It’s in the best interest of the rich to heed the old Mexican saying: “For the good of all, the poor come first.”

Inequality in America

While imperfectly practiced south of the border, this wisdom has yet to cross the Rio Grande into the world’s richest country, where, according to the Census Bureau, about 1 in 10 Americans were officially poor, about 1 in 4 lived below twice the poverty line — a better rough proxy for the “barely making it” population. 771,000 people were homeless, and 13.7% of U.S. households — about 18.3 million households (48 million people) — were food insecure at some point during 2024, according to the U.S. Department of Agriculture. Nearly 1 in 10 Americans (around 30 million) lack health insurance, and medical costs and illness are major contributors to hundreds of thousands of U.S. bankruptcies each year. According to the Federal Reserve Bank of St. Louis, the top 10 percent hold 68.1 percent of the nation’s wealth, while the bottom half holds only 2.5 percent.

Ruling elite justifications of inequality

When pressed to justify this egregious inequality, let alone the widespread suffering of the poor, the ruling elite offer multiple explanations, most of which form a defensive perimeter that safeguards the status quo. Some of the more shameless defenders of the status quo argue that, compared with poverty in previous centuries, America’s poor today are relatively well off. Nothing to see here, folks. What these worthies proffer as a serious justification today was, a century ago, fodder for comedians like Will Rogers, who wryly observed in 1931 during the Great Depression: “We are the first nation in the history of the world to go to the poor house in an automobile.” Sadly, the humor wears thin today.

Another justification rests on the notion of meritocracy, whereby rewards go to those who contribute the most value through talent, discipline, innovation, education, and/or superior productivity. While sometimes true, as demonstrated by, say, Steve Jobs, many, if not most, highly rewarded individuals come from inherited wealth and birthright advantages in education, connections, and social standing (like the Koch brothers) in a society with limited upward mobility. Moreover, merit often takes a back seat to unscrupulous manipulation of the levers of economic and political power through corporate regulatory and legislative capture, anti-competitive practices, asset inflation, stock buybacks, tax arbitrage, financial engineering, and de-unionization.

Others abdicate responsibility for inequality to an impersonal market, whose “invisible hand” allocates scarce resources through voluntary exchange, competition, and consumer preference. However, the three branches of government set the terms of conduct in the marketplace, and, as is obvious to all but the most committed ideologues, government serves the interests of its donor oligarchs, thereby perpetuating the highly personal status quo.

Another, less meretricious argument holds that unequal rewards encourage effort, risk-taking, study, invention, entrepreneurship, and investment, contributing to economic growth and employment. True in principle, but in practice, since the Reagan Revolution, virtually all productivity gains associated with these factors have accrued to the rich, with CEOs routinely awarded eight-figure annual compensation while the working classes feel lucky to have a job and to get cost-of-living raises.

In short, Washington’s donor-dependent politicians regard inequality as regrettable but necessary or tolerable, and best addressed through growth rather than redistribution (implying tax increases on rich donors). With twisted logic, Republicans, since Reagan in 1981, have made tax cuts for the rich the centerpiece of their growth strategy under the rubric of “supply-side economics,” about which more in a moment.

Consequences of inequality

As I argue in “THE UPSIDE OF THE DOWNSIDE, Part IIIA, Why Another Stock Market Crash and Great Depression Are Inevitable,” without a real (after-inflation) pay raise over the 45 years since Reaganomics was introduced in 1981, everyday Americans are forced to borrow incessantly to maintain or improve their standard of living. The rich, having diligently gathered up all the marbles, obligingly provide the credit through financial intermediaries. An economy dependent on unrelenting expansion of household debt amid stagnant wages will eventually crash and burn when borrowers succumb to the crushing weight of debt, as in 1929 and 2008. (See: LEGISLATING INEQUALITY OF INCOME AND WEALTH –How Reaganomics Produces Long-Term Economic, Financial and Social Chaos) This economic scaffolding and its predictable outcome go to the heart of why the rich, “for the good of all,” should, as Obama said to Joe the plumber, “spread it around.”

Bottom line: Extreme inequality is not merely unjust to the poor; it is structurally dangerous and ultimately contrary to the interests of the rich. To understand why this condition persists, one must examine the economic theology that has justified it for more than four decades: supply-side economics, with the Laffer Curve as its sacred diagram.

Supply-side economics

As an economist, I am critical of supply-side economics, which holds that lightly taxing the rich will give them more capital to invest in plant and equipment, provide more jobs, and make more goods and services available at lower prices, all in response to the immutable laws of supply and demand. Sounds good in theory, but in practice, not so much.

We have more than four decades of experience with supply-side economics (aka Reaganomics or “Voodoo Economics”), and the results are indisputable: the rich get stupendously richer, the poor remain mired in poverty, and the middle class -- which has not had a real (inflation-adjusted) pay raise in forty-five years -- is losing ground. According to the Pew income definition, the percentage of the population in the middle class has shrunk from around 61% in 1971 to 51% in 2023. Moreover, tax cuts for the rich (during the Reagan, Bush II, and Trump administrations) reduced government revenue. The resulting fiscal deficits have swollen the national debt from less than $1 trillion before President Reagan took office to $38 trillion four and a half decades later. All of which prompts the question: Is this the best we can do?

The Laffer Curve

Economist Arthur Laffer added sizzle to the supply-side steak with his backward-bending “Laffer Curve,” claiming that at some (never-defined) point, the direct relationship between tax rate increases and higher revenues reverses (i.e., the disincentive of higher taxes discourages economic activity, producing a corresponding decrease in government revenues). As usual in Republican policy pronouncements, there exists a kernel of truth atop a heap of self-serving nonsense, lending credibility to their flawed reasoning.

The typical display of the Laffer Curve shows an aesthetically pleasing point of inflection at the midpoint between zero and 100% top tax rate, implying, without evidence, that any tax rate above 50% falls within a “Prohibitive Range” (i.e., higher taxes will produce lower revenues). This is despite evidence of continued growth in both economic activity and tax revenues at top marginal tax rates as high as 91%, dating back to World War II and the Eisenhower and Kennedy administrations. Laffer himself has never put a number to the point of inflection. (See: IS LAFFER THE BEST MEDICINE?) In short, the Laffer Curve supplies the pseudo-theoretical ornament that makes tax cuts for the rich look economically serious.

Unsurprisingly, Republican ideologues have seized on Laffer’s vague, evidence-free assertions as policy directives, namely a) cutting taxes for the rich at all levels of current taxation as sure-fire growth accelerants and, as a corollary, b) any tax increases on the rich will cause a recession. Disregarding the irrefutable evidence of gaping deficits that have added $37 trillion to the national debt following these cuts, Republicans say the resulting economic growth will be so strong that it will increase revenues beyond what they would otherwise be without the cuts, closing the deficit gap. Ironically, ever since Reagan introduced supply-side economics, the only time the deficit gap has been closed to produce surpluses occurred in the final years of the Clinton budgets, after George H.W. Bush and Clinton raised the top tax rate by a total of 11 percentage points.

The corollary to the flawed notion that tax cuts for the rich stimulate economic growth is that tax increases on the rich will stifle growth. Consequently, raising taxes on the rich has been off the table except for George H.W. Bush and Clinton. The elder Bush raised the top marginal tax rate from 28% to 31%, and Republicans denied him a second term despite winning a brief war in Kuwait and shepherding a satisfactorily growing economy. When Clinton further raised the top rate to 39%, Republican doomsayers foresaw a severe recession, if not another Great Depression. GDP and employment growth during Clinton’s administration exceeded those of the previously mentioned tax-cutting Republican administrations, and he finished his presidency with two years of budget surpluses.

Nevertheless, for Reagan, George W. Bush, and Trump, tax cuts for their wealthy donors were the key to victory. When deficits grew unrelentingly, Republicans fell back on Dick Cheney’s sop: “Reagan taught us deficits don’t matter” (until a Democrat is president, at which point deficits become the all-important reason to cut non-defense discretionary spending that benefits everyday Americans).

Beyond this damning evidence, simple logic exposes the fallacy of the supply-side proposition linking tax cuts for the rich to job-creating capital spending. Supply-side proponents claim tax cuts leave more money in the private sector providing the wherewithal for increased job-creating capital investment. However, that is only half the story. The part supply-siders leave out is that tax cuts also create deficits funded by additional government borrowing, the bulk of which is necessarily underwritten by wealthy investors, who, after all, are the ones with money to lend. Therefore, what the government giveth with the right hand, it taketh away with the left, in effect nullifying the promised source of stimulus. Moreover, business will add production capacity only in response to increased demand, a pattern notably lacking among a consumer base overburdened with debt.

