Given Enough Time, Bad Policies Will Eventually Ruin Any Advantage

Recently I spent a month in Buenos Aires. I went there to study the culture and the economy of a formerly prosperous land, filled with kind well-educated people.

One key lesson was this: Given enough time, bad policies will eventually ruin any advantage.

While not as bad off as it was in 2002, when the masses took to the streets banging pots and pans in protest of their nations ruined economy, the city of Buenos Aires is still clearly depressed. As are most of its people.

More than that, all hope has been lost. Every time a new politician is elected, things are promised to get better, but they don't. Argentina's current woes are the result of far too many successive political regimes that made terrible decisions. It's a clear as simple as this: Bad policies lead to bad outcomes.

As we learned in our interview with Daron Acemoglu on Why Nations Fail, what matters most for widespread prosperity is that the political and economic institutions be fair and inclusive. From the podcast:

It all depends on incentives and opportunities. If people have opportunities to become rich, to open businesses, be innovative, do things that are going to further their interests and at the same time the nation's GDP (Gross Domestic Product) and they have incentives to do so, that's going to lay the foundations of economic prosperity.
It sounds extremely simple but the thing is that most nations don't provide those sorts of opportunities and incentives to their citizens and therein lies the big divide. How do we summarize those opportunities and incentives?
It's the institutions, the rules, formal and informal regulations, and organization of society that determines what sort of opportunities are available to different people, to people from different walks of life, and what sorts of incentives they function under.

In Argentina, after having been economically disappointed so many times, any sense of economic vitality and entrepreneurial spirit has long since disappeared.

Old buildings there display a grandness in the quality of their architecture. Newer construction is clearly blocky, rushed, and low-grade.

“Basuras" are everywhere. They're the street-side dumpsters located all throughout the city. Sometimes I would notice people rummaging in them as I walked about during the day. But after dark, formerly middle-class people can be seen in the basuras, usually from the knees down with their feet waving in the air, as they rummaged through looking for anything of value to glean:

How did Argentina get here? How did a nation -- once the most prosperous in the world on a per capita basis -- stumble to a place of forlorn hope and such diminished prosperity that economists sometimes joke that there are first world economies, developing economies, and Argentina?

The answer is: Poor policies.

A long succession of flawed governance, coupled to some crucial mistakes in apportioning the spoils of the land to too-few wealthy families at the outset, has seved to erode the prospects for nearly all Argentinians.

Now rapid inflation is again back in the news. Having seen this movie before (and not that long ago, either) everyone dreads what's coming next.

Argentina is instructive for us living in the rest of the world, because it is a real-time case study in how bad polices lead to bad outcomes. And in applying this same logic to central banks, we can conclude: Bad models lead to terrible outcomes.

So we should all very much care when our institutions, both political and economic, are becoming less inclusive and more extractive (and/or oppressive). Because if we continue down that road far enough, eventually the majority of us will find ourselves similarly waiting for night to fall as we slink off to tip headfirst into a basura.

On Delusions & Rackets

The longer this massive delusion of the viability of perpetual economic growth goes on, the more entrenched I find myself in a foxhole half-filled with dread. And I really don't like it.

I'm ready for meaningful change. I want to be able to once again focus on the positive. I want to find ideas and people in leadership positions in whom I can believe. I'm sure you do as well.

I find myself thinking: Let's just rip the Band-Aid off already! Let's count the losses up now, apportion them fairly, and move on having learned some painful but useful lessons about living within one's means as a society.

But that's just fanciful dreaming. The powers that be are doing (and will continue to do) everything in their considerable power to prevent this from happening.

And so the list of things in which I have lost faith in in the US is large and growing:

  • The rule of law. Laid bare as a complete joke by Eric Holder under Obama, and now under Sessions/Trump.
  • Financial “markets." These are now the playthings of machines that apparently cannot produce a single losing day for their owners as if they were legitimately money-making machines. But pay no attention to the fact that central banks are pouring $200 billion a month into these same “markets." Further, try to ignore that it is the taxpayers on the hook for the “assets" the central banks are accumulating to legitimize the farce and remember to bust out your best 'surprised face' when the Wall Street machine operators get to keep their 'winnings' while taxpayers have to foot the eventual bill.
  • Politicians. Always a suspect crowd, their complete fawning subservience to banks, bankers and corporate money in general has led to an even more profound, almost final collapse in public confidence in them.
  • Sick care. Misnamed 'healthcare' this racket is so obviously a cesspool of corrupt, price gouging activities foisted upon desperate captive hostages in the throes of a medical emergency that it beggars belief that not one proposal out of DC has yet included the simple application of existing price-gouging laws that already protect you from hikes in the price of plywood during an approaching hurricane.
  • Foreign policy. Sure this is a complex sea of ever-changing interests and alliances but I am going to throw up if I hear one more State Department person talk about “democracy" in whatever country we're bombing or secretly funneling arms into while saying nothing at all of Saudi Arabia's grotesque violations of every principle that the State Department swears we hold dear. Bombing and creating chaos everywhere is a really bad policy, yet it's somehow gotten entrenched and I am beyond tired of it.
  • Environmental/ecological policy. Anybody who thinks the US already went through and achieved something with the environmental movement in the 1970's either hasn't read the papers carefully lately, been outside in enough places, or both. 500,000 chemicals, many of them far more toxic than ones previously banned, have been released and done their damage. Insects are now gone from thousands of square miles subjected to neotnicotinoid pesticides. Obama's administration punted as long as possible and then when the bad data was inescapable opted for “more study." Trump will be worse. There's another Silent Spring upon us. Shame is too light a word.
  • Main Stream “News." Could it get any worse for the MSM? Apparently it can. Caught firmly between the proverbial rock and a hard place, those being declining viewership and public hostility towards their lies, the MSM response has been to double down and manufacture clearly fake news to serve a truly awful set of craven purposes. At a time when we desperately need clear analysis and proper context, the MSM has stampeded off in a different direction.

