Author: haroldblackphd

Its the Fed’s fault – Part II: The search for neutral

Every now and then we start to see new terms appear followed by the musing of learned observers. One is the concept of a neutral interest rate defined as that rate of interest at which there is no inflation and full employment. At that rate, Federal reserve policy itself is in neutral being neither expansive nor contractionary. Think of it as the economy’s equilibrium interest rate. The problem with the concept is that the neutral interest rate cannot be observed. There are some fancy formulations out there to estimate it but those are just estimates. Anyway, that interest rate is a moving target given the dynamics of the economy. Today’s neutral most likely won’t be tomorrow’s. If the Fed seriously tried to continuously manipulate monetary policy to find neutral it would be more destabilizing than it is currently – and that is plenty destabilizing all ready.

But let us suppose that the neutral rate could be accurately measured and predicted. The Fed actually makes sounds like they know what it is. Fed chair Powell has droned on about a neutral rate of around 3 percent, meaning that a Fed rate above 3 percent would be restrictive while a rate below 3 percent would be expansionary. This would mean that current Fed policy is restrictive and would have room for ease. Hence, the logic of lowering the Fed funds rate. The fragile labor market and inflation above the Fed’s target of 2 percent would present challenges for the Fed seeking to move from restrictive levels toward the lower neutral rate but it seems to be on that path.

One of the problems of course is that no one knows what is the actual neutral rate. Chairman Powell has said “There are a range of views of what the neutral rate is at this moment for our economy … It’s not so mechanical. We understand that no one actually knows what the neutral rate is. We know it by its works.” Those “works” are the way the economy reacts to changes in the Fed rate. This is reminiscent of what Justice Potter Stewart said about pornography in that he knows it when he sees it. In the case of the Fed, that’s one hell of a way to run an economy.

Supposedly the model most commonly used by the Fed is from the Federal Reserve Bank of New York, the Holston-Laubach-Williams model. You can find it at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1063.pdf?sc_lang=en&hash=E048A35AE227C58E9E5D635FCC9259EC

I am no longer in academics but monetarists would question the very foundations of this model which are Keynesian in nature within an IS-LM framework incorporating the Phillips curve showing an inverse relationship between inflation and unemployment. There is a significant body of work outside the Federal Reserve’s economists questioning not only Keynesian economics but also the IS-LM and Phillips curve formulations. My doctoral seminar was littered with lectures on the deficiencies of such models and their inaccurate predictions. I know the economists at the Fed know this since the former economics head of the Open Market Committee was one of the readers on my dissertation. But if the Fed is actually using these formulations then we need a new set of economists working there.

Consider that the model applies the “Kalman filter to translate movements in real GDP, inflation, and short-term interest rates into estimates of trend growth, the natural rate of output, and the natural rate of interest.” The problem inherent in all this is that there must be assumptions made regarding the nature of the shock processes that affect the movement of inflation and output. This is the problem with all such models as I have written with regard to climate models. These models are overly complex yet must be restrictive at the same time. The Fed’s model estimates a real neutral rate and then adds the current rate of inflation to yield the nominal neutral rate. The estimated real neutral rate in the fourth quarter of 2025 was 0.84%. The Fed’s inflation target is 2% meaning that the nominal neutral rate would be 2.84 percent. This would imply that even with the past three rate cuts, the Fed’s monetary policy is still too restrictive. So given the Fed’s own estimates, President Trump was right in arguing that the Fed should lower interest rates because its own models show that interest rates are too high being above their own estimation of the neutral rate.

Its the Fed’s fault (too)!

Almost from day one, the president has expressed his displeasure with Fed chair Jerome Powell for not dramatically decreasing the Fed funds rate. The president wanted two things. First to head off a slowing of the economy and second to reduce the cost of financing the ever increasing federal government debt. To recap, the Fed doesn’t control interest rates. The market does. What the Fed does is to affect short term rates that are tied to the Fed funds rate which is the rate on overnight borrowings of banks’ excess reserves. If the Fed wants to lower the Fed funds rate it must increase the supply of bank reserves. It does this by purchasing Treasury bills from the banks which increases bank reserves. Since banks lend out excess reserves (those reserves above what is required) and now are holding too many excess reserves, they increase their lending thereby leading to increased consumer spending and business investment.

Or that is what is supposed to happen. But not always. Didn’t we have near zero short term rates during the reign of George Bush the Second, Obama, the latter part of Trump’s first term and during Biden? Those were times of low economic growth. So why does the president think things will be different this time? Why don’t zero short term rates necessarily spur consumer spending and business investment? It is the old adage of being able to lead a horse to water. I remember my sainted mother asking why did the Fed hate old people when her CDs were earning virtually nothing. You can’t force consumers to start spending if their sentiment about the economy is in the dumps. You can’t spur business investment and hiring if there is little consumer demand and businesses are failing.

