and China announced $50 billion in response.  Tariffs are disastrous; trade wars are worse.   I would have thought this news would spike gold, but it had a reverse effect. 

I looked at the VIX, the one-month forward volatility indicator, and it fell by 1.16% in response to the announcement of a trade war.  What? The announcement of a trade war led to less volatility? Sometimes the announcement of news causes a reverse result when insiders have been trading in anticipation of the announcement. Then, they sell on the news.  That may have happened here, but it still seems strange. Another possibility is that Mario Draghi, head of the European Central Bank, made dovish remarks about ECB interest rate policy, causing the euro to fall against the dollar. This has short-term bearish implications for gold, which often goes in the opposite direction to the dollar. Low European interest rates may fuel demand for US stocks.

Whatever the reason, the decline in gold and the VIX both suggest a market sentiment that risk in the dollar and in financial markets are falling despite a trade war with one of the largest holder of dollars.  As I've previously blogged, the massive monetary expansion of the Bush and Obama years may have created a lengthy bear market in commodities. Lower interest rates means more funds are available for exploration, which means lower commodity prices. Eventually, the pendulum swings the other way as falling prices cause miners to go bankrupt.  Then, there is an explosion to the upside, as gold experienced in the 1970s and 2000s.

Still, a bloated stock market, a high dollar, significant Chinese dollar holdings, and the announcement of a trade war don't support a strong dollar, rising stock market scenario.  I'm puzzling over the apparent decline in volatility in response to the trade war news. Is the trade war a ploy or fake news of some sort?  It was announced on the heels of positive news about North Korea, which should have helped improve Sino-US relations.

If the VIX falls much more, it might be sensible to buy it in case of a sharp market fall at some point. I've made the decision to buy gold when it falls, even if that means to $200.

Heterodox Academy Open Mind Conference

I just returned from the first Open Mind conference of Heterodox Academy, founded by Jonathan Haidt. I've been involved with the academic reform movement for more than 25 years, and this meeting was a watershed, not least because of the large audience of academics from all over the country who have taken an interest in campus speech issues and political correctness.

Haidt's strategic and organizational skills are impressive. The meeting integrated important mainstream and left-wing academics into some manner of organized expression of concern about an issue that heretofore conservatives have dominated. There have always been Democrats involved in leadership roles of the academic reform movement, such as Greg Lukianoff of FIRE (who has just coauthored a book with Haidt) and KC Johnson of Brooklyn College, but this meeting was different, for Heterodox is a mainstream academic and even left-organized group.

Among the speakers were President Robert Zimmer of the University of Chicago; President Michael Roth of Wesleyan; and a former president of the University of California, Mark Yudof.

They also included Heather Heying, who had resigned from Evergreen State with her husband, Bret Weinstein, in a bizarre controversy. (Weinstein has received a $500,000 settlement from Evergreen.)  Alice Dreger, a professor who had resigned from Northwestern over a censorship issue, also spoke. Scott Jaschik, editor of Inside Higher Education, moderated one of the panels.

The meeting was held in an auditorium on the ground floor of the New York Times building. In other words, the New York Times has lent support to Heterodox Academy.

The speakers were mostly from elite institutions, with the exceptions of Angus Johnston,  a left-oriented scholar of protest movements, a public scholar, and an adjunct at CUNY’s Hostos Community College, and Heather Heying, with whom I had a conversation during the breakfast hour. There were several speakers associated with Yale, Haidt's alma mater, including Michael B Poliakoff, president of the American Council of Trustees and Alumni, and philosophy professor Jason Stanley.

Only a few of the speakers, like Robert George (founder of Princeton's James Madison program), were conservatives or libertarians. John McWhorter of Columbia (see his Atlantic article) made some comments that conservatives might like. ACTA's Michael B. Poliakoff also spoke.

There are strengths and weaknesses to organizing a higher ed protest movement from inside the higher ed Leviathan.  A strength is that the Republicans have dropped the ball on this issue, so reform from outside is unlikely in the short run.  A weakness is that this movement might forestall such reform. Moreover, many of the important failings of higher ed, such as the failure of higher ed institutions to do much in the way of real education, might get overlooked.

