The United States’ Middle Eastern interventions have an unhappy history. In both Iraq and Afghanistan, the U.S. occupiers chose between possible “democratic” politicians and engineered for them to win elections. As a result, both countries indulged in an orgy of corruption as well as being wholly ineffectual against various terrorist groups that sought to remove U.S. domination. In the long run, both wars were lost, but only after the U.S. had spent trillions of dollars and thousands of U.S. lives, not to speak of hundreds of thousands of Iraqi and Afghan lives in a futile multi-decade occupation.

In Iraq, there was no alternative to this – other than staying out in 2003, which would almost certainly have produced a better outcome (or finishing the job in 1991, which would have opened up far more possibilities in a country then more recently downtrodden). The Iraqi King Faisal II had been killed in a 1958 coup and was the heir to a monarchy only 37 years old which had been imposed by the British using a Saudi chieftain – the ruling family had no connection to Iraq’s distinguished long-term history.

In Afghanistan, on the other hand, there was a clear and much better alternative available. Mohammad Zahir Shah (1914-2007), the King who had been deposed in 1973, had ruled for almost 40 years before his deposition and his reign was remembered as a period of peace and prosperity. He was also descended from the Barakzai dynasty that had ruled Afghanistan independently since 1823. Although in his late 80s when the U.S. invaded, he thus had both an excellent track record and full regal legitimacy. It was a crime against civilization that the loathsome George W. Bush administration was so besottedly committed to republicanism that it imposed fly-by-night, corrupt politicians over the only man who might have made a success of their occupation. Regrettably, such a restoration is growing ever more distant; Prince Ahmad Shah Khan, the King’s second son and oldest surviving male heir, died near Washington in 2024.

Mohammad Reza Pahlavi, (1919-80) Shah of Iran from 1941 to 1979 was a truly admirable ruler in a very unpleasant part of the world. Once he had got rid of the leftist coup-wannabe Mohammad Mossaddegh (1882-1967) in 1953, possibly with the help of the CIA, he embarked on a program of free-market economic reform, the “White Revolution” that trebled the living standards of his people, to a level far above the miserable secret police-ridden subsistence under which they have since suffered. He also positioned Iran deftly as a reliable ally of the West, yet one that worked to overthrow the cartel underpricing of oil that had persisted during the 1950s and 1960s through domination by the giant Seven Sisters oil companies, with their subservience to U.S. and European political wishes for cheap oil.

At its peak in March 1974, the global oil price rose to $12 per barrel, equivalent to a mere $82 today, based on U.S. inflation, only slightly below today’s elevated level, which has been reduced by the immense technological advance of fracking. In other words, the Shah, who was the principal force behind the 1973-74 rise, had restored an equilibrium to the world oil market that had been artificially suppressed by the greedy United States and Europe.

In the West at this stage, the Shah was regarded as an infinitely rich superman, an example of which is Punch’s pastiche job application by John Betjeman for the post of Iran’s Poet Laureate (by Ernest Sackville Turner (1909-2006) in the issue of March 27, 1974, still fondly remembered by me 52 years later):

Shahanshah! Anointed Reza! Prince upon the Peacock Throne!
Scourge of all the Grasping Nations! You can have me for your own!
Star of Shiraz! Lord of Meshed! Conquering Lion of Abadan!
If you need a new Court Poet, send at once for Betjeman!

Betjeman, the new Firdausi! Omar! Hafiz! Three in One!
Odes of every kind accepted, no commission left undone!
Mosques defended! Tombs befriended! References from Princess Anne –
Shahanshah, you won’t regret it. Give the job to Betjeman!

Betjeman (U.K. Poet Laureate, 1972-84) would probably have taken the Shah’s job; his annual fee for the U.K. Laureateship was £200 plus a butt of canary wine, thought good money by John Dryden (Laureate 1667-89) when he was appointed by Charles II, but sadly devalued by Betjeman’s time.

Inevitably the Shah overspent his country’s new riches on poorly managed infrastructure projects, the oil price fell back and by 1977-78 Iran was in crisis, with frequent violent demonstrations against the Shah’s rule. At that point U.S. President Jimmy Carter got involved; not only did he not back the Shah properly with U.S. military support, but he virtue signaled incessantly about human rights, and may well have conspired with the CIA to remove the Shah. Consequently, the Shah felt unable to subject the rebels to the “whiff of grapeshot” necessary to suppress them, but instead was forced out, to be replaced by Ayatollah Ruhollah Khomeini, (1900-89) who was welcomed by the New York Times with a fawning editorial “Trusting Khomeini” and named Time magazine’s “Man of the Year” in 1979. Ordinary Iranians have suffered ever since.

Democracy is a cultural construct. Even in the West, where it was invented, the one-man-one-vote version of it has a dreadful tendency to subject the populace to lengthy dark interludes of poverty, decline, repression or warfare when the electorate gets it wrong. In the Middle East, it has never worked, save as a fig-leaf of legitimacy for a lengthy period of authoritarian dictatorship such as that of Turkey’s Recep Erdogan (Prime Minister 2003-14, President, 2014 to today and counting). The U.S. attempts to impose democracy in Iraq and Afghanistan produced nightmares of corruption, bad governance and internal civil war. There is no reason to suppose that imposing a phony democracy on Iran would work any better, complete as it would be with corrupt “democratic” politicians with no legitimacy eager to steal their way to an early retirement.

Only where there is an active democratic tradition does it make sense to restore free elections. Even then, borderline cases such as Venezuela, where the only economically competent governments have been dictatorships, suggest that it is no automatic road to success. Venezuela’s economic management was atrocious well before Hugo Chavez was elected in 1998; its oil revenues provided endless slush funds for successive leftist governments and prevented a viable private sector from emerging (by making wage costs too high, for one thing).

Walter Bagehot (1823-77) in “The English Constitution” defined monarchy as the “dignified” part of the constitution, as distinct from the elected and administrative “efficient” part. That was not entirely true when Bagehot wrote it – Queen Victoria played a major “efficient” political role at several points in her reign – but it is truer now, although the British monarchy since Elizabeth II’s death has done its best to seem neither dignified nor efficient. In countries where the quality of government is lower, a monarch can play a more active role, training the elective politicians to serve the people rather than their offshore bank accounts. In terms of power, the ideal Third World monarch is a George III, politically very influential and able to dismiss unsatisfactory governments (such as the Fox/North coalition in 1783) but nowhere near absolutist.

In an ideal world, President Trump would restore the Crown Prince Reza Pahlavi to the Peacock Throne, helping him to design a constitution with a fairly strong but not absolute monarchy. Over time, the monarch could train the politicians, removing any that were damagingly socialist or super-corrupt, and then retreat to a more purely “dignified” status.

With the Persian/Iranian monarchy dating back under various dynasties to Cyrus the Great’s (600-530BC, Shahanshah 559-530BC) accession of power more than 2,500 years ago, it potentially has plenty of “dignity” to satisfy its populace. Like the British Royal Family, its history, buildings and pageantry can also provide a rich source of upmarket tourist revenue, a useful diversification from oil. (I wanted very much to go there in the 1970s, but alas revolution intervened before I became rich enough to afford the trip.)

The Iranian people should be allowed to grow rich and happy, and a restored monarchy is the best way to achieve this.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: Bring Back the Peacock Throne! appeared first on True Blue Will Never Stain.

We were assured in the 1960s and 1970s, when the shift from individual capitalism to institutional capitalism was taking place, that it would all be for the best. Responsible well-trained institutional investors would take the place of individual investors who had neither the time nor the skills to monitor their investments properly. Through institutional investment managers, corporate top managers would be held to account and compelled to act in the best interests of shareholders, who would be represented by institutional investors with the voting power and specialist skills to monitor management’s policies and activities and propose changes where they were needed.

Like many such theories, this turned out to be bunkum. The bureaucrats managing the institutional money had far more in common with the bureaucrats managing large corporations than they did with the individuals whose money they were managing. Naturally, a confluence of sympathy rapidly became a confluence of interest. Institutional investors consistently underperformed the stock market indices, because the focus on institutional investor performance only resulted in the ousting of a bureaucrat-investor when he grossly underperformed the broad mass of investors. Hence sheep-like behavior, in which institutional investors buy what is fashionable and follow the herd, became almost universal, resulting in the over-funding of the popular (for example, electric automobiles) and the underfunding of the unfashionable (for example, emerging markets).

This market pathology became worse with the emergence of index funds, in which no investing intelligence was required, beyond the simple mimicking of an index that had been constructed by somebody else. (The construction of the indices required decisions to be made; the motivations for decisions on which companies are included in a given index have always been murky and may in some cases represent corruption and malfeasance.) Such funds can be guaranteed to match the market, subject only to a generally small tracking error – which since institutional investors and investment advisors consistently underperform the market, makes them attractive to retail investors seeking a decent return, ideally combined with sleep at night.

The problem is that, to the extent they become a substantial part of the market, indexed funds remove any pressure at all from the companies in which they invest, allowing the bloating of bonuses and the grotesque proliferation of stock options that increase investors’ costs, reduce their returns, and make corporate management not merely bureaucrats but overstuffed bureaucrats following leftist political fads without regard to their effect on their shareholders.