Today’s economy is showing signs of weakness in employment. Job growth is either anemic or nonexistent. Inflation keeps hovering above the Fed’s target of two percent at around three percent. The Fed, obviously more concerned about employment than inflation just lowered the Fed funds rate for the third time. Doing so has increased bank excess reserves. What the banks will do if they cannot lend out those excess reserves is just to hold them since the Fed actually pays the banks some interest on their reserves. The Fed can then turn to monetizing the national debt, namely buying Treasury bills that are being used to finance the debt directly from the Treasury or its agents. This is purely inflationary. The increased inflation or the threat of increased inflation leads to increased bond rates as long term investors seek to minimize losses of holding longer term securities. This will have the effect of increasing government borrowing costs since most of the government debt is in longer term Treasurys rather than in shorter term Treasury bills. Therefore the president’s demands can work against himself if lowering short term interest rates lead to an increase in inflationary expectations, an increase in longer term Treasurys and an increase in the cost of servicing the government debt.

I have often said that the Fed’s twin mandates of low inflation and full employment are often incompatible and the Fed must choose one or the other. There are Fed members more concerned about inflation than full employment and vice versa. The current votes of the open market committee reflect that division. I personally feel that for the overall long term health of the economy that inflation should be job one. But the pressures of Washington politicians on the Fed are generally in the other direction. But Trump’s push to a one percent Fedd funds rate is reckless at best. Some say that he really doesn’t want the rate to be that low but is using that tactic to get some lowering of the Fed funds rate. Well you could have fooled me.

All things considered, its the government’s fault. The higher rates are mostly because of the government itself with its ever higher spending and growing accumulated debt. The Fed is just a convenient scape goat for the consequences of government excesses. If Trump really wanted lower interest rates he should lead the charge of federal austerity. Fat chance. Instead we got the One Big Beautiful Bill which increased spending, deficits and government borrowing through more Treasury bills to finance it all. So in reality, it is not all the Fed’s fault (or Joe Biden’s). It is the president’s. He knows it but like all politicians seeks to shift the blame. 

Raise your hands if you thought that a republican president along with republican control of both the House and the Senate would lead to more fiscal responsibility rather than the same old stuff. Someone once said that in Washington, republicans are only democrat-lite. Increased spending and demanding lower interest rates seem to be universal among Washington politicians regardless of party (with the possible exceptions of Thomas Massie and Rand Paul). What happened to all those who were elected as fiscal hawks? With the federal debt to GDP constantly rising, it will be interesting to see what happens to the economy when the dollar’s status as the world’s reserve currency is truly threatened. There are none to take its place. What happens when the dollar loses so much value that like in many countries our citizens start moving away from the dollar into cryptocurrencies? What will the Fed do then? What can it do? Interesting questions all but most likely I won’t be around to ponder the answers.

Ford’s EV, Xeopronouns and more lipstick

Bye, bye Ford F-150 Lightening

Not too long ago I saw a commercial for an electric Ford F-150 Lightening that offered a free charger with free installation. I guess Ford is trying to clean out its inventory since it just announced that it is discontinuing production of the electric F-150. I was wondering what they were going to do with the Blue Oval plant they built in west Tennessee to build that truck. Ford announced that it was going to be used to produce a new affordable gas pickup, whatever that means. Maybe it will a small pickup like the Ford Ranger. Ford will likely join the crowd and also produce a hybrid F-150. Hybrid is the flavor of the month. Personally, I don’t get it. It seems to me that a hybrid must be heavier than a strictly gas vehicle and hence should be poorer gas milage when the gas engine is on. The electric engine I guess would be used for short trips and commutes. But the electric motors have very limited range and usually poor performance too. What is there not to love?

The electric pickup was a vanity vehicle in the first place. Most of us (I own a diesel F-250) use a pickup for towing and hauling not just to look cool going to get the morning latte. Mine is used to tow a fifth wheel, be a work truck at the farm with four wheel drive that comes in handy on hunting trips. But the electric pickup was not particularly useful doing any of those things and has a severely limited range. However, for those wanting to feel virtuous by hauling groceries from Publix and going to and fro to No Kings rallies, the Lightening probably worked just fine.

Ford did not announce whether it will continue to produce the electric Mustang. Yet that vehicle must also have contributed to the staggering losses that Ford was incurring to leading it to take a $19 billion charge. I don’t feel sorry for the automakers and I especially don’t feel sorry for their stockholders who put up with such nonsense. Ford’s CEO Farley and GM’s Mary Barra both embraced EVs because they would require a whole lot fewer workers and could relieve their pension funds’ burdens. What I never could understand is why the auto unions didn’t resist with impending job losses. It will be interesting to see whether the next democrat administration will try to revive the green grift to further enrich Al Gore and his buddies. 

Bye, bye teachers’ unions?

