Fasten Your Seatbelts
That’s not to say that capitalist democracies can’t run off the rails, but typically with enough dissenting voices, the worst outcomes don’t usually take place. There are exceptions though.
Capital Thinking · Issue #986 · View online
Ready for a cold winter? Much of the world is not.
Many places have discouraged using hydrocarbons to produce power, ostensibly for environmental goals, whether those are valid or not. Whether by the fiat of the Chinese Communist Party, or because some Eurocrats push a green agenda, many people are facing a winter where power/heat may be limited.
And even if there may not be absolute shortages everywhere, higher prices for all forms of energy, will pinch the budgets of many in the lower middle class and below this winter in the Northern Hemisphere.
Unforced Errors
David Merkel | The Aleph Blog:
Part of this stems from central planning. China is the easiest example.
Xi Jinping has arrogated to himself more and more power over time, changing the dynamics of the Communist Party, which once at least had some factions, to a unitary party that has only one leader, Emperor President Xi.
Some of it came about by eliminating corrupt rivals, but the rest from instilling fear within the Party.
Almost every evening, my wife and I read the Bible together. Recently we have been going through the post-exilic portions of the Old Testament where the Jews live under the rule of the Babylonian and Medo-Persian Empires.
Those rulers were typically absolute monarchs: do what I say or die! In going through Esther, my wife commented that it was stupid to have laws that cannot be altered. (The same thing is stated in the Book of Daniel.)
My comment back to her was if you were an absolute monarch in that era, you were God walking on earth, and could never be wrong. Thus no decree of an Emperor could be wrong.
And so it is for President Xi: everything he says is right.
He may be an atheist, but to the Chinese in Red China, he is “God walking on Earth” in at least the Hegelian sense. As such, he makes a decree, and those serving him are scared to do anything more or less than he wants.
But with vague directives, what does he want?
Unilateral authority is particularly vulnerable to making mistakes. In the intermediate-term, China is likely to get weaker because of the increasing concentration of power of President Xi.
That’s not to say that capitalist democracies can’t run off the rails, but typically with enough dissenting voices, the worst outcomes don’t usually take place. There are exceptions though.
The first exception is regulators with too much discretionary authority. By pursuing one limited goal in the short-run, such as long-term environmental objectives, they may harm the interests of ordinary people in developed markets by making it hard to get food, fuel/energy, and other necessities.
And applying the same rules in foreign policy, they may well condemn the developing world to permanent poverty. The developing world thinks the developed world doesn’t care.
They are right, and they will ignore what their current leaders have promised in order to curry temporary favor with the developed world.
Now where there is the ability to self-correct, eventually societies will remove regulators, politicians, etc. That said, some things are more entrenched than others. I speak of the cult of stimulus.
What is more untouchable than the central banks?
It’s hard to think of anything more unaccountable. They may technically be beholden to the local parliament, but practically, no one ever messes with them aside from despots pursuing hyperinflation (Venezuela, Turkey, Lebanon, etc.).
David Merkel