Consequently, rather than invest the tax savings in increased production capacity and employment, the rich plow much of their tax windfall back into government bonds, neatly converting tax liabilities into assets. In short, the donor class has trillions to lend but not to pay taxes. All this bit of “ledgerdemain” requires is a few million dollars donated to pliable political candidates for national office. QED

To summarize: the current American distribution of income and wealth is not merely grossly unequal; it is politically engineered, self-reinforcing, increasingly hereditary, and unsustainable, ultimately leading to a stock market crash and severe economic contraction. Accordingly, it is in the best interests of both average Americans and the wealthy to share the fruits of prosperity fairly, about which more below.

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Regrettably, the dominant faction within the oligarchy today fails to recognize the ultimately self-destructive consequences of its primordial pursuit of unlimited wealth and unbridled power at the expense of the working classes, upon whom its wealth depends both as workers and as consumers. I suspect these worthies genuinely believe the country’s fate rests best in their grasping hands, little realizing the dangers that the inequality they embrace poses to themselves, their enterprises, the country, and indeed the world. Notably, King Louis XVI and Czar Nicholas II suffered the consequences of the same myopia.

A more equitable distribution of productivity gains would eliminate, or at least mitigate, economic and financial trauma occasioned by AI-related job displacement; promote a prosperous, secure, contented middle class as a sustainable source of demand; lift people out of poverty and thereby dampen the impetus for street crime among the economically pressed; and foster political tranquility.

Thus, rebalancing the distribution of the fruits of technological change between capital and labor would serve the long-term interests of wealthy corporate managers and owners who depend on the general population as customers. After all, despite his faults, Henry Ford recognized that paying his workers well would give them the wherewithal to buy his cars. Similarly, Harry Truman recognized the post-war need to rebuild America’s European and Japanese customer base through the Marshall Plan and MacArthur’s enlightened administration of Japan.

Achieving such equitable distribution faces formidable odds. Members of Congress and the president would have to raise taxes on the rich -- a hard pass for today’s Republicans and a fair number of Democrats, dependent on rich donors to finance their campaigns. For their part, shortsighted rich donors adamantly oppose higher personal and corporate taxes. Breaking this vicious cycle will require a major shift in the national mindset, resetting the priorities of both government and corporate America to align with the sentiment expressed in the Mexican epigraph and, somewhat ironically, the inconvenient parts of the Christian gospel.

Reprogramming the national mindset would require creating a new form of political organization. I have proposed such an organization in two posts, titled MULTIPLEX DEMOCRACY – How We Make Face-to-Face Politics the Next Big Thing and MULTIPLEX DEMOCRACY - Merging the Spirit of Chautauqua and the Activism of Town Halls. This new approach to politics centers on establishing an organization that meets periodically in town hall meetings held simultaneously in movie theaters across the country, linked to a national digital network accessible via smartphones and computers. By severing dependence on rich donors, the new political system would rely on citizen funding to build consensus, elevate new leaders, recruit followers, and plan and execute winning national, state, and local political campaigns without resorting to expensive television, radio, print, and electronic media, thereby nullifying the innate advantage Big Money confers on candidates in the wake of Citizens United.

With the umbilical cord to Big Money severed, MULTIPLEX DEMOCRACY can foster a necessary shift in the national political mindset, supporting new candidates and innovative policies that rebalance the distribution of prosperity’s fruits more equitably between capital and labor. I will propose a raft of such policies in future posts in this series. For now, suffice it to say that they will involve a reversal of Reaganomics: replacing its supply-side corollary with demand-side Keynesian economics, raising taxes on the rich, restoring financial and consumer-protection regulatory safeguards, and redeploying federal resources away from armaments toward retraining the labor force to adapt to the brave new world of artificial intelligence.

Ironically, the defining feature of this “radical” mindset will entail a return to the same state of mind the Founders had when writing the Constitution, as summarized in the Preamble, the principles to which the Federal Government must be rededicated, emphasizing the primacy of We the People:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

A lesson in leadership I learned while serving as a Naval Gunfire Liaison Officer attached to the U.S. Marine Corps in Da Nang, South Vietnam, succinctly illustrates the mindset needed to guide not only the government but also the private sector toward the people-oriented goals listed in the Preamble. On a sunny spring day in March 1965, I was assigned to an observation post on the ridge of Hill 327, just below a Hawk anti-aircraft missile battalion. I made my way to the tent on the other side of the ridge, where a hot breakfast was being served. About a dozen men were making their way through the chow line. The company commander, a tall Marine captain, stood by the entrance to the tent, acknowledging his men by last name and rank as they moved into line. I had befriended the captain during the six months afloat off Cape St. Jacques in an attack transport troop ship, waiting for President Johnson to send us in. We struck up a conversation. After a brief exchange, I suggested we join the line and continue the conversation over breakfast.

“Not yet,” the captain replied.

“Oh,” I said. “Are you expecting someone?”

“No.”

“Not hungry?”

“That’s not it. Tradition in the Corps requires the company commander to be the last man through the chow line.”

“Ah,” I replied, as the penny dropped. “Make sure everyone gets fed, and if they run short of food before you get in line, you and the Mess Sergeant will have a little chat.”

“Mmhmm. Or if the food is cold or unappetizing. My men need to know I’m lookin’ out for them.”

That is the principle America’s ruling class has forgotten. Leadership does not mean eating first and explaining later why the line ran out of food. It means accepting responsibility for the welfare of those whose labor, loyalty, consumption, and citizenship sustain the enterprise. Whether expressed as a Mexican saying, the inconvenient parts of the Christian gospel, the Preamble’s promise to promote the general welfare, or a Marine captain’s place at the end of the chow line, the lesson is the same: for the good of all, the people at the bottom must come first.

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Years ago, I had the privilege of teaching at the Chautauqua Institution, a nonprofit educational center and summer resort at the western tip of upstate New York, dedicated to universal education, spiritual growth, and intellectual development. If you’ve never been there, it can be hard to explain what makes it distinctive.

More than a lecture series or a summer retreat, Chautauqua is a civic habit—one that has been practiced, refined, and sustained for nearly a century and a half. Every day during the summer season, people gather early, willingly, and attentively to listen to ideas. They come to hear historians, scientists, philosophers, writers, theologians, artists, and public figures speak in propria persona, not just at the Great Amphitheater, but also in smaller classrooms, like the one I taught in.

Chautauquans listen respectfully, ask questions without partisan “gotcha” barbs. They debate, discuss, argue politely afterward. They change their minds. Or they don’t. And then they come back the next day and do it again.

What struck me most, as both a teacher and a participant, was the tone.

The genuineness and civility Chautauquans exhibit throughout the season are difficult to find elsewhere in public life. Civility without timidity. Seriousness without sanctimony. Disagreement without contempt. People speak plainly, listen carefully, and treat one another as capable adults.

That spirit didn’t arise by accident.

Chautauqua emerged in the late nineteenth century to fill a profound void in rural American life. Farmers and their families, living hardscrabble lives, were hungry not merely for entertainment, but for knowledge: news of the day, new ideas, music, a sense of connection to a wider world. Chautauqua met that hunger by bringing ideas to people where they were, in a form that respected their intelligence and curiosity. (As an aside, I will return to the subject of entertainment as an essential component of Multiplex Democracy, as it was for Chautauqua, and for the same reason. More in future posts.)

In addition to local Chautauqua chapters in many rural communities, the traveling Chautauqua Circuit extended this impulse nationwide. By the mid-1920s, at the peak of circuit Chautauquas, they appeared in over 10,000 communities, drawing audiences of more than 45 million. Under the Chautauquan aegis, the Redpath Lyceum Bureau (later Redpath Chautauqua) became the first great speaker’s bureau in America. I owe my own speaking career to that lineage. Chautauqua organizers understood something we’ve largely forgotten: people will show up—repeatedly—for serious ideas if you give them a place, a structure, and a program that make it possible.

The Circuit had its quirks. Theater, for example, was considered suspect. Actors were thought to be hiding behind masks, not being genuine. So performers adapted. One well-known actress—a protégé of Mark Twain, Gay Zenola McClaren—became famous for what were called dramatic readings. Standing alone, she would read entire plays aloud. Deploying a unique talent of mimicry, she vocally summoned each character in turn, complete with regional dialects and native pronunciation. By any reasonable measure, it was theater. But it was theater aligned with the Chautauqua ethos: direct, human, unmediated.

She later wrote about life on the Circuit—the travel, the audiences, the intensity of those encounters. What comes through most clearly is how seriously people took the experience. That, more than anything, is what Chautauqua provided: a place to feed the mind, renew the spirit, and rekindle community.

When I think about Multiplex Democracy, I think about that spirit. Chautauqua created: a place for regular gathering, shared attention, respect for the audience, and confidence in people’s capacity to think together — civily.