We all know that teachers’ unions are agenda driven and have no interest in educating our children. I have mentioned time and time again how at their meetings there are precious few sessions on teaching effectiveness. However, there are plenty of sessions on climate, gender and social justice. How come? Why should our teachers be instructed in these things having nothing to do with learning how to read, write and do arithmetic. My guess is that many of the teachers themselves have trouble reading, writing and doing arithmetic. 

The latest nonsense was at a NEA minority and women’s leadership conference in Denver to “advance racial and social justice in our schools.” Why a state accreditation board would allow this is beyond me. Couldn’t the teachers’ unions (both NEA and AFT) be decertified? At this conference, the attendees were treated to the topic “Advancing LGBTQ+ Justice” in which they were instructed in the proper use of “neopronouns” and “xeopronouns.” I won’t waste time defining these abominations. But surely here in Tennessee I wonder why our teachers don’t rebel against their leadership. Tennessee is a right to work state so joining the union is not mandatory so am I to assume that all teachers who are members of the unions actually endorse this stuff? I think the only way the union can be decertified is for its members to petition for a vote of the membership. Absent that, what good is the state’s board of education if it allows this social justice stuff to be part of our schools’ curricula?

A word on Obamacare

Obamacare is a ponsi scheme. It uses subsidies to hide the real cost of insuring healthcare through its generous subsidies increasing the fiscal burden borne by us all. At issue is the enhanced subsidies that were added “temporarily” during Covid that are set to expire at the end of the year, much to the distress of the enrollees. The program is rife with fraud with enrollees falsifying their information in order to get the subsidies. Again, economics says that if there are subsidies then there is additional demand for the product which drives up the price. This is what has happened with Obamacare. I am surprised that with the penchant of this president to try to fix prices (just like the democrats) that he doesn’t try to impose some limits on medical charges to lower the claims on Obamacare.

Rand Paul has introduced legislation that includes health savings accounts and the ability to combine health plans across state lines. All the other bills from both sides of the aisle are just putting more lipstick on the pig and are complicated Rube Goldberg machines. Paul says of his bill “I, for one, continue to support the repeal of Obamacare and replacing it with true free market reforms, not just some rearranging of the current system. Legalizing cross-state health care buying co-ops and letting everyone have an HSA is the only truly conservative option.” What! Free market reforms? There is no way the congress is going to give up the power of messing with healthcare to the market. What does Paul think – that we live in a capitalist free market country?

The coming midterm disaster for the republicans

Note: In response to the president’s remarks regarding the death of Rob Reiner, Louisiana’s John Kennedy said “I think a wise man once said nothing. Why? Because he was a wise man. I think President Trump should have said nothing. I think when the president says these sorts of things, it detracts from his policy achievements.”

The fact that the House just overturned one of Trump’s executive orders is the clearest sign to date that the president may be losing his grip on some of the republicans in congress. Don’t be surprised if soon those seeking reelection in contested districts don’t start distancing themselves from the president. Much has been written about the election results in Virginia, New Jersey and the congressional race in middle Tennessee. Democrats also won two statewide races in Georgia and flipped a state senate seat in Athens, Ga – a district won soundly by Trump and elected a mayor in Miami. 

I wrote that I thought the republicans would lose at least 20 House seats in the midterms. It may even approach the 47 seats they lost in 1958 or even the record 63 seats lost by the democrats in Obama’s second term in 2010. Historically, the party of the presidents with job approvals below 50 percent average a loss of 37 seats in the midterms. Even when the approval is above 50% the average lost is 14 seats. President Trump’s approval rating has fallen as low as 31%. Although there may be circumstances that might raise it, I doubt if his approval will approach 50% by election time. 

A case in point is the Obamacare subsidies enacted on a temporary basis during Covid. The sainted Milton Friedman once said that there was nothing more permanent than a temporary government program. He may be right. Americans have gotten used to the subsidies and now face a stunning increase in their premiums. Those premiums will on average double for 24 million Americans on Obamacare. In a classic case of herding cats, the republicans have had plenty of time to come up with a plan to soften the impending increases. But no. Every proposal has failed while the democrats watch with glee. They probably are thinking that a failure to extend the subsidies will guarantee them the takeover of the House and likely flipping the Senate too. How about a Senator Jasmine Crockett, ya’ll? 

I know Trump is saying that “affordability” is a democrat hoax. But affordability is real and health care is one of the three along with housing, food and energy. The core of Trump’s MAGA party is the working class who are at the forefront of affordability. Want to bet if they stay MAGA in the midterms if their health premiums skyrocket? Is it too much to ask that the republicans just agree to extend the subsidies (which I oppose) through 2026 to take the issue off the table until after the elections? Polling shows that 72 percent of republicans enrolled in Obamacare plans support the continuation of the subsidies (no surprise there). How do you think these folk will vote if they lose the subsidy? One study finds “In the 10 most competitive districts in the last election, the margin of victory was fewer than 6,000 votes. There are at least 27,000 ACA Marketplace enrollees in each of these districts.” Oops.

