Category: Uncategorized

Trump, Trump, Trump, all about Trump

Are we supposed to take him literally but not seriously or is it the other way around? Are his rants those of a truly crazy person or can he really not know that his totally nutty rants are doing serious damage to the U.S.? https://heathercoxrichardson.substack.com/p/september-7-2026?r=1n8osb&utm_campaign=post&utm_medium=email  

I had worried that Trump’s anti trade, protectionist instincts would do serious damage to our country, but never dreamt that he would so blatantly abuse executive power against his domestic enemies and would so quickly turn almost the whole world, our allies included, against us, something not good for the country. By the way, U.S. manufacturing output is the greatest it has ever been. Manufacturing employment, on the other hand, has decline some because of increases in labor productivity.

The party that had aways best reflected my views on the policies that best served us, the Republican Party, has totally failed to uphold congress’s constitutional responsibilities to block Trump’s lawlessness. As much as I hate to say it, our (the country’s) only hope to stop Trump before his picture and name are on every building in town and almost every country in the world (I leave it to you to decide which might still like Trump) has condemned us and refused to cooperate with us, is to elect a Democratic congress in November. I think this will happen whatever the courts rule on mail in ballets. I always vote in person on election day anyway.

Inflation

The disappointing performance of the Chairman of the Board of Governors of the Federal Reserve, Kevin Warsh, and the Secretary of the Treasure, Scott Bessent, prompts me to return to my favorite topic of inflation, the rate of change in the value of money. Being a monetarist, when discussion inflation I give primary attention to the money supply and its rate of growth.  

But monetary policy and inflation are generally linked to interest rates, in particular the Federal Reserve policy rate. President Trump wants it low (the government interest payments on its 40 trillion dollar debt were $1.2 trillion in 2025, more than its War Department budget of $868 billion the same year) but the Fed has kept it unchanged at 3.65% all of this year despite inflation of 3.4% from a year earlier and a target rate of 2%.  Since the 2008 financial crisis the Fed’s policy rate has been the rate it pays banks for their deposits at the Fed (Interest on Reserve Balance—IORB).

This note will clarify the relationship between the Fed’s policy interest rate, market interest rate, the money supply and inflation. If these issues don’t interest you, stop reading now and we can still be friends. If they do interest you I will depend on your reading my earlier blogs that provide necessary background. The first point is that while interest rates are determined in the market, the Fed’s influence is indirect. https://wcoats.blog/2025/07/17/the-feds-policy-interest-rate/   https://wcoats.blog/2025/12/13/econ-101-interest-rates/

The main point is that the Fed’s policy rate is the instrument by which it controls the money supply, and the behavior of the money supply is the most important factor determining inflation. If the Fed lowers its policy rate (relative to what economists call the neutral rate), banks will draw down their reserve deposits at the fed and lend more. Thus the money supply will grow more rapidly. As market rates (say on ten-year treasury bills) reflect the balance of saving and investing—the real interest rate—plus the market’s expectation of inflation, an increase in the expected rate of inflation will increase observed nominal market rates. So, if the increase in the rate of money growth from lowering the Fed’s policy rate increases inflation it will increase longer-term market interest rates. https://wcoats.blog/2024/11/08/econ-101-money/

No one has really figured out what Secretary Bessent thinks he is doing with his repurchase of long-term government bonds. He said this was to lower long-term interest rates when in fact it is more likely to increase them if anything. Lowering long-term interest rates requires reducing government debt (less spending or higher taxes), increasing our trade deficit (so that China finances more of our fiscal debt), or lower inflation that reduces the inflation expectation component of market rates. Bessent’s repurchase does none of these. The money he needs for the long-term debt repurchases will need to come from increased borrowing of short term securities. It’s all nonsense.

And then there is Chairman Warsh. I applaud his intention to review how policy is formulated and communicated. He is right to reaffirm the Fed commitment to its 2% inflation target, giving it the pride of place in the Fed’s dual mandate of stable prices and “full” employment. He is right that the Fed’s forward guidance was misunderstood and counterproductive. The Fed should not commit itself to a path of its policy rate in the future. The Fed’s forward guidance should be to do whatever will best achieve its inflation target. The policy rate chosen today (its instrument for controlling the behavior of the money supply) should be the rate the Fed judges, given the current status of the economy and its forecasts for other relevant data, will result in 2% inflation in one to two years.

