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Volume XIX Number 5 - March 14, 2020     RSS Feed   

A Periodic Newsletter for Committed Texas Conservatives

In This Issue

The Panic Of 2020

Timely New Book: America's Expiration Date By Cal Thomas, Asks Will History Repeat Itself And America Fail?

When Everything Is A Priority, Nothing Is A Priority

Border Wars 2020

Perspective (Advice For Donald) By Ken Veit, Guest Columnist

A Tale Of Two Credit Bubbles By Neland Nobel, Contributing Editor

Red, White and Blue
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Thoughts This Fortnight

The Panic Of 2020

In 1841, Charles Mackey wrote the book Extraordinary Popular Delusions and The Madness of Crowds which detailed about the history of mass deception and delusions like the Dutch tulip mania where tulips exploded in price amid claims they could sub for currency.

We mention this because much about Coronavirus reminds us of that book and previous panics. So let's collectively take a deep breath and examine our situation. What do we really know?

The flu, which we face yearly, kills an average of 16,000-30,000 per year and auto accidents kill 50,000. The coronavirus in the U.S., maybe about 35 deaths so far. Every life is precious, but compared to other dangers we face daily, so far not so bad.

Some observers think this is just more politics. The mainstream media has gone full-blown crazy sowing panic like we haven't seen for decades with their 'we are all going to die' mentality.

And what's worse, they are misrepresenting the facts. For example, take Dr. Fauci of the National Institute of Allergy and Infectious Diseases, who testified last Wednesday that the virus is 10 times more lethal than this season's flu and then explained what that fact meant in context and which means that it brings the new Coronavirus fatality rate to around 1% (down from prior estimates of 3%). That is great news. But what the major media (CNN, MSNBC, and others) said was that it's 10 times more lethal than the flu and dropped the rest of the story!

Why misrepresent and mislead the story? It's easy to create panic, hurt the economy by closures, with the ultimate goal of damaging President Trump so much that he loses in November.

So let's learn the proper lessons from this virus, take precautions as doctors have instructed us to do and practice healthy habits.

The panic has caused essentially a shutdown of significant parts of the economy, a stock market freefall, travel and entertainment industry essentially closed for business, and massive cancellation of public events.

This too will pass; let's not get fooled by the major media.

Please take the virus seriously and take common-sense precautions, but do not panic. For example, the run on toilet paper, come on. Panic will only create more problems.

Timely New Book:
America's Expiration Date By Cal Thomas,
Asks Will History Repeat Itself And America Fail?

Is it a coincidence? Maybe. The new Cal Thomas book asks about the future of the U.S. A month ago, you may have said we will be fine. Today in the middle of the Coronavirus panic, it's instructive to look at the five marks of a decaying culture as identified by Edward Gibbon. Author of The Decline and Fall of the Roman Empire:

  1. Concern with displaying affluence instead of building wealth.

  2. Obsession with sex and perversions of sex.

  3. Art becomes freakish and sensationalistic and not creative and original.

  4. Widening disparity between very rich and very poor.

  5. Increased demand to live off the state.

When Everything Is A Priority,
Nothing Is A Priority

In late February, accidental County Judge Lina Hidalgo passed on a party-line vote to provide "free" legal services for illegal immigrants for her failed immigration court hearing at the startling cost of $1.5 million per year, and like any entitlement, it will go up in cost.

The short question here is why is it a function of county government to pay legal costs for illegals who violated our immigration laws by entering the country?

This proposal was supported by the three big spending Democrats who last year tried to raise taxes for the second time in a year on taxpayers. Maybe the citizens need to decide whether county government needs to expand into non-traditional county activities.

TCR's vote on that is No Way.

Border Wars 2020

Watching the replay of the Middle Eastern asylum seekers in Turkey at the Greek border? We are and the same thing could happen at our southern borders!

So let's look at what is happening and who is aiding and abetting no one, other than our old friends, the mainstream media.

Just read the headlines from the Turkish Media with thanks to Daniel Greenfield, columnist for FrontPage Magazine, who is credited with all the quotations:

"Turkey's Islamist regime is threatening an invasion of millions. And NATO is absolutely helpless to stop a NATO country from masterminding an invasion of Europe."

"'Hundreds of thousands have crossed, soon it will reach millions,' Recep Tayyip Erdogan, the Islamist leader of Turkey declared.

"The European media has been feeding the public a steady stream of staged photos and videos of crying women and children. However, crowd photos showing masses of young men are not seen. The women and children are there purely as human shields and sacrifices.

"Children are made to cry by burning them and killed outright to guilt the west into selling out the future of their children.