You may well ask how I exercise my rights of corporate governance as an individual shareholder with time to manage my modest portfolio. Well, I freely admit I do less than I possibly should (but then my holding is never more than about 0.001% of the outstanding shares, if that). I don’t check the criminal records of those put up for Directors but vote them all through indiscriminately. I never care a scrap which one of the Big Four auditors is selected to audit the accounts, and I am positively pleased if one of the next tier of substantial and perfectly respectable firms is chosen instead; it may be a sign of intelligence in management, and it at least takes us beyond the auditing oligopoly. Only if an auditor is chosen of whom I have never heard, or who was responsible for an auditing disaster in one of my other companies, may I vote against adopting them and at least dig a bit to find further information.

As an investor I become the scourge of management in several areas. One is woke DEI and environmental initiatives, which I vote against without fail, since I assume they are a sign that management is putting their left-wing views ahead of shareholder returns. I also always vote against share repurchase plans, if I am given the option; they are a ripoff of shareholders, and managements worldwide have shown themselves unfit to be trusted with them – they always buy at excessive prices, then are forced to issue shares at much lower prices in the next downturn. Finally, while I look at management compensation and vote in favor if it looks reasonable, I always without exception vote against stock option schemes, which I regard as rewarding management to dilute and destroy the interests of long-term shareholders.

I also watch the company news closely, and if I think management are cheating the shareholders or doing something stupid, I sell immediately. In that sense, I am an active shareholder, though generally if management appear sensible and honest, I do not panic in the inevitable share price downturns, because I recognize that things can go wrong without it being management’s fault, and they should be given time to come right again. I am probably more likely to sell if the market for the shares goes mad and drives their price up to ridiculous heights, because too expensive is too expensive, however good the company and its management.

A society in which almost all money is institutionally managed, or worse still not managed at all, is akin to the EU, in which essentially all opportunities for survival require working either for the government or for a behemoth corporation in which management is remote and employees have no control simply because of the laws of large numbers. When the EU says it wishes to be a “regulatory superpower” it is demanding the removal of agency from all private sector entities, except those that obey the ruling bureaucracy’s bidding.

Index funds and ownership through institutions that are in the pocket of behemoth companies has the same effect; there are almost no mechanisms by which the free market’s price signals can be brought to bear to improve economic decision making. If this corporatist, institutional, over-regulated capitalism is our future, we will in the long run be very little better off than dwellers in the old Soviet Union, with no President Reagan to show us the way out of eternal economic and political decline.

The solution is structural. As far as possible, we must revert to a society in which capital is controlled by leisured country gentlemen, only some of them genuinely wealthy, who hold shareholdings directly, not through institutions, and who have the time and inclination to inquire properly into the investments they hold. In this respect we have one enormous new help: AI models, which can be used to search through all available information on a company, report back on what is salient to our investment decision and, if we wish, recommend a course of action — sell, buy more, vote against the Directors, vote down the woke initiative or stock option scheme, etc. Naturally, each “country gentleman” investor will need to instruct the AI of their general views on such matters, their investment priorities, etc. but as a new generation arises for whom AI is a well-known tool, this should become no problem.

With AI’s assistance, individual investors with modest portfolios will have time to take their own investment decisions and vote their shares according to their investment and political preferences. AI will elevate the abilities of ordinary laymen at least to the level of the average institutional investor, without the conflicts of interest and pressures from corporate lobbyists from which such institutional investors inevitably suffer. It will no longer be necessary for the individual to buy an index fund or to entrust his affairs to a pernicious and expensive “advisor” – with the assistance of AI he will be able to make his own investment decisions, as did his ancestors. And if on occasion he wishes to attend a shareholders’ meeting and harass management, he will be able to do so remotely, without having to travel to rural Idaho, or wherever the company has arranged to hold the AGM to avoid its shareholders.

With people saving for their own retirements, they generally accumulate a substantial “pot” of investment capital by the time they are 55 or 60. By managing that pot themselves, they will bring the performance pressure on managers that is needed to make the capitalist system function properly. And over time, the dozy, often corrupt corporate behemoths with their overpaid managements will be out-competed by smaller and more intelligent companies, who no longer have to rely on their connections with government and the big institutions, but can attract capital directly from “country gentlemen” investors.

Eighteenth century capitalism was true capitalism, just as eighteenth-century country gentlemen were truly independent gentlemen, rendered so by their capital and fully equipped to play an active role in politics and society. With fewer people and greater wealth, we will all be able to approach the country gentleman ideal. We must structure our policies and lives to do so!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: The Joys of Active Ownership appeared first on True Blue Will Never Stain.

Japan endured more than 30 years of relative decline before its fortunes began to turn early this decade. In 1990, at the peak of its bubble, Japan had GDP per capita of $25,810 compared to Britain’s $20,913, the United States’ $23,848 and Singapore’s $12,763. Alas, those figures are nominal and thus do not take account of relative living costs which were very high in Japan then. On the same nominal basis in 2026, Japan was at $36,391, Britain at $60,011, the U.S. at $92,883 and Singapore at $99,042. In other words, over the last 35 years Japan has done even worse than Britain; whereas it was leading the United States in 1990, it is now below half the U.S. level.

The above numbers naturally need to be taken with a large pinch of salt. Singapore’s position is overstated because it is home to many tax haven companies, who employ few Singaporeans but contribute heavily to GDP – Ireland’s figures are subject to the same distortion, while paradisical Liechtenstein and gambling-hell Monaco rank even above Singapore in GDP per capita. Also, exchange rates have a considerable effect on GDP per capita that I do not entirely understand. Japan’s GDP per capita figures in the early 1990s are distorted by a strong yen above 100 to the dollar, whereas its current figures are depressed by a weak yen below 150 to the dollar, with the yen having fallen by a third against the dollar even though Japanese inflation has throughout been below U.S. inflation. Still, the distortions are not so great as to destroy the qualitative picture, merely modify it.

Traditionally, Japan was always richer than its neighbors. At the Meiji Restoration in 1868, Japan’s living standards were about double those of its neighbors China and Russia, although well below the richest countries in the industrialized West. The disaster of World War II set it back badly, to a level even below that of postwar Germany, but it should not have been a surprise when after 1949 Japan’s economic growth ran at 10% per annum and its living standards soared, converging rapidly on those of the industrialized West.

In the 1980s the Japanese economic miracle began to go wrong. The endless run-up in the stock market over-financialized the economy, producing an equivalent run-up in Japanese real estate prices, so that ordinary people resorted to tactics like the 100-year mortgage – Londoners of the last couple of decades will know how they felt! I was in Japan several times during those years, and I was struck both by the over-sophistication of downtown Tokyo (my New York colleagues loved it!) and by the relative backwardness and poverty everywhere outside the city centers.

I have since discovered that this repeated a previous pattern, from the “Genroku” period of 1688-1704, and that the great Shogun Tokugawa Yoshimune (1684-1751, Shogun, 1716-45) had solved the problem by re-orienting the economy towards rural areas. Instead of ostentatious display by over-rich big-city merchants under Yoshimune there appeared an entrepreneurial rural economy in which the father of Eiichi Shibusawa (the greatest company-creator in Japanese history) had, as a peasant farmer before the Meiji Restoration, made his family quite well off by wholesaling indigo balls, used in textile dyeing – Shibusawa himself got his start as an indigo ball salesman for his father.

After 1990, the financial crash de-financialized the Japanese economy, bankrupting many banks and companies and removing the excesses in house prices. Today, house prices in Japan are quite reasonable by Western standards, although it must be remembered that in Japan with its frequent earthquakes, houses are smaller and flimsier than in the U.S. and are expected to fall down after 20-30 years and be replaced with new buildings. The gradual decline in Japan’s population and the restrictions, formal and informal, on immigration, are helpful here also – there is no excess pressure on the housing stock as in the urban West with its tsunami of legal and illegal new entrants.

Alas, since 1990 Japan’s crazy adoption of the fallacious nostrums of Ben Bernanke and Maynard Keynes has led the economy to three decades of stagnation, with zero interest rates, public debt above 250% of GDP and the stock market’s Nikkei 225 Index in early 2020 still below half its 1990 peak in nominal terms. For most of this time, the yen was thoroughly overvalued, above 100 to the dollar, so the stagnation and deep recession was partly imposed from outside.

Even in their own terms, the Bernankeist monetary policies did not work; a stock market that in 2020 was half its level of 30 years previously was killing, not stimulating economic activity. Instead, the excessive encouragement of unsound debt, government and otherwise, and lack of reward for equity investment condemned the Japanese economy to decades of stagnation. It would have been much better, when Junichiro Koizumi after 2001 attempted to get the government budget under control, to accompany that with a freeing of interest rates, so that the giant sucking sound of resources into the public sector was stemmed or ideally reversed. By doing so, Japanese policymakers could have revived the private sector after a recession that, while unpleasant, did not take up so grotesquely large a fraction of people’s lives.