Senator Susan Collins who always seems to be the most vulnerable republican running for reelection introduced a bill with Ohio’s Bernie (MAGA) Moreno to extend the subsidies for two years but with income caps and the elimination of zero-premium plans. It failed to pass the Senate. Collins along with Missouri’s Josh Hawley and Alaska’s Lisa Murkowski and Dan Sullivan all voted with the democrats for a three year extension. It failed to garner the 60 votes needed in the senate and lost 51-47. Rand Paul has a plan that is market based. It doesn’t have a snowball’s chance in hell of being enacted either.

The House has its own proposal about to be introduced that does not extend the subsidies. I won’t go through all the details here but the bill is primarily aimed at reducing premiums for lower income enrollees. Experts say that the bill won’t pass the Senate because there is no reason why the democrats should come to the republicans rescue by getting to the 60 vote threshold. House majority leader Mike Johnson has said “Since its inception, premium costs have skyrocketed, networks have shrunk, and the system has become bloated, inefficient, and riddled with waste, fraud, and abuse.” What! The fraud is not from just the Somalis? Although the republican House bill addresses the “waste, fraud, and abuse” in Obamacare it has no chance of getting any democrat support. But you have to admire the democrats. They enacted Obamacare with zero republican support and now the republicans will get the blame when the subsidies lapse. Bravo!

So for me the question is not whether the House will flip or even by how much, it is will the Senate flip too?

ICE melts and Minnesota garbage

Won’t ICE melt in New Orleans?

Homeland Security is now going to move away from mass arrests and focus on arresting and deporting criminals. What, no more glam shots of Kristi (Border Barbie) Noem with her hair extensions and false eyelashes preening before the cameras in full battle gear? Why Homeland Security would make this public is beyond me but more fundamentally, what is going to be the reaction of the “deport them all” crowd? Will this erode the support of the MAGA Trumpers? Supposedly, ICE is changing its tactics because the public is souring on reports of little old ladies being snatched off the streets. But I am not in favor of deporting criminals. How many have simply reentered and perpetrated more crimes? I say lock them up!

Trump’s approval of ICE tactics is down to 33 percent which may have something to do with the change in tactics. Now will ICE go ahead with the Louisiana “Swamp Sweep” where 250 ICE personnel were to descend on New Orleans with the goal of arresting 5,000 illegals? Makes sense to me. It is getting too cold to stay in Chicago so let’s head to where it is warmer and have beignets and crawfish etouffee instead of deep dish pizza. But then again, you would think that ICE would prefer the cold. And don’t you think “Swamp Sweep” more aptly applies to the land of the Alligator Alcatraz?

In preparation ICE has opened a detention facility at Louisiana’s notorious Angola prison where stabbings were so common it was dubbed the “bloodiest prison in the south.” You mean there were bloodier ones elsewhere? If you have read any of James Lee Burke’s novels featuring Dave Robicheaux and Clete Purcell you know of the horrors of being incarcerated at Angola. Once more, why detention? Why not incarceration? 

Minnesota garbage?

I cannot be the only one appalled by our president’s language. His tweets are full of insults and coarseness. He lashes out at friends and foes alike. His vitriol knows no boundaries. I would be tempted to say that being president is wearing him down. That may be true but he has always been crude. I admire those on the receiving end who respond without lashing back. Jay Powell is one. Marjorie Taylor Greene is another. However, Ilhan Omar had a sharp response to Trump regarding his comments on Somalis and her. Trump called all Somalis “garbage” and that the Somalis ought to go back where they came from. Since the vast majority of them were born in the United States, I guess that Minnesota would be where they came from. He said that “I don’t want them in our country.” He said that Omar was “the worst Congressman/woman” and “Ilhan Omar, always wrapped in her swaddling hijab, and who probably came into the USA illegally in that you are not allowed to marry your brother, does nothing but hatefully complain about our country, its Constitution, and how badly she is treated. I always watch her. She hates everybody. And I think she’s an incompetent person. She’s a real terrible person.”

In response, Omar’s tweeted “Trump’s obsession with me is beyond weird. He needs serious help. Since he has no economic policies to tout, he’s resorting to regurgitating bigoted lies instead. He continues to be a national embarrassment.” She went on to say “I would say the President’s obsession with me and the Somali community is really unhealthy. It’s creepy. And I hope that he gets the help that he needs. It sounds like he is trying to deflect from the failures that he’s had as president. His immigration rates are not going in the way that he’s expected. We know that the tariffs are not working to make life affordable for Americans. We know that he is afraid of what is in the Epstein files, as he’s fought to be the head of the pedophile protection party. And we know that right now he is being investigated for war crimes that he might have committed when he ordered what seems to be illegal attacks against boats in the Caribbean.” She then added “He’s always been a racist, bigot, xenophobic and Islamophobic.” (Pedophile protection party? Ouch).

