How Does America Keep Functioning While It Sinks Into Depravity and Corruption?

By Victor Sperandeo with the Curmudgeon

Disclaimer: As usual, the views expressed herein are those of Victor Sperandeo. However, the Curmudgeon whole heartedly agrees with Victor’s assertion that the U.S. is sinking deeper and deeper into depravity and corruption in all three branches of our federal government.

Introduction:

On Friday morning I woke up to find that the Russell 2000 rally on Thursday, October 8^th had caused the “Cumulative Breadth Index” to make an all-time high. It did so again on Friday, October 9^th. However, my morning ritual of reading the Wall Street Journal (WJS) looking for the “good news” that caused the rally made me pause in bewilderment.

As I read the WSJ editorial section, I found three editorials that spoke of an America that has undergone major structural declines. [It should be noted that the WSJ is a classic, conservative “establishment” paper. It is 100% on the side of the Chamber of Commerce, big business, and “Globalists” - Democrat or Republican.] Let’s examine these three editorials in some detail.

Analysis of October 9, 2020 WSJ Editorials:

1. “The Judiciary Grabs The Census,” criticized on one of the most distinguished positions in America -Chief Justice of the Supreme Court John Roberts! I believe it is very well deserved as the nation’s top Judge/Jurist has gone so far away from “the law” (i.e. The U.S. Constitution) that many political analysts assume that “he must be compromised.”

The caption headline in the piece is “A bad John Roberts ruling is leading to more legal mischief.” This had to do with Roberts blocking a question on the Census Form that asked: “Are you a citizen?”

This question has been asked and debated many times in the past with these recent developments:

· In December 2017, the U.S. Department of Justice sent a letter to Commerce Secretary Wilbur Ross, asking that a citizenship question be added to the 2020 census because citizenship data was needed to protect minority populations from “racial discrimination in voting.”

· Ross announced in March 2018 that he was adding a question about citizenship to the 2020 census, it triggered legal challenges by cities, counties, states, and immigrant-rights groups. One of the lawsuits, brought by the New York Attorney General’s office, prompted a federal judge to block the addition of the question. President Trump’s administration took the case to the U.S. Supreme Court.

· On June 27, 2019, the Supreme Court ruled that the Commerce Department’s explanation for adding the question was “contrived.”

· Chris Dolmetsch of Bloomberg explained the controversy in this article.

In my opinion, Roberts has no jurisdiction on this matter as the U.S. Constitution empowers Congress to conduct the Census in “such manner as they shall by Law direct.” The Census is not under the purview or review of the U.S. judicial system, let alone its high court.

The WSJ Editorial Board wrote:

Justice Clarence Thomas, joined by Justices Brett Kavanaugh and Neil Gorsuch, warned that Chief Justice John Roberts’s decision last year blocking a citizenship question on the Census under the APA “reflects an unprecedented departure from our deferential review of discretionary agency decisions. And, if taken seriously as a rule of decision, this holding would transform administrative law.

The Ninth Circuit cites the Chief Justice’s majority opinion in the citizenship-question case to claim that courts can now review discretionary decisions by the Census Bureau under the Administrative Procedure Act (APA). The Justice Department is asking the Supreme Court for a stay, and the Chief should help to rein in the legal mischief that his earlier opinion has unleashed.

Roberts has become an obvious political roadblock, acting beyond his powers, to obstruct the Trump administration. Here we have a man that is an activist, who changed the Obama Care bill (Affordable Care Act or ACA) by calling the consequence for not buying health insurance a “TAX,” rather than a “PENALTY.”

Unconstitutional as a penalty, but in Roberts’ opinion the ACA is constitutional as a TAX? So, changing a key word validates a law (the ACA) that would otherwise be deemed unconstitutional? What’s your next hocus-pocus trick, Justice Roberts?

In my opinion, the U.S. judicial system (our 3^rd branch of government) has a corrupt Chief Justice who keeps overstepping his authority. Rather than objectively adjudicating the law, he keeps getting in the way of it. Hat tip to the WSJ Editorial Board for calling him out.

2. “Jerome Powell’s Big Political Gamble” by Joseph C. Sternberg is about the Fed Chair getting into politics by suggesting that another $2-3 trillion dollar fiscal spending package would be fine with him, and the Fed will buy all the U.S. Treasury debt necessary to make that happen.

The article caption reads: “The Fed is independent as a safeguard against fiscal indiscipline. The chairman is shirking that duty.”

Powell suggests “the (economic) recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”

I have been following the Fed since 1966 and have read the minutes of Fed meetings back to 1959. So, I can justifiably state that this kind of talk is nowhere to be found in the modern history of the Fed.

This WSJ editorial states:

Mr. Powell is popular because he’s telling lawmakers—primarily Democrats—what they want to hear. To wit, he has become Washington’s most eminent advocate for a phase-four spending blowout. “The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods,” he opined Tuesday. He warned that the failure to provide such stimulus would be “tragic.”

Monetary independence already was endangered, with central banks doing most of the endangering since 2008. Expansive asset-purchase programs and ever more intrusive banking regulation have dragged the world’s central banks into fundamentally political debates about the distribution of credit and wealth in their economies.

Mr. Powell’s political-economy sin is that he kicked it up a couple notches, in two ways. One is his lobbying on behalf of fiscal stimulus legislation. Worse, at the end of August the Powell Fed adopted a new inflation target that will permanently politicize American central banking. The “average inflation targeting” regime gives the Fed infinite scope to allow inflation to run hotter than its 2% target to make up for periods when inflation runs below the target. This average is so malleable in practice as to be no target at all.