"The Alawites of Syria, their Shiite allies from Lebanon and Iran, will defend their borders. As the Turks discovered the hard way. They will lie, cheat, and steal, and die and kill to protect those borders.

"And the Europeans will ask you for your papers. If you refuse, they will eventually let you in anyway.

"The Europeans are neither willing to die nor kill. And so, the continent is being overrun by those who are.

"Erdogan ... understands this. So does the migrant hurling a cinderblock at a border guard. Westerners won't fight for their countries. They will.

"Migrants are a weapon. They're one of the more potent human missiles in the arsenal of globalism which has shifted the future from the technocratic upstarts of western civilization with their skyscrapers and empty houses of worship, to the old civilizations of Asia which have the relentless will to take them.

"Western humanitarian nations want to fight their wars with bombs and tanks, but their ruthless eastern enemies prefer to fight them with humanitarian weapons. Muslim countries dispatch refugees, and when they turn terrorist, pay for their lawyers.

"Nobody wants to fight us on our own terms. And why should they? Who's going to try to punch the giant in his armored chest when he has a glass jaw? Why bother equipping 30,000 men with rifles, when you can just dump them ashore, accompanied by a few women and children, for a successful invasion.

"Resisting humanitarian warfare requires drawing firm lines between 'us' and 'them.' That's the line that globalism erases. And if there's no line, then their crimes are evidence of the evils of our society.

"Wars are won only by those nations, peoples, and people who can draw that line.

"If there is no 'us,' then what are we fighting for? If there are no nation, why defend their borders? If all beliefs are equal, then great conviction establishes moral superiority over those with lesser conviction. It doesn't matter if the belief is in the supremacy of Sharia law and the descendants of Mohammed.

"Europe allowed its cities to be swarmed before and thousands of women were raped, bombs and vehicles were used as weapons in crowded streets, and it still hasn't learned to say 'no' and mean it.

"Refugees are a weapon. But not one that comfortable people in prosperous societies understand. And by the time they come to understand what is happening, it may be because they will be the refugees.

"When you believe in nothing, and family is an empty word, then you will only fight for what you have.

"Einstein reportedly said, 'I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones."

Perspective (Advice For Donald)
By Ken Veit, Guest Columnist

Many years ago I visited Antarctica. The most memorable aspect of the trip was viewing the penguins, which come in 19 species and can be seen in hundreds of thousands at a time. An extraordinary time was when the penguins went to eat. They waddled to the edge of a cliff and stared out at the broad ocean. Looking back at them were a bunch sea lions, waiting for lunch. We could see the penguins chattering among themselves, discussing the sea lion danger. Eventually they decided to risk it, and one penguin dove in, followed by the rest. Of course some fell to the sea lions, but for the rest it was eat or die.

On June 6: 1944, Allied forces in the largest army in world history stormed onto French beaches and into murderous fire from the Wehrmacht. 4,414 troops of the Allies died that day. Eisenhower was warned that casualties could run into 6 figures, but, like the penguins, the attack was necessary because the alternative was unacceptable. So he made the difficult choice, knowing that he was sending many of his countrymen to their graves.

I have thought of Ike and the penguins during the Coronavirus crisis we are currently in. The experts are warning that a calamity is possible and advising that much economic activity should be brought to a standstill. This is typical thinking by experts who are always inclined to counsel painful alternatives over ones that would leave them vulnerable to criticism in case "the worst" happens.

When I was working internationally, the Security Dept. at Aetna always warned me before each planned trip that I was taking a risk and would be well advised not to go. There was a lot of terrorism back then too. I went anyway, and never experienced any problems. My point is not to suggest flying today, but rather to illustrate that expert warnings are always to do nothing.

In our current crisis, mainstream thinking is that the loss of any person dying is unacceptable if it possibly could be avoided. I would suggest that this is the wrong way to approach a crisis.

The greater the extent to which we shut down the economy, the greater will be the financial damage done to families and businesses. That economic damage will cause immeasurable hardships, the totality of which will not be fully known for years. Putting values on such difficult alternate outcomes is never easy. Nevertheless, in the end it more or less comes down to trying to assess whether it is better to accept some number of excess deaths or some number of lives ruined by a badly impacted economy.

Who should make such a decision? Who is best qualified to make one on a dispassionate basis? A narcissist? A radical reformer? A bumbling geriatric whose brainpower is suspect? A Congressional politician with an agenda of one kind or another?