A 2007 Japanese movie “Bubble Fiction: Boom or Bust” well illustrates the effect of the Bernanke-prolonged recession. The young heroine is unemployed (until she time travels back to 1990 in a washing machine invented by her mother, who works for Hitachi) and the promising Long-Term Credit Bank trainee of 1990 has been reduced in 2007 to debt-collecting for the yakuza. Regrettably, the film’s solution of encouraging the 1990 real estate bubble still further and spending yet more borrowed money on fancy infrastructure was precisely the reverse of what was needed. You can’t expect film-makers to understand economics, even though they portray its effects memorably!

That is now changing; with the Nikkei 225 at 57,000 almost 50% above its 1990 peak, interest rates safely above zero – the Japan 10-year bond today yields 2.12% — and modest growth and inflation already reducing the overhang of public debt to around 230% of GDP. A stimulative right-wing government, clamping down on immigration so that Japanese real estate prices do not form another bubble and productivity growth is encouraged, is just what the economic doctor ordered. In an ideal world, that government would take the Yoshimune approach, seeking to emphasize small-scale and rural development since Tokyo is already too big and even in Japan with its people’s unique approach to life, we cannot expect all the necessary innovation and entrepreneurship to come from within corporate giants, however well-run they may be.

Now what is needed is deregulation, removing all the impositions of the “climate change” scam and other economic drags imposed by international bureaucracies. The only one of Takaichi’s stated policies that must be avoided is a burst of public spending, or yet more superfluous infrastructure – growth will make the fiscal position come right, both by increasing revenues and by increasing the GDP denominator of the debt to GDP ratio, but it needs time to do so. Meanwhile, the Bank of Japan needs to keep increasing interest rates to the 3-4% range, to prevent re-financialization and new bubbles as the stock market continues to surge.

Historically, Japan achieved its higher living standards by superior technology and discipline – in the 1860s, the country bred over 200 varieties of silkworms, producing a far greater range of silks than was available in the West or even China. Those virtues still exist – Japan is the world leader in robotics, a technology infinitely combinable with the U.S. superiority in AI. Given that superiority, low immigration and moderately decent policies will cause Japan’s rapid rise in living standards to resume, quickly overtaking the pathetic laggards of Britain and the EU and making progress towards the heights of the U.S. and Singapore.

Singapore, in contrast, benefited from two supremely good leaders, father and son in Lee Kuan Yew (1923-2015; prime minister, 1959-90) and Lee Hsien Loong (1952- ; Prime Minister 2004-24) who followed basically the same philosophy of low-tax free market development, albeit with strong government guidance as in Japan. Singapore saw itself as an open trading nation, so avoided the policies of import substitution that held back so many Third World countries. Then after 1990, and the Asian financial crisis of 1997-98, it managed to avoid a visit by Ben Bernanke, and so avoided the zero interest rates, money printing and debt expansion that infested most Western countries. As the most stable country in the region, it has become a major financial center, not simply for investment bank “deals” but for international fund management, a more important business in today’s global economy. It has also tightly controlled immigration in terms of quality, although its current population of 6.1 million and its extensive office, logistics and retail developments strain the real estate markets of a small island.

I am an enormous admirer of Singapore, but without the Lees, father and son, it may slip back somewhat in relative living standards. Japan, conversely, seems certain to advance rapidly under Takaichi, fueled by its high-tech capability. It was well ahead of Singapore in 1990; for it to return to that position would essentially require it to run the last 35 years’ developments in reverse which, absent washing machines that can move through time, seems unlikely. But as the disclosure below notes, I would bet on either Japan or Singapore ahead of almost all Western countries or indeed China.

Disclosure: I have moderate portions of my investment portfolio in Japanese and Singapore shares (Japan somewhat larger), as well as in other parts of Asia.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: Will Japan become as rich as Singapore? appeared first on True Blue Will Never Stain.

Marconi, from a well-off Italian gentry family, had picked up the basics of University of Karlsruhe professor Heinrich Hertz’s (1857-94) 1886 discovery of “hertzian” radio waves in his local library in Bologna. There he had also read in a scientific journal about University College, Liverpool professor Oliver Lodge’s (1851-1940) June 1894 presentation at the Royal Institution. He then staved off his father’s increasingly urgent suggestions that he join the Italian Navy and spent eighteen months in the grounds of his family’s country house refining Lodge’s invention, so that it had a practical use in transmitting Morse code signals over a distance without a wire connection.

Once he had successfully transmitted Morse code a mile over a local hill, he went to London with his well-connected Irish mother, got an introduction to William Preece (1834-1913) chief engineer at the Post Office, also without a university degree but theoretically responsible (thanks to idiotic Disraeli legislation of 1868) for all British telegraphs, wireless or otherwise, and with Preece gave a successful public demonstration at Toynbee Hall in December 1896. When the Post Office thereafter proved dilatory in taking up the idea, he was able to avoid that monopsonist institution, obtain a British patent and through a stockbroker relative float a company in July 1897. The rest is history, although Lodge and the combined British academic community made much fuss and many patent lawsuits attempting to prove that so great a discovery could not have been made by so unqualified a man.

Marconi’s lack of a university degree would have been irrelevant 50 years earlier – almost no university offered degrees in any science beyond pure mathematics. 100 years later, when credentialism was at its height, he would have been very lucky to have got any kind of hearing. In 1996, radio would have remained un-invented until some dozy college department realized there might be a practical use for it, or Marconi himself had worked his way through four years of a college degree and three of a PhD – say around 2003. Today, credentialism is still with us, but it is thankfully in decline.

In today’s world, the most important benefit of a college degree that takes four years and may cost close to $400,000 is as a signaling mechanism to the large prestige employers – Google, Facebook, Nvidia and the like – that you are a high-quality employee who can bear the unutterable tedium and drudgery of the average four year college STEM course. (In arts subjects, the tedium is equally bad but the drudgery is less, especially if you get ChatGPT to write your essays!) A generation ago, this made sense; the colleges selected almost entirely on merit and so if an employer selected a graduate of a top college, he knew he was getting the best. At a lower level, the same applied to graduates of state colleges and lower-rated institutions, except that a state college graduate with exceptional grades might have attended it for financial rather than ability reasons and be as good as any Ivy Leaguer.

This is no longer the case. Top colleges have taken to requiring all kinds of meaningless extracurricular activities from their entrants, most of which are designed to show if the student’s political affiliation aligns with that of the college administration. Various “affirmative action” policies, which prioritize rich members of minority groups over white and Asian applicants who may be much poorer, further distort the selection criteria away from merit. However, if the top college’s Admissions Deans are selecting based on non-merit criteria, and the college has “dumbed down” its classes so that almost all students get As provided they repeat the “party line” then a degree from a top college is no longer an accurate representation of ability, any more than it was in 1890, when top colleges took few non-aristocratic students. If large prestigious companies are still selecting primarily on the basis of Ivy League or equivalent degrees, they are now selecting sub-optimally and over time will fall by the wayside, overtaken by smaller, intellectually nimbler competitors.

Even the venture capital/private equity industry, which selects the best graduates of the top schools, has found its investment returns dropping below those of a simple index fund, as have the endowments of top colleges such as Harvard, Yale and Princeton. The “best of the best” at these institutions may well have been nothing of the sort, merely lucky enough and woke enough to be selected by the Admissions Office of their Ivy League alma mater and endowed with sufficient bovine conformity not to get thrown out of it.

Without college, fifty years ago it was impossible to acquire the necessary knowledge to specialize in anything near the frontiers of science. Culturally, the paradigm was a somewhat socially inept individual, clad generally in a white coat (even when his scientific activities did not require one) who worked best in a large team of similarly-clad, similarly-personalitied oddballs, managed by an MBA of far less intellectual ability. With the Internet and subsequent AI revolutions, this paradigm has switched; while many scientists still work in large teams doing the tedious coding work necessary to keep today’s mega-software operating and free from malware attacks, the people who make major advances are typically lone operators. As AI becomes more capable, it is the large teams who will be made redundant.

Marconi is an excellent example. He was only 22 at the time of the Toynbee Hall demonstration and almost entirely self-taught, although he had received a little private tutoring from local physics professors in Bologna. It is not given to all of us to be born into a wealthy landowning Italian family, with British connections also. Yet a Marconi today would not need private tutoring; courses in whatever he wanted to learn would be available to him from various online vendors. His sources of information, like those of all of us, would also be more or less infinite, not constrained by the resources of a provincial town like Bologna, the first university in Europe in 1088 but by 1896 a medium-sized city of only 150,000 population. Peter Thiel was the first to recognize this new paradigm, setting up in 2011 his “Thiel Fellowships” available to those who drop out of college to pursue “ambitious, innovative projects.”

With modern online learning available, the cost-benefit equation of university attendance has changed, especially for those of exceptional intelligence and non-leftist belief systems. As governments have idiotically attempted to push higher and higher percentages of their populations through college, the intellectual quality of those colleges has inevitably declined. For the top 1-2%, especially those sufficiently motivated to put themselves through a directed course of learning from online sources, college is not intellectually stimulating. If in addition his college has an active DEI culture, it may suppress a top student’s ability to express his own beliefs as he develops them.