A fundamental part of Mr. Powell’s job is to do the opposite—to impose some discipline, however light, on political spending decisions. He’s not fulfilling that duty if he argues for limitless fiscal expansion (and then, by the way, becomes a major buyer of the Treasuries the government will issue to pay for it all).

The above comments strongly indicate that fiscal discipline is completely gone, the U.S. budget deficit is totally out of control, that government spending will be dictated by the most powerful politicians, and (most importantly) the Powell led Fed has no discipline or backbone. The Fed appears to have reneged on its mandate to control inflation. What would the late Paul Volker say about that?

It appears that another “Golden Calf” (The Fed) has bitten the dust! In this case, a “Golden Calf” symbolizes “misplaced priorities, loyalties, or having one's attention focused on something that appears glorious, but which is, in fact, a meaningless substitute for something of truly immeasurable value.”

The God-like institution called “The Fed” that keeps the U.S. from Depression and Hyperinflation now seems to be an empty $99.99 suit.

So, the market is trading based on the belief in “The Fed.” That despite the Fed Chairman’s cry for fiscal help and admitting that he’s effectively out of ammo. Yes, Powell has QE’s in his quiver, but as proven over the last 12 years, that does not help the real economy. It only raises financial asset prices to today’s unimaginable levels.

Even our self-proclaimed “master negotiator” (President Trump) is acting like a whimsical teenager in love, as he flip-flops from “canceling the stimulus negotiations” to the next day wanting more than both Democrats and Republicans proposed. That contradiction causes a jaw dropping “what is this all about?” And what message does it signal to Trump’s fiscal stimulus negotiators Steve Mnuchin and Mark Meadows?

The markets and economy can now go full steam ahead into a huge iceberg, as the art of the deal master just got bamboozled by a “Casablanca rug trader” named Nancy Pelosi.

3. “An American Coup Attempt” by Senator Ron Johnson (who chairs the Senate Dept of Home Land Security and Government Affairs Committees) chronicles the greatest scandal in U.S. history: A cabal working together in many critical parts of the U.S. government, including the DoJ, FBI, CIA, State Dept ,and led former President Obama. The objective is to take out a duly elected President using illegal means including the FISA Court, NSA, and “The Five Eyes Alliance” (which consists of Australia, Canada, New Zealand, United Kingdom and the U.S.). Johnson states:

Their actions can only be described as an attempted coup—as the Ukraine whistleblower’s attorney, Mark Zaid, did in a Jan. 30, 2017, tweet: “#coup has started. First of many steps. #rebellion. #impeachment will follow ultimately.”

This “attempted coup” is effectively “treason” and makes “Watergate” [1.] look like a Boy Scout BBQ.

Note 1. Watergate refers to the June 17, 1972 break-in of the Democratic National Committee (DNC) headquarters by GOP operatives. The objective was to search for inside information which might aid President Richard Nixon’s re-election. The nation was riveted by hearings for four months and the lack of confidence in the U.S. government contributed to a recession. Nixon was not involved in the original Watergate plan, but was caught covering it up and resigned in disgrace on August 8, 1974. Later, he was pardoned by President Ford for various crimes.

According to History Collection: “Richard Nixon’s crimes went far beyond Watergate. His abuse of power, his use of the IRS, FBI and CIA against his perceived enemies, his obstruction of justice, payment of hush money, maintenance of an enemies list, are just a few of the crimes he committed while President and while trying to become President. Most of his criminal activities are forgotten, other than the Watergate scandal, itself not one crime, but a lengthy series of criminal behavior by the President and his underlings.”

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The highlighted WSJ op-ed caption reads: “Time maybe running out to expose the effort to overthrow Trump, which began before his election.”

Incredibly, all the agencies which are headed by President Trump are stonewalling documents which aim to expose this coup in detail. Yet current FBI Director Christopher Wray, CIA Director Gina Haspel and DoJ head William Barr are all covering up their department’s crimes. This was an attempted overthrow of the U.S. government executive branch, but not a single person has been prosecuted or sentenced after 1.5 years of investigation!

You can bet all these players, including Bill Barr, will be gone if Trump is re-elected President in November.

When most of the U.S. federal government is corrupt and only a handful of lawmakers care... the U.S. is on its last legs, as the rule of law is finished.

Conclusions:

The bottom line is that America is in a Constitutional crisis. Many of the most prestigious institutions of our government are believed to be corrupt! Yet nothing is being done to expose this corruption, stop it, and be once again governed by honesty and the rule of law (i.e. the U.S. Constitution). That makes the Mafia look good.

During the Watergate scandal resulting in President Nixon’s resignation, the market (S&P 500) fell 26.5% in 1974 because of the consequences of an unknown outcome. Fast forward to today, where the NASDAQ 100 is up 34.3% YTD in the face of corruption that’s much worse.

In this case, the scandal is all fine because the mainstream media does not want to hurt its narrative that Trump is the bad guy, rather than the rest of the federal government.

It’s logical to assume that if the government doesn’t punish anyone for the many obvious crimes committed, then those and similar transgressions will likely happen again. That’s because there would be no perceived deterrent.

That will eventually cause another 1974 -like recession and a major stock market decline. Sadly, the problems are being compounded and there is no rule of law that is being equally applied.

Closing Quote:

To quote a patriot who exposed the U.S. government’s illegal NSA program (and thereby trashing the 4th amendment) to spy on Americans without a warrant…

“Sometimes the scandal is not what law was broken, but what the law allows.” by Edward Snowden.

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Be well, stay safe and calm, good luck and till next time…….

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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