In the absence of national leadership, decisions will be made piecemeal by regional leaders, likely resulting in "death by a thousand cuts". This is tragic. The public senses it, and their fear is reflected in a collapsing stock market. A "take no chances" strategy may save lives, but it will be an economic nightmare. We can't just close schools, entertainment venues, travel, etc. and not affect collateral businesses that depend on them. It seems to me we will be guaranteeing a recession of major proportions.

Dealing with crises almost always involves choices between awful alternatives, and making all those affected aware of what you decided and why. If President Trump does not deal effectively with this one, his presidency is over. We should all keep in mind that this is exactly what the Democrats want. They can be counted on to make his decisions as difficult as possible. Pointing fingers does nothing to help solve a crisis.

What does?

First, we need much better data on how the virus is transmitted, what the rate of infection is, what the rate of hospitalization is, and what the death rate is. We have lagged in testing, but the Koreans have not. Trump should lean on them for as many testing kits as possible as fast as possible. This is one place where his bullying style could work if he meets excuses and reluctance to cooperate. Before telling everyone not to touch anyone or anything, let's find answers to questions like how long you have to touch something infected and how quickly you have to wash it off. Surely our vaunted scientific community can find answers quickly. It beggars belief that we still don't understand how community transmission occurs as opposed to human-to-human. That is vital in determining how much activity to curtail and what kind.

Once we have reliable data, we can make realistic estimates of how many are likely to be infected, how many of those will require treatment, and how many will die. From that it can be estimated what resources are likely to be required and how stringent curtailment efforts should be, vis-a-vis the economic damage they do.

Hospitals are already screaming that they are overstretched. OK. What other places can be brought into service for an emergency? Review how things were handled in the aftermath of Hurricane Katrina. Mar-a-Lago and Trump Tower should be considered.

The medical profession wants tight "social distancing" controls because it will alleviate pressures on medical facilities by stretching out admissions. They don't consider the economic impact of essentially shutting down the economy for a long time. From their parochial point of view, longer is better. The economic problem is for someone else to solve. It would be better to use presidential power to find more places to commandeer as treatment facilities.

Congress is approving a huge stimulus bill. As usual it is loaded with pork in the form of expansion of broad welfare programs and subsidies to favored organizations. What would make more sense is to provide direct subsidies to people whose livelihoods have been snatched away by business shutdowns.

This past week, the Indian Wells tennis tournament was abruptly cancelled, an important event economically in California. I keep thinking about some poor guy who bought a thousand T-shirts with "INDIAN WELLS 2020" on them for sale to visitors. What can he do with them now? He is the one who needs help, not the teachers' unions. Help teachers and stewardesses, not unions!

Trump should pressure China to give us access to all they have learned as fast as possible. He could also waive the tariffs that have hurt China as well as Americans. That would speed up cooperation and do good all around.

He should also call his buddy Prince MBS of Saudi Arabia and tell him to end this futile oil war with Russia or the U.S. will stop supporting him completely. We no longer depend very much on Saudi oil, but they depend on us for military support. He could also call Putin and offer to raise sanctions in return for cooperating with the Saudi's. The oil war is crippling us.

Finally, he should get everyone to stop worrying who is going to pay for all the testing. Let the Government pay, but tell the suppliers that this is not going to be an opportunity to make a windfall profit from a national crisis.

All this requires leadership. Congress needs to be told that this is no time to play every angle of the crisis for political advantage. I was not an LBJ fan, but his style of leadership is what is needed now. He would call in someone and softly encourage him with simple words like, "Goddammit, the Pres'dint of the YOU-nahted States is askin' you to do something for your country If'n you don't, the full power of the Gov'mint will be deployed agin' you at every turn. Now, what do you say? Can I count on your support?"

Can you do that, Donald? If not, you'll be back in NY next year, tweeting to no followers at all.

Ken Veit is an actuary and retired president of an international insurance company.

A Tale Of Two Credit Bubbles
By Neland Nobel, Contributing Editor

Rarely does history repeat, but as Mark Twain once quipped, it often rhymes.

The financial crisis of 2008 and 2009 was a rolling crisis, with some of the features that crisis listed below. A number of things clustered late summer 2008 that culminated in the housing crisis, the collapse of Lehman Brothers and the shotgun wedding of Bear Sterns.

It was followed by bailouts of money funds, the auto industry, nationalization of mortgage firms Fannie and Freddie, and the FED purchase of insurance giant AIG.

Then there was the $700 billion dollar bailout, central bank coordination, and TARP.

There was extraordinary monetary experimentation with four waves of Quantitative Easing (QE) coupled with zero interest rate policy (ZIRP). Most foreign treasury departments and central banks coordinated their response with the US Federal Reserve with similar policies.