In a healthy capitalist economy, the most interesting opportunities are not with the big companies – Google, Facebook and the like – however fashionable they may be. Nor are they in government – heaven forbid – or in the myriad of institutions, success in which depends on office politics and an ability to adhere to the fashionable norms of the day. The best opportunities will not all lie in entrepreneurship either – not everybody is well suited for that perilous road. Nevertheless, steering clear of the big battalions, whether the fashionable employers or the “best” colleges is probably wise for anyone with intellectual integrity, access to a modest minimum of resources and sufficient determination to overcome life’s difficulties, whatever form they may take. Obeying instructions from a boss with inferior abilities is soul-destroying – trust me, I have endured it – and if you are any good you will be fired in the end, anyway.

Colleges are pretty useless for people with such ambitions, and those people are increasingly coming to recognize this. Given that recognition, and the top colleges’ extortionate cost, the demand for colleges will evaporate fairly quickly, and they will therefore shrink or disappear – their endowments, however huge, are not sufficiently well managed as to save them.

If we are lucky, Guglielmo Marconi represents our future!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: The Incredible Shrinking Colleges appeared first on True Blue Will Never Stain.

Ben Bernanke (Fed Chairman, 2006-14) put three policies in place that have bedeviled U.S. monetary policy ever since. First, he began the policy of quantitative easing “QE”, that exploded the Fed’s balance sheet to a peak of $9 trillion from around $800 billion in 2007-08. After years of tepid efforts at “quantitative tightening” those policies have left it at $6.6 trillion, and expanding rather than contracting as Fed Chairman Jerome Powell has reinstituted a QE program.

Second, Bernanke in 2008 dropped short-term interest rates to zero, where they had never stood before, and kept them there or thereabouts throughout his term of office, as did his successor Janet Yellen (2014-18). In consequence, since the U.S. inflation rate remained positive throughout, real interest rates were negative throughout the 2010s, long after the worst of the recession was past.

Third, in 2012, Bernanke instituted a Fed inflation target of 2%, claiming on the evidence of 1930-33 but ignoring that of 1873-96, that deflation was uniquely economically damaging. He had some precedents for doing this – New Zealand’s Fiscal Responsibility Act of 1994 was the first to set such a target, although it mandated the Reserve Bank Governor receive pay rises of 2% minus inflation, which effectively set the inflation target at 1%, since the Governor did not want to become steadily poorer! In any case, as this column has remarked, Bernanke’s 2% target for U.S. inflation was directly contrary to the Humphrey-Hawkins Act of 1978 governing the Fed, which mandated that the Fed pursue price stability, which by definition means a zero inflation target over the long run. Whether or not the Fed hits that long-term average, it must pursue it.

Bernanke’s policies have proved enormously damaging to the U.S. economy in three ways, and that damage is mostly still continuing. His zero interest rates policy, making real rates negative, made unproductive real estate investment irresistibly attractive and produced such excrescences as New York’s “pencil towers,” residential structures of huge height, ultra-thin footprint and shoddy construction, that you could not pay me to live in – it has also by diverting capital to such rubbish suppressed productive investment. As Austrian economic theory sternly mandates, this superfluous “malinvestment” must be demolished before the economy can regain full health. The only saving grace is that since the inflation spurt of 2022, the Fed has kept interest rates above the inflation rate, so this damaging Bernanke policy is not currently wreaking further havoc, although if Trump gets his wish of 1% interest rates without a reduction in inflation, it will start laying waste to the economy again.

Bernanke’s policy of buying Treasuries and housing agency bonds in large quantities through QE has left the Fed with large running losses and $240 billion in negative capital, as the bond investments were made at the foolish artificially low interest rates of 2010-21. While the recent declines in interest rates have brought the running loss close to break-even, there is no plan to eliminate the accrued deficit.

More important, this policy has subsidized government budget deficits since 2010, resulting in the Federal deficit rising to around $2 trillion per annum. It also appears to have suppressed productivity growth in the economy as a whole, as unproductive (government) or fairly unproductive (mortgage debts) assets are given special treatment. Finally, it has allowed the banks to make around $2.9 trillion of interest-bearing Fed deposits (to fund the Fed’s portfolio) which yield them a wholly unearned profit and block their balance sheets from lending to small business, their proper economic function. The current “QE” policy must be reversed forthwith, the “quantitative tightening” policy of selling bonds and shrinking the Fed’s balance sheet resumed and the rate paid to banks on deposits with the Fed reduced to no more than 1%, thereby stimulating the banks to do something more useful with the money and allowing the Fed to make a modest profit and pay down its capital deficit.

It is however Bernanke’s third policy, the 2% inflation target, that has done most damage of all his policies, yet this policy would be easiest for Warsh to reverse. With an inflation target of 2%, which experience has shown is frequently missed, nominal interest rates must be around 5% for a neutral Fed policy, making real estate and long-term asset financing very expensive in cash-flow terms as well as increasing the cost of government debt. If Warsh were to reduce the inflation target to zero immediately, and put his credibility behind that move, interest rates would move within a period of 18-24 months to the level consistent with zero inflation, in other words in today’s market below 3% for long-term government bonds (long-term TIPS with inflation protection currently pay 2.6%). That policy will make yields decline, so creating a bull market of rising prices in long-term bonds, making it easier for Warsh to run down the Fed’s bond holdings rapidly, because the rising bond prices will attract buyers. President Trump will then be happy, the U.S. economy will be far healthier and more balanced, and ordinary people will be able to save for retirement in the secure knowledge that inflation will not erode their savings.

Apart from moving the inflation target to zero, which he can do easily, we know that Warsh has been very critical of the QE programs. Indeed his resignation as a Fed Governor in 2011 was partly caused by disagreement on this policy. He will therefore want to reduce the Fed’s balance sheet, through a program of QT. The problem with this is that the Federal Budget deficit is still so bloated that QT might cause a crisis in the markets (or might be engineered by the big banks to do so, a repeat of the same trick the Bank of England used against Liz Truss in 2022).

It all comes down, therefore, to productivity growth. If Warsh is right in seeing a sustained period ahead of 4-5% per annum productivity growth, then his problems solve themselves. The productivity growth produces output growth without inflation, extra revenue pours into the Treasury, and the Budget deficit shrinks as if by magic (provided Trump and Congress restrain themselves – no new programs or random giveaways, however tempting they may be)!

There is certainly a productivity boost coming; indeed it is already here in 2nd quarter and 3rd quarter figures – 4.9% in the 3rd quarter. You would expect that. Trump has already removed many of the Biden administration’s stupidest regulations, while returning to producing coal, oil and gas rather than windmills will increase productivity growth further, as well as relieving everybody’s electricity bills. The question is how long the productivity boost will last, and whether productivity growth will remain close to its current level of nearly 5%. AI may help in the long run, but it would be foolish to rely on that. Warsh at least needs a plan for policy if the productivity growth boost is not quite enough to solve all problems.

Since Warsh has promised Trump to avoid higher rates, and he knows the inflationary problems of reducing rates without a productivity “miracle,” his only solution will be for Congress and the Trump administration to get their act together and make substantial real cuts in the budget deficit. Tariffs help substantially (provided the Supreme Court is not so idiotic as to invalidate them) but the yield from tariffs cannot be more than about $400 billion a year. To get the Budget deficit down to $1 trillion, from which increased economic growth can reduce it to zero, another $600 billion in annual savings must be found. Trump may find this boring, and the Congressional Republicans may have got used to making no significant effort to cut spending, but the effort must be made. Warsh must exhort them and keep exhorting them. If they want ideas on how to proceed, they should ask Newt Gingrich. He made the necessary cuts, in 1995-99, before the sloppy leftist globalists of the George W. Bush administration combined with the pork-loving Speakership of Dennis Hastert to reverse Gingrich’s achievement.

Fiscal as well as monetary probity are needed. If Warsh can provide the latter and encourage Trump and Congress to make a better attempt than they have been making so far on the former, the United States’ problems will be solved, and Warsh will go down in history as a great Fed Chairman, worthy to rank with Paul Volcker and Bank of England Governor Montagu Norman.

But he must start with making zero the inflation target. On that all else depends!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: Will Warsh be the Anti-Bernanke? appeared first on True Blue Will Never Stain.

Amelia dresses up to meet Lord Liverpool

The former cabinet ministers Suella Braverman and Robert Jenrick’s defections to the Reform party suggest that the disastrous “Conservative” governments of 2010-24 may indeed finally be extinguishing that long-lived and very occasionally illustrious party. Yet Reform’s Nigel Farage has shown himself prone to the faults of the 2010-24 “Conservatives” in barring original thinkers such as his ex-colleague Rupert Lowe from becoming or remaining Reform MPs. With such leadership and structural flaws, neither party will regenerate Britain. That regeneration must await the arrival of the next generation, hopefully well represented by the splendid purple-haired Goth AI avatar Amelia.

For those not up on the twists and turns of social media, “Amelia” was developed by doubtless ludicrously overcompensated consultants at the behest of the “Squishy Rishi” Sunak British “Conservative” government for a roleplaying educational game “Pathways – Navigating the Internet and Extremism” in which she was an attractive “Goth” girl with purple hair who expounds views held by Hackney-based consultants to be “far-right” and is thus an Antagonist. As anyone with the intelligence of a hamster could have told them it would, this backfired.