There may be a tendency to follow the mainstream Progressive patterns that led to political correctness in the first place. Insiders who oppose groupthink may offer Caspar Milquetoast prescriptions. It's not at all clear that moderate reform of some speech issues addresses what is required. 

Most of the speakers were on the obvious side of issues like opposition to shouting down campus speakers, but several said things like “free speech is just a justification for racism” and one or two defended shouting down.

I was skeptical of the degree to which President Zimmer painted Chicago as a center of academic freedom. I have no doubt that it’s better than most places, but I wonder what their D:R ratios look like, especially when you exit the economics department. (Illinois doesn’t provide voter registration information.) Also, although I had a pleasant conversation with Michael Roth before his talk,  I am skeptical that places like Wesleyan will become centers of free speech in the next 25 years.

That said, the brilliance of the movement that Jonathan Haidt and Heterodox Academy are creating is certain. Let's hope that great things will result.

Wednesday, June 13, 2018

The Politicization of Science

Heather MacDonald of City Journal wrote a frustrating but riveting piece about the cooptation of the National Science Foundation by the political correctness movement. It's not surprising, but MacDonald provides the gory details of the politicization of science. What have the Republicans and Trump been doing about this? My guess is nothing so far. (H/t Dan Elmendorf.)

Tuesday, June 12, 2018

Stock Buybacks and the Wisdom of Presidents

Steven Pearlstein of the Washington Post published an article that draws a parallel between the mortgage bubble of the Bush years and the current corporate stock buyback bubble, which to be fair began under Obama but continues under Trump. Pearlstein omits the biggest bubble of all:  the Obama bailout that sustained years of malinvestment in derivatives and real estate.  Also to be fair, the Obama bailout began under Bush but was ramped up.  At one point economists at the Jerome Levy Center at Bard College identified $29 trillion in subsidies to Wall Street; hence, Obama oversaw the largest subsidization of any industry in the history of the world.

Here is the wisdom of presidents, reflecting the democratic, Progressive genius of the American people:

Bush:  Have the Fed print lots of money and sell houses to people who can't figure out how to find a job. 

Obama: Have the Fed print lots of money and give it to Wall Street investors who can't figure out how to invest. 

Trump: Have the Fed print lots of money and give it to corporate executives who can't figure out how to innovate.

Monday, June 11, 2018

Public Opinion about the Fed

Pew has done an interesting opinion survey about the Fed. Pew finds that Democrats and leftists tend to like the Fed while Republicans and pro-freedom Americans tend to dislike it. The breakdown of the opposed-to-favor ratios is as follows. The omitted proportion is "don't know": Rep:48:39; Rep-Cons 54:33; Rep-Mod: 40:13; Dem: 28:57; Cons-Dem: 26:59; Left-Dem: 30:56. Overall, 37:47.
The Fed is among the most-entrenched federal institutions, yet the total difference is a mere 10 points (37:47).
The Fed is an institution that subsidizes the wealthy and those who do not work at the expense of those with moderate and lower incomes. It fosters corrupt, insider relationships among government, money center banks, and Wall Street. It has supported one bubble after the next, to include the Latin American debt crisis; the Hunts' cornering of the silver market; Long Term Capital Management; the millennial derivatives bubble; the ongoing stock, bond, and real estate bubbles; and a whole slew of other kooky bubbles and mistaken economic policies. Leftists like the Fed because it permits ongoing indebtedness to subsidize welfare benefits. Rockefeller Republicans like it because it subsidizes and bails out their incompetent investment decisions.
Unfortunately, though, American indebtedness is now in excess of 105% of GDP, and Social Security will be 25% underfunded in 15 years. Sooner or later the debt bubble will burst, and Americans used to welfare will suffer because of the left's good intentions. The left has always had a taste for gambles that lead to mass suffering, and we will see that outcome again, although I doubt that we will see the mass murders of Cuba, the USSR, and the PRC. Rather, we will probably see some riots and mostly quiet suffering, elderly people eating pet food, and a reversal of the 180-year-old free market trend of lengthening life spans.
I also suspect that conservatives have trouble vocalizing these concerns because elite conservatives are in bed with elite leftists. The military industrial complex, for instance, receives support from the paper money system.