The same spirit animated colonial town halls, another successful American civic infrastructure, with a significant difference. Unlike Chautauqua, but very much like Multiplex Democracy, town halls were designed to produce united action after due deliberation about problems facing the community. Ordinary citizens met face-to-face not only to deliberate on common problems but also seek consensus for united action. They didn’t always agree. But they shared a room, a process, and a sense of mutual obligation. That combination mattered then as it does today.

Multiplex Democracy is an attempt to recover the spirit of Chautauqua and the activism of the colonial town hall in a contemporary form. Not by turning back the clock, but by using places we already recognize and trust as shared rooms for civic life, augmented by modern digital technology. The aim is not nostalgia. It is continuity.

We have ample evidence in our history that Americans will engage seriously with ideas, with one another, and with the responsibilities of self-government—if we give them places designed for that purpose. They were infrastructures for democracy in a country that recreated the Athenian ideal in modern form.

We’ve lost many of those places and much of the underpinnings of democracy. Multiplex Democracy begins with a simple question: What might be achieved if we paired the Chautauqua Spirit and Town Hall Activism in regular, simultaneous meetings anchored in a nationwide network of movie theaters?

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I suspect there are many Chautauquans among the subscribers and writers at Substack (Heather Cox Richardson prominent among them). I encourage you to leave a comment about your experience of Chautauqua and whether you think American politics could benefit from an infusion of the Chautauqua Spirit, paired with modern town halls conducted simultaneously in a nationwide network of theaters.

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If you think, as I do, that Multiplex Democracy may offer the last best hope of preserving the American experiment in self-governance, then forward this post to contacts who might share this view with your recommendation to subscribe to the Cassandra Chronicles.

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We argue online. We watch the same arguments repeat on television. We march in the streets by the millions—and then find ourselves asking the same question: What do I do now?

And many of us, quietly, step back—not because we don’t care, but because we no longer see a place where caring constructively fits.

This post is about an idea I’ve been working on to address that absence.
It’s called Multiplex Democracy.

I’m not launching anything today.
I’m starting a conversation.
You’re invited.

The Core Idea:

Across the United States, there are roughly 38,000 movie screens, most located in multiplex theater complexes, many sitting idle for long stretches of the day.

Multiplex Democracy proposes turning those screens—periodically, simultaneously, and voluntarily—into local civic town halls, networked and capable of sending and receiving audio and video across the national network.

Town halls are among the most democratic of political processes. They embody the proposition that all are entitled to be heard and to participate in how the consent of the governed is formed within a civil, deliberative community.

In this model, movie theaters become a new and powerful civic hub: an infrastructure dedicated to supporting an informed, involved electorate—thinking nationally while acting locally—and fostering the development of leaders who may ultimately seek elected office at every level of government. Leadership does not emerge through preselection or insider processes, but through sustained participation in public, face-to-face deliberation. Individuals earn trust and recognition over time through the quality of their thinking, their conduct, and their contributions to civic life. Those who later choose to pursue public office may seek support from within the Multiplex Democracy network that helped elevate them, regardless of party affiliation.

Here’s the basic idea:

• Each screen hosts a focused, issue-specific gathering
  (climate, housing, fiscal policy, public safety, immigration, education, etc.)

• People meet in person, face-to-face, on a regular schedule, forming lasting bonds

• Discussions are moderated for fairness and civility, not ideology and bombast

• Technology supports the room rather than hijacking it

• Local groups are connected regionally and nationally, but grounded in where people live

• Participants help define problems, debate solutions, seek consensus, set priorities, plan and execute action, and, over time, develop and support leadership

• The organization is entirely citizen-funded, with participants buying tickets at the box office to the screening room featuring their issue of choice, displayed on the marquee.

Think of it as democracy, multiplexed: many serious conversations happening in parallel under one roof, avoiding the cacophony that arises when single-issue groups all compete for attention in the same room.

Why Movie Theaters? Because they already solve several hard problems:

• They’re everywhere

• They’re designed for listening and attention

• They are comfortable and fully serviced

• They support parallel conversations under one roof

• They’re culturally neutral—not government buildings, not churches, not campuses

Most importantly, they’re familiar. You don’t need to learn how to enter a movie theater. You just show up. Plenty of parking. Comfortable seating. Air conditioned. Clean toilets. Food.

Multiplex Democracy is best understood as:

• Place-based, not platform-based

• Habit-forming, not episodic

• Issue-focused, not everything-at-once

• Citizen-funded, not donor-driven

• Deliberative first, electoral second

It doesn’t replace:

• Elections

• Parties

• Legislatures

• Assemblies

It fills a gap most systems ignore: the regular practice of thinking together as citizens.

What Multiplex Democracy is NOT:

• Not a political party. It’s the revival of the ultimate democratic process in a familiar venue.

• Not a social media platform, but instead an effective political infrastructure and methodical process.

• Not a protest movement (though participants may decide to protest).

It’s also not a utopian attempt to “fix everything,” although some things may be.

It’s a missing layer—a place between private opinion and formal power where people can think, discuss, debate, bond, and act together, face to face, without being reduced to digital avatars or data points.

Multiplex Democracy is nonpartisan by design and does not predefine political outcomes. Support for candidates or policy positions may emerge only through open, transparent, and inclusive deliberation among participants. Multiplex Democracy rests on a simple premise: when people are given the time, structure, and shared space to think together, most are capable of acting sensibly and responsibly—even amid disagreement.

A Word About Technology and Why This is Different:

Phones, Bluetooth, and the Internet would be used— deliberately, and carefully.

Participants would use a simple app to:

• Request a turn to speak (fair queues, no domination)

• Be seen and heard clearly by the room on-screen and through loudspeakers

• Take quick, transparent polls to gauge consensus

• Coordinate civic actions outside the theater

What the app would not do:

• No feeds

• No likes

• No followers

• No algorithmic amplification

• No outrage incentives

The goal isn’t attention. The goal is deliberation through face-to-face participation. Technology here is part of the infrastructure, not a stage.

Why I Think This Matters Now

We’re facing multiple overlapping problems addressed by Multiplex Democracy:

1. A crisis of civic process
   Many people no longer trust how decisions are made, regardless of outcomes, and don’t know whether, how, or where to participate. Multiplex Democracy provides a familiar place, a functional infrastructure, and an orderly political process scheduled at regular intervals, answering the question: What do I do now?

2. A crisis of social isolation
   The loneliness epidemic is real, and digital politics has become another isolating arena instead of a connective one. Multiplex Democracy regularly brings people together, face-to-face, as a community with a common purpose.

3. A crisis of truth
   Not because truth doesn’t exist, but because we’ve lost shared ways of approaching it together. We’ve learned that without agreed-upon truth, intelligent debate is impossible and division becomes inevitable. Multiplex Democracy provides an evidence-based, debate-tested process for arriving at working agreements—good enough to guide intelligent action, even amid disagreement.

4. A crisis of integrity
   The normalization of money-driven politics has corroded trust. Multiplex Democracy eliminates those incentives through citizen funding and public, face-to-face accountability—where dishonesty and demagoguery are difficult to sustain.

Multiplex Democracy doesn’t promise agreement (though agreement would be welcome).
It promises better disagreement—more rational, more civil, more human, and more accountable—by citizens committed to the proposition that government of the people, by the people, and for the people shall not perish from the earth.

- . -

That’s it for now. Much more to follow. I look forward to continuing the conversation in the comments with those for whom this idea resonates—and with those who may wish to participate in its development.

If this speaks to you, I invite you to:

• Join the discussion in the comments

  Leave a comment

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Two parting thoughts:

“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”
— Margaret Mead

“If you do what you’ve always done, you’ll get what you’ve always gotten.”
— Tony Robbins

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Dr. Krugman’s post sounds the alarm about the “shocking and terrifying” consequences of Trump’s “attempts to bully the Fed into large interest rate cuts.” As a harbinger of such a move, Krugman cites the president’s “attempt to fire Lisa Cook, a member of the Fed’s Board of Governors, over unsubstantiated claims that she committed financial fraud.” Why the alarm? Krugman explains:

There is now a substantial chance that the Fed’s independence, its ability to manage the nation’s monetary policy on an objective, technocratic basis rather than as an instrument of the president’s political interests and personal whims, will soon be gone.

Nations in which central banks lose their independence sooner or later suffer high inflation, especially when they are taken over by autocrats who buy into crackpot economic doctrines. And Trump, who has been demanding large rate cuts because, he claims, the economy is running hot — which almost every economist would say is a reason to raise rates, not cut them — certainly fits that pattern. Yet although there have been small tremors in the bond and currency markets, there have been no significant upheavals in financial markets that reflect the severity of the situation we are in. Throughout this episode, the stock market has remained fairly flat, and bond yields haven’t spiked.