I could keep going, but why bother? This list of ridiculous awfulness will serve as a rocket fuel for the speed and the depth of the coming big reset when it finally arrives.

Don't worry, there will be good news on the other end of the correction. But only once we finally get that Band-Aid pulled off. We should already be imagining that next world, and everything that we want to find in it. Which is why we need to understand how to adopt better models than the ones we're currently navigating by.

Bad Models = Terrible Outcomes

The main predicament at the core of everything is that economics is the primary way we organize ourselves. If your economic models are seriously flawed, meaning they will eventually fail, then your very society is at risk, as Argentina's neighbor Venezuela is currently demonstrating. Money is a critical part of our social glue, it is a central part of the narrative that we live by, and this is why we find it so deeply disturbing when that narrative is obviously beginning to fall apart.

That feeling in the air right now? The one making folks angry, hostile, anxious, and scared?

That's just the herd appropriately sensing an approaching storm.

The big issue here is that the central banks have seriously flawed models that guarantee even worse outcomes for everyone. This is no different than, say, if NASA were calculating a trip to Mars and used miles instead of kilometers for part of the atmospheric approach calculations and burned up a $125 million orbiter -- as indeed happened in 1999.

Whether or not you have the right numbers, the wrong model will always give you a bad outcome.

In Part 2: A Better Model For Predicting What Happens Next, we detail how today's bad models will literally destroy financial and economic markets for generations to come when that pesky thing called "reality" finally intervenes.

Debts do matter, because debts are a claim on future production. As we have repeated over the years, GDP growth is now way below past periods of GDP growth -- leading us to conclude that future resource constraints will not only prevent the economy from ever again returning to its prior rates of rapid expansion, but force it to face the prospect of shrinking instead.

Click here to read the report (free executive summary, enrollment required for full access)

The Senate Judiciary Committee was set to vote on subpoenas to compel Twitter CEO Jack Dorsey and Facebook CEO Mark Zuckerberg to testify on alleged censorship and bias across their platforms. But that all changed when Republican committee members "expressed reservation about the maneuver," Politico reports.

Sen. Ted Cruz (R-Texas), who chairs Judiciary's Subcommittee on the Constitution, was definitely not one of the committee members with cold feet. On the radio program Tuesday, he told Glenn Beck that he's fighting "vociferously" to ensure Dorsey and others testify before the November 3rd election.

"Jack Dorsey and Mark Zuckerberg are both going to testify. They're are going to testify in person. They're going to testify before Election Day. That's what I think should happen," Cruz said. "That's what I'm fighting vociferously to happen. Right now, the companies are negotiating with the chairman's office to discuss terms to come voluntarily. I don't give a damn whether they come voluntarily or under subpoena. They need to testify in person and answer questions for the American people about why they are trying to steal this election, to suppress the free speech, and to censor the press."

The subpoenas would require Big Tech leaders to testify on the alleged "suppression and/or censorship" of two consecutive blockbuster stories from the New York Post. The first story was about emails that allegedly came from Hunter Biden's computer which are currently being investigated by the FBI, and the second was based on additional emails that allegedly showed communist China directly offering millions of dollars to then-Vice President Joe Biden.

"Big Tech stepped in, and they've done something they've never done before," Cruz explained. "We know that Big Tech has been censoring individual conservatives, trying to suppress conservative speech. But the step they took here is, they blocked if any individual user tried to share either of the New York Post stories, [they] were blocked ... Sharing a news story, from a major media outlet is part of democracy, part of free speech. And not only that, they blocked the New York Post itself. Right now, today, the New York Post is not being allowed to post its own damn stories on corruption. This is ridiculous. It's a threshold that's never been crossed before, of Silicon Valley oligarchs declaring the authority to determine what the press is allowed to report, and who is allowed to see it."