If Trump feels this way because of a $1 billion fraud, what does he think about the Italians and the Italian Mafia? Are they garbage too? Apparently not, since he lavished praise on the Italians and Christopher Columbus while denouncing Indigenous Peoples Victim Day a while back. BTW do you think the Minnesota officials were looking the other way because the money being defrauded was federal dollars and not the state’s and the fraudsters were people of color?

Finally, in proper perspective the Somali fraud is small potatoes. The federal government loses around $500 billion annually to fraud. Apparently, there is a lot more garbage out there than just in Minnesota.

Trump is in trouble

There is no clearer sign of a president in trouble than his continuing to blame his predecessor for his current ills. Case in point: the president just gave a speech in Pennsylvania in which he mentioned President Biden 31 times including calling him an SOB. This is now a recurring theme. Yes Biden allowed the southern border to be overrun with illegals all the while whining that he could not stop it without a change in the law. Trump proved Biden wrong and stopped it. But now that it is stopped and there are mass deportations afoot, blaming Biden for letting them in is now an excuse where Trump can highlight any misdeed done by an illegal. 

Trump blames Biden for the inflation. Yes it was over 8 percent during Biden’s term but when Trump came into office it was at 3 percent and has stayed there throughout his 11 months in office. Why hasn’t it come down more? Is it still Biden’s fault? Trump says so. “I inherited the worst inflation in history. There was no affordability. Nobody could afford anything.” Of course it was not the worse inflation in history and his White House translator Karoline Leavitt attacks reporters who ask that question. Leavitt is now becoming Karoline (Lying) Leavitt and is proving to be hardly better than her predecessor Karine Jean-Pierre who was arguably the worse press secretary ever. Trump has yet to address whether his tariffs might be playing a part in keeping consumer prices high. Jay Powell just said that and it is interesting that Trump didn’t respond to those comments. 

Trump even blamed Biden for the Chinese stopping the purchasing of American soybeans. Didn’t he learn from his first term? The president said “We inherited a total mess from the Biden administration.” Although his tariffs on China and their retaliation caused him to propose a $12 billion bailout of the farmers (just like in the first term), Trump blamed Biden for agriculture’s woes. BTW, Trump said that the $12 billion would come from tariff revenues. However, he will need an act of congress to pry that money out of the general fund. And of course the farmers say that the $12 billion is not enough to compensate them for their loss. What was really weird was Karoline (Lying) Leavitt’s response to all this. She said “Following his successful meeting with President Xi Jinping in South Korea, President Trump convinced President Xi to continue purchasing, or begin purchasing again, American soybeans, which is something China wasn’t doing under the last administration because they had no respect for President Biden or for the country at the time.” This is simply not true. The only drops in Chinese soybean purchases have been during Trump’s two terms, not the time that Biden was in the White House. Leavitt has been roundly criticized by those on both the left and the right for telling such an obvious lie. I wonder how all this will impact the midterm elections in soybean country?

Trump blamed the killing of the national guardsman in Washington on Biden. The Afghan shooter came in during the rescue of the Afghans who had aided US forces in Afghanistan and faced retribution by the Taliban. Trump said that the shooter was not vetted even though the report to congress by the Biden Administration said otherwise. However, the president has not answered why the killer was granted asylum this year by the his administration. He even blamed Biden when asked why he released the Honduran president jailed for aiding and abetting cocaine trafficking saying that his conviction was a Biden setup.

Of course, someone is out there keeping count and reports that Trump has mentioned Biden over 580 times since becoming president. This is getting ridiculous and isn’t counting the 31 times mentioned in the Pennsylvania speech. Although Trump labels Biden as the “worse president in history” this is no excuse for blaming the continuing problems of the Trump presidency on the ghost of Joe Biden. The right accuses the left as having TDS – Trump Derangement Syndrome”. Is it fair to say that the president suffers from BDS?

Our racist administration, the eyes of Texas, more CDC chaos and the president’s conflict of interest

Our racist administration

Some time ago in a piece titled “Bye, bye Europe” I wrote that Europe was in decline. I said that we should look to other countries for alliances. I was grateful for Europe for western values but said that their glory days were long past. Instead of the stale stagnant countries in the EU with the possible exception of Poland and maybe Italy, I suggested that we look to vibrant economies especially those who lean toward economic and personal freedoms. A reader called me a racist castigating me saying that I was obviously antiwhite. Well is Trump antiwhite too? His administration’s annual National Security Strategy document indicates that someone in the administration reads my blog. It is harsher than what I wrote painting European nations as wayward, declining powers that have ceded their sovereignty to the European Union and are led by governments that suppress democracy and muzzle voices that want a more nationalistic turn. Didn’t Vice President Vance say as much when he spoke to that security conference in Munich? Is Vance an antiwhite racist too? Vance and the document (and I) stated that on its current path, Europe could may no longer be trusted as a reliable ally. Europeans have fretted that Trump might pull back from NATO and start bringing some of the 80,000 US troops permanently based in Europe. But regardless, you read it here first. So dear reader whoever you are, is Trump also antiwhite?