Amelia is naff but rather a hottie (possibly especially to those from my 1960s teenager generation) and her views are in general platitudinously obvious – not Enoch Powell’s “Rivers of Much Blood” or anything of the kind. The fact that Amelia has become a social media hit is down to the policies of all British governments since 1997 attempting to cover up their failure to act in the interests of their electors by using the police to arrest and even imprison those citizens who express views that dissent from leftist orthodoxy.

Before 2006, we could have hoped for a Conservative government to save us from this tyranny imposed by Tony Blair’s Labour government, but it has been obvious in the last two decades that “Conservatives” are as likely to intensify the censorship as to remove it, as they should. On immigration also, “Conservative” governments have talked of restricting the flow, at least of illegal immigrants, but have done nothing of the kind – the final betrayal was the “Boriswave” of illiterate alien predators that followed Johnson’s “reform” of immigration rules from January 2021.

As I have pointed out previously, there is a structural reason for this. The first sign that things were going drastically wrong was Michael Howard’s disgraceful defenestration of the brilliant Shadow Chief Secretary of the Treasury Howard Flight (R.I.P.) before the 2005 election, when Flight’s constituency was forced to “deselect” him. As part of David Cameron’s pernicious “modernization” project after he gained the party leadership that year, the partial control over candidate selection by Conservative Campaign Headquarters (CCHQ) became effective total control. No candidate is eligible for selection by a local constituency party who has not undergone a rigorous ideological weeding out at CCHQ, the panels at which are uniformly metropolitan and fashionably “woke.”

Before 2017, women and candidates from ethnic minorities were given preference as such, so partially evaded this control, which is why we got the somewhat conservative Suella Braverman, Priti Patel and Kemi Badenoch as “Conservative” cabinet ministers. Since the 2017 election that loophole has been closed, so minority women “Conservative” parliamentary candidates must now perforce be as “woke” as blond Aryan candidates with faint German accents.

It appears that Farage has structured Reform to impose the same central party headquarters restrictions on ideological diversity. Certainly, his defenestration of Rupert Lowe, by far the most creative thinker among his modest group of MPs, was indefensible. Lowe appears to be the best chance we have for some genuinely creative policymaking on the right of politics. (Sir John Redwood and Jacob Rees Mogg performed the same function in the “Conservative” party, and Redwood at least should have been a senior member of every Conservative cabinet since 1990, if not Prime Minister, but they are now both out of Parliament.)

Without Lowe, beyond his continuing support of Brexit, for which we should be forever grateful, Farage has shown a dreadful tendency towards ideological policing of his colleagues. If he has set up the Reform Party headquarters to have the same control over candidates as CCHQ, a Farage government will be identical to the 2010-24 “Conservative” governments and a complete disappointment, surrendering always to the Blob and making no progress on rectifying Britain’s problems.

Britain cannot afford another “Conservative” or Reform government dominated by the center-left; too much damage has been done. The 2010-24 government was a grotesque failure on immigration, but its malfeasance was not confined to that issue. Boris Johnson travelled specially to Ukraine in 2022, encouraging the Ukrainian dictator Volodymyr Zelenskyy to reject the peace deal with Russia then being negotiated, a trip that has resulted in a re-run of World War I’s Western Front for four years and over 1 million dead, Ukrainian and Russian. Theresa May made attainment of “net zero” carbon emissions a legal requirement. That has doomed the British economy to decades of high and rising energy prices, all in pursuit of what is now quite clearly a leftist scientific hoax by which no competent statesman would have been fooled. But then Oxford University, from which May and Johnson graduated, is especially weak in science. Finally, the 2010-24 governments, after a feeble attempt at “austerity” in their early years, indulged in an orgy of public spending, succumbing to every alarmist fallacy relating to the COVID-19 outbreak (the lack of science, again) to damage British civil liberties and waste incredible amounts of money, much of it through fraud.

Reform, on the basis of its first couple of years, seems likely to be no better. Farage is a brilliant salesman, but also a pathological control freak, who does not tolerate rivals like Lowe, and is all too tolerant of other well-spoken value-free encyclopedia salesmen like Robert Jenrick. With such people in charge, and access to winnable Parliamentary seats tightly controlled, there will be no access to power for those who have good ideas or might otherwise offend the woke Blob, any more than there was in 2010-24. More time will go by without proper root-and-branch policy reversal, as the country slides ever more deeply into the despond of multi-ethnic socialism.

That’s where an Amelia Party comes in. An Amelia Party, being rooted in Amelia’s sound British common sense, would never have been fooled by the “climate change” scamsters, so Britain would have North Sea Oil and no windmills. An Amelia Party, while sensible and moderate, would solve the immigration problem once and for all by slowing to a trickle the flow of random foreigners into an already grossly overcrowded island. That would itself solve some economic problems, such as the grossly overinflated cost of housing and the lack of resources in the National Health Service. An Amelia Party would not start any foreign wars, since it would not be able to find Ukraine on a map (and would take a pragmatic view of Ukraine’s Eastern boundary, when it found out the current boundary was set by Kaiser Wilhelm II in the last gasp of approaching defeat by the Treaty of Brest-Litovsk of March 1918).

An Amelia Party would allow full freedom of speech, since Amelia herself is an icon of that belief. However, it might engineer say a 2-year extension of present restrictions, but reversing their effect, so that the BBC (which Amelia would defund, abolishing the license fee, finally) could not propagandize the electorate against her before her policies were in place — “hate speech” during that period would be defined as that which showed hatred of ordinary native Britons. Naturally, an Amelia Party would deregulate, since Amelia would correctly believe that regulations are instruments of oppression devised by the over-educated against the prosperity of ordinary people.

Finally, all we need is a Svengali, who would persuade the young and impressionable Amelia to follow the economic policies of Lord Liverpool, that brought the first great wave of British prosperity and entrepreneurship. With such a Svengali, government would be cut back far more radically than in even Elon Musk’s DOGE dreams – if it was possible for Lord Palmerston to run the Foreign Office with 36 staff, at a time when Britain ruled a quarter of the globe, it should be possible now in her much reduced state.

Since Amelia’s foreign policy would be isolationist, there would be little need of massive defense forces. The substantial social security bureaucracy, so oppressive to all with whom it comes in contact, would be effectively removed. Agriculture subsidies would be abolished, and replaced by Corn Laws, which would protect British agriculture only if it was economically worth protecting. Tariffs would be instituted, and as far as possible government would be financed through tariffs and sumptuary taxes, so that ordinary people of limited means would pay very little tax. Finally, income tax would be sharply reduced to a low flat tax, with little or no need for form-filling.

There are ways to run Britain properly. Amelia knows what they are; we should follow her sound common-sense judgement. Should she be given the chance to govern, I would be more than happy to volunteer as her economic Svengali!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: Britain needs an Amelia Party appeared first on True Blue Will Never Stain.

There are three major transactions of this kind in American history: the Louisiana Purchase of 1803, the Gadsden Purchase of 1854 and the Alaska Purchase of 1867 (the Adams-Onis Treaty of 1819 did not pay Spain directly for Florida but merely assumed residents’ claims). Each of these can be examined, both as to the price paid and the relative negotiating positions of the two sides of the deal, to determine an appropriate equivalent price for Greenland today. To get a modern equivalent of a 19th century price, the most generous conversion method is to inflate by the increase in nominal U.S. Gross Domestic Product between the two dates. This takes account not only of inflation and of increased purchasing power through technological change, but also of the population increase between the two dates, which makes remote real estate relatively more valuable today. By this comparison, we can see what the U.S. might pay for Greenland, and at what price Trump may have made the usual real estate tycoon mistake of overpaying to get a deal done.

The Louisiana Purchase, first, related to 827,000 square miles of territory, purchased from Napoleonic France in 1803 for $15 million. While mostly remote from existing settlements, Louisiana’s land was in a temperate zone, so even in 1803 could be seen as ripe for U.S. expansion. Both sides had strategic reasons for doing a deal. Neither side wanted the territory to fall into the hands of Britain, considerably richer than both at that time and with the potential to block U.S. expansion. (France had woven dreams of riches from the territory in the 1716-20 Mississippi Scheme, but by 1803 had abandoned them.) The U.S. had some difficulty raising the cash, but Napoleon had a desperate need of ready money, as the second phase of his war with Britain was about to begin.

U.S. Gross Domestic Product in 1803 was $493 million, according to “Measuring Worth;” in the third quarter of 2025 it was $31.1 trillion, at current prices. Hence the 2025 equivalent of the Louisiana purchase price was $946 billion. Greenland at 836,000 square miles is slightly larger than Louisiana, so a price of $956 billion would be an appropriate equivalent for the larger area. However, Louisiana was temperate land with substantial settlements such as New Orleans and St. Louis, so one would expect a premium to have been paid compared to a Greenland purchase today.