Let me repeat that. What the Fed needs to confirm to the market is its commitment to set today’s policy interest rate so as, in its best judgment, will produce a 2% inflation rate within one to two years. If conditions change, the Fed may need to change its policy rate. Its only commitment to the future is to do today what it thinks will achieve its inflation target.  https://wcoats.blog/2021/08/09/a-shift-in-monetary-regimes/

But to keep the public’s inflation expectations anchored at 2%, the Fed must clearly explain why it thinks its current policy rate will achieve that target. This is where Warsh has stumbled.  In his address to the annual Jackson Hole monetary policy gathering Aug. 28th he made significant progress in improving his messaging. https://www.washingtonpost.com/business/2026/08/28/fed-chair-warsh-speaks-jackson-hole-conference/

Where is Trump Going?

From Trump’s first days of his second term I have worried about where he was taking us.

 “US President-elect Donald Trump’s trade policy challenges the post-war global trading system. By rejecting the World Trade Organization’s principles of non-discrimination and reciprocity, Trump proposes a power-based approach that would fundamentally alter international economic relations, risking the predictability and fairness that have underpinned global trade for seven decades.” “How Trump threatens the world trading system” Fortunately our Supreme Court has blocked some of Trump’s outrageous tariff threats. Congress has been missing in action.

But Trump hasn’t stopped there.  Though promising to end our “forever wars” and restraint in our international relations, Trump is coming on as the most aggressive President in memory. Many people have been understandably astonished by Donald Trump’s recently proclaimed desires to ‘take back’ the Panama Canal ‘in full, quickly and without question’ and to take over the self-governing Danish territory of Greenland. More shockingly he has launched attacks wherever he wants without regard for international law or the requirement of Congressional approval.

In the 66 bombings of boats heading to the US in the Caribbean and eastern Pacific, the US has killed 215 people. In an unprovoked bombing of Iran jointly with Israel, in February of this year, Trump launched a war without Congressional approval that we are still stuck in leaving us with greatly reduced military capacity. “President Trump said today [Aug 17, 2026] that he was ’not in a hurry’ to strike a new deal with Iran now that his preliminary truce with the country has reached its official expiration date. He also took aim at Oman, an American ally on the Arabian Peninsula that has been attempting to mediate negotiations between the U.S. and Iran.

“’If Oman gets in the way,’ the president said, ‘we’ll bomb the shit out of them.’ His comments, in an interview with Fox News, underscored how difficult it has been to end a conflict that Trump said would be over months ago.” https://www.nytimes.com/2026/08/17

 “Trump separately on Monday doubled down on the idea that the U.S. has total control of the Strait of Hormuz and on the possibility it could be turned into a U.S. territory.

“We control it with the blockade, and I like the idea of declaring it a territory,” Trump told reporters in the Oval Office…. President Trump posted an image of a map labeling the Strait of Hormuz as a U.S. territory early on Tuesday in an apparent effort to double down on his calls to annex the waterway.” https://thehill.com/6034221 Trump is rapidly losing allies who would not support our war in Iran (Spain, South Korea, and Oman). France and Germany have also criticized the war. The Soviet Union was never so bold.

In addition, the Trump administration has exited or initiated withdrawal from a series of major international treaties, conventions, and accords:

Arms Control & Security

  • Iran Nuclear Deal (JCPOA): Withdrew in 2018, re-imposing economic sanctions on Iran.
  • Intermediate-Range Nuclear Forces (INF) Treaty: Exited in 2019, citing non-compliance by Russia.
  • Open Skies Treaty: Withdrew in 2020, citing Russian violations and restrictions on surveillance flights over key regions.

Climate & Environment

  • Paris Climate Agreement: First withdrew in 2017 (effective 2020; reinstated under Biden); exited a second time on his first day back in office in 2025.
  • UN Framework Convention on Climate Change (UNFCCC): Ordered the U.S. exit in January 2026 as part of a broader withdrawal from climate-focused international bodies.