Prompting the question Krugman asks and then answers, citing “market complacency,” and “the crowd’s” adherence to “the conventional wisdom,” and will “only abandon those views when they become blatantly unsustainable.” He then offers examples of such behavior buttressed by a number of pertinent charts – all of which I urge you to read. He concludes with:

So if you want to know why markets aren’t reacting to the risk of very bad policy if Trump takes over the Fed, you should know that major market reactions to that kind of risk are rare. In fact, I can’t come up with a single example.

All of which says, in turn, that the absence of a strong reaction to Trump’s assault on the Fed isn’t a sign that everything is OK. We are, in fact, looking at a policy disaster in the making. But markets probably won’t react strongly until the disaster is already upon us.

All very true. I have often written and lectured about this phenomenon, which I call “demon extrapolation”: the crowd’s tendency to project recent past conditions into the indefinite future, thus always missing the turns. Think of driving on a winding road by looking into the rear-view mirror. Nothing behind you will alert you to the turns in the road ahead, so inevitably you crash and burn. However, in my view, there’s more to the story than just citing herd-like behavior first revealed in Charles Mackay’s seminal study (1841) of crowd psychology, “Extraordinary Popular Delusions And The Madness of Crowds.”

There’s a more fundamental explanation for why markets aren’t freaking out, rooted in economic and policy factors (with an assist from psychology) and supported by historical precedents. The culprit behind the recent resilience of the markets is the concentration of extraordinary wealth (stemming from the introduction of profitable new technologies: computers in the 1980s, internet in the 1990s, AI in 2022) shunted upwards for four decades by Zombie Reaganomics. The superabundance of profits flowing to the rich is plowed back into financial markets, creating a virtuous cycle (for the rich), pumping up markets exponentially. Given investor euphoria inevitably accompanying the introduction of game-changing new technology, the rich, further emboldened by tax cuts, possessed by greed, lust for power, a “master of the universe” complex, and demon extrapolation, perpetuate the cycle, propping up markets to the point of irrational exuberance despite politically unsettling events. We have seen this play before, performed by wealthy individuals who possess more dollars than sense.

Meanwhile, households suffer the effects of stagnant wages, prompting an unsustainable accumulation of debt obligingly underwritten by the wealthy who, after all, have plenty of money to lend. Eventually, debt-laden households are forced to trim their spending, curbing aggregate demand and, in turn, capital investment. Concurrently, the law of diminishing returns on new technology kicks in (exposing overinvestment), as do the consequences of Trump’s “insane” economic policies (frosting on the disaster cake). These three events combine in a perfect storm to degrade corporate profits and prompt cascading defaults, undermining the “virtuous cycle” to the point where the rich suddenly awaken to their irrational exuberance, greed turns to fear, and the rush for the exits takes us back to the October 1929 Crash followed by the Great Depression, fulfilling Dornbusch’s law: “The crisis takes longer to happen than you can possibly imagine, then happens quicker than you can possibly imagine.” (Helluva way to make America great again.)

The upside of this downside likely to occur on the Republicans’ watch, is a strong swing of the political pendulum to the liberal left as seen in 1932, (assuming Republicans haven’t jettisoned elections), raising the question of whether Democrats are prepared to take charge. So far, no evidence of it. A rebuttal to the Republican Project 2025 is needed, about which more next. Watch this space.

For further elaboration, refer back to my previous posts in the links below:

• THE UPSIDE OF THE DOWNSIDE -PART I 2024 is the new 1928

• THE UPSIDE OF THE DOWNSIDE -- PART II MEGACYCLES: Technology and the Economy and Financial Markets

• THE UPSIDE OF THE DOWNSIDE - PART IIIA Why Another Stock Market Crash and Great Depression are Inevitable

• THE UPSIDE OF THE DOWNSIDE - PART IIIB Causes and Consequences of Income/Wealth Inequality

• THE UPSIDE OF THE DOWNSIDE – PART IIIC Timing and Consequences of Phase II of the AI Megacycle

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Sixty-four years ago, President Eisenhower, in his Farewell Address, famously warned Americans of the danger of “misplaced power” in the “military-industrial complex”:

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

To confront this danger, the President urged “an alert and knowledgeable citizenry” to defend “our liberties and democratic processes.”

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Largely forgotten were Eisenhower’s other warnings about dangers we now face:

Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades. In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.

As we peer into society's future, we-you and I, and our government-must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.

To confront these dangers Eisenhower urged our statesmen “to balance, and to integrate these and other forces, new and old, within the principles of our democratic system -- ever aiming toward the supreme goals of our free society.”

The President concluded with the ultimate appeal to Diversity, Equity, Inclusion and, without specific religious reference, the ideals of true Christianity:

We pray that peoples of all faiths, all races, all nations, may have their great human needs satisfied; that those now denied opportunity shall come to enjoy it to the full; that all who yearn for freedom may experience its spiritual blessings; that those who have freedom will understand, also, its heavy responsibilities; that all who are insensitive to the needs of others will learn charity; that the scourges of poverty, disease and ignorance will be made to disappear from the earth, and that, in the goodness of time, all peoples will come to live together in a peace guaranteed by the binding force of mutual respect and love.

How far from these ideals America has strayed. How long will it take for the “arc of the moral universe” to “bend toward justice”?

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This statement supporting stock prices, while not unusual,[1] puts the Fed in an awkward position. Presumably, to “stabilize financial markets,” the Fed would “print money” to be injected into the banking system by buying Treasury bonds (“Treasurys”), the immediate effect being to raise bond prices and make more cash available to buy stocks, potentially boosting stock prices as well. The added cash in the banking system, plus lower interest rates prompted by higher bond prices, would support economic growth while simultaneously adding to the inflationary pressures generated by Trump’s trade war. (“Too much money chasing too few goods” produces inflation.) Accordingly, the Fed’s financial market stabilization would put the objectives of its “dual mandate” of full employment and price stability in conflict with each other – a not unusual situation.

The Fed’s ultimate decision on which policy to enact typically depends on the outcome it perceives as the greater threat. During the Oil Shock era in the 1970s and early 1980s, then-Fed Chairmen Arthur Burns and Paul Volcker prioritized price stability, sacrificing full employment by inducing massive recessions to reduce oil demand in a successful effort to lower oil prices. Their successors, Alan Greenspan (1987-2006), Ben Bernanke (2006-2014), and Janet Yellen (2014-2018), focused on full employment through “easy money” policies aimed at preventing or ameliorating recessions. They enjoyed this flexibility as they faced a diminished threat of inflation from high oil prices, given that the U.S. economy became increasingly service-oriented, reducing oil dependency as a primary driver by half.

Jerome Powell (2018-Present) will be facing the worst of possible worlds, given the confluence of forces simultaneously driving the U.S. and world economies into another Great Depression and an alarming surge of inflation.

• Forces driving economic contraction:

  • The complex forces of Megacycle Phase II described in THE UPSIDE OF THE DOWNSIDE series Parts I through IIIC include the upward redistribution of wealth generated by new technology at the expense of the working classes (heightened by politically motivated tax cuts for the wealthy); the corresponding overinvestment in stocks by the wealthy, which sets the stage for a stock market crash; and unsustainable increases in working-class consumer and mortgage debt to compensate for stagnant real wages, ultimately resulting in cascading defaults and economic and financial collapse. (N.B. The same combination of these forces produced the Great Depression during Phase II of the Second Industrial Revolution in the 1930s, the Dot-Com bust, and the Great Recession during Phase II of the Computer Revolution in the first decade of the 21^st century, and I predict will cause another stock market crash and Great Depression in this century’s second decade during the second phase of the AI Revolution, which began on March 11, 2025.) (See THE STOCK MARKET IS CRASHING.)

  • The negative impact on world trade resulting from Trump-ordered tariff increases. (NB: higher tariffs create stagflation, simultaneously hindering the growth of world trade and increasing inflation due to the elevated prices consumers pay for tariffed goods and the decreased supply of goods and services caused by trade barriers.)

  • The added dampening of aggregate demand for consumption and business capital investment caused by higher interest rates responding to the inflation created by Trump’s tariffs.

  • Further upward pressure on interest rates caused by the Treasury’s issuance of new bonds to finance the Republican-legislated deficits produced by tax cuts for the wealthy donor class.

  • (Potentially) Higher interest rates caused by the Fed attempting to dampen inflation. (See below.)

• Forces driving a surge in inflation:

  • Higher domestic prices of foreign goods and services caused by the reduction in supplies caused by the trade war and the weakening dollar, as well the added cost of tariffs imposed on imported goods and services paid by U.S. consumers.

  • Higher natural gas and associated electricity prices caused by skyrocketing demand for electricity by data centers created to meet the surging requirements of the AI Revolution and the global shift toward electrically powered transportation.