The Gadsden Purchase of 29,640 square miles in 1854 is of the three transactions psychologically the most closely equivalent to Greenland, because it involved an unwilling and disgruntled seller, Mexico, which had just lost much of its territory by the Mexican War and the 1848 Treaty of Guadalupe Hidalgo. The Purchase was negotiated by Secretary of War Jefferson Davis, who wished to construct a southern transcontinental railroad to connect the future Confederacy to California, and needed the Purchase to allow the railroad route to avoid the Rocky Mountains. (Davis’s survey work and the Purchase itself would later be used for the Southern Pacific Railroad, the second transcontinental railroad and the first year-round transcontinental railroad, completed in 1883.) Mexico was short of cash and the U.S. following the California gold discoveries, was both rich and liquid; hence the price of $10 million was high for such essentially worthless arid terrain.

U.S. GDP in 1854 was $3.78 billion; grossing up to 2025 gives a Gadsden purchase price of $82.2 billion today. Grossing up for Greenland’s much larger size gives an equivalent 2025 price of $2.32 trillion for Greenland. Jefferson Davis clearly overpaid to get the deal done; Mexico was in an excellent negotiating position.

The Alaska Purchase of 1867 from Russia was negotiated by Secretary of State William H Seward, and he paid remarkably little for Alaska’s 665,384 square miles of frozen wasteland. Both sides were short of cash, having recently undertaken the Civil War and serf emancipation, respectively. Alaska was strategic for neither side, being impossibly remote in steamship days from both countries’ centers of population. However, Seward as a Republican was a very good if slippery negotiator, whereas Russian Czar Alexander II’s ministers, being liberal intellectuals, were very bad negotiators. They had already in 1861 made a pig’s breakfast of serf emancipation by tying the serfs to uneconomically small plots of land and burdening them with 45-year debts to buy those plots, thus eliminating the possibility of serf entrepreneurship and over time turning a conservative peasantry into alienated revolutionaries ripe for 1917.

The price of $7.2 million paid for Alaska, when U.S. GDP was $8.47 billion, translates into a 2025 price of $26.43 billion, or $33.2 billion for the somewhat larger Greenland. The deal was “Seward’s Negotiating Triumph” in other words, not “Seward’s Folly.”

Even though he is nominally a Republican, Trump should not expect to sucker the EU the way Seward did Russia. Equally, he should not pay anything like as much per square mile as Jefferson Davis paid for Gadsden; if he does, he will have been the sucker. The third example, the Louisiana Purchase, also gives too high a figure at $956 billion; even in 1803 Louisiana, while no larger, was clearly more valuable than Greenland was then or now. Overall, I would suggest as a former merchant banker that $500 billion would be a fair price for Greenland today, but if Trump wished to go to $750 billion to assuage hurt European feelings (maybe with a $20 billion pledge – roughly $300,000 per capita – to keep the Greenlanders happy) he should probably do so. If the price is higher than that, Trump will have been the patsy.

The best strategic argument for the United States buying Greenland is that, given its size, it must have an abundance of natural resources, which are becoming a danger to U.S. and Western economies as China, which controls near-monopolies of rare earths and several other strategic metals, has shown itself eager to impose embargoes on the West. China has gained these near-monopolies because of dozy short-termist Western management and the eagerness of Western environmentalists to impose additional costs on mining ventures, which have made them cost-uncompetitive with Chinese competitors. For example, the West controls an excellent source of rare earths in the Mountain Pass deposit, but alas it is located in California, the principal home of environmental lunacy, so its previous owner, Molycorp, was forced to file for bankruptcy in 2015, leaving China with a near-monopoly on the most useful rare earths.

The Trump administration is making state strategic investments in MP Materials, which now controls the Mountain Pass deposit, and in several smaller rare earths companies, much to the fury of free market absolutists. As so often happens, free market absolutists are living in their own cuckoo land; state investments are essential in these cases, where an unfriendly foreign power controls a resource. The world is NOT flat, Thomas Friedman, and we must live with that fact. The German Second Reich, for example, faced an insuperable strategic problem of potential starvation in a war, since nitrate fertilizer sources were controlled by its enemies; only with the invention by BASF of the Haber-Bosch nitrogen fixation process in 1913 did it overcome that problem, which is why World War I happened when it did.

It has become clear that a Europe controlled by the oppressive EU bureaucracy and its economically self-destructive Marxist and environmentalist fantasies is no longer a reliable ally for the United States. Nor can it be relied upon to develop Greenland’s natural resources; it lacks the mining companies and is more likely to impose a plethora of idiotic environmentalist blockades against their development. Thus, in a world of malign and unscrupulous anti-capitalist states, one of which is the EU, the U.S. needs all the resources it can get. We read this week that Chinese contract workers were becoming common in Greenland; since Greenland’s population is only 57,000 and the Greenlanders are not militarized, even a modest force of Chinese “contract workers” could overwhelm the local population and seize Greenland’s resources and strategic position, essential to a U.S.-projected “Golden Dome” to protect the North American continent from intercontinental missile attack.

The flat-earth world of the economists’ models existed only between 1815 and 1871, while the benign and trade-friendly Britain controlled its arteries. Once a protectionist Germany and United States arose after 1871, that world had disappeared, although it took over 40 more years for British statesmen to realize this. Today, the “flat earth” dream of 1991-2001 has also disappeared – it was always largely an illusion, as it had not been before 1871.

Trump is the first American statesman to realize this reality; for this and other reasons he will almost certainly be remembered in 2200 as one of the greatest of American Presidents. Meanwhile Denmark, an innocent small power too small to flourish in the new world and the thoroughly malign EU should concentrate on getting the best price they can for Greenland and its inhabitants.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: What is the Right Price for Greenland? appeared first on True Blue Will Never Stain.

The Fed’s new $2.5 billion building, which ran far over cost and which may have involved improper contracts (I presume that is what the Justice Department inquiry will check) is symptomatic of the mission creep that over the last few decades has expanded the Fed’s authority far beyond what is authorized by statute. Indeed, in some cases mission creep has allowed the Fed to institutionalize policies that directly contradict its clear instructions from Congress. Naturally, with a bloated mission that under the Biden Administration was to include “climate change” the Fed needs more space for its ever-expanding empire. Bureaucracy expands whether or not there is a need for it. In this context you should note the Deutsche Bundesbank’s 12,500 employees, when it has responsibility neither for monetary policy nor for bank regulation – what do they do all day, beyond bureaucratic infighting?

The Fed’s diversion from the objectives legally imposed on it by the 1978 Humphrey-Hawkins Act is gratuitous and widespread. The Act instructed the Fed to maintain an objective of price stability and indeed mandated an objective of attaining zero inflation by 1988. Nowhere in the Act was the Fed authorized to set a 2% inflation target, which doubles prices every 35 years and by definition is completely incompatible with price stability. If the Fed wishes to set such a damaging target it must return to Congress for authorization to do so, which must be in legislation passed by both the House and the Senate and signed by the President. Since Fed chairman Ben Bernanke arbitrarily set the 2% inflation target in 2012 the Fed has made no attempt to get that target properly authorized, while monetary policy has been bedeviled by its strictures, with a bizarre attempt to lower interest rates to negative real levels in 2018-19 when inflation was still close to 2% and showing signs of acceleration.

The other huge bloat in the Fed’s current responsibilities is its responsibility for bank regulation. This is a huge conflict of interest with its responsibility for monetary policy – a necessary tight monetary policy will generally be disliked by an inflation-happy banking system. That was, for example, demonstrated by Andrew Bailey’s Bank of England in 2022, when it was able to cause a financial crisis against the Liz Truss government it did not like by scarifying markets about the financial state of pension funds, which had been forced into buying overpriced negative-yielding index-linked bonds by the Bank’s own regulators. Central Banks should not be able to cause financial crises against governments they don’t like; their political power is grossly excessive and will almost certainly be exercised against the kind of capitalist growth-promoting populist government that Liz Truss briefly and Donald Trump more permanently represent.

Even the Fed’s pure interest rate responsibilities are operated with too much latitude and have been corrupted by political considerations. Chairman Powell’s 0.50% rate cut in September 2024, when unemployment was artificially low, inflation was still quite high and the Fed had previously telegraphed caution in rate cuts, was very clearly timed so as to boost the Harris/Walz ticket in November’s Presidential election and avoid Powell’s nightmare of another Trump administration.

A less controversial example at this date: the sainted Fed Chairman Paul Volcker, having set out in October 1979 to conquer inflation once and for all, pushed the Federal Funds rate up from an average of 10.94% in August 1979 when he took office to a peak average of 17.61% in April 1980. Then, realizing that his friend and political sponsor President Carter had a difficult election ahead in November 1980, he allowed the average to crash to 9.03% in July 1980, an extraordinarily rapid drop that (I speak from experience) was very difficult to trade. That of course reinflated the economy and rekindled inflation, so Volcker had to tighten again. Although the Federal Funds average rate was still only 12.81% in October 1980, before the election, Volcker pushed it up to 19.08% in January 1981 and kept money very tight for the whole of 1981, so that the average was still 14.78% in February 1982.