International Agreements & Compacts

  • Trans-Pacific Partnership (TPP): Signed an executive order to withdraw the U.S. signature in 2017 before the trade deal was ratified by Congress.
  • UN Global Compact on Migration: Opted out in 2017, stating the agreement compromised U.S. sovereignty over immigration policy.
  • OECD Global Minimum Tax Agreement: Rescinded U.S. support and commitments to the agreement upon taking office in 2025.

An example, of Trump’s disregard for the international rule of law, the US State Department just announced: “sanctions against the president of the International Criminal Court (ICC) and another official amid the Trump administration’s campaign to dismantle the international body. Sanctions were imposed on ICC President Tomoko Akane, a Japanese national, and ICC senior trial lawyer Abdoulaye Seye, a Senegalese national who was investigating alleged war crimes carried out by Israel, said Rubio in a statement.” https://www.theepochtimes.com/world/rubio-announces-sanctions-against-international-criminal-court-president-6076592

Trump has delivered on his promise to tighten our borders and removed illegal immigrants. Deportations and voluntary exits jumped from over 460,000 and 700,000 in 2023 and 2024 to over 2,500,000 in 2025 of which and estimated 1.9 million were self exits.

However, the behavior of masked ICE agents, including the deaths of over 30 people in ICE custody in 2025 have created a public outcry. In 2024 and earlier, the majority of ICE arrests focused on those with criminal records. In 2025, the government stated that 70% of ICE arrests involved individuals with criminal charges or convictions. However, independent analyses of 2025 data suggested that only 23% of those targeted in broader sweeps actually had prior criminal convictions, with many of those being for minor traffic or immigration offenses.

While Trump is complaining about our balance of payments deficits, his immigration policies are making it worse. One of our important exports are tourists to the US who spend for food, accommodations and other goods and services while here. The number of tourists in 2025 was 5.5% lower than in 2024. Trump’s clamp down on student visas is bound to reduce their number this year and going forward. https://wcoats.blog/2026/07/30/foreign-students/

Putting his name on the Kennedy Center was sort of harmless (but distasteful) but then shutting it down all together is much less so, and, and as is so often the case with Trump, hard to understand. The United States Institute of Peace is now the Donald J Trump Institute of Peace. Then there are programs he has created in his name: Trump accounts, Trump Gold Card, TrumpRx, Trump National Parks pass, etc. But he hasn’t stopped there, creating the “Trump-class” battleship. His picture hangs from many government buildings. Though it violates the tradition of the U.S. Treasurer, currently Brandon Beach, signing our currency notes, Trump will do so in the future. While most of these displays of Trump’s name might be taken as the actions of an immature child, his proposal to issue special one-dollar coins with his likeness seems to violate more than just good taste.

Far more dangerous than indulging his ego are Trump’s use of government power to punish his “enemies” (those who criticize him). We have gotten used to Trump using his Truth Social or X/twitter accounts to damn and/or label as stupid or evil those who have criticized him, but he has used the power of his office to much more seriously attack his enemies or to force compliance with his policy views.

For example, after firing FBI director James Comey, who oversaw the probe of ties between Russia and Trump’s 2016 Presidential campaign, Trump repeatedly called for investigations of Comey over alleged leaks and handling of memos, and his current Justice Department has pursued renewed inquiries. Similarly motivated DOJ indictments or investigations have been made against Trump appointed officials John Bolton, Letitia James, Robert Mueller, Andrew McCabe, John Brennan, and others who played leading roles in Russia‑related or Ukraine‑related investigations. These are just the tip of the spear. https://wcoats.blog/2026/04/20/trumps-record-so-far/

Trump’s wealth has increased $2.2 billion in the first year of his second term. Ralph Nader told Chuck Schumer that: “You should have described his huge loot as $1.1 million an hour. That’s right, $1.1 million an hour based on a 40-hour work week over one year. (And remember, Trump spends a lot of his time on his vengeance missions, his golf game, and napping—so a 40-hour work week is a generous estimate.)” https://www.counterpunch.org/2026/08/17/1-1-million-an-hour-trumps-personal-profit-in-2025/

About 65% of this was from Trump’s cryptocurrency ventures. The office that regulates the nation’s banks is run by a man Trump appointed, and he just gave World Liberty Financial, the family’s own crypto venture, preliminary approval to operate as a trust bank. If you want an insider trading advantage, you can pay Trump $100,000 per month for early access to his Truth Social messages on social media.

