My practice is to avoid commenting about countries or states of the Union in which I’ve never lived and about which I know little. My philosophy is better to remain silent and be thought a fool than to speak and remove all doubt.

In that light I think the best comment of the day is from Glenn Greenwald at X:

There are a bunch of ignorant American liberal pundits pontificating this week about Brazil even though they don’t know the first thing about any of the relevant facts or dynamics (Naomi Klein with Mehdi Hasan was so confused as to be comical).

Mr. Greenwald has lived in Brazil for the last ten years.

I don’t know enough about Brazilian politics to comment intelligently.

I also think it’s at least incautious to side with a “left-wing” or “right-wing” political party in another country because you, yourself, consider yourself “left-wing” or “right-wing”. Those labels don’t travel well. I’m reminded of the line from the satirical sketch comedy Beyond the Fringe comparing British and American politics:

Well, let’s see, you have the Republican Party, you see, which is the equivalent of our Conservative party. And then you have the Democratic Party which is the equivalent of our Conservative Party.

When I was out and about my errands this afternoon I saw a car I didn’t recognize. It looked like a Tesla but wasn’t identical. It had a Texas Manufacturer’s plate. No insignia or brand. Its rear window was opaque or, at least, you couldn’t see into the car from behind. It had no side mirrors. When we stopped at a red light, I asked the driver what kind of car it was.

“Tesla Cybercab”, he replied.

In their latest editorial the editors of the Chicago Tribune declaim that “the days of extraordinary public-sector union wage hikes must end”:

The budgetary backdrop for the county and the city has changed dramatically since most of the exissting labor arrangements were negotiated in the hyperinflationary period immediately following the pandemic.

Do our political leaders actually understand that?

For example, city of Chicago workers generally will get raises exceeding 3% in 2027. Additionally, many of their union contracts tie their pay to the consumer price index, ensuring city workers’ compensation will not fall below the rate of inflation.

I wonder if the editors realize that these “cost of living” increases are themselves inflationary? That is true of all wage increases public or private unless the workers’ productivity has increased. Higher public wages are funded either by increasing taxes, cutting other spending, or running a budget deficit. If funded by deficit spending, it introduces new money into the economy, increasing aggregate demand without a matching increase in the supply of goods and services, which is structurally inflationary. The editorial seems to regard inflation protection for public employees as an ordinary contractual benefit while treating its cumulative fiscal consequences as extraordinary.

A significant question is how? The governor of Illinois, the mayor of Chicago, the president of the Cook County Board and most other major elected officials in Illinois either financed their own elections or depend on public employee unions to fund them. Said more bluntly they owe the unions.

Cook County Board President Toni Preckwinkle is, essentially, running without serious opposition for re-election. No Republican is running. A libertarian candidate few have ever heard of is running against her.

The “why” of the editors’ plaint is easy: the state, county, and city can’t afford it and neither can their residents. The how is considerably harder. How do elected officials restrain public employee compensation when the organizations representing those employees are among the political constituencies on which their careers depend? It’s the how our political leaders make that choice without committing political suicide that’s hard.

There’s quite a bit to comment on in David Malpass’s new op-ed in the Wall Street Journal. If his name doesn’t ring any bells Mr. Malpass is an economic analyst and former government official in the first Trump Administration. The op-ed is ostensibly a call for the Federal Reserve to update its “economic models” but I think there’s more going on in it.

The Federal Reserve’s outdated economic models and board structure are pushing it toward interest-rate increases that would hurt affordability and small businesses without curbing inflation. This approach risks keeping bond yields and mortgage rates higher than necessary while waiting too long to cut rates. Instead, the Fed should consider broadening its models to include the value of the dollar as a key factor in price stability, which would help deliver low inflation, fast growth and dollar dominance.

Perhaps his sharpest criticism is levelled at the Phillips Curve, the empirical observation that inflation and unemployment are inversely correlated:

Better data and analytical tools will help, but the Fed faces larger problems. Its old-fashioned models exclude the dollar even though its value significantly affects inflation and price stability. The models also assume that faster growth and wage gains cause inflation and that higher rates are the best tool to slow it.

It is hard to see how. Even with better data, inflation is a flawed guide to setting rates. It depends on factors beyond the Fed’s control, such as gasoline and diesel prices, and on liquidity in the economy from asset-price gains. Inflation also depends on the dollar and external supply factors such as energy production, deregulation, wage growth, tariffs, innovation, tax cuts and China’s pricing decisions.

When I took economics courses, the better part of a century ago, the Phillips Curve was taught as Holy Writ. When Congress defined the Fed’s “dual mandate” in the late 1970s, the Phillips Curve was still influential in economic thinking about the relationship between inflation and unemployment. Keeping prices stable while minimizing unemployment. Is the Phillips Curve actually obsolete? Or has the Federal Open Market Committee (FOMC) managed to thread that needle for the last 35 years? I don’t know and Mr. Malpass presents no evidence to suggest otherwise.