  • Higher wage costs caused by Trump’s mass deportation policies, reducing the supply of labor.

  • (Potentially) Inflation caused by new money injected by the Fed into the private sector to “stabilize financial markets.”

Which policy will Powell’s Fed adopt? Much like Schrödinger's cat, we won’t know the outcome until we open the box.

U.S. DOLLAR: For about the last 15 years, the U.S. Dollar Index has been trending unevenly higher, climbing from lows around 73 in 2010 to a sideways trading range between 100 and 110 over the past 3 years. The latest fluctuation within that range began last October at around 100, increasing to just under 110 in early January 2025 before starting a decline to 103.9 just before Trump’s April 2 tariff announcement. In the nine days following the announcement, the dollar index abruptly dropped further by 4.6% to 99.9 on April 11 at the lower extreme of the trading range - a decline that significantly reaffirmed the loss of confidence in the dollar that has persisted since Trump took office last January.

GOLD: A bull market in gold began in earnest in 2019 as prices surged from a previous plateau of around $1,250/oz to more than $3,000 during the next six years. As a global market, gold prices tend to reflect events with worldwide repercussions. Accordingly, factors prompting higher gold prices include:

• Flight to safety amid global uncertainties such as U.S.-China trade tensions, the Covid-19 pandemic, the Russian invasion of Ukraine, and conflicts in the Middle East, including Gaza, Yemen, and Syria. Disruptions in trade and supply chains, along with interruptions in oil supply from oil-producing regions, have inflationary implications, leading investors to purchase gold, the traditional hedge against inflation.

• Low interest rates diminish the opportunity cost of holding gold, which pays no interest or dividends. Central banks worldwide pushed interest rates to near-zero between 2020 and 2022 through quantitative easing (“printing” money), to sustain their pandemic-stricken economies, with the influx of new money heightening inflationary concerns. (Conversely, higher interest rates usually suppress gold prices by increasing the opportunity cost of holding it.)

• The value of the dollar typically relates inversely to the price of gold. Since gold is priced in dollars worldwide, a weak dollar requires more dollars to purchase an ounce, meaning higher gold prices expressed in dollar terms. (Conversely, a strong dollar generally means a dollar can buy more gold, effectively resulting in a reduction in gold’s price.)

• Gold purchases for jewelry, particularly in China and India, push up gold prices.

• Purchases or sales by central banks and investment funds, not necessarily tied to specific economic outcomes can influence the price of gold unpredictably.

Recently, gold appears to be caught between conflicting signals. Following Trump’s Liberation Day announcement on April 2, gold prices mirrored the stock market, declining by approximately 5.6% from a peak of around $3,150 per ounce to $2,975 on April 7. This drop was likely due to expectations of a trade-war recession, typically accompanied by abating inflation and lower interest rates, which tend to depress gold prices. However, immediately after Trump’s tariff pause announcement on April 9, gold investors reassessed the situation, driving the price of gold up to $3,237 by the close on April 11, probably because of:

• Fears of rekindled inflation stem from both domestic price increases linked to tariff pass-throughs and shortages caused by interruptions in the supply of essential goods from China, many of which the U.S. no longer produces.

• The weakening dollar reflects a loss of confidence in the currency among U.S. trading partners, buffeted by Trump’s aggressive and erratic trade policies.

• While the increase in U.S. bond yields would tend to depress gold prices, gold investors may be looking beyond the higher opportunity cost of rising rates to the inflationary rationale behind the rise.

SUMMARY: In my 24 years publishing my Cyclical Investing newsletter (1984-2008) and speaking on the national/international stage, rarely have the benchmark financial market indicators – stocks, bonds, oil, currency, gold -- unanimously pointed to the same outcome as they now do. In the present instance, they point to resurgent inflation and rising economic entropy for sure – with either a) slow-to-no growth (i.e. stagflation) or b) an economy contracting somewhere between recession and another great depression. The Fed, agrees on inflation but, always reluctant to call a recession lest it cause one, goes with the milder, more palatable alternative of slow growth. Being a contrarian deep into thoughts of Phase II of the AI Megacyle, I’m sticking with my prediction of a stock market crash and great depression.

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[1] Famously, a similar one-line statement by Fed Chairman Alan Greenspan in response to the October 19, 1987 “Black Monday” stock market crash singlehandedly turned the market around, allaying fears of a reprise of the Great Depression: "The Federal Reserve, consistent with its responsibilities as the Nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system"

President Trump unveiled the centerpiece of his reactionary policies on April 2, 2025, “Liberation Day” -- a day which will live in, you know, infamy. Overriding Congress’ Article 1, Section 8 constitutional “power to lay and collect Taxes, Duties, Imposts, and Excises, and in the Commerce Clause, to “regulate international trade,” Trump signed EO 14257: Regulating Imports With a Reciprocal Tariff To Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits.

To bypass the Constitution’s clear Congressional mandate, Trump clung to authority granted by Congress to a president in cases of “national emergency,” claiming that “the domestic economic policies of key trading partners” posed “an unusual and extraordinary threat to the national security of the United States.” With this assertion, along with interminable paragraphs of grievances, Trump imposed “ad valorem duties on all imports from all trading partners [starting] at 10 percent and shortly thereafter, the additional ad valorem duty shall increase for trading partners enumerated in Annex 1 at the rates set forth in Annex I to this order. These additional ad valorem duties shall apply until I determine that the underlying conditions described above are satisfied, resolved, or mitigated.”

The subsequently stated purposes of the tariffs included:

• Forcing foreign trading partners to relocate factories within U.S. borders to avoid punitive tariffs, thereby creating U.S. factory jobs lost to “globalization,” while pointedly overlooking U.S. export jobs lost when trading partners reciprocate with increased tariffs of their own, to which we must add loss of U.S. jobs associated with the distribution of imported products.

• Forcing foreign government leaders to “kiss [Trump’s] ass” (his words) to negotiate terms that would eliminate present deficits in the U.S. balance of payments with their countries.

• Raising government revenues (erroneously said to be paid by foreign exporters) to help finance income tax cuts sought by Republicans, mainly to appease their donors and keep their campaign contributions coming. In effect a national sales tax, tariffs raise the cost of living, the burden falling disproportionately on the working classes, who spend virtually all they earn, whereas the wealthy spend only a fraction of what they earn, saving the rest.

An unstated objective, alleged by Democratic Connecticut Senator Christopher Murphy, was to enable certain individuals favored by Trump to profit from insider stock trading with advance notice of market-moving tariff policy changes. Trump bragged in the Oval Office about the outlandish profits his favored oligarchs made buying stocks just before the April 9^th announcement of the tariff pause. According to The Hill, “House Minority Leader Hakeem Jeffries (D-N.Y.) said Thursday [April 10] that House Democrats will soon launch investigations into potential wrongdoing following President Trump’s surprising decision a day earlier to pause his reciprocal tariffs — a move that immediately caused stocks to soar.”

The widespread view in the mainstream press suggests that, shaken by the panicked responses of stock and bond investors to his tariff plans, numerous institutional forecasts of an impending recession, and an outcry from his wealthy donors, Trump relented on Wednesday, April 9, announcing a 90-day pause on the imposition of tariffs (except for China) exceeding a baseline of 10% on all imports. However, Trump and his so-called propaganda ministry at Fox News claimed that the pause was “part of the plan” to compel trading partners to negotiate terms more favorable to the U.S. We’ll see.

Financial markets were unusually clear in their assessment of the situation, uniformly expressing expectations of renewed inflation and subdued economic growth – in a word, “stagflation,” with varying opinions on the extent to which economic growth would be affected. Even the Fed concurred.

The two presidents, Xi and Trump, appear to be taking the trade war personally. On Thursday, April 10, the day after Trump announced the pause, Xi dampened the market euphoria that had followed Trump’s announcement of the 90-day pause, by declaring China’s imposition of a countervailing tariff of 125% on all imports from the U.S., effectively closing the door on U.S. trade with China.

U.S. STOCKS: In my March 12, 2025 post titled “THE STOCK MARKET IS CRASHING, " I revealed the technical breakdown of the Dow Jones Industrial Average (DJIA, Dow) benchmark stock market index, signaling the onset of the Megacycle Phase II crash I have been predicting since December 7 of last year. Closing at 41,433.48 on March 11, breaking below the triple-confirmed support level of around 42,000, the Dow signaled a technical breakdown, pulling the trigger to sell stocks. The Index rebounded briefly during the next 3 weeks, but on April 2, as news spread of Trump’s ‘liberation day’ tariff announcement, the Dow promptly plunged nearly 11% in the next 6 days to a low of 37,606 on April 8, nearly 16% below its previous peak of 44,747 in early February. This sudden drop occurred as investors awakened to the catastrophic effects on world trade and inflation implied by the imposition of unprecedentedly high worldwide, country-specific tariffs (rather than item-specific). Next day, the decision to pause triggered one of the largest stock market rebounds in history on April 9, only to be followed by a slump the following day when the administration announced it would set its tariffs on Chinese imports at a prohibitive 145% in response to China’s steadfast counter-reaction to Trump’s tariffs.