Watch the video below to catch more of the conversation:

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If we learned nothing from the media over the past 4 years it's that colluding with a foreign entity to either win an election or for personal gain is absolutely grotesque. Well, that depends on whether you have a (D) or (R) before your name anyway. President Trump was impeached on rumor and innuendo yet Joe Biden has all but skated on his corruption up to this point.

Below is a timeline that shows the level of corruption and the lengths the Biden's went to in order to build that family's wealth and influence internationally.

2009

In 2009, Joe Biden was the brand-new Vice President and John Kerry was a U.S. Senator. Just five months after Joe was sworn in, his son Hunter, and Kerry's stepson, Christopher Heinz, formed an international private equity firm called Rosemont Capital. It had several different branches, including one called Rosemont Seneca Partners.

2010

Just nine months after Rosemont Seneca opened its doors, Hunter Biden went to China for meetings with executives from China's biggest banks, and its sovereign wealth and social security funds. That's unheard-of access for a brand-new firm. Was it just coincidence that at the same time Hunter was meeting these Chinese bigwigs, his dad was meeting with China's then-president Hu Jintao in Washington DC at a nuclear security summit?

2011

In May 2011, Joe Biden met with Chinese officials for the U.S.-China Strategic & Economic Dialogue conference in Washington. Just two weeks later, Hunter Biden went to Taiwan for meetings with the same Chinese financial giants he'd met in China in 2010, plus some new ones.

2013

By December 2013, Joe Biden was enjoying his second term as VP, and John Kerry was now Secretary of State. That's when Joe traveled to Beijing on an extended official trip and Hunter traveled with him on Air Force Two.

During their stay, Vice President Biden met with President Xi and Hunter was mostly out of sight. We don't know exactly what he was up to, but the deal finalized between Rosemont Seneca and the Bank of China just ten days after the Bidens' trip pretty much gives it away. The most powerful financial institution in China formed a joint venture with tiny Rosemont Seneca to create a giant new investment firm called Bohai Harvest RST – the "RS" stands for Rosemont Seneca.

The firm is often called "BHR" for short.

Hunter Biden was a member of the Board. Remember, the Bank of China is government-owned, which means its business is completely intertwined with the goals of the Chinese Communist Party. BHR also got the freedom to operate in the newly created Shanghai Free-Trade Zone where, over the next six years, it would use $2.5 billion of Chinese government money to invest in China, as well as in other countries, including the U.S.

During their Beijing trip, Hunter also introduced Jonathan Li to his dad. Li is Hunter's business partner – he's CEO and Director of BHR.

Hunter arranged for Joe to meet Li in the lobby of the hotel where they stayed during their Beijing trip.

2014

In 2014, one of BHR's first major investments was in the China General Nuclear Power Corporation.

CGN is a Chinese government-owned nuclear power company that sold off a stake of the company to outside investors. Problem is, CGN was under FBI investigation for paying informants in the U.S. to steal nuclear secrets.

In 2016, the FBI arrested the ringleader of this nuclear espionage, a man named Allen Ho.

When they arrested Ho, he was using a random code generator to access funds being provided to him from – where else? – the Bank of China.

Yet while this FBI probe was going on, the son of the Vice President owned a stake in the company being investigated. And even after arrests were made, Rosemont Seneca did not alter its relationship with BHR, nor did it divest from CGN, even though it was stealing U.S. nuclear secrets.

2015

In 2015, BHR partnered with the Aviation Industry Corporation of China (AVIC) to buy an American company called Henniges for $600 million.

AVIC is a gigantic military contractor in China – think Lockheed Martin – that makes fighter jets, bombers and drones. BHR bought 49% of Henniges and AVIC bought 51%.

Henniges is a precision parts manufacturer specializing in anti-vibration technology. The stuff they make is known as "dual use" by the U.S. State Department, which means the technology can also have a military application.

Because of that, the deal had to be approved by the Committee on Foreign Investment in the U.S. (CFIUS) since it could have national security implications. The thing is, the American side of BHR – meaning Hunter Biden and his pals – had to know there were serious national security implications with AVIC.

The year before they formed a partnership with AVIC, the Wall Street Journal reported how AVIC stole technology related to the U.S. Air Force's F-35 stealth fighter and used it in its own stealth fighter for the Chinese.

How the Committee on Foreign Investment approved that deal remains a mystery. CFIUS does not publicly disclose any information regarding its decisions. Their findings are not publicly announced.

Interesting that China accounted for the largest share – with 74 transactions – approved by CFIUS during Obama's second term (2013-2015).