Run Henry run

Henry Cuellar, who the president just pardoned, announced that he is again running for his old congressional seat – as a democrat. The president went ballistic (an all too common event). He said on Truth Social “Only a short time after signing the Pardon, Congressman Henry Cuellar announced that he will be ‘running’ for Congress again, in the Great State of Texas (a State where I received the highest number of votes ever recorded!), as a Democrat, continuing to work with the same Radical Left Scum that just weeks before wanted him and his wife to spend the rest of their lives in Prison – And probably still do! Such a lack of LOYALTY, something that Texas Voters, and Henry’s daughters, will not like. Oh’ well, next time, no more Mr. Nice guy!”

The president is wrong on this one. Since we have two parties, we need democrats like Cuellar who are prolife and for border control to counter the loud left in the democrat party. I am certain that the progressives will try to primary Cuellar again. The last time they came close to unseating him and could only remove him by use of an indictment. Cuellar’s core values make him an old fashioned democrat. Why doesn’t the president see value in that?

Speaking of Texas, Jasmine Crockett announced for the Senate. Immediately the polls show her as the favorite and Colin Allred who once ran against Ted Cruz dropped out announcing that he will try to regain his seat in congress instead. Crockett’s ad was interesting. It shows her being silent while being insulted by President Trump.  Will the republicans beat each up so much that Crockett would actually have a chance? Stay tuned.

The CDC in Disarray

I really can’t figure out what its going on at all the initials under RFKJr.’s HHS. To this observer it sure looks like chaos as out with the old and in with the new. What in the world is the anti-vax Kennedy doing? One of his minions, Vinay Prasad, director of the FDA’s Center for Biologics Evaluation and Research (CBER) issued a memo that says the actions of FDA scientists who express concerns about agency processes or decisions to outside parties as “unethical” and “illegal.” It calls for scientific debates to be kept within the agency “until they are ready to be made public,” and instructs members who disagree with to “submit your resignation letters.” Needless to say this has generated a bit of controversy. Is he stifling debate? Some think so. But the new approach will subject vaccines to a substantially higher and more subjective approval bar. Is this a good thing? Well it may slow the development and adoption of new vaccines which may or may not be a good thing.

Then there is the end to the mandate that newborns receive the hepatitis B vaccine and two subsequent boosters. The medical establishment is up in arms saying that 1,000 babies of the 17,000 infected will die as a result. Mind you that is 1,000 out of the 4 million babies born in the US every year. Statistically should the almost 4 million babies who will not get hepatitis B get the shot? How about only inoculating those whose mothers put their unborn babies at risk?

Trump and another conflict of interest

The president says he will be involved in the Netflix acquisition of Warner Bros. Why should a president in his right mind stick his nose into what is a private matter? Is it because Jared Kurshner’s group is involved in Paramount’s competing $10B bid for Warner Bros? Why should the government (the president) have a say in who acquires Warner Bros? That Trump would inject himself into something that involves his family businesses is beyond the pale. Will he be able to get away with it? He is just giving more ammunition to the democrats for another impeachment when they retake of the House in 2026.

The latest – and perhaps last – Fed rate cut

As the market anticipated, the Fed’s Open Market Committee voted to lower the Fed funds rate by another 25 basis points. The market yawned. The Dow rose 1.05%, ‌the S&P 500 rose 0.67% and the ⁠Nasdaq Composite rose 0.33%. However, the dollar fell in world markets. Lower interest rates reduce the dollar’s yield advantage in world markets. Global investors then move rotate out of dollars and into higher-yielding currencies. 

The vote on the committee had three dissents. Two members voted for no change. Trump’s man on the board, Miran voted for his usual 50 basis point cut. Miran knows that if he doesn’t do Trump’s bidding that he won’t get his job back at the Council of Economic Advisors when his Fed term ends in January. The two votes to hold were both reserve bank presidents, Schmid of Kansas City (third dissent in a row) and surprisingly Goolsbee of Chicago. I thought Boston president Susan Collins – who has the best resume on the Committee – might vote to hold but she did not.

As usual, the president voiced his displeasure saying that the number was too small and he wanted one twice as large (see Miran). He said “We have to get a mindset that when the country is doing well, you don’t want to kill the growth. That’s what they’re doing. They kill the growth because they’re so afraid of inflation. But you can have tremendous growth without inflation. Everything goes up with the growth. But that’s not inflation.” Well at least this time he did not insist that the rate be lowered to 1%. He then called Chairman Powell a “stiff.” BTW do you really want Trump to dictate monetary policy?