These gyrations gave us wild economic swings with a ‘double-dip’ recession of a type we have not suffered before or since in my lifetime and inflation that did not drop back definitively until the summer of 1982, at which point the stock market took off on a bull run that has basically lasted to this day. The double-dip recession of 1979-82 with its wildly fluctuating inflation and teeth-aching interest rates, even real interest rates, was most unpleasant; fine for us bankers, but extremely hard on U.S. industry, much of which went bankrupt and was forced to liquidate – the unemployment rate peaked at 10.8% as late as November 1982, the worst since the Great Depression. Had Volcker not played political games as Fed Chairman before the 1980 election, the tight money would have squeezed out inflation a year earlier, the recession would have been a year shorter and would have resulted in a much lower unemployment peak and far fewer bankruptcies of iconic U.S. companies.

Under a classical Gold Standard, central banks are not really necessary, but if you have one like the 19th Century Bank of England, its job is the purely mechanical one of managing the gold flows in and out of the economy so that the money market remains in equilibrium. If the Bank gets it wrong, as in 1825, the political authorities must step in and sort the system out, as Liverpool did so ably in December of that year. In such a system, banking should ideally be widely dispersed so that financial power is not concentrated to favor the metropolitan and well connected. The English country banking system of 1825 was admirable in that respect, as was the 19th century U.S. banking system. Ideally, a clearing house would ensure that rural bank paper is accepted at close to par throughout the system; the Bank of England and other London clearing banks did that in 1825; in the U.S. that was the principal function of the two Banks of the United States. Another alternative is to have a limited number of nationally chartered note issuing banks, like the U.S. from 1862 to 1913. Further artificial restrictions of the system are unnecessary; Britain’s 1844 Bank Charter Act did more harm than good.

Given that the gold price is now $4,600 per ounce, the world may be about to return to a Gold Standard whether the Keynesian nitwits at Fed, the Bank of England and the European Central Bank like it or not. President Biden may have wrecked the dollar’s reserve currency status by stealing $600 billion of Russian central bank dollar reserves, and no other currency has shown itself fit to replace the dollar. Bitcoin, the private sector alternative, is far too susceptible to fraud, so gold appears to be reasserting its rightful place in the world economy.

Even if a full return to gold does not happen (if it did, the Fed should be abolished) the Fed must be split in two, with bank regulation removed from it altogether, and additional functions such as consumer protection closed down. If necessary, through a lawsuit based on the Humphrey-Hawkins Act, which should have every chance of success, the Fed must be made to set an inflation target of zero and stick to that target, with appropriate financial and other penalties imposed on the Federal Open Market Committee if they miss that target by more than 1%.

With the Fed’s function restricted in that way, it will no longer need its new $2.5 billion headquarters. Indeed, to ensure it does not suffer from either political or financial corruption, that headquarters should be moved away from the centers of political and financial power, perhaps to Kansas City, a suitably unfashionable and unbeautiful venue (Jackson Hole, Wyoming is far too attractive!) that will not attract the “academic scribblers” who corrupt the “madmen in authority” in Keynes’ immortal words.

Even without a Gold Standard, a Kansas City headquartered Fed with a firm zero-inflation mandate and a Chairman nobody has ever heard of will run a far better monetary policy than that the Fed has managed to run since 1913.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: The U.S. Needs a Much Humbler Fed appeared first on True Blue Will Never Stain.

The Japanese bubble had unique characteristics, both on the way up and after it burst. For one thing, it was far more fueled by debt than most Western stock market bubbles, or even real estate bubbles. Monetary policy was easy and the government attempted to control a surging yen in 1984-88 by keeping interest rates low. However, the government also increased government spending aggressively, since budgetary income appeared buoyant. The result was a classic asset price inflation, not matched by consumer price inflation because the yen was spiraling upwards, depressing the price of imported goods. The cheap money resulted in a debt-fueled bubble in two areas. One was real estate, where Japanese residential real estate rose to prices utterly unaffordable by Japanese sararimen (though 100-year mortgages became common to improve cash flow). Notoriously, at the peak the grounds of the Emperor’s palace in downtown Tokyo were worth more than the state of California.

The other debt-fueled binge, mostly by the corporate sector, was a surge of “tokkin” funds, whereby companies would set aside reserves and use their borrowing capacity, not for productive investment in their business or even for acquisitions, but to speculate in the ever-rising stock market. Profits on tokkin investment would be reported to shareholders as if they had been made in the company’s business, inflating reported earnings and pushing up share prices further. The tokkin funds brought an exuberant upsurge in stock prices, with the Nikkei index trebling between 1985 and 1989. They also caused a huge debt problem when the market bubble burst, because companies were loaded with debt, had share portfolios worth less than the debt raised against them, and reported earnings that were suddenly bare of artificial inflation from stock market profits.

After the bubble burst, Japan made several mistakes. With the collapse of tokkin portfolios quickly bringing debt defaults, it did not allow Schumpeterian creative destruction to take its course, instead propping up “zombie companies” in some cases (Sharp, for example) for decades, allowing them to suck value out of the economy. It attempted to prevent a proper recession by increasing government spending on infrastructure, building “roads to nowhere” that were primarily determined by the political clout of local politicians.

It allowed the yen to rise even further; whereas it had been around 160 to the dollar in 1989-90, a level already far above that earlier in the decade, it was allowed to appreciate until on several occasions before and after 2000 it stood for substantial periods at 80 to the dollar. Even though Japan was enjoying (no, not ‘suffering from’) price deflation for much of this time this made exporting almost impossible. I remember meeting with senior finance staff of Honda around 2005, forecasting (correctly) that the yen was again about to rise to 80 and being met with horrified explanations that such a level would make international business impossible for even Japan’s most efficient companies.

Japan suffered an inevitable financial crisis in 1998, with the collapse of several major banks such as Long-Term Credit Bank and one of the “Big Four” brokerage houses, Yamaichi Securities. Several other banks entered into forced mergers to preserve their existence, resulting in Japan’s previously competitive banking system becoming highly oligopolistic.

During the period of maximum strain in 1998, the Bank of Japan was unlucky enough to receive a visit from future Fed chairman Ben Bernanke. He peddled his usual zero interest rate/quantitative easing snake oil and the foolish Japanese bought it, jamming interest rates at zero or below for the next 25 years and over time buying 6% of the Tokyo Stock Exchange capitalization (mostly through ETFs) and an astounding 53% at its peak of the Japan Government Bonds outstanding.

After the banking crash of 1998, Japan’s economy was purged and ready to recover, and the advent of Junichiro Koizumi (prime minister 2001-06) promised austere fiscal policies that would allow growth to resume. Alas, the Bernankeist monetary policies being followed made it all too easy for the government to run deficits, so more and more of the economy was devoted to servicing government debt, which rose to an astounding 270% of GDP at its peak, killing growth and making it very difficult for the industrial sector to innovate or for small businesses to get financing. This produced an entire generation of stagnation, which is only just beginning to lift as the Bank of Japan has reversed its most damaging policies and begun to raise interest rates.

Japan was bound to suffer a slump after 1990, as the previous decade’s malinvestment was worked off. The zombie companies made the slump last a decade; the Bernankeist monetary policies added more than two further decades, so the stock market did not recover its 1989 level until 2024. Similarly in the U.S., abominable economic policies under Presidents Hoover and Roosevelt turned the inevitable short sharp downturn after the 1929 crash into a 25-year destruction of stock market value, from a market that, unlike Japan in 1989, was not especially overvalued in 1929.

The other U.S. stock market downturns since 1929 did not involve mountains of debt and hence the subsequent recessions were short-lived. In 1968 and 2000, stock market speculation had built up to an extraordinary extent, but only a few of the late-1960s conglomerates and none of the late 1990s dot-coms were heavily financed by debt, so the subsequent downturns were relatively short-lived, though the bankruptcies of Penn Central in 1970 and Enron in 2001 were substantial shocks to the system. 1979-82 saw a deep recession with only a mild stock market downturn, as 1970s inflation had already eroded the value of stocks by about two thirds from their 1968 level.

Only the 2008 crash involved heavy debt financing, in that case in dodgy home mortgages rather than stocks; although stock indices declined by almost 70% top-to-bottom, the stock market had not been very overvalued in 2006. In any case, 2008 saw the debut of Bernankeism, in which money was pumped into the system to prevent a downturn (and prevent the economically necessary Schumpeterian creative destruction). The result was more than a decade of appallingly sluggish economic growth and even worse productivity growth that, with a mild remission for President Trump’s first term, lasted until April 2025, when Trump’s “Liberation Day” and his rapid deregulation, especially through dismantling the “climate change” scam, began to dispel the Bernankeist low-growth miasma.

The stock market is unquestionably extremely high at present, but in principle that might presage only a repeat of 1970 or 2002, a short sharp recession with only a couple of major bankruptcies. However, there are disquieting signs of 1980s Japan. Most important, the revolting rash of stock buybacks, driven by top management’s stock option greed, has increased leverage ratios throughout the corporate sector, in some cases wiping out book equity altogether. This is painfully reminiscent of the tokkin mania. Companies are equally borrowing and drawing down reserves to invest in the stock market, but instead of a broad-based equity risk they are investing only in a single stock, their own. When the market break comes, those companies will not have to report losses, as did the tokkin nitwits, but that is simply a matter of grossly inadequate accounting; in reality the value of the company stock they have bought will sharply decline while the debt incurred will remain outstanding.