The Dow closed on Friday, April 11 at 40,212 and the NASDAQ at 16,724, down nearly 11% and 17% %, respectively, from their all-time record peaks recorded last December of 45,014.04 and 20,173.89.

While tariffs undoubtedly account for most of the recent market volatility, we should not lose sight of the underlying long-term, secular bearish forces dominating Phase II of the current Megacycle. (See THE UPSIDE OF THE DOWNSIDE – Part IIIB). Inasmuch as the technical breakdown described in THE STOCK MARKET IS CRASHING on March 11 occurred three weeks before the tariff kerfuffle, suggesting the beginning of the Phase II bear market, I expect stocks to continue declining even if the tariff issues fade into the background. Rudimentary technical analysis reveals breakdowns in both near- and long-term support and a downtrend that remains intact. (See graph.) Moreover, the stock market abhors uncertainty. Given the uncertainties associated with Trump’s stop-and-go policies, uncertainty hangs over the market like a cloud over Joe Btfsplk. Accordingly, investors who are cyclically alert and responsive will avoid stocks.

U.S. BONDS: Bond yields, which had been steadily declining for most of the year due to reassuring news of decreasing inflation and the Fed easing monetary policy with lower short-term interest rates, suddenly skyrocketed after the announcement of tariff increases. This shift indicated investor expectations of resurgent inflation and a deterioration of investor confidence in U.S. government securities as a safe haven.

In mid-January, the benchmark 10-year Treasury bond yield peaked at around 4.8%, significantly declining to 3.9% on April 2, just before the tariff announcement. Following this announcement, the yield surged to 4.49% on April 11, primarily driven by fears of inflationary consequences arising from higher tariffs. The surge in bond yields heightened economists’ expectations of a recession due to their dampening effect on aggregate demand and capital investment associated with higher borrowing costs.

Unlike the stock market, bond yields showed no signs of relief with the news of the 90-day pause. Typically more discerning than stock investors regarding the long-term outlook, bond investors communicated a clear message reflecting fears of renewed inflation and diminished confidence in U.S. Treasurys - sentiments further confirmed by soaring gold prices and a weakening dollar.

OIL: World oil prices had been trending downward for the last 3 years, since climbing from a low of $19 per barrel for West Texas Intermediate (WTI) on weak oil demand at the trough of the Covid economic shutdown in February 2020 to a peak of $120/bbl in mid-2022 on surging demand as the world economy recovered. (By the way, that spike in oil prices goes a long way to explaining the severity and duration of the inflationary surge during the Biden administration, commonly attributable only to “supply chain interruptions.”) By April 2, 2025, just before Trump’s tariff announcement, the price of WTI had eased to $71.76/bbl. Immediately after the announcement, oil plunged 23% to $55.51/barrel, reflecting the market’s expectation of a trade-war recession’s diminished oil demand. (Subsequent modest rebound to $61.336/bbl on April 13)

DUE TO LIMITATIONS ON THE SPACE ALLOWED IN E-MAILS This concludes Part 1 of the series THE STOCK MARKET IS STILL CRASHING — Trump's Tariff Shock Heightens Fears of Inflation, Recession and Further Stock Losses. Part 2 will follow shortly with the reaction of the Fed and dollar and gold market reactions to Trump’s tariff policy gyrations.

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Last December I began a series titled THE UPSIDE OF THE DOWNSIDE, in which I predicted a stock market crash signaling an impending great depression needed to prompt the political backlash that would repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era. To all appearances, the stock market is exhibiting the classical “double top” formation, with resistance confirmed twice and a breakdown in three-times-confirmed support at around 42,000, and the 7-month trendline at around 43,000, presaging a major bear market, in turn the forerunner of a serious economic contraction. Such an event would be in keeping with the beginning of Phase II of the long-term, 3-phase Megacycle I revealed in the series. On March 11, 2025, the Dow closed at 41,433.48.

Substack analytics says only half my subscribers opened their e-mails announcing each post in the series. So I am issuing this Notice to Subscribers, urging the other half to get up to speed by reading Parts I through IIIC without which it’s virtually impossible to understand the “great sweep of history” we are now caught up in, or to visualize the bright future that awaits us on the other side of this horrible episode we must, unfortunately, endure.

Part I advanced the basic premise of “THE UPSIDE OF THE DOWNSIDE” series (Dec. 7, 2024):

The Downside: We are facing economic and financial turmoil aggravated by a destructive and despotic second Trump administration bent on revenge against political opponents, rewarding the donor class with added power and wealth, “deconstructing” the federal government, and reducing the wellbeing of the rest.

The Upside: “Hard times” will trigger a political backlash, empowering the opposition to enact a new political agenda necessary to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the needs of the new technological era.

Part II introduced the concept of “Megacycles,” repeating episodes of economic transformation, “revolutions” triggered by new technology unfolding in three phases (Dec. 10, 2024):

Phase I: Exponential, technology-driven economic growth leads to a significant upward redistribution of new wealth, resulting in an excessive accumulation of debt, euphoric over-investment in new technology, bubbles in financial and housing markets, and radical economic, social, and political changes throughout society.

Phase II: The bubbles burst, causing financial and economic turmoil, “creative destruction,” political backlash, and, so far, war during three complete Megacycles. The crashing stock market beginning in February 2025 could very well be the opening bell announcing the beginning of this traumatic episode.

Phase III: An era of peace and sustained economic and financial progress adapted to the new technology.

Parts IIIA and B: Delved more deeply into the recurring preconditions in Phase I creating the turmoil of Phase II, demonstrating the inevitable recurrence of these “hard times.”

Part IIIC discusses the timing and severe economic implications of Phase II of the current Artificial Intelligence Megacycle. This section outlines the warning signs. now in place, setting the stage for the calamities to follow in Phase II.

I urged subscribers to “Heed the warning signs and react promptly when the stock market’s major indices start breaking down below rising trendlines of support. A stock market crash typically leads the economic/financial crunch by about 6 months and never fails to plunge the economy into the abyss. The warning signs of the approaching danger associated with the present Artificial Intelligence Megacycle must be taken seriously. None of the three technologically induced Megacycles during the past two centuries has failed to produce a tumultuous second phase with a stock market crash, credit crunch, major economic contraction, and war. It is a rite of passage from one technological era to the next deeply embedded in the collective psyche of humankind. Only a financial/economic cataclysm will produce the kind of massive swing in public opinion to provide the opposition with the mandate necessary to enact the radical reforms needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era.” I might add: Once the MAGA constituency feels the devastating effects of the economic meltdown and the administration’s policies through which the social safety net is sacrificed on the altar of tax cuts for billionaire donors, they will join the opposition. So be prepared to welcome them kindly without “I told you so’s.”

Part IV and beyond: I’m in the process of writing the UPSIDE narrative of this series, in which I outline a new political process through which the currently evolving resistance and opposition can organize itself into a powerful, coherent movement to regain power in service of the people and reverse the legislated upward distribution of wealth and income initiated during the Reagan administration and subsequently intensified by the Bush II and Trump administrations. These parts will include sound, common-sense policy prescriptions around which the renewed Democratic Party can productively unite to achieve these objectives. Stay tuned and pass it on.

AS THE CHART ABOVE SHOWS, A TECHNICAL STOCK MARKET BREAKDOWN HAS OCCURRED, SO BRACE YOURSELVES AND TAKE THE MEASURES NECESSARY TO PROTECT YOUR PERSON, FAMILY, WEALTH AND INCOME FROM THE HARDSHIPS THE TRUMP ADMINISTRATION AND THE IMMUTABLE LAWS OF ECONOMICS WILL UNLEASH IN THE COMING YEARS. JOIN OTHERS IN MUTUAL SUPPORT AND OPPOSITION TO THE PREDATIONS OF A MALIGN AND SELF-SERVING ADMINISTRATION.

MY OBJECTIVE IS TO PROVIDE THE MOST VALUABLE INFORMATION YOU CAN USE AND THE MOST EXPENSIVE ADVICE TO IGNORE. IF YOU AGREE, PASS IT ON.

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So far in this series, the problem has been clearly defined as the inevitability of another financial crash and great depression as the necessary precursor to positive political change required to successfully adapt to a new economy driven by the Artificial Intelligence Revolution.

