Deutsche Bank Faces its Acid Test Italia

We have for some time been directing the attention of the reader to the woeful condition of Deutsche Bank and its potentially significant relationship to future episodes of the euro crisis.

Although the moment that will furnish proof whether our analysis was correct has not yet arrived, we do alert the reader that the hour when our view will be put to the test is coming within sight.

Next week Italy will hold a referendum on a government supported package of economic reforms.  If, as expected, the Leftist government of Prime Minister Matteo Renzi loses the referendum, his government will fall and new national elections will be held that will likely lead to an anti-euro coalition assuming power.

Should the referendum be defeated, Italian financial markets – anticipating the election of a rightwing government on a promise to take Italy out of the eurozone – will be thrown into turmoil after referendum results are announced.

It is at this point where the weakness or strength of Deutsche Bank will be revealed:  Shockwaves originating from Italy’s markets will cascade through the rest of Europe’s markets.  When these waves finally crash against Deutsche Bank, how well or poorly that bank reacts to the turbulence will suggest its true health.  If the bank’s defenses have indeed been reinforced over past months then it will weather the storm.  However, any buckling on its part will suggest it is still veering towards the edge of collapse.

And with the EU having foolishly linked the economies of Northern and Southern Europe together with the criminal scheme known as the euro, it will not be long before the consequences of Italy’s vote test the German banking system:  Whatever the consequences of a ‘No’ will mean for Deutsche Bank should be evident sometime in the weeks before Christmas.

Whatever the results, we will be here to provide analysis.


Infrastructure’s Place in Hamiltonian Capitalism

We have introduced the Hamiltonian model of the three major economic systems:

  • Capitalism – Government actors set the common business environment without favoring particular private actors; individual private actors are then free to take any business action within the boundaries of the established environment.
  • Libertarianism – Private actors set the common business environment without favoring particular private actors; individual private actors are then free to take any business action within the boundaries of the established environment.
  • Liberalism – Government actors set the common business environment without favoring particular actors; government actors then decide on all individual economic actions within the boundaries of the established environment.

The model is named after Hamilton because he more than any other statesman defined in theory and practice what the relationship between the state and free market should be in a Capitalistic nation.

The main advantages of the model are, first, its flexibility across scenarios (the government actor-private actor relationship holds true as the situations handled by the model rise in complexity); second, the instructive context it builds around government projects and private initiatives.

Capitalists especially must clearly understand when government action is and is not appropriate because their position does not dismiss all government action as illegitimate as pure Libertarians do, which position was refuted by us here.  Nor do Capitalists hold to the pure Liberal position that all types of intervention are always legitimate.  If conservatives accept that Federal initiatives are at least sometimes permissible then they must be prepared to answer under what circumstances they should be allowed.

What little has been written by Conservatives about a positive role for government is inadequate.  This is a disservice to free market Conservatives.  Without exploring what government should do Conservatives are only partially prepared to distinguish the wisdom of Capitalism from Liberal recklessness.

To shed light on this matter for Conservatives we here apply the Hamiltonian state-private actor model to a situation when Federal Government action should take the lead over state action.

The example selected to illustrate this is Trump’s planned oil and gas infrastructure buildout.

Continue reading “Infrastructure’s Place in Hamiltonian Capitalism”

European Nationalism in the Age of Trump

The world now belongs to Donald Trump.  Such an unusual situation cannot help but alter the course of world politics.  Here is how we see the political course of Western Europe changing in the wake of Trump’s victory:

Italy – The domino most likely to fall in the near future.  Before America’s November election the unpopular Leftist government of Prime Minister Renzi had staked its future on winning a referendum on economic reforms early in December.  With populist victories in Britain and the United States, Renzi’s referendum, which was already lagging behind in polls, now looks certain to be punished by voters in an anti-establishment backlash.  A referendum loss will lead to the collapse of his leftist government and early elections that are expected to be won by a coalition of anti-euro nationalist and center right parties.

In its already weakened position the euro will enter a new crisis when an incoming Italian government prepares for Italy’s exit from the currency union.

Britain –  Concern in Britain had been growing over whether PM May would encounter strong resistance to her triggering article 50 next Spring to begin formal exit negotiations with the European Union.  Britain’s exit now becomes more certain after Trump’s win demonstrated ignoring public opinion is more politically untenable than ever.

Germany – Merkel’s plan for Germany’s 2017 general election was to portray AfD’s leader Petry as Hitler.  Courtesy of America, Merkel has been handed a label worse than Hitler – Merkel will try to frame Petry as Trump, albeit a pixie-Trump in a skirt hiding underneath a Beatle’s moptop.

Will Petry emerge from the election standing on high heels atop the Fatherland with a Bundestag majority, whip in hand, herself wrapped tightly in a Hugo Boss outfit of leather?

Though it would make for excellent blog material, sadly she will not be Kanzlerin.

Petry is too Prussian to win what is necessary in West Germany to form a national majority.  However, with Petry’s stance against increasingly unpopular refugees she will be well-poised to deny Merkel a majority or let her easily form a governing coalition.

France – Le Pen, at first glance, should be positioned to triumph in the aftermath of Britain’s referendum and Trump.

But on further examination the momentum started by Farage and Trump may not convert to her benefit in French politics.  The French are natural trendsetters, not trend followers, and they are loathe especially to admit they are merely catching up with Anglo-Saxon trends, which no amount of spin on their part could deny if they elected Le Pen almost six months after America elected Trump and a year after UKIP won over Britain.

