Foxes in the Chicken House


Turning Inward

U.S. stocks fell a little on Monday. After the excitement of Brexit, investors don’t seem to know what to do. Some believe the vote in Britain signals a “breaking up” pattern… a move toward Trumpism and away from globalization and financialization.


CarneyMark Carney… quite possibly the biggest bubble blower on the planet… and now they’ve given him another excuse to do what he does best (print, print, print…)

Cartoon by Kipper Williams



If so, it may mean “walls” – turning inward and away from the go-go era of ever rising credit and central bank backstops for the capital markets. Others believe Brexit will have the opposite effect. The “Hillary Effect,” they say, causes policy makers to close ranks – and do “whatever it takes” to protect themselves.

What it takes, they believe, is more phony money.

In Friday’s paper, Mark Carney, head of the Bank of England, said he was ready to act if Britain should suffer “economic post-traumatic stress.” We will translate that for the benefit of readers who don’t speak Centralbankese.

Carney said: If stock prices drop, we’ll rush in with enough cash to turn it around. And yesterday, the Financial Times cautioned policy makers to forget the long view. The important thing is to prevent a recession now!

“This is not the time for [the Treasury secretary] to set long-term tax policy,” says an editorial. No –  this is a time to watch the news. Or the “incoming data,” as Fed chief Janet Yellen calls it.


Tipping the Playing Field

Donald Trump was in Maryland over the weekend. Actually, he was in Berlin, Maryland, far out on the Eastern Shore. Berlin is in Worcester County, which has the highest unemployment in the state and the highest level of support for Mr. Trump.

In Maryland, the unemployment rate is below 5%. In Worcester County, it is 7%. Why? We are connecting the dots. One of our dots is that center of light, liquidity, and hysteria – Washington, D.C. Berlin, Maryland, another dot, is about as far away as you can go from Washington and still be in Maryland.

Washington has an average home price of about $500,000 and the highest median household income in the nation (about $90,000). How did Washington get so rich?


1-washington house pricesWashington DC house prices – this is where the bubble now lives…in Deep State Central. And they didn’t even need Carney to do it! – click to enlarge.


The simple explanation: Instead of leveling the playing field, the insiders tipped it in their direction.  Now, money drains away from all over the country into the deep pockets of the nation’s capital. Wait a minute… how does that work?

Every state in the union has two senators and at least one Congressman. How does D.C., with no senators and only one delegate in the House without voting rights, get the best deal? Ah-ha! Another dot: the Deep State.


Foxes in the Chicken House

The government is not controlled by the Congress. Nor is the nation’s money. Instead, both are controlled by a group of unelected insiders – aka, the Deep State.

They pull the strings. They write the legislation (which members of Congress admit they are too busy to read). They make sure that whatever meat is served to the rest of the nation, the choicest cuts are left in the District of Columbia and the surrounding counties of Maryland and Virginia.


vilfredo-pareto-1848-1923Vilfredo Pareto, a.k.a. the man who had their number.

Photo via Wikimedia Commons


We’ve mentioned this often. But we’ll do so again, for the benefit of new readers and Alzheimer’s victims. The great Italian economist Vilfredo Pareto explained how government works. No matter what you call the system – a monarchy, a theocracy, or a democracy – real power always ends up in the hands of a small group.

“The foxes,” Pareto called them. They make the system work – and they make it work primarily for themselves. The foxes produce nothing of value. Instead, they are lobbyists, bureaucrats, contractors, regulators, lawyers, insiders, administrators, educators, policy wonks, cronies, and hangers on of all sorts.

They are the Deep State. They are the foxes living in the D.C. chicken house.


The “JFK Effect”

“The Donald” went to Berlin, Maryland, and Monessen, Pennsylvania… and not to a wealthy D.C. suburb such as Chevy Chase, because he has positioned himself as the anti-establishment candidate.

But if elected, we don’t know whether he would take on the Deep State. John F. Kennedy was the last U.S. president to challenge it. And you know how that worked out…

Ms. Clinton, meanwhile, is the Deep State’s champion. She seems to approve of every agency, every policy, every crony, and every war the Deep State has undertaken. Ms. Clinton is the insider. Mr. Trump, the outsider. Each position has its advantages.


U.S. Secretary of State Hillary Rodham Clinton ajusts headphonesDeep State puppet, crony, war harpy… the ideal establishment candidate

Photo credit: Alexander Zemlianichenko / AP


As the Establishment Candidate, Ms. Clinton raises $7 for every $1 raised by Donald Trump. On the other hand, 9 out of 10 voters would probably be receptive to an anti-establishment message, if Mr. Trump could deliver it properly. The outcome?

To be determined…


Chart by Zillow


Chart and image captions by PT


The above article originally appeared as “Is the Whole World Moving Toward Trumpism?” at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.


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