· Part I advanced the basic premise of “THE UPSIDE OF THE DOWNSIDE” series:

o The Downside: We are facing economic/financial turmoil aggravated by a destructive and despotic second Trump administration bent on revenge against political opponents, rewards of added power and wealth to the donor class, “deconstructing” the federal government, and reduction in the wellbeing of the rest.

o The Upside: “Hard times” will detonate a political backlash, empowering the opposition to enact a new political agenda needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era.

· Part II introduced the concept of “Megacycles,” repeating episodes of economic transformation, “revolutions” triggered by new technology unfolding in three phases:

o Phase I: Exponential, technology-fueled economic growth prompting massive upward redistribution of new wealth, creating an excessive accumulation of debt, euphoric over-investment in the new technology, bubbles in financial and housing markets, and radical economic, social, and political change throughout society.

o Phase II: the bubbles burst, causing financial/economic turmoil, “creative destruction,” political backlash, and, so far, war during three complete Megacycles.

o Phase III: An era of sustained economic and financial progress adapted to the new technology.

· Parts IIIA and B: Delved more deeply into the recurring preconditions in Phase I creating the turmoil of Phase II, demonstrating the inevitable recurrence of these “hard times.”

· Now, in Part IIIC we will consider the timing and dire economic and uplifting political consequences of Phase II of the AI Megacycle, considering the reactionary policies of the incoming administration.

· Part IV and beyond: Only then can we move forward into the more pleasant subject matter, the “Upside” portion of the series, where the other half of the solution to the problem is revealed. Stay tuned.

Timing and financial/economic consequences of the second phase of the AI Megacycle:

At this point, the approaching economic and financial turbulence of The AI Revolution’s Phase II is known only to subscribers to this blog and a handful of contrarian economists, media commentators, and investment strategists on Wall Street, while Trump followers and the conventional wisdom on Wall Street remain oblivious.

Trump followers, now divided into warring Tech Bros and hardcore MAGA camps, can’t foresee the coming economic/financial crunch because of their fevered distractions of quests for personal enrichment, power, vengeance, mass deportations, concentration camps, and further exercise of grievances, hatred, fears, and other base instincts unleashed by Dear Leader. Moreover, lightly educated, low-information MAGA followers, isolated in the Fox News terrarium, not only lack exposure to contrarian thinking but also blindly believe Trump’s conjured grandiose plans for “the greatest economy in history” – or “a concept of a plan” at any rate.

The conventional wisdom’s cluelessness stems from blinding greed mixed with FOMO (fear of missing out) and “Demon Extrapolation,” the human instinct to project the recent past into the indefinite future due to an innate reluctance to contemplate change. Linear thinking in a curvilinear, cyclical world is like driving by looking in the rearview mirror. Nothing in the road immediately behind alerts drivers to a curve ahead, so they crash and burn. And just as you don’t navigate a turn in the road by calculating distance divided by speed to arrive at the time to turn, you don’t need to predict precisely when the turn will occur. It’s enough to heed the warning signs and react promptly when the stock market’s major indices start breaking down below rising trendlines of support. A stock market crash typically leads the economic/financial crunch by about 6 months and never fails to accompany the economy into the abyss.

The warning signs of the approaching danger associated with the present AI Megacycle must be taken seriously. None of the three technologically induced Megacycles during the past two centuries has failed to produce a tumultuous second phase with a stock market crash, credit crunch, major economic contraction, and war. It is a rite of passage from one technological era to the next deeply embedded in the collective psyche of humankind.

Those readers remaining unconvinced of the inevitability of the approaching turbulent Phase II of the AI Megacycle would do well to consider the present warning signs within Phase I:

• A new technology has been introduced, dramatically increasing productivity and, thereby, the creation of new wealth, launching Phase I of the AI Megacycle.

• The maldistribution of this new wealth in favor of top-income earners (in large part aided by lingering Reaganomics) has augmented vast investable fortunes which, when loaned to consumers and invested in equities and housing, have produced the following bubble-like preconditions to Phase II: (See Parts IIIA and B of this series.)

  • Dangerously high burdens of household, corporate, and government debt, leaving the economy vulnerable to retrenchment and/or “cascading defaults.”

  • Skyrocketing stock prices, reaching dangerous levels of overvaluation when coupled with euphoric overinvestment in the new technology, greed, FOMO, and low levels of fear on Wall Street, present traditional signs of an impending bear market and Darwinian shakeout within the new technology space. All that remains is for the conventional wisdom to proclaim, “This time it’s different” and “Things couldn’t be better” (ergo, they are bound to get worse).

  • Escalating high prices and rents for housing, vulnerable to collapse when owners and renters living paycheck to paycheck cannot keep up the payments when faced with high (and possibly still climbing) mortgage rates, mounting debt service burdens, and rising unemployment in an economic crisis.

• To these ominous portents, we must add the incoming administration’s potentially destabilizing social, fiscal, and monetary policy changes likely to trigger a bear market, credit crunch, and great depression.

  • Mass deportations would produce critical labor shortages in agriculture, food processing, construction, and hospitality, with inflationary consequences stemming from reduced aggregate supply and cost-push increases in wages in those industries.

  • Increasing tariffs would aggravate inflation by boosting the prices paid for imported goods by U.S. consumers. Higher tariffs would also trigger a trade war, as did the Smoot-Hawley tariffs in 1930, stifling international trade with a corresponding drop in production and a rise in unemployment worldwide.

  • Monetary policy can be expected to respond to inflation as it always has, with demand-killing interest-rate increases triggering an economic contraction, which, under the present circumstances enumerated above, would devolve into another great depression. I don’t share the conventional wisdom’s confidence in supposedly upgraded monetary policy tools to prevent another great depression or to recover from one. The core of stimulative monetary policy remains the expansion of the money supply by an operator seated at “The Desk” at the Federal Reserve Bank in New York tapping a keyboard, sending a significant digit followed by a string of zeros into the banking system. The added funds are likely to remain idle in extreme situations when fear paralyzes the captains of industry, masters of the universe on Wall Street, and workers wondering if their last paycheck was, indeed, their last. When the will to engage in economic activity is lacking within the public sector, the government must step in and reignite it with programs putting people back to work. (More about this in future parts of this series.)

  • The extension of tax cuts for the rich enacted during the first Trump administration, coupled with further profit-enhancing deregulation and bountiful government contracts for Trump cronies, would exacerbate income/wealth inequality with all the attendant dangers also mentioned above.

  • Trump’s aversion, or at a minimum, indifference to government solutions to societal problems, compounded by his “Schedule F” plan to replace the upper echelons of government agencies with inexperienced loyalists, heightens the likelihood of an inept government response to the looming financial crisis. Consequently, like Hoover in the early stages of the Great Depression, the Trump administration’s incompetence and inactivity would heighten the crisis.

Political consequences of the recurrence of Phase II of the current Megacycle:

The “Upside” thesis of this series, based on historical precedents, posits a radical electoral shift to the opposition in the wake of major financial/economic crises, as demonstrated by the elections of James Polk, Abraham Lincoln, William McKinley, Woodrow Wilson, Franklin Delano Roosevelt, and Barack Obama. Teddy Roosevelt snuck in there too, as a trustbusting progressive innovator presiding over a time of major reformist fervor, though within the incumbent Republican party. As James Carville correctly states in his recent apologia: “It was, it is, and it always will be the economy, stupid.”

Absent a major economic crisis, it is unlikely that Democrats will regain the power needed to enact major reforms, given the following:

· The Republican stranglehold on the media through Fox “News” and its cable TV wannabes, billionaire-controlled chains of talk radio and newspapers, and Musk-controlled X and other right-wing social media.

· Jim-Crow 2.0 voter suppression in red states, including selective mass purging of voter rolls, radical SCOTUS-approved gerrymandering, and disqualification of mail-in ballots under various pretexts. (Listen to Thom Hartmann’s masterful podcast “Will America Die Gradually Then Suddenly?”)

· A 6 to 3 majority in the U.S. Supreme Court “legislating from the bench” nakedly favoring Trump Republican and corporate interests to the detriment of Democrats and state-active liberals. In this regard, SCOTUS today mirrors the “Nine Old Men” who rejected FDR’s liberal reforms in the 1930s.

· Unconstitutional authoritarian policies promised by Trump, including prosecution of political opponents by the loyalist-administered Department of Justice and FBI; suppression of free speech and freedom of the press of those deemed “enemies of the state”; population control by the U.S. military following a declaration of a state of emergency suspending posse comitatus restrictions; control of public education favoring private, often religious, schools by dismantling the Department of Education, expanding the use of vouchers and mandating “conservative” curricula; intimidation of universities deemed “liberal”; mobilization of Trump-loyal, armed militias to suppress the opposition’s right of peaceful assembly.

