“Open the markets!”, one widely-followed member of the finance Twitterati joked (sort of), late Saturday evening, after Bernie Sanders triumphed in the Nevada caucuses.
In what The New York Times described as a “show of might”, Bernie presided over a veritable landslide. He barely bothered to allude to his competition while speaking to supporters in San Antonio.
“We have just put together a multigenerational, multiracial coalition, which is not only going to win in Nevada it’s going to sweep the country”, he said. “No campaign has a grass-roots movement like we do”.
Betting markets now give Hillary Clinton better odds on the nomination than Elizabeth Warren who, just six months ago, was the arguable frontrunner.
Bernie’s Nevada flex comes on the heels of similarly strong (if not overwhelming) showings in Iowa and New Hampshire, and also amid reports that the Kremlin is attempting to bolster his campaign.
US officials briefed both Sanders and Donald Trump on the situation this month.
“I don’t care, frankly, who Putin wants to be president”, Bernie said. “My message to Putin is clear: stay out of American elections, and as president I will make sure that you do”.
For his part, Trump is predictably irritated by reports that Putin is once again angling to assist his campaign. Or maybe it’s more accurate to say the US president is irritated that the information was delivered to lawmakers and also to the public.
There’s no mystery here. Moscow is simply angling to implement the same strategy they employed (with more than a little success) in 2016. As The Washington Post puts it, “the prospect of two rival campaigns both receiving help from Moscow appears to reflect what intelligence officials have previously described as Russia’s broader interest in sowing division in the United States and uncertainty about the validity of American elections”.
That’s not a partisan assessment, and, as Robert Mueller was happy to inform lawmakers during his testimony in July, it’s hardly surprising. The Kremlin sees an opportunity to further divide America, inflame tensions and foster the kind of vitriolic politics that has created what amounts to an existential crisis of civility in American democracy.
Is it lamentable? Absolutely. But it’s important to note that Moscow’s fingerprints have shown up on everything from the Catalan separatist movement to Brexit to AfD’s efforts to bring back the far-right in Germany. This is a global espionage effort on Russia’s part, and the only thing that makes America different is that the populace is, on balance, more susceptible to it, in part due to years upon years of intellectual decline among the average voter. Misinformation campaigns don’t have to be very sophisticated when large swaths of the electorate are objectively ignorant. The rest of the country, meanwhile, is so fed up with seeing their fellow countrymen/women fall hook, line and sinker, for lies and nonsense, that they’ve given up trying to reason with their neighbors.
In any event, if Sanders is the nominee, market participants are likely to recoil, or at least that’s the consensus view among… well, among market participants.
And that strikes at the heart of a key consideration which is often lost on traders, investors and economists. The reaction in financial assets to a given political turn is not preordained by some set of immutable laws or eternal truths. Some things are indisputable. For example, repealing the Trump tax cuts would dent corporate earnings and almost surely lead to a de-rating of US equities. But beyond that, nothing is set in stone.
I continually emphasize to readers that irrespective of any near-term tumult, there is a very strong argument to be made that, over the longer-haul, removing the albatrosses of student debt repayment and skyrocketing monthly health insurance premiums from the necks of those with the highest marginal propensity to consume would be an economic boon of epic proportions for an economy that lives and dies by the consumer.
As far as the deficit goes, the bottom line is that inflation is the only constraint. Without getting too far into the weeds of economic history, let’s not forget that it was de-regulation, unbridled capitalism and faith in the wisdom of “independent” central banks that brought us the financial crisis.
Subsequently, an unwillingness to rethink things left central banks as the only game in town when it came to reflating the global economy. Austerity measures adopted in Europe were – let’s face it – a wholesale disaster, and now here we are, more than a decade on from the crisis, with sluggish growth, no inflation, negative rates and central banks buying up everything from government bonds to ETFs to corporate debt issued to finance Louis Vuitton’s purchase of diamonds. Consider these passages from a Bloomberg Opinion piece:
Bernard Arnault, the boss of LVMH Moet Hennessy Louis Vuitton SE, exceeded even his own incredibly low yield expectations in his company’s giant bond sale this week – which included the biggest corporate issue in euros since 2016. The luxury giant raised 7.5 billion euros ($8.3 billion) and 1.55 billion pounds ($2 billion), over a range of maturities from two to 11 years, to help finance its $16 billion purchase of Tiffany & Co.