What is interesting is that Treasury Secretary Bessent noted that Powell only has one vote on the committee, so a change in the chair does not guarantee the entire committee voting in a way desired by the president. Four other members of the committee who voted to lower the rate indicated initially that they did not favor a cut but apparently were persuaded by Powell to go along with the 25 basis point cut. Powell indicated that more cuts may not be forthcoming in 2026 as did seven members of the committee. Recall that the committee consists of the seven governors, the president of the New York Fed and four of the 11 other reserve bank presidents. This is a warning shot across the bow of the president indicating that regardless of who he picks in January and who he then picks to replace Powell, that rate cuts are not likely forthcoming in the new year. Prepare for more insults hurled at the committee members and stepped up efforts to fire them.

Trump is already looking to see if the governors nominated by Biden were authorized by use of the autopen, indicating that they are not legitimate. The Supreme Court has yet to opine on the president’s attempt to fire Lisa Cook. Bessent is questioning the appointment of several reserve bank presidents who did not reside in the district that they preside over prior to their nominations by their reserve bank boards of directors. He wants there to be a three year residency requirement for any president. Atlanta Fed president Bostic is an example. He was on the faculty of the University of Southern California prior to being named Atlanta Fed president. Boston president Susan Collins was provost at the University of Michigan although she did get her PhD from MIT. Yet the notion of the nominee residing in the area is not new. When I was in Washington in the 1970s, a Texas congressman proposed it but it never became law. Personally, I don’t see the logic in it for the reserve bank presidents. There is a de facto rule however that a person nominated to the Board of Governors itself is supposed to represent a particular Federal Reserve district and traditionally that person is a resident of that region.

You’re fired – I think

The Supreme Court is deciding whether the president can fire members of independent federal agencies appointed by a president and confirmed by the Senate to fixed terms. Heretofore, such a person could only be terminated for cause and/or impeached by the Senate. I believe in their deliberations the justices are conflating two very distinct issues. First, there are 50 independent federal agencies that essentially constitute a fourth branch of government. Since we only have three branches, judiciary, legislative and executive these agencies are technically under the executive branch. Yet the president has virtually no say over their actions. However, Article II of the Constitution says, “the executive power shall be vested in a President” and that he alone “shall take Care that the Laws be faithfully executed.”

President Trump wants to be able to fire any of these previously appointed officials. Second, when these agencies write regulations are they performing a legislative function? Technically their actions are supposed to be in accordance to some enabling legislation yet their actions often go well beyond the intent of the congress.

Here is what I think. Many of these agencies have boards that are bipartisan with the party in power having the majority of the seats. Thus if the president had requested the resignation of the democrat members to appoint republicans to restore the balance in a change of administrations, I think he would be on solid grounds. Consider at NCUA – where I was appointed by President Carter to serve on its very first board – there were two democrats (one appointed by Trump in his first term the other by Biden) and one republican (also appointed by Trump). When Trump was elected, the democrat chairman (who had been appointed by Trump) resigned as chairman so that the republican member could now be chairman. But the democrat stayed on the board since his term as a board member had not expired. Trump then fired the former chairman and the other democrat and was promptly sued. However, suppose he had requested the resignation of only one of the democrats and announced the appointment of a single republican, I think he would be on legal grounds to do so. Also, consider this: Trump is assuming that the democrats on these boards will not follow his policy prescriptions. Yet he has not tested that assumption. Let us suppose that he kept the boards intact and requested that some board take a certain action. If they refused, it again seems that he would have grounds to fire them. In the case of NCUA the republican member was obviously not happy with the decisions made by the two democrats and likely played a role in having both of them fired.

The other issue that I think is separate from the firing is the writing of regulations that go beyond the intent of the congress. Here I think it is the congress’ duty – not the president’s – to rein in the agency. I consider this a different issue from the firing one. Yet in the arguments the court is mixing the two together. Justice Sotomayor is clearly confused when she states that Trump will have absolute power if the justices allow him to fire the officials. No he won’t. The power to legislate would still rest with the congress. The question is whether they would want to exercise their authority. She said “You’re asking us to destroy the structure of government, and to take away from Congress

its ability to protect its idea that the government is better structured with some agencies that are independent.” Again she is mistaken. The ability to fire an official is very different from giving the president absolute power to then write legislation that would usurp the power of the congress. Also she should substitute “any president” for Trump. This is why the democrats should hope for a ruling in Trump’s favor for it would expand the power of the next democrat who is president.