The French are too self-assured and contained within themselves for us to discount the possibility they will give in to the ancient temptation to diverge from the Anglo-Saxon world simply because they want to prove their independence.

Expect France to surprise for the sake of surprising, and no other reason.

Hamilton Against Anarcho-Libertarians, Hamilton Against “Hamilton”

Pragmatically Distributed avoids tabloid sensationalism.

And not because we wouldn’t fit such a role.  We would, in fact, be great in it.

If we were so inclined (we are not) we would have a Twitter account updated continuously with 140 character sensationalism, memorable hashtags, and useful advice scandalous in nature:  How to avoid prison for driving a woman in a Model T across state lines for moral purposes, how to smuggle bottles of Dom Pérignon past customs on your return trip from France during Prohibition, what Bible passages according to your local Reverend justify the use of strikebreakers (hint – they are primarily, but not exclusively, in the Old Testament.)

It would make for the most scandalous horror-mongering the Union has seen since Taft was stuck in the White House bathtub.  The UK’s DailyMail wouldn’t try to compete.

But we have a chosen a route different, and substantive at that.

Nevertheless, events intrude; and the intruder of the moment is this hashtag event involving the treatment of Vice President-elect Pence at the hands of the cast of “Hamilton”.

How wrong is this?

Trump’s wisdom was to run for the presidency on the most Hamiltonian platform in a century; Trump’s genius was to win by disguising Hamilton’s crypto-Royalism as Jacksonian populism.

The result of the hijacking of the Republican party by Trump has been to pull it back (unwillingly) to its glorious origins in Hamilton’s Federalist Party and Lincoln’s Golden Age GOP of 1860 to 1932; and for this his Vice President-elect was heckled by the pothead actors of “Hamilton” who have never read any books and consequently do not realize the electoral college they want abolished was a favorite project of Hamilton.

Continue reading “Hamilton Against Anarcho-Libertarians, Hamilton Against “Hamilton””

Trump and Iran’s Nuclear Program – The Hamiltonian Perspective

From Britain, Pragmatically Distributed receives this question from prolier than thou:

So how does wanting to rip up the Iran nuclear deal fit in with this Hamiltonian ethic? By all accounts it’s been successful, and opening up to trade with America is surely in America’s interests. What are the critical American interests which require these kind of entanglements with Iran?

Continue reading “Trump and Iran’s Nuclear Program – The Hamiltonian Perspective”

In Trump the Robber Baron Nationalism of Hamilton & Lincoln Finds a Potential Heir

Donald Trump will bring with him to the American presidency a governing instinct and attitude favorable to the Robber Baron Nationalism of Alexander Hamilton’s Federalist Party and to its successor, Abraham Lincoln’s Golden Age Republicans of 1860 to 1932.

The nationalist traditions of those two great parties echo the themes of Trump’s campaign – tax reductions for business, infrastructure development, trade protectionism, central banking, investment in the military industrial complex, and foreign policy realism.

That Trump’s political inclinations should lean strongly towards Hamiltonian nationalism – and do so despite, in all likelihood, him being unaware of its history – is only natural.  Hamilton and Lincoln are the two men most responsible for transforming America into the world’s preeminent power.  It was they who gave the Federal Government the centralizing means to fashion conservative economic policy, guide foreign affairs, secure the money supply, conduct trade negotiations, raise a powerful military, and industrialize the nation.

Trump has not come to limit the powers Hamilton and Lincoln left to their conservative heirs, but to wield those powers like a monarch.  Trump, far from being a libertarian, sees little problem with government itself; his primary objection to government has been that it was not government under the control of Donald Trump.

With the presidency his, the opportunity to return the Republican Party to its Hamiltonian heritage is before Trump waiting to be seized.

How closely do we expect Trump to adhere to Federalist principles?

The nature of Trump’s tax and health care policies will most be free market.  Although Trump has shown signs of favoring progressive policies in both cases, he does not appear as strongly motivated to push them as he is with trade and immigration.  Instead he appears satisfied to delegate these issues to his free market advisors who will themselves push them further right in the absence of resistance from Trump.

Heavy infrastructure and military spending will garner much more enthusiasm from Trump and will surely pass through the Republican Congress given how many Republican special interests stand to benefit from such projects.

Trade policy will not be implemented easily.  Renegotiating existing trade agreements with foreign nations will take time and require the approval of Congress.  He may be able to strike a deal with China to end unfair trade practices such as currency manipulation; but this too faces obstacles since China has leverage over the US with its purchases of American debt.

On foreign policy we expect international relations in a Trump administration to follow the realist tradition of Hamilton.  Hamilton’s example, set when he firmly opposed the French Revolutionaries in favor of the Bourbons, calls for cooperation with authoritarian regimes where possible, restricting military actions to narrow objectives when a national interest is at stake, and eschewing democratic nation building and humanitarian peacekeeping.  Trump will not be isolationist, but selectively interventionist.

The significance of selective intervention to international organizations such as NATO is that the incoming administration will seek reform of existing world forums rather than their abolition  (campaign rhetoric to the contrary notwithstanding) because Trump will not have America completely from all international engagements.  Instead, existing resources will be consolidated and reallocated to different international priorities.

Regular Blogging to Resume Next Thursday

The election of Donald Trump impacts America and the world to such an extent that Pragmatically Distributed will not be lacking in material anytime soon.  However the election was such an ordeal that this blog will take a week long break and return, with style, to normal operations next Thursday.  In the meantime I will be considering various blog topics to convert into articles.