And it will need God to get it done...
The SWAMP is where the injustice arises, writes Bill Bonner in his Diary of a Rogue Economist.
It's where the win-lose deals are forced onto people. It is where waste, corruption, and larceny steal their time and money.
"To loose the bonds of injustice, to undo the thongs of the yoke, to let the oppressed go free, and to break every yoke."
- Isaiah 58:1-12
We don't have to know whether a new law or new policy will actually do what its proponents say it will do. We just have to ask: Win-lose? Or win-win?
In the "public" space, as a general rule, deals must be win-win...or the average person will lose. Thou shalt not steal. Thou shalt not kill. Thou shalt not do win-lose deals.
Because only win-win deals add to wealth, choice, and prosperity.
In a private deal, you can make money by taking it from someone else. But not everyone can make money that way. So, as a general rule or policy, it won't work. It won't make the average person better off.
In fact, it will make him worse off. Partly because of the friction, waste, and disincentives it creates. And partly because the average guy is never the winner in a win-lose deal.
Who feels the burden of the yoke? Who is the victim of injustice?
Is it Wall Street, with its millions in contributions to the feds and its key men filling the most powerful posts in the administration? No.
Or the Northern Virginia military/security insiders who have received as much as $50 trillion (in today's Dollars) of taxpayers' money since World War II? No.
What about the cronies with their insider deals? The zombies with their payoffs and hush money? The Washington-New York-California establishment? No, no, and no.
Holdup Men, Shysters, and Bully Boys
We've gotten considerable feedback on our formula. Some good...some bad...and some that leaves us scratching our head. (Modestly, we'll put our formula up against Thomas Piketty's silly "r>g" formula any day.)
Ours is not a universal formula, however. It is not like the second law of thermodynamics or "All you need is love." It is just a description of how a civilized economy works.
And it seems to lead to a shocking and impossible conclusion. If win-win is good and win-lose is bad...why do we have a government at all? Every one of the government's deals is win-lose.
"Did you know that there are robber bees?" asked a local beekeeper on Saturday. "They don't gather honey. They just steal it from other hives. We have to keep an eye out for them."
Yes, dear reader, there are bees that practice win-lose, too. The robber bees win. The robbed bees have less.
Our formula doesn't tell us what to do about them...It only tells us that we'd be better off without them. And we'll accept the cost of preventing and deterring them, doing our best to keep it as low as possible.
But that's just life, isn't it? There are inevitably some holdup men, shysters, and bully boys. And, as far as we know, there is inevitably government.
Some win-lose deals – imposed by the feds – may be necessary. But what the formula tells us is that Jefferson was right: The fewer of them you have, the better off you are.
"The government that governs best," he said, "governs least."
In order for Trump to govern well, he must reduce the reach of government. He must drain the swamp.
He must chase the moneylenders out of the temple...send the soldiers back to their barracks...and stop old people from exploiting the young.
Tall order? You betcha...
In our recent meeting in Baltimore with former US Fed chief Alan Greenspan, the wily old fox tossed a grenade.
The discussion had arrived at the biggest topic in finance: WWDD?
What would Donald do?
Then the bomb exploded: "Tax cut? A tax hike is more like it..."
Mr.Greenspan was explaining why President Trump's program won't work. No tax cut, no Main Street boom.
Readers ask why we are suddenly writing so much about politics generally...and Donald J.Trump specifically.
We've been writing a daily column since the Clinton years. But rarely did we focus on government. And only twice have we gotten so much negative feedback from readers.
The first time was at the end of the 1990s when readers did not appreciate our view of the dot-com boom.
"It's a fantasy," we said.
Then, after President George W.Bush invaded Iraq, they thought it was unpatriotic of us to say that it was most likely going to be a disaster.
It turned out to be an even bigger disaster than we had imagined.
Now President Trump has divided readers – one from another and us from many of them, too.
"Now, you need to pay attention to politics," says Ray Dalio, the manager of the world's largest hedge fund.
Understanding politics is now crucial to making investment decisions.
Never before have we had a president with so much power (given to him by gutless courts and congresses over the last five decades). And never before have we had a president so ready to use it.
President Trump's economic plan centers on cutting taxes and regulation while boosting government spending on infrastructure. The combination is supposed to double GDP growth rates, taking them back to where they were when America really was great.
If this seems likely to you, you may want to keep your money in Dollar-based assets and profit from the boom you see coming.
If not, sell your stocks and bonds. They've had a marvelous 35-year run; time to get out.
As to the regulations, we have no doubt our new president is on the right track. Regulations are win-lose deals. They impose restrictions, costs, and requirements that get in the way of voluntary win-win deals.
Remember, there's no magic or mystery to our formula: S = rv (w-w – w-l).
The net satisfaction in a society equals the real value of the win-win deals minus the cost of the win-lose deals.
To make it super simple: The fewer deals in which someone is forced to do something he doesn't want to do (win-lose), the better off we all are.
The biggest win-lose deals in America fit into three major categories with three major winners – all of them swamp critters:
The military-industrial-security complex at a rate of about $1 trillion a year, including the estimated $7 trillion bill for the Iraq debacle.
The Wall Street-Fed complex, with its control of the fake-money system.
The medical-pharmaceutical-zombie complex.
To "drain the swamp," Mr. Trump must take them on. Not just symbolically...not individually by calling out single companies and persons...and not by tweet.
Instead, he has to slash their budgets, clip their crony deals, and curb their power. He will have to limit their "wins" so that the average American feels his burden lightening and his yoke loosening.
And he can't do it using any of the Fed's trickery.
It is no use cutting taxes if government spending isn't also cut. And there's no use pretending to "stimulate" growth by lowering borrowing costs. It won't work.
Central banks in the US, Japan, and Europe have been at it for years, including the last seven years of near-zero interest rates. We've seen what happens: The rich get richer; the poor and middle classes lose ground.
Ultra-low interest rates mislead people. This causes misallocations of capital...and mistakes.
The losers, in the real Main Street economy, stoop under the burden. The winners are flush as the funny-money funds Wall Street, the empire...and the welfare state.
The best thing about this fake-money system – at least from the insiders' point of view – is that the masses don't know what is going on.
Not one person in 10,000 understands how he is ripped off by his own money.
And who knows how much military spending is enough?
"You can't be too safe," people say to one another.
Everything is subject to the law of declining marginal utility: The more you have of something, the less each additional increment is worth to you.
And as we explored in our book Hormegeddon: How Too Much of a Good Thing Leads to Disaster, the excess often becomes toxic.
One dessert is great; by the time you've eaten your fifth, you're ready to throw up. Excess military spending is worse: It leads to meddling and reckless adventurism.
As President Eisenhower warned in his farewell address, eventually, the military you pay to protect you becomes a danger – to you.
Muddling into pointless wars and destabilizing foreign governments makes you less safe. And by the time you figure it out and try to bring the spooks and soldiers under control, it's too late.
They have the guns, after all.