A fact I think that Mr. Malpass should take into consideration is that Paul Volcker’s success in curtailing inflation with high interest rates 45 years ago is the baseline, the standard of comparison. His actions were necessary due to the previous 20 years’ worth of bad fiscal and monetary policy, including excessive federal spending, accommodative monetary policy, and the disastrous experiment with wage and price controls, compounded by external shocks. Bad fiscal policy is the underlying cause of the present riots in France.

Here’s the kernel of his op-ed:

Bond markets are pricing in painfully high interest rates for the foreseeable future because of the Fed’s models. Hence the rise in bond yields and mortgage rates contributing to losses in the equity markets. Higher-than-necessary rates will also add significantly to the U.S. budget deficit given the size and short maturity of the national debt.

Is that true? The market is charging for risk, including fiscal risk and the consequences of Treasury supply, as well as forecasting the Fed’s rate path. Here’s the St. Louis Federal Reserve’s chart of 10-year Treasury rates over the last 60 years:

You may draw many conclusions from that but a conclusion you cannot reasonably draw is that bond rates are presently “painfully high”. They’re well below the extraordinary levels of the early 1980s but whether they’re excessively high today depends on inflation expectations, real interest rates, and the risks investors perceive. Mr. Malpass provides no evidence that the Fed’s models are responsible for those risks.

Here’s his conclusion:

A final point: Including prices and viewing growth as a positive factor in the Fed’s models would increase investor confidence in the dollar’s value and attractive returns on Treasurys. Linking the Fed’s price-stability mandate to a stable dollar would also solidify the dollar’s market share in the rapid growth of digital currencies and stablecoins. Dollar stability would, in turn, intensify pressure on China’s investment portfolio, which is underweight the dollar and overweight zero-yielding gold.

Would faster interest rate changes be an improvement over the status quo? I won’t argue that the Fed shouldn’t update its models. The question is to what end. I would argue that the Fed should keep its present mandate (stable prices and low unemployment) and eschew the “Greenspan put” (ensuring that asset prices rise). IMO what we face right now just as 45 years ago is the consequence of bad fiscal policy. That’s outside the scope of the Fed. The responsibility for that is with the Congress and, as we have seen, the executive.

Is Mr. Malpass really arguing for better economic models or is he arguing for models that will justify the policies he already favors?

On our last day in Alaska we visited the Iditarod Museum. That was of particular interest to my wife and me—we’ve been Iditarod Insiders for 30 years. We also took the opportunity to buy a few things in the gift shop. It was hard to pass buying decent quality hats and sweatshirts for a couple of bucks each. They were marked way down since they were commemorative of past races.

We had lunch that day with some other friends. They built their home themselves and, honestly, it was one of the most magnificent I’ve ever been in. Here’s the view from their backdoor:

We flew out of Anchorage at 9:00pm that evening and were back in Chicago at 7:00am Chicago time.

North to Alaska
Next Stop, Ketchikan
Port of Call: Juneau
Next Stop: Skagway
At Sea
Leaving the Ship
Visiting Wasilla

For the last ten years I have been saying that I didn’t understand Donald Trump. I don’t know why he does things. And I can’t simply trust that what he does will be the right thing. Those two reasons were sufficient for me never to vote for him. In his Wall Street Journal column Holman Jenkins presents his unified theory of Trump:

I find myself joking with die-hard Russiagate believers that their theory of Trump treason explains only half of Mr. Trump’s Russia actions. My theory explains 100%: Mr. Trump says and does whatever, in his cynical mind, he thinks will benefit Mr. Trump in the next five minutes. This is a universal theory of Trump behavior to which I have yet to find a significant exception.

That isn’t precisely “circular reasoning” but it’s close enough to it for government work. That sort of reasoning may be explanatory but I don’t believe it’s sufficient. It’s not predictive.

I wanted to share some misgivings I had about an op-ed I read recently in the Washington Post. In it a professor of Islamic law attempts to reassure Americans who fear that Muslims want to impose sharia on everyone else. His argument is that classical Islamic jurisprudence distinguishes between fiqh, the rules governing personal religious conduct, and siyasa, the rules by which governments maintain order and promote the public good.

He explains:

Even Muslims can miss this distinction. Too often, I hear American Muslims approach an election by looking for which candidate or policy most closely reflects the religious rules by which they personally live.

I think the author has inadvertently identified the principal weakness in his own argument.

The problem isn’t whether Islamic jurisprudence contains such a distinction. I’ll take his word for that. The problem is that not all Muslims make it. Indeed, he acknowledges as much himself.

There is a tendency in religious communities, hardly confined to Islam, to conflate religious obligations with customary practices. “The way we’ve always done things” becomes “the way God commands us to do things.” Once that happens, distinguishing between personal religious observance and public law becomes considerably more difficult than the author suggests.

There is another complication. Not all Muslims agree about who possesses the legitimate authority to make siyasa. Some believe that authority properly belongs to the caliph. Others recognize different forms of political authority. The author’s suggestion that an American Muslim entering the voting booth is, in effect, standing in the shoes of the sultan is an interesting analogy but not one that all Muslims would necessarily accept.