The stock market fell about 50% and bottomed in March of 2009 and did not recover back to the old high until 2013. The gold price troughed out a little over $600 per ounce and rose to over $1900 and then backed down.

The economy was very slow growing for almost the entirety of the Obama Administration, but picked up speed under the tax reductions and regulatory reform of Donald Trump. Stocks moved to new highs and on to extremely high valuation levels.

Conditions are quite different today in that markets are concerned that the Covid-19 virus could spread, causing the economy to either slow significantly or actually tip into recession. So, while there are significant differences today to 2008, what you have in both cases is a likely decelerating economy running into a debt bubble. The bubbles may not be so much in real estate finance but have their counterpart in bloated emerging market debt, low quality domestic corporate debt, Chinese debt, and financial leverage causing a significantly over valued stock market.

Markets have two issues to face: will the virus spread, and more importantly, will people panic and thereby inflict damage on the economy just the same? Cowboys can be killed by stampeding cattle, whether the herd panics for valid or imagined reasons.

As we write, it would appear the panic over the virus is doing much more damage to the economy than the virus itself. However, time will tell and the outcome is uncertain. The uncertainty is not good for the stock market or for business planning.

The economy and the stock market have been in bubble phase for a while. The economy has been held aloft, even when growing, by extraordinary loose monetary policy, active fiscal stimulus, and plunging interest rates. We have government debts out of control, huge unfunded liabilities, and many state and local government pension programs underfunded.

The economy can scarcely afford a significant slowdown or the ugly underbelly of credit excess will surface quickly.

A credit crisis could develop first in the debt of marginal oil producers being crushed by the collapsing prices of crude, or by problems in China, which has been a debt bomb with a hissing fuse for some time. A serious slump in China will additionally spread to all the commodity producing countries that sell to China and endanger their tenuous debt.

As a major trading partner of the US, we will feel their pain as well.

One stark difference between then and now, is that the FED has largely fired all of its ammunition to maintain the current prosperity, saving little to fight off the invading deflationary hordes.

That means monetary policy will be limited in what it can do and politicians will reach for fiscal stimulus. In plain language, that means big spending programs. Jason Furman, former Chairman of the Council of Economic Advisers under Obama made precisely this argument in a recent editorial in the Wall Street Journal.

Republicans, seeking to hold on to their power, are unlikely to resist these calls for more spending and higher deficits. They don't want another Herbert Hoover. And besides, even when they held both the White House and Congress, Republicans could not muster the nerve to curtail spending or reform entitlements. We wish they had been able to do so, but the Democrats so demagogued the discussion, little headway was made. Remember the Paul Ryan look-alike pushing grandma off a cliff?

Adding to the complications is the fact that demographics will be driving spending higher as the biggest bulge in the Baby Boom is in the process of retirement.

Recession plus demographics added on top of the debt and deficits that have been growing rapidly absent a crisis, will equal record fiscal deficits. Look for mind-boggling deficit numbers over the next few years.

This crisis will likely also have the same kind of rolling feature as government plays whack-a-mole dealing with debt problems that will emerge from various stricken sectors. With the bailout of the auto industry and insurance as precedent, it will be hard not extend that to say airlines or cruise lines.

We do not know how it will unfold nor does anyone else. All we do know is printing money is the only thing governments know how to do and big deficits are about the only thing upon which our political parties can agree.

As to the political aspects of this, it is fortunate in a way that this whole problem has its source in China, their dietary habits, and their secrecy and mishandling of events. Clearly is not the "fault" of the Trump Administration. As long as he provides a rational response to both the economic and health issues, it is doubtful he will be "blamed" for the market drop and possible recession.

However, you can expect the political opposition and their propaganda arm the mainstream press, to attempt to blame this all on Trump and the Republicans. But given the origins of the problem, it will be a hard sell.

We use the term fortunate because there are many occasions in history where underlying imbalances in the economy reach a critical inflection point rather quietly on their own, and the market decline and economic reversal cannot be blamed on anything specific. Whoever is in office, thus seems to take the blame. At least in this case, the specific triggering event (Covid-19) cannot be blamed on policy error. The underlying imbalances could be, but they are largely a bipartisan affair that has promoted big government, big debt, and cheap money policies.

Both parties have allowed government debt to soar, and zero interest rate policies of the FED have encouraged companies to gorge themselves and debt, often to use proceeds not for production or research, but to buy back their own stock. Individuals also have used debt excessively, mislead by the signals that it is "cheap."