There are further sources of untoward debt in today’s market. The expansion of business lending beyond the banking system to specialist private debt funds has inevitably led to an erosion of credit standards, such as the elimination of debt covenants, that will produce a blizzard of debt losses when a downturn sets in. The subprime auto loans market has the same dangers as the subprime mortgages market (plus others besides) that have already caused two collapses and will undoubtedly bring more. Yield premiums for low-quality public debt over high-quality debt have collapsed, leading to an overhang in this area also. All these factors are reminiscent of 1980s Japan; the potential for a deflationary spiral as in 1990s Japan is undoubtedly present.

The massive deflationary cleansing of the overindebted U.S. corporate sector will last 34 years if U.S. politicians replicate Japan’s mistakes. The Trump administration has shown itself far too partial to bailouts, pouring new capital into the most decayed sectors of the economy such as Intel. Thus, the likely “rescue” of Boeing and other stock-buyback victims will replicate exactly Japan’s creation of zombie companies, that suck value out of the economy for decades. President Trump’s absurd real-estate-speculator desire for interest rates below the level of inflation will not only increase the level of inflation but cause the kind of Bernankeist stagnation under which Japan suffered for a quarter century. The U.S. government is still running gigantic budget deficits at the top of a boom, with unemployment around 4%; the Trump administration and Congress’s pathetic inability to cut spending bids fair to give the United States public debt of 250% of GDP by 2050 or so, condemning the private sector to credit starvation and decay.

All economic forecasts are uncertain, but one that is more certain than most is that this column will not be around by 2060, when the impending super-recession will end, given current policy trends. Sharp policy reversals are in order, to prevent such a result and cleanse the U.S. economy of its insufferable load of zombie debt.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: Trump-san, you’re running late 1980s Japan! appeared first on True Blue Will Never Stain.

In mediaeval times, large landowners ran most political systems (whether or not nominally headed by a monarch) and sought to maximize their wealth by keeping labor in as subservient a condition as possible. Mediaeval legislation thus took two forms. One was artificial restriction of free markets to ensure that merchants and other urban folk did not profit excessively at the expense of landlords (the periodic pogroms of typically urban and trade-oriented Jews were part of this effort). The other was restrictions on wages, which were especially necessary when labor’s value had suddenly increased for some reason.

When the Black Death wiped out a third of the population in 1348-49, the 1351 Statute of Labourers attempted to force suddenly scarce and valuable workers to work for their pre-1348 wages. For the landlords, the Black Death had been doubly an economic disaster; land had suddenly become much less valuable because there were fewer mouths to feed and workers had become suddenly more valuable because there were fewer of them. For any self-respecting Feudal baron, this appalling example of market forces must be resisted at all costs.

The suppression of the lower orders began to break up in Britain with the Restoration, although the retrograde Whigs of 1714-60 passed legislation that attempted to perpetuate it. Daniel Defoe’s 1722 “Moll Flanders” is the daughter of a convict who uses her charms and various legal and illegal maneuvers to raise her status; she ends up a wealthy plantation owner in 1683 Maryland. The idea that someone of low birth could through brains and sheer hustle become wealthy was a new one in post-Restoration Britain; it became the norm under William Pitt and Lord Liverpool, who led governments that favored entrepreneurship, technology and rising living standards.

Interestingly, the same change happened in Japan at around the same time. The Genroku period (1688-1704) had seen rising prosperity, but the wealth had all ended up with feudal lords and urban merchants, who employed it in conspicuous consumption. The reforming Shogun Tokugawa Yoshimune (ruled 1716-45) reoriented the Japanese economy towards rural areas, setting up central markets for rice that allowed growers to sell their product directly, permitting the introduction of Western books and allowing tax exemptions for rural entrepreneurs. As a result, Japanese living standards improved substantially, so that the country was roughly twice as rich per capita as either China or Russia when opening to the West came in 1853. Even rural farmers of modest background, such as Ichiroemon Shibusawa were able to amass substantial wealth through trading indigo balls; his son Eiichi Shibusawa (1840-1931) was the father of modern Japanese capitalism.

It is clear from these examples that an economy of higher wages was critical to the emergence of capitalism and the Industrial Revolution. It liberated the mass of people from serfdom and destitution, allowing them to pursue their own destinies in a relatively free system. Whether in a small way – Ichiroemon Shibusawa’s indigo balls – or on a large scale – his son’s part in the foundation of most major Japanese companies – a high-wage system gives incentives to new technologies and removes the blocks from small-scale individual enterprise, which cannot be attempted from a subsistence-level wage base. As Thomas Malthus (1766-1834) propounded while advising the Liverpool government in 1814-15, it is essential through legislation and technology to move the mass of people well above the Malthusian poverty level, so that technology can outrun population growth and progress can accelerate.

In the modern world, the need for government policies to promote high wages continues. First and most important, immigration must be severely restricted, to a level no higher than the 1980s average, in Britain, the EU or the United States. In particular, there must be no forms of “indentured servitude” immigration such as the H1B and H2A U.S. visas, which undercut the domestic workforce by providing an alternative source of indentured lower-paid docile labor who can be sent home if they rebel. Anomalies like “birthright citizenship” must also be stamped out, so that proper immigration controls are not subverted by unscrupulous foreign scamsters seeking to live on U.S. welfare. Milton Friedman said that unrestricted immigration was incompatible with a welfare state; the United States has had both in place for 60 years now and has more than proved his contention.

The second necessity for a high-wage economy is a society with a low level of embezzlement and fraud. Government programs that lead to fraud must thus be shut down; any good they may do is hugely outweighed by the moral damage they cause. Similarly, the financial sector must be prevented from causing scams and bubbles; to this end it is essential to run a tight monetary policy with high real interest rates, ideally a Gold Standard. Such a policy will also eliminate the biggest swindle of all: the government’s use of inflation to erode the earnings and especially the savings of ordinary people. Only when ordinary citizens are assured that their savings are secure against erosion, fraud and theft will they be able to plan the seed ventures that are the true source of economic growth. Eliminating fraud in the public sector will also do much to eliminate it in business; a high level of business ethics is essential to protect small and new enterprises, which have fewer defenses against malefactors.

A third essential, neglected by Britain in the 19th Century, is a protective tariff to prevent the country’s most productive industries from being undercut by low wage ghettos. That is not to say that all industries should be protected; most agriculture is better left unprotected because high wages can be supplemented by extensive mechanization. The Corn Laws, which protected corn agriculture and the existing social structure, were invented by Liverpool; agriculture subsidies, which subsidize outdated farming methods and impose a huge burden on the non-farming majority, were invented by the cuckoo socialist Henry Wallace (1888-1965). From that comparison alone, we can see that while protection of some agriculture may be appropriate and will yield revenue, subsidizing it is expensive Marxist nonsense.

Conversely, it is important not to subsidize dying industries whose economics are clearly moving towards lower-wage countries. One has huge sympathy for the unfortunate handloom weavers and framework knitters of early 19th century Britain, but they were becoming obsolete. Allowing unscrupulous employers to drive their wages down below subsistence levels was far more damaging for the economy and the weavers/knitters themselves than would have been a faster replacement of their jobs by mechanization. Prolonging the life of decrepit relics like the British volume car industry may satisfy the unions and their “Red Robbo” convenors but is a grotesque waste of public money and prevents resources from being redeployed into more productive uses.

The most important assistance to a high-wage economy is to encourage the new industries and companies from which new opportunities for high wages will come. This is a tricky policy balancing act; merely handing out subsidies, like the Biden “Chips” Act will produce infinite scams and very few new jobs. Indeed, the cost to the economy’s non-favored sectors of the additional taxes and borrowing needed to fund the subsidies may well result in a net loss of jobs.

Government cannot “pick winners” from the tech or biotech sectors and should not attempt to do so. It must simply provide a fiscal, monetary and regulatory environment in which new industries and companies will thrive. Part of this involves avoiding the obvious mistakes; the state of California’s proposed wealth tax will not only divert wealth to other states but destroy it altogether, because it will discourage business formation and capital accumulation, making wealth creation less attractive than holding a well-paid easy job which dozy policymakers are unlikely to attack directly. However, the excess regulation, whether inspired by “climate change” fanaticism, healthcare control-freakery or otherwise, of the Biden and Obama administrations and their state and local government allies fell especially heavy on the small business sector, the main source of growth and good new jobs.

Artificial Intelligence can help greatly in producing a high-wage economy. By replacing repetitive and uncreative operations, it will eliminate many jobs that were in any case going the way of the British auto worker. Equally, it will create a myriad of new jobs and wants that demand specialist skills of their users and are hence highly paid. For those in manual labor, it will improve their productivity, hence reducing the threat of competition from low-wage economies and permitting worker remuneration to grow. Its overall boost to productivity is quintessentially the most important requirement for the United States to remain the world’s highest wage economy and American workers to benefit accordingly.

Reject the bleating of the low-wage lobby, seeking to import cheap labor and reduce living standards; only by equally rejecting its ancestors’ machinations like the 1351 Statute of Labourers did we escape the dreary wasteland of feudalism.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

The post The Bear’s Lair: The Battle for Expensive Labor appeared first on True Blue Will Never Stain.