Nor does accepting the distinction between fiqh and siyasa settle the matter. The author argues that government should act in the public good. But what constitutes the public good? A devout Muslim might quite sincerely believe that requiring everyone to observe certain religious rules would benefit society as a whole. The distinction between personal religious obligations and public policy doesn’t resolve that disagreement.

There is also a difference between acknowledging the authority of a government and regarding that government as religiously legitimate. Muslims who reject the latter may nonetheless accept the former. That distinction deserves consideration, too.

The author illustrates his argument with abortion. He suggests that a Muslim woman deciding whether to have an abortion is asking a question of fiqh, while deciding whether abortion should be prohibited by law is a question of siyasa. I understand the distinction. But if she believes abortion takes an innocent human life, why would that belief cease to inform her understanding of the public good when she enters the voting booth? Secular voters face precisely the same problem.

My principal objection is that the author is attempting to answer an empirical question with a theological argument.

The question that concerns Americans who fear the imposition of sharia is not whether a scholar can construct an interpretation of Islamic jurisprudence compatible with religious pluralism. It is whether Muslims who participate in American political life actually accept that interpretation and act accordingly.

Those are two very different questions.

It would be equally mistaken to assume that all Muslims want to impose their religious practices on others. Islam is not monolithic, and neither are Muslims. But the existence of a jurisprudential distinction between fiqh and siyasa tells us little about how widely that distinction is accepted or how it is applied in practice.

I don’t doubt the author’s sincerity. I think his argument for religious pluralism is worth making, particularly to his fellow Muslims. What I question is whether it provides the reassurance he intends for non-Muslims.

Indeed, when he acknowledges that even Muslims can miss the distinction on which his entire argument depends, he has supplied a reason for asking the very questions he is trying to put to rest.

I’ve got to admit that I’m confused by Fareed Zakaria’s most recent Washington Post column. I don’t like President Trump’s foreign policy any more than he does but I don’t think the key asset that prevented the use of nuclear weapons or nuclear proliferation was trust. The slug is “For decades, global trust in Washington kept nuclear weapons in check. Now that restraint is fading.” Here’s the meat of the column:

After World War II, the United States pulled off something close to a geopolitical miracle. Japan and Germany became the second- and third-most-powerful economies on earth, yet neither sought nuclear weapons or the ability to defend itself alone. They aligned their security policy with Washington and entrusted their ultimate defense to American soldiers and American nuclear weapons.

Think how strange that arrangement was. Great powers throughout history have acquired armies to counter the top dog. Yet America’s allies agreed to depend on it for their survival. They did so not because America was invariably wise or generous but because the entire international system thus created benefited the U.S., too. American power was formidable but trust in America was priceless.

Nowhere in the column does he mention global strategic superiority, unsurpassed industrial capabilities, or mutually-assured destruction. IMO what stayed the Soviets’ hand from using nuclear weapons was their belief that the United States would retaliate overwhelmingly with nuclear weapons. Those were the same forces that prevented other countries from developing their own nuclear weapons.

The perfect counter-example is North Korea. North Korea did not develop nuclear weapons because they did not trust us. They developed nuclear weapons because the Chinese allowed them to and the Chinese had a nuclear deterrent of their own.

To me the more important question is why did the Chinese allow the North Koreans to develop nuclear weapons? Certainly they didn’t trust the North Koreans. My best guess is that the Chinese trust the North Koreans more than they do us and believe their own nuclear weapons deter the U. S. sufficiently. China did not have to trust North Korea with nuclear weapons. It merely had to be unwilling to accept the consequences of preventing North Korea from acquiring them.

I wanted to call your attention to the post at the Uncharted Territories Substack analyzing the riots presently going on in France. Here’s a snippet:

How did we get there? Initially, students were complaining about their terrible conditions: There’s not enough money for schools and teachers. They said it’s because there’s too much austerity. Is it?
Others say it’s the immigrants—especially Muslims—who wreck everything.
Or the opportunities of non-Whites.
Others say it’s the islamo-leftist alliance.
Or the police, because they’re too violent.
Or the justice system, which doesn’t imprison agitators enough.

I didn’t know, but I wanted to find out, especially as a veteran of French education (I did all my primary and secondary schooling in the French system and got one of my undergrad degrees from a Parisian university). So I did. The following is a detailed account of what has happened, and why I think it happened, based on plenty of videos and data.

In the author’s characteristic manner he goes on to review the matter in a dispassionate, highly factual, supported manner. The TL;DR version is

What did not cause the riots

• Not enough spending on education
• Too many immigrants

What did cause the riots

• The French are spending too much on pensions
• The French are not screening their immigrants properly
• The French are not enforcing their own laws sufficiently

I have my own views but I’ll keep my opinions to myself. The United States has problems of its own and, honestly, I’d rather have our problems than France’s.