Trump’s corruption worries me less than his steady strengthening of his control over the government. One of his first acts was firing all Inspector Generals, independent officials who audit government programs in order to prevent fraud and find waste. Many of the Defense Department’s (now called the War Department—guess why?) best generals and admirals have been fired. The new head of the Justice Department was previously Trump’s personal criminal defense attorney.

The Trump Treasury Department has just [Aug 17] permanently exempted American companies from disclosing who actually owns them — effectively gutting the Corporate Transparency Act, a bipartisan anti-money-laundering law passed with overwhelming support in 2020. The rule doesn’t just halt enforcement; it deletes all beneficial ownership data already submitted. Where is all this headed? Trump now jokes about a third term. Ha, ha.

While Trump has done many things that are worrisome and we should object to, he made many campaign promises that he has not delivered. Should we be thankful?? https://www.nytimes.com/interactive/2026/08/18/opinion/trump-economy-campaign-promises.html?smid=nytcore-ios-share

While I increasingly worry about all of this, Trump’s destruction of the Kennedy Center hurts me personally the most. I am too old to worry too much about the rest.

Econ 101: Capitalism and Socialism

The popularity of socialism seems on the rise. Is it justified?

Starting from the top, the difference between capitalism and socialism is who decides how our resources (capital and labor) are allocated. Under capitalism the private owners of a country’s resources decide how to use what they own. They are driven by the desire to maximize profit. Under socialism public owners (government) of our resources decide how to deploy them. They are driven by…. Well let’s see.

Capitalists (company shareholders and the management they employ) seek out the goods and services the public want and the cheapest way to provide them. Entrepreneurs develop new products and services they hope the public will want and will pay for. The government’s role is to protect private property, enforce freely-agreed contracts, provide infrastructure that facilitates trade, and enforce law and order (including defense from potential foreign invaders). Freely negotiated prices reflecting supply and demand provide capitalist with essential information in their search for maximum profits.

While capitalists own the capital they deploy, they must attract and hire the labor who work with it. Consistent with their pursuit of maximum profit they seek the most productive (skillful) workers at the lowest cost (wages). While a worker’s wage is a very important part of their willingness to accept a particular job, every other aspect of the conditions of their employment is important as well. Thus, their employer has a profit incentive to establish with employees the least-costly way of satisfying those demands. These incentives (private ownership and profit maximization) have maximized the incomes of capitalist economies. https://wcoats.blog/2026/08/02/econ-101-profits/

The incomes of the average person hardly changed from poverty levels for thousands of year. But with the advent of capitalism and the industrial revolution average income in the United States over the last 250 years increased 50 to 60 times.

Some capitalists have become very rich. For seventeen years Bill Gates was the richest man in the world. Was that a bad thing–a price we had to pay for the benefits of capitalism? I have always and continue to think that I have benefited from Gates’ Microsoft products (Windows, Word, Excell, PowerPoint to name a few) far more than I have paid for them. But that is the nature of capitalist free market transactions: win-win.

In Socialist economies, the “government” owns much of the economy’s capital (e.g., government grocery stores, or airplane factories), and determines how to allocate much of its resources (what to build and produce—e.g., silicon chip factories). While the government might seek to determine what the public wants, it will also determine what it thinks it should have.

But who is the government and what are the incentives it faces when making its decisions? The government consists of elected politicians (in democracies) with the power to make laws, the public officials they appoint to various agencies to implement them, and the workers those officials employ. The primary incentive for politicians is to get elected and reelected. Presumably that depends on supporting (and actually implementing) the policies most voters in each congressional district want. Voters might support policies they think are in the country’s best interest or in their own personal best interest.

Many of the voters in the state of Washington work for Boeing aircraft and might favor government programs that direct tax money to that company. Boeing has a large complex a few blocks from where I live in Pentagon City Virginia (half a mile from the Pentagon). It builds nothing there but seems to keep its workers busy.