Justice Jackson obviously taking a shot at Commerce Secretary Lutnick and Robert Kennedy said “Congress is saying that expertise matters with respect to aspects of the economy and transportation, and the various independent agencies that we have. So, having a president come in and fire all the scientists, and the doctors, and the economists, and the PhDs, and replacing them with loyalists, and people who don’t know anything, is actually not in the best interest of the citizens of the United States.” Certainly that may be the case but why is she assuming that the people that are fired are a priori experts rather than hacks in the first place?

Regardless, I am sympathetic to the president on being able to fire an appointee that does not share the president’s priorities. However, keep in mind that the Supreme Court has culled out the Fed as an exception due to its role in conducting monetary policy. On this I agree. But if we do not have a fourth branch of government and if the independent agencies are under the executive, then the executive should not be powerless with regard to the actions of those agencies. Moreover, the president should have some assurance that the officials in those agencies are not acting against the president’s best interests. Consider Lina Khan the FTC chair or Rohit Copra at the CFPB both appointed by Biden. They were conducting policies approved by Biden but opposed by Trump. Supposed either were still in place with unexpired terms when Trump was elected. Do you favor Trump being stuck with them and have no control over their actions? I think this is the reason why in this instance, the Court will rule in the president’s favor.

Bill Gates: climate denier?

Are we beginning to see the end of climate hysteria? Back in its heyday when all around us were predicting doom and gloom about the climate as an “existential threat” I was reminded of those of us who as children went through drills at school in case there was a nuclear attack from the Soviet Union. Do you remember having to crawl under your desk? How silly was that? Well about as silly as AOC, that great environmental scientist saying back in 2019 that man-made climate change will “destroy the planet” in 12 years if humans do not address the issue, no matter the cost. Oops. 

She was not by herself. As evidence showed otherwise we went from the coming ice age to global warming to climate change to climate crisis to climate emergency and to whatever it is now. But to quote a great philosopher “The times they are a-changing”. Even the most uninformed among us no longer think that the sky is falling, the seas will rise 20 feet (Al Gore) and a carbon dioxide cloud will cover the earth. Even Bill Gates has become a climate skeptic. Gates, perhaps the richest proponent of reducing carbon emissions now says the focus should shift to preventing disease and hunger. He says that climate change is not going to wipe out humanity and that past investments fighting climate change have been misplaced. Glory be! Even that great doomsday prognosticator Greta Thunberg has shifted from the environment to protesting Gaza. Remember when she said “A top climate scientist is warning that climate change will wipe out humanity unless we stop using fossil fuels over the next five years”? Oops.

The president has called the Green New Deal the ‘Green New Scam.” And he may be right. For all the trillions of dollars spent worldwide there has be only a negligible return and it is certainly not cost effective. Trump’s 2026 budget ends all the funding for the green boondoggles that have made Al Gore and his friends rich at our expense. Europe is the poster child for this folly. Germany in particular has the highest energy costs in the west and the slowest growth. How its people stand for this is the question. And I thought the Germans were smart. They still embrace the Paris Accord and make the appropriate clucking noises at the UN’s annual climate conferences where this year they bulldozed down trees in the Amazon to put in a highway.

Look at all the scare narratives that have proven false. When I was writing for the local daily in Knoxville, no columns elicited more hate mail than my articles on global warming. The paper even devoted an entire page of letters to the editor attacking me for being a climate denier. I was not a denier but a climate change skeptic. I questioned the legitimacy of the climate models with all of their complexity that could not predict next month’s weather much less next century’s. The paper was cheered for firing me for questioning the local health department’s Covid mandates. Apparently as was the case with the climate I was spreading misinformation.

Climate change was the villain for all ills. Hurricanes, wildfires, earthquakes, floods, immigration, a plague of locusts maybe even love bugs were more intense because of climate change.  Scientific data that proved otherwise was refused publication. The climate scientists and businesses kept beating that drum so long as the money kept flowing. The politicians especially loved climate change because it expanded their power and manipulation of the masses. The left loved it because they could put the blame for climate change on capitalism. And even the capitalists loved it because of the trillion dollar honey pot.

I wrote once that I was proud of my carbon footprint. I owned a F-250 diesel, pulled a 41 foot toy hauler, had an SUV and four motorcycles and an ATV. From the howls of the critics, you would have thought that I was the environmental equivalent of Jack the Ripper. I said I thought land could be put to a more productive use than all of those solar panels with their environmental consequences. I hated windmills with their environmental impacts. I said isn’t it strange that the same crowd that embraced solar and wind ignored their negative environmental effects. The left just lashed out at me even more. But yet solar and wind are unreliable and expensive sources of energy. For all the trillions spent they still only account for less than six percent of the world’s energy. Isn’t it time to throw in the towel and admit that cheap energy is what lifts people out of poverty? There may be a place for wind and solar. Maybe in a desert somewhere. But in a time where AI demands more and more energy, solar and wind are woefully inadequate.

But just to set the record straight, I actually do believe in climate change: spring, summer, fall and winter.