Two of the five euro tranches were placed at negative yields, meaning investors are paying single A-rated LVMH to borrow money. Arnault’s expectations back in November for yields from the sale of “between 0% and 1%” have been surpassed. Even the 11-year tranche has a coupon of just 0.45%. M&A has never been cheaper.
[The company’s] three-year bond, issued last year, has moved negative in yield.
France’s richest man can thank the European Central Bank for this state of affairs. The restart of its 189 billion-euro Corporate Sector Purchasing Program has driven credit spreads ever lower. While the central bank wants to lessen the funding costs of European companies – and local subsidiaries of global firms – to make it easier for them to invest, it may not have been meaning to help a French luxury behemoth snap up an American jewelry icon.
That, folks, is absurd. And it speaks to just how far afield we are.
Somehow, we’ve reached a point where it makes total sense for central banks to effectively provide the financing for a manufacturer of luxury handbags to purchase $16 billion worth of diamonds, but anyone calling for the world’s richest economy to adopt universal healthcare is deemed “crazy”.
Meanwhile, the US Treasury Secretary recently denigrated a teenager for daring to demand action to save the planet from what even JPMorgan admits might be an extinction-level climate event.
Given all of that, it’s hardly clear that “Crazy Bernie” (to quote Trump) is the “crazy” one.
With the price Phillips curve having apparently ceased to function and the “3Ds” poised to provide a structural drag on inflation in perpetuity, is it really “crazy” to suggest that governments which print reserve currencies pivot away from policy prescriptions that open the door to absurd outcomes like that described above by Bloomberg?
Is it “nuts” to suggest that, instead, developed economies transition to monetary-fiscal partnerships that fund meaningful change and make a difference in everyday people’s lives?
Maybe so. Maybe that’s totally “crazy”.
If so, I guess the next “logical” step is for Mark Zuckerberg to place some negative-yielding debt with the Fed in order to finance a buyout of Ferrari.
I’m starting to feel it. The Bern. If Sanders beats Biden in SC and takes California and Texas, watch out. His crowds will be enormous and enthusiastic — and a welcome antidote to Trump’s Nuremberg rallies.
If Bernie beats Biden in SC, he will likely be a new POTUS
Thanks, H. One of your most passionate columns.
Repubicans long ago lost their reputation for fiscal prudence. They complained for years about “tax and spend” Democrats. Well at least back in the day the Democrats taxed and spent. Republicans cut taxes and increased spending. Kinda like buying a new house with a big mortgage then quitting your job. In actual practice both parties now are so beholden to those that pay them their campaign contributions [ in other countries they call it bribery] so as to be indistinguishable.
You mention LVMH’s purchase of “diamonds,” presumably referencing TIF. Are you aware of Arnault’s partnership in an African diamond company? See last paragraphs in this article:
https://www.newyorker.com/magazine/2020/02/03/the-woman-shaking-up-the-diamond-industry
We need your real examples in the story line of the campaign. You could make a difference if you could influence the communications strategy of the Dems.
If the Dems picked Steve Bannon as the nominee, the Republicans would denounce Bannon as a socialist /commie. It doesn’t matter, they’re gonna call anyone who runs against Trump a socialist/commie.
Why? Because it’s all they’ve got.
The mainstream media is realizing they have zero control over this primary and it’s making them lose their shit.
🙂
The SS Bern would immediately run aground of the DC reality upon reaching Washington. Let’s say the Dems eke out a senate majority (in my opinion that would be tougher with sanders on the top of the ticket) you think that Democratic senators from Connecticut and New Jersey are gonna wholesale nationalize the insurance / pharma industries ? Or that dem senators from New Mexico, Ohio, WV, Pennsylvania are going to get behind a fracking ban?
It’s all a fairy tale.
50-60 years ago, this country was in the midst of a mass movement. Big changes were occuring because the passionate young people of this country made it happen.