Unlike the profits from sales by private firms to their customers, which result from the voluntary purchases of satisfied customers, the goods and services provided to the public by governments are rarely paid for by the recipient. Nor are their costs paid for by the politicians or officials who provide them. Therefore, the incentives of governments (politicians, officials, employees) are very different than those of private firms.  This is true of any government but the scale of what is directed by socialist governments is significantly greater.

Consider the implications of these incentives for the workers hired by socialist governments. By the way, in 2024, the US federal government employed just over 3.0 million people (excluding 1.3 active-duty military personnel). State and local governments employed an additional 20 million, or a combined 7.1% of the total population.  As government officials are not spending their own money, their incentives for choosing workers can be quite different than are those for private capitalists. Hiring friends and relatives may be more rewarding to public sector bosses than those who are most qualified and hard working.

The incentives for corruption in large governments are significant. Thus, the American constitution provides checks and balances between the congress, executive, and courts. Moreover, congress has established additional oversight of executive branch agencies in an effort to keep them honest. Unfortunately, in January 2025, President Trump abruptly fired at least seventeen presidentially appointed inspectors general from major cabinet departments and federal agencies without providing the 30-day advance notice or substantive rationale required by the Inspector General Act. And by the way, Trump’s net worth and business revenues have surged during his second term, with financial analysts estimating he brought in roughly $2.2 billion to $2.4 billion during his first year back in office alone, pushing his overall net worth to an estimated $6.5 billion. This does not include our tax money he has used to put his name, picture, and gold all over the place. This is a failed businessman who declared bankruptcy six time. Just sayin.  

Even if a Socialist government is led by honest people truly committed to the general public’s interest, they lack the market prices that guide capitalists when deciding what would be “best.” Moreover, they are not likely to offer multiple options when choosing policies to impose on the public. It is unlikely that a socialist government will establish a range of different policies to satisfy different tastes. The top-down decision making of socialist governments is more likely to impose uniform approaches to the provision of goods and services and rules. In capitalist economies we are freer to choose among a wide variety of e.g., stores following different approaches to satisfying their customers.

When choosing capitalist or socialist economies, we want to know which has been more successful in allocating our resources to their most productive and desired uses. Given the differences in the incentives faced by each outlined above, have socialist governments been better at “choosing winners” than capitalists? The answer from the real world is overwhelmingly clear.

Given the different incentives faced by each, it should not be surprising that the economic well-being of capitalist and socialist economies has been dramatically different. The most dramatic comparison of the economies of two otherwise similar countries are the former East and West Germany and North and South Korea. In 1989, the year before East and West German merged into the Federal Republic of Germany, percapita income of West Germany was about double that of East German. The differences are much more dramatic between North and South Korea. In 2024 percapita income in North Korea was only 3.4% of South Korea’s.

Perhaps those promoting socialism do so thinking that it would better service the poor. This has not been true, but it does suggest that capitalist societies need to provide well-considered safety nets for those who stumble. The U.S. does not have a perfect set of safety net policies by any means. I advocate a Universal Basic Income and a government financed by a consumption (rather than income) tax. These maximize the freedom of choice and incentive to work. https://wcoats.blog/2023/01/15/fair-tax-act-of-2023/

More than 13,000 immigrants convicted of homicide are living outside immigration detention in the U.S., ICE says

The above headline of an NBC News article on September 28 is technically correct but grossly misleading. “13000 immigrants convicted of homicide living freely in US”  For example, “many of the 13,000 migrants may have entered the U.S. decades ago, and also that some may be in jail or prison.”  Say what?

Alex Nowrasteh, a careful Cato Institute scholar, unpacks this headline and explains that “There are not 13,099 Illegal Immigrant Murderers Roaming Free on American Streets.” “There are not 13099 illegal immigrant Murderers…”

For example: “the migrant murderers included in the [ICE] letter are overwhelmingly in prison serving their sentences.” What is going on with the word play? Read Alex’s careful unpacking of these figures.

What is Israel’s Objective in Gaza?

Following Hama’s brutal October 7 attack on Israel, Israel announced its “revenge” attack on Gaza to destroy Hama’s capacity to endanger Israel. In what looked at first like a human gesture, Israel urged the Palestinian residence of northern Gaza to move south to avoid Israel’s bombing of the north. But it didn’t take long before Israel began to attack Palestinians in the south as well.