Under the umbrella of Rosemont Capital was a real estate company called Rosemont Realty. In 2015, a Chinese company called Gemini Investments bought a 75% stake in Rosemont Realty. The company was renamed Gemini Rosemont

Gemini brought $3 billion to the partnership with Rosemont, with the aim of buying "Class A institutional-quality commercial office properties in U.S. markets."

Red flag (literally) – Gemini Investments is a subsidiary of the China Ocean Shipping Company, a.k.a., "COSCO."

COSCO is a Chinese government-owned company. Its headquarters in Beijing is actually next to the headquarters of the Bank of China. COSCO is well-known for its close military ties. It's essentially a branch of the Chinese Navy.

2017

In 2017, BHR invested in Face++. That's the facial recognition phone app built by a Chinese company that is incorporated in a separate app built by the Chinese government. Police in the Xinjiang [Sin-jong] region of China use that app to keep tabs on citizens, and track and detain Uiguhr [Wee-ger] Muslims.

The app allows police easy access to data about Chinese Muslims including things like religious activity, blood type, and even the amount of electricity they use.

2018

In March 2018, a spokesman (Chris Bastardi) for Christopher Heinz (John Kerry's stepson) emailed The Hill to say that Heinz had "no operating role" in Rosemont Seneca, and that he was not involved in any of Rosemont's deals in China (which contradicts Schweizer's report in his book Secret Empires).

Chris Heinz was involved in Rosemont Capital. Rosemont Seneca was established under the same GP as Rosemont Capital, but Chris Heinz had no operating role in it. Chris and his family have no financial interest or investment in Bohai Harvest RST, he has never traveled to China, and he has never met with the firm's Chinese management team or investors.

2019

In October 2019, Hunter Biden's lawyer, George Mesires, said Hunter did not conduct any business on that 2013 trip to Beijing with his Dad.

Mesires said the timing of BHR's business license getting approved was purely coincidental because the paperwork had been submitted months before the Bidens' China trip.

According to Hunter's lawyer, the approval " was not related in any way, shape or form to Hunter's visit."

Hunter Biden finally stepped down from the BHR board last October (2019), but he DID NOT give up his 10% stake in the company.

When Bevan Cooney — the former "junior" business partner to Hunter Biden and Devon Archer — went to jail in 2019, investigative reporter and New York Times bestselling author Peter Schweizer thought he'd never gain access to the damning emails Cooney had promised. That all changed three weeks ago when Schweizer was given complete access to Cooney's gmail account.

Schweizer joined Glenn Beck on the radio program Tuesday to describe just some of the business deals revealed within these emails — like Hunter working with an alleged Russian criminal and with Chinese communists to secure their assets, or to secure one-on-one time with his dad, then-Vice President Joe Biden. And all of this new information is completely separate from the emails allegedly discovered on Hunter Biden's laptop recently reported by the New York Post.

"So, I want to make this clear. This [Cooney's emails] has nothing to do with what's on the laptop … It didn't come from [Rudy] Giuliani. It didn't come from anybody else, right?" Glenn asked Schweizer.

"That's absolutely correct," Schweizer confirmed.

He briefly explained how Cooney, a former Los Angeles nightclub owner, is currently serving a prison sentence for his involvement in a fraudulent business bond scheme with Biden and Archer. From prison, Cooney gave Schweizer written permission to access his Gmail account.

"This is really important," he noted. "We're not looking at printouts. Not looking at PDFs. We're actually in his Gmail accounts themselves, sifting through these emails. And there's a shocking amount of information about deals involving China, involving Russia, involving all sorts of things they were trying to pull off."

Watch the video below to catch more of the conversation:

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The king of "No Spin" and bestselling author of "Killing Crazy Horse," Bill O'Reilly joined Glenn Beck on this week's podcast to talk about the latest developments in Joe Biden's Ukraine and China corruption scandal. Now that some of the details are finally coming out in the open, does the average Democrat care? Maybe, but the Left doesn't seem to.

O'Reilly argued there's more hatred for President Donald Trump now than in 2016, and that some people hate President Trump so much that they'd rather vote for the "senile, corrupt" Joe Biden.

"Hunter got tens of millions of dollars from Ukraine, from Russia, from China because his father was vice president. I have no doubt in my mind," O'Reilly said. "But the hatred for Donald Trump overrides that in the minds of millions of viewers. They're saying, 'You know, we'd rather have the senile corrupt guy than Trump.'"

Asked by Glenn if any other Republican running for president would be met with the same level of vitriol, O'Reilly answered, "The Left is the Left. They don't like America. The want to redo the Constitution. They want to take some of our freedoms, like the Second Amendment and the First Amendment, and change them. And they want to destroy capitalism and replace it with a big centralized government in Washington that controls the economy … but I'm talking about the folks. I have liberal friends and I say to them, 'Do you not understand that when you vote for Biden, you're voting against your own self interest?'"

Watch the video clip from the full podcast below, or find the full episode HERE:

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