But then — this happened. It’s not a fairy tale.
https://billmoyers.com/content/the-powell-memo-a-call-to-arms-for-corporations/
Speaking as an old fart, all I’m saying is perhaps should at least try be open to this new crop of passionate young people coming up. Acknowledge that they, if fact, do exist, there’s a lot of em’, and they are not a fairy tale. Could very well be we’re witnessing another mass movement, in progress.
From another old fart, there are plenty of neo-liberals (no less responsible for the top down destruction of the middle class) that have to go too. All those “deplorables” recognize this, just hooked their wagon to the wrong horse.
Not sure why you say “wrong horse.” By use of the word “they,” apparently you don’t include yourself among the “deplorables.” Well, I am not in that group, but I am among them. Dude, they TOTALLY LOVE “that horse.” Apparently you don’t – but, make no mistake, they imbrace him more than ever. You may, or not, have legitimate criticism of “neo-liberals” – but please, do not infer that any (insert adjective)-liberals are responsible for trump. If you ride that horse, no one else made you get on. And don’t bitch if you’re sharing the reins (?reigns) with a “large swaths of the electorate are objectively ignorant.”
Fascism/Socialism/Alcoholism. All things in moderation.
“Is it lamentable? Absolutely. But it’s important to note that Moscow’s fingerprints have shown up on everything from the Catalan separatist movement to Brexit to AfD’s efforts to bring back the far-right in Germany. This is a global espionage effort on Russia’s part, and the only thing that makes America different is that the populace is, on balance, more susceptible to it, in part due to years upon years of intellectual decline among the average voter. Misinformation campaigns don’t have to be very sophisticated when large swaths of the electorate are objectively ignorant. “
We know who the Republican candidate is, therefore am I misinterpreting that you support a democratic candidate other than Bernie? I’m not sure that anyone other than die hard Clinton fans and Chris Matthews gives a hoot about what the Russians are doing. I’m not even sure what exactly it is you’re implying the Russians are doing?
Russia has the same GDP as New York state and half the population is drunk. I’d say Israel, China and many others are dabbling in the election, but that shouldn’t surprise anyone considering the USA dabbles aggressively in many other country’s affairs.
All of the mainstream democratic candidates suffer from serious issues. Bernie is the only one where, you know what he stands for (He will be a godsend for volatility and I’ll do quite well until he boosts my taxes. Trump is good for stocks, but I don’t like the Fed forcing me to buy over-priced crap)
Student debt forgiveness may not work that way in my opinion,I could be wrong. I love my college educated co-workers but good grief they do not stack up well against the competition. Like it or not the coddled generation of student debt is heavily populated with the type of coddled people who resent 8:00 am meetings because they are used to eating breakfast at that time rather than being at their desk ready to work. The type of people that complain about student debt and leave work 15 minutes early to buy fast food or restaurant take-out then come back to work and eat at their lunch at their desk while they surf the internet; instead of bringing lunch and eating in the roomy and well equipped break room. The type of people who one year into being a supervisor can be found at their desk with an earbud in their ear listening to their i-pad. Still living with the parents still broke even with the generous new salary These delicate types may vote Sanders but probably will not they have never operated voting equipment and it “should be done with a cell phone anyway”.
Furthermore if by some miracle Sanders wins and their debt is forgiven the first thing they will do with that money is justify going on a distant vacation; on credit. I cannot put any faith hope or belief that freeing these guys and gals from student debt will spark some kind of economic recovery. Their expectations will be met, but their resolve at least for the vast majority of these kind souls is of the tin badge variety.
Having said all of that I defer to H. I am not a Political Science major nor an economist, my ranting is out of frustration.
Clearly this is personal for you, but that person just sounds depressed. Unless they are complete assholes, maybe don’t make assumptions?
Maybe they resent 8am meetings because most meetings are a massive waste of time that only serve to make a manager feel productive without having to actually do anything.
Maybe they don’t eat with you in the break room because you are insufferable.
Preach.
Somehow, we’ve reached a point where it makes total sense for central banks to effectively provide the financing for a manufacturer of luxury handbags to purchase $16 billion worth of diamonds, but anyone calling for the world’s richest economy to adopt universal healthcare is deemed “crazy”.Another great article H