“Israeli forces shelled the outskirts of the last refuge on the southern edge of the Gaza Strip on Friday [February 2], where the displaced population, penned against the border fence in their hundreds of thousands, feared a new assault with nowhere left to flee.

“More than half of Gaza’s 2.3 million residents are now homeless and crammed into Rafah. Tens of thousands more have arrived in recent days, carrying belongings in their arms and pulling children on carts, since Israeli forces last week launched one of the biggest assaults of the war to capture adjacent Khan Yunis, the main southern city.

“If the Israeli tanks keep coming, ‘we will be left with two choices: stay and die or climb the walls into Egypt,’ said Emad, 55, a businessman and father of six…. Israeli Defence Minister, Yoav Gallant, said on Thursday that troops would now ‘eliminate terror elements’ in Rafah, one of the few areas not yet taken in an almost four-month-old assault. But this is the same Israeli line used since the start of the war, which has killed and wounded tens of thousands of innocent civilians.

“As the only part of Gaza with access to the limited food and medical aid trickling across the border, Rafah and nearby parts of Khan Yunis have become a warren of makeshift tents, clogged by winter mud.”  “Nowhere left to flee-Rafah to become Israel’s new battlefield”

What is Israel trying to accomplish? “Hamas, which Israeli Foreign Minister Eli Cohen said on Tuesday ‘must be erased off the face of the planet.’… Israeli officials have vowed a merciless campaign of retribution against ‘human animals.’” “Defending Israel”

Israel’s far right officials have not been shy in proclaiming their purpose. It is to remove Palestinians (one way or another) from Israel’s occupied territories in order to enable a democratic Jewish state to rule all of Palestine. Jewish Israelis blocking access of food and medicine to Gaza’s starving Palestinians are equally explicit about their Genocidal objective.

While Israel’s objective is explicitly clear, facts of the war, as with any war, are harder to confirm. The Israeli claims that Gaza invaders on Oct 7 raped women and beheaded babies were never supported with any evidence and are surely propaganda lies of war.

The United Nations Relief and Works Agency for Palestine Refugees (UNRWA) is the largest relief agency operating in this war zone, delivering critical food and medical suppliers to displaced Palestinians. Its relief work is critical for the survival of hundreds of thousands of displaced Palestinians.
When Israel claimed that UNRWA had been infiltrated by Hamas, “the international media reproduced without question the ‘dossier’ of alleged evidence Israel distributed to journalists, a dossier which it never formally handed to UNRWA itself…. The UN agency first knew about the allegation that initially 12, then 190, then 1200 of its employees were ‘members of Hamas’ when they read about it in the media. UNRWA regularly shares lists of its employees with Israel….

“The Israeli army that has killed over 152 UNRWA staff in Gaza, turned, in their minds, into the victim of the UN agency which had been ‘infiltrated by Hamas’….  I still find it hard to understand how readily governments across the western world swallowed the bait, without any fact checking, and how, in the blink of an eye, accounting for just over $440m, half of the UNRWA’s operational budget, suspended funding.” “Gaza war-why west is falling to stop Israel’s plan to destroy UNRWA”

Biden’s pleas for Israel to be more careful about killing innocent Palestinians are pathetic. We must demand an immediate cease fire in Gaze and the end of all Jewish settlements in the West Bank and their return to their Palestinian owners or our aid to Israel will end. Jews and Palestinians deserve safety, and fair and equal treatment. Peace and justice will not be achieved in the area without that. “One state solution for Palestine and Israel” More and more Americans and Europeans are speaking up in protest of our complicity with Israel’s atrocities. Even many within the American and European governments are speaking up  Over 800 Western Officials Denounce Pro-Israel Policies | TIME  American Jew Yoav Litvin put it very bluntly: “Liberation, reconciliation and an end to Israel’s genocidal violence can only be achieved within a steadfast and unwavering anti-Zionist framework that aligns with wider leftist, antiracist, anticolonial values.”  Yoav Litvin is a Postdoctoral Fellow in The Laboratory of Neurobiology and Behavior at The Rockefeller University, New York, NY.  He was born in Jerusalem. “The anatomy of Zionist genocide”

But our attention is now being distracted by more reckless wars in the Middle East.

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