Investors themselves bear some responsibility. Signs of over valuation and over leveraging of assets have been evident for some time, but to borrow a phrase from a Citibank executive from the last credit crisis, everyone wants to dance until the music stops.

In fact, money managers that pursued a more cautious course are fired from their jobs for not keeping up with index funds. That is because investors became greedy and felt entitled to outsized portfolio gains. Then again, what was the alternative for those saving for retirement? With zero interest rates, bank deposits and bonds have offered little competition for stocks. It was called the TINA affect, as in there is no alternative to equity investing. TINA helped pushed equity prices to unrealistic levels.

We have had the longest business cycle expansion and the longest bull market in equities in American history. It has been prolonged by very unusual monetary and fiscal policies under the last few Presidents. The FED morphed from a central bank into a central planning agency and has become habituated to interference in market processes. The FED has all the problems that have plagued central planning namely the hubris to superimpose their decisions over those of the free market. In the famous words of Hayek, it has been "the fatal conceit."

Blameworthy or not, the problem is when bad things happen, people want to blame. Socialistic opportunists want to use this as an excuse to bash capitalism to advance their agenda. As Hayek ruefully noted, "emergencies have always been the pretext on which the safeguards of individual liberty have been eroded."

The next few months will require cool heads and a quick response to those that want to blame the President or capitalism for the current crisis.

But here are some added thoughts. The President's proposal to cut the payroll tax, will cause the deficit to grow by about another trillion. Revenue will drop to the government, they will have to borrow the difference, and so it is basically MMT. Instead of sending everyone a check, the public gets to keep a large portion of what they would have paid in FICA taxes, hence it is the same thing as direct cash to the public, something I have long predicted. This will get around the "constipated" banking system, which had difficulty pushing loans (pushing on the string) out to people already up to their eyeballs in debt. It is QE for the common man.

If other governments follow with similar strategies, the supply of bonds is going to rise immensely, putting downward pressure on bond prices or upward pressure on interest rates, which increases the deficit even further. This rise in rates also damages those already on the margin in their ability to service debts. To mitigate that problem and the oversupply of bonds problem, central banks will add bonds to their balance sheets with money created out of thin air. In short, another round of QE policies.

This is along the lines of my "end game" piece written some time ago. It is "infression." We will see symptoms of recession: a marked slowdown in economic activity, bearish action in commodities and equities, and serious credit default because of over leverage in the system. At the same time, huge deficits and money creation will be occurring, which will depreciate the value of paper money. With supply chains and production being interrupted by Covid 19, central banks will likely get the inflation they have yearned for.

The political odds of implementation are high. Democrats are already the party of deficit spending and now MMT. They simply can't offer any resistance. Republicans will do what is expedient to see that they don't get blamed for the crisis and for not acting. Remember much of the New Deal was actually implemented by Hoover, but he got blamed and that hurt the Republicans for 20 years. There is no force of any significant political power to stand in the way of easy money emergency measures. And given the risk of societal discord, it may be the only practical thing to do. Reduce the debt burden via currency depreciation, a technique long used in history.

This in the end, should be bullish for gold. It provides protection both against default and depreciation of money value.

Neland D. Nobel is an Arizona based free market economist and a contributing editor for TCR.

TCR on the Air

Red, White, and Blue featuring TCR Editor Gary Polland on Fridays at 7:30 pm on Houston Public Media TV 8, replaying Saturday at 6:30 p.m. on Channel 8, Monday at 11:30 pm on Channel 8.2 and on the web at

Upcoming show:
03-20-20 - Coronavirus - The Real Story with Dr. Peter Hotez, Baylor College of Medicine and Baker Institute expert and Congresswoman Sylvia Garcia (D) Texas.

About Your Editor

Gary Polland is a long-time conservative and Republican spokesman, fund-raiser, and leader who completed three terms as the Harris County Republican Chairman. During his three terms, Gary was described as the most successful county Chairman in America by Human Events - The National Conservative Weekly. He is in his twenty-second year of editing a newsletter dealing with key conservative and Republican issues. The last eighteen years he has edited Texas Conservative Review. As a public service for the last 16 years, Gary has published election guides for the GOP primary, general elections and city elections, all with the purpose of assisting conservative candidates. Gary is also in his 18th year of co-hosting Red, White and Blue on Houston Public Media TV 8 PBS Houston, longest running political talk show in Texas history. Gary serves on the Board of Directors of American Values, a national pro-family, pro-faith, conservative organization supporting the unity of the American people around the vision of our founding fathers and dedicated to reminding the public of the conservative principles fundamental to the survival of our nation. Gary is a practicing attorney and strategic consultant. He can be reached at (713) 621-6335.

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