Good morning. Here’s your Early Warning for Wednesday, 14 November 2018. (All times Central.)
InFocus: Sen. Chris McDaniel (R-MS) warned last night that America is heading towards a fiscal catastrophe. That shouldn’t be news to anyone, but that a sitting U.S. Senator’s warning should be news somewhere. It had all of 52 retweets and I couldn’t find the story on any major news outlets. McDaniel wrote:
By 2023, just the interest owed to service the national debt will exceed the amount we spend for our entire national defense budget. I’ve spent the past 10 years ringing alarm bells. I don’t know what else to do. Our republic is facing a day of reckoning — sooner than you think [source]
That’s a long term concern and it’s going to permanently reshape U.S. political and social landscape, likely through the form of de facto default through money printing. The purchasing power of $10,742 in September 2018 has the equivalent purchasing power of $1,000 in January of 1950. That’s a decline of 90 percent over the course of 68 years. As a point to ponder, what would a 20, or 40, or 60 percent decline look like over the course of 20 years?
In the near term, yesterday I mentioned the 85-100 investigations that the House has lined up for the Trump administration — BIG news over the weekend. And it moved President Trump to warn in a press conference last week that if the Democrats investigated him, then he’d investigate them back. It likely explains the move of Matt Whitaker to acting Attorney General, because Whitaker is reportedly willing to launch investigations into powerful Democrats. The risk was always that the Democrats would take over the House Oversight, Intelligence, Judicial, and Ethics committees and wield large amounts of power used to stop Trump’s America First agenda. Unless President Trump ultimately wins this game of chicken, the Democrats want to take on Trump himself, grind him down, and ensure that he can’t win again in 2020. Regardless if we see impeachment proceedings, the two-year objective is the depletion of Trump’s political capital. They want accomplish that through using investigation and subpoena power to implicate as many Republicans as they can, and pursuing a divide and conquer strategy against the GOP. My first question is, at what temperature will Republicans start to peel away their support for President Trump? My second question is, how many Republicans can House investigations take down?
Often, America in 2018/2020 is cast against an 1860 moment in American history. Abraham Lincoln wins the presidency through a four-way race, without carrying a single Southern state. The South secedes as war ensues. There may be more to this comparison than meets the eye (but not in the way of civil war, yet) because former Ohio governor John Kasich remains in the news. He’s constantly being quoted in mainstream media outlets, mainly due to his very vocal opposition to Trump. One way I see 2020 shaping up, with regard to 1860, is potentially a four-way race between President Trump, John Kasich, maybe Hillary Clinton (or any Democratic nominee), and a Sanders-esque democratic socialist candidate. That certainly would throw a wrench in the typical two-party election cycle. But more likely, at this point, is that the Democrats nominate their left wing populist candidate for 2020, and Kasich runs as an independent after losing the GOP nomination. Kasich wants to be the spoiler. Trump loses 5-10 percent of the vote to Kasich, and the Democrats get their president.
The President: Nothing significant to report.
Caravan Watch: After hitching rides from Mexico City and Guadalajara, migrants are slowing pouring into Tijuana and some are now reportedly climbing the border fence into San Diego, according to San Diego news and U.S. Border Patrol. [source] Thousands more migrants, up to 8,000 or more, are expected to funnel in during the next several days and weeks.
Secretary Pompeo: Nothing significant to report.
Defense Secretary Mattis is traveling to survey the U.S.-Mexico border
These are the last publicly reported locations of these ships. Conflict requiring an aircraft carrier/carrier strike group does not appear imminent.
The Carl Vinson (CVN-70) was last reported as taking part in a sustainment exercise off the coast of southern California.
The Abraham Lincoln (CVN-72) was last reported as being in port at Norfolk, but will be transitioning to a new home port in San Diego.
The John Stennis (CVN-74) was last reported as being underway in the eastern Pacific as it begins its shift to a new homeport in Norfolk.
* The Harry Truman (CVN-75) was last reported as being off the coast of Portugal.
* The Ronald Reagan (CVN-76) was last reported as being in the Philippine Sea.
The George H. W. Bush (CVN-77) was last reported as having returned to port in Norfolk.
* Indicates significant changes to last reported location or other amplifying information.
Significant House Activity:
- Nothing significant to report.
Significant Senate Activity:
- Nothing significant to report.
* Only events pertinent to national security are listed. Significant reporting will appear in this week’s Strategic and National Intelligence reports.
Former Treasury Secretary Henry Paulson warned this week of a Cold War with China unless both sides find a way to reconcile. “And that is why I now see the prospect of an Economic Iron Curtain — one that throws up new walls on each side and unmakes the global economy, as we have known it,” he said at the Bloomberg New Economy Forum. “The U.S.-China strategic interaction is by far the most consequential in the world. I am very sobered by the trajectory we are on now. And ultimately, I think it could pose a risk to the very functioning of the international system… There is no doubt in my mind that how the United States deals with China, and how they deal with us, will shape the geopolitical landscape for this century.” What Paulson is saying is that we risk another period of expanding and protecting ‘spheres of influence’ across the globe, like we had during the Cold War with the Soviet Union.
Goldman Sach’s bear market risk indicator is the highest since the late 1960s and early 1970s, and analysts are forecasting zero rates of return for the next 12 months. Goldman chief global equity strategist Peter Oppenheimer says, “Historically, when the Indicator rises above 60 percent it is a good signal to investors to turn cautious, or at the very least recognize that a correction followed by a rally is more likely to be followed by a bear market than when these indicators are low.” Oppenheimer is looking for a sharp rise in inflation and interest rate hikes before he signals the potential for a recession.
Lastly, it’s just one data point, but it should be known that economic numbers for Q3 show that Japan and Germany’s economies actually contracted. Annualized, Japan’s economic growth was negative 1.2 percent for the quarter, and Germany’s slipped to negative 0.8 percent. Japan, the world’s third largest economy, posted two quarters with negative growth out of the past three. In context, Japan suffered some natural disasters, and analysts hope that Germany’s setback is mainly due to a temporary disruption of automobile production. Still, cracks could be forming in the global economy.
HurricaneWatch: The National Hurricane Center reports a small disturbance in the Caribbean. About 16 days remain in “hurricane season,” which ends on 30 November. [source]
What I’m Looking at this Morning
“Rivals and adversaries are challenging the United States on many fronts and in many domains. America’s ability to defend its allies, its partners, and its own vital interests is increasingly in doubt.” Providing for the Common Defense, a report from the U.S. Institute for Peace [source]