Only a financial/economic cataclysm will produce the kind of massive swing in public opinion to provide the opposition with the mandate necessary to enact the radical reforms needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era.

However, there remains the open question of whether a groundswell of effective popular opposition can overcome Trump’s authoritarian measures cited above. The answer depends on whether, as I expect, Trump’s failure to provide relief to the MAGA faithful, compounded by the devastating effects of the crash, persuades the heavily armed MAGA militias to switch their allegiance to the opposition or, alternatively, to defend the continuance of Republican domination of government by violence. The possibility of the latter outcome raises a corollary question, namely whether, attempting to cling to power despite widespread public opposition, the Republican administration is prepared to engage in civil or foreign war. I will address this issue in the next post.

SUMMING UP: With the dominoes leading to a financial/economic crash already lined up, implementation of the incoming administration’s reactionary policies seems certain to set the cascade in motion on Trump’s watch. Trump’s lack of effective countermeasures will lengthen and deepen the resulting financial and economic collapse typical of a Megacycle’s Phase II. History tells us such a crisis would produce a political switch in favor of the opposition, in this case, the Democrats. In turn, during the next four years, the Democratic Party must reorganize itself through what I call "Multiplex Democracy": essentially a new political machine, superseding TV and social media, to recruit new members/activists, elevate new leaders, communicate, build consensus, finance operations, and ultimately mobilize the majority to take power and implement democratic, people-oriented reforms needed to right the foundering ship of state.

Stay tuned to this space.

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There exist disturbing financial parallels between 1928 and 2024 explaining the inevitability of another crash and great depression á la 1929 and 1930s: Then, as now, the unprecedented wealth created by the commercialization of highly profitable new technology in the “good times” of Phase I of the Megacycle flowed disproportionately upward to corporate top management, shareholders, and Wall Street financiers, aided in no small part by legislation enacted by pliant politicians beholden to their wealthy donors. This maldistribution of wealth exacerbated inequality between the rich and the rest, creating excessive debt, thereby setting the stage for the “hard times” of Phase II, as described in the previous models.

The Second Industrial Revolution (ca. 1895 to 1980)

For a description of the basic timeline of the Second Industrial Revolution, see Part II of this series. The paragraphs below flesh out the salient economic and financial events of this Megacycle.

The 1920s witnessed the introduction of a new phenomenon: formalized consumer credit systems. The mass production of consumer goods fueled an initially virtuous cycle of consumer credit extended to working-class households, funded by the extraordinary surpluses of the wealthy, who in turn profited from the credit-financed sale of goods from factories they owned and/or managed. Rinse and repeat. However, the cycle turned vicious as the growth of household debt outstripped the gains in wages, prompting households eventually to trim spending, thereby arresting and later depressing corporate sales and profits as debt-burdened consumers either stopped borrowing or defaulted in large numbers. Shrinking sales prompted layoffs, in turn producing more defaults and less spending. Less demand prompted more layoffs, and so on, in the downward spiral of the Great Depression of the 1930s.

These events reverberated in the stock market. In the Roaring Twenties, stock prices soared in tandem with surging corporate sales and profits in the early virtuous stage, magnified by greed-driven investors speculating with as much as 10:1 leverage in margin accounts. Corporate sales and profits were, in turn, themselves highly leveraged by management seeking to maximize return on investment. The same applied to many undercapitalized banks. “Easy money” sparking greed in those halcyon days prompted overproduction of agricultural and industrial goods. However, in 1929, as the outlook for sales and profits darkened when consumers became overburdened by debt, the cycle turned vicious; managers and speculators quickly learned that leverage cuts both ways, exacerbating the decline in profits, in turn steepening the decline in highly leveraged stock prices, creating panic and plunging stock prices beginning in October 1929. The Crash marked the beginning of Phase II of the Second Industrial Revolution, the 3-year bear market, and Great Depression of the 1930s. The overriding flaw in the system precipitating the collapse of the stock market and economy was TOO MUCH DEBT as a consequence of income/wealth inequality.

The recovery began in 1933 as the incoming Roosevelt administration “primed the pump,” restimulating demand by providing jobs in the Civilian Conservation Corps, the Tennessee Valley Authority, the Works Progress Administration, and many other reforms you can learn about by clicking here.

In simplest terms, Roosevelt succeeded where Hoover failed because, beyond building the Hoover Dam, Hoover essentially did nothing, remaining stuck in Alfred Marshall’s classical economic theory based on the flawed notion that free markets would self-correct through wage decreases in response to changes in the supply and demand for labor (i.e., high unemployment would lower wages to the point where business would put the unemployed back to work, reversing the downward spiral.) However, both Hoover and Marshall underestimated the “stickiness of wages” and the demoralization of fearful business executives and owners, unwilling to ramp up production in the face of weak demand, and likewise, the reluctance of fearful bankers to lend in the face of rampant defaults. Roosevelt, on the other hand (who famously said, “The only thing we have to fear is . . . fear itself.”) adopted John Maynard Keynes’ theory, figuring if business and banking were frozen into inaction by fear, the government must step in and put the unemployed to work on government projects to revive demand, in turn giving business the incentive to hire the unemployed and ramp up production, thereby reversing the downward spiral.

The 1930s Great Depression ended conclusively, and Phase III, sustained, mature growth, began around 1940, with the government’s mobilization of industry undergirding the military build-up to fight World War II (Keynes’ theory on steroids). The stock market reflected the shift to Phase III beginning in June 1942 when victory in the Battle of Midway reassured prescient early investors of the ultimate favorable outcome of World War II. The ensuing bull market persisted after the war, sustained by mature U.S. economic growth to meet the pent-up U.S. demand for consumer goods and housing, the postwar rebuilding of Europe and Japan, and the building of Eisenhower’s Interstate Highway System. The postwar bull market ended in 1966, shortly after the U.S. invaded Vietnam in March of 1965. (See graph of 100 years of the Dow Jones Industrial Index below.)

Beginning with the Arab/Israeli War and the Oil Embargo in 1973, oil shocks finally upended Phase III of the Second Industrial Revolution, producing rampant inflation, high interest rates, two recessions, and the worst stock market of the postwar period. The eventual collapse in oil prices in 1986 occurred as a consequence of a sustained campaign by central banks around the world (led by the U.S. Federal Reserve Bank) to curb the demand for oil by restraining the U.S. and global economy with high interest rates (“tight money”). The combination of flat demand for and expanding deliverable supply of oil in response to high oil prices led inexorably to an oversupply of oil, causing oil prices to collapse. Beginning in late 1985, oil prices (officially $34/barrel and as high as $40 on the spot market) plunged to $10/bbl by March 1986. Low oil prices in the latter half of the 1980s then spurred the bull market in stocks associated with Phase I of the Computer Revolution.

The Oil Shocks episode ultimately relates to Megacycles insofar as:

• Oil shocks presage the inevitable, eventual shift in dominant energy source, much like the shift to coal in the First Industrial Revolution and to oil in the Second. I say “inevitable shift” inasmuch as oil as a finite, diminishing resource must eventually be replaced by alternative energy sources, including renewables and, hopefully, hydrogen fusion and geological hydrogen.

  • ‘World’s first’ grid-scale nuclear fusion power plant announced in the US

  • Hidden Hydrogen. Does earth hold vast stores of renewable, carbon-free fuel?

  • Potential for Geologic Hydrogen for Next-Generation Energy

  • More articles on geologic hydrogen. Click here.

• Changes in oil prices dominated financial and economic cycles for decades after the first oil shock in 1973. I built a 24-year career of accurate forecasting based on this principle. My first paragraph as a newsletter writer on July 4, 1984, began: “The economic outcome over the foreseeable future will be determined, as it has been during the past decade, by the contest between the interests of oil and industrial capital over the price and availability of oil.”

The Computer Revolution (ca. 1980- ca. 2015)

The end of the Second Industrial Revolution and the beginning of the Computer Revolution arguably occurred around 1980, with the introduction of the personal computer and related innovations driven by electronic technology (which originated with Bell Labs's invention of the transistor in 1947). See Part II of this series for the timeline of this revolution. The paragraphs below flesh out the salient economic and financial events of this Megacycle.

The Dot.com Bust in 2000-2003, The Crash of 2008, and the Great Recession of 2007-2009

In 2000 and 2008 we witnessed what can be described as a repeat of the 1930s and a preview of coming attractions when the same credit-fueled, greed-driven mechanism pumped up dangerous bubbles in the stock and housing markets.

The bursting of these bubbles resulted in two bear markets and recessions when a) the Dot-Com bubble burst in 2000-2003 with a Darwinian shakeout of weaker players and b) the housing collapse, Panic of September 2008, Stock Market Crash of 2008 and Great Recession beginning in the 4^th quarter of 2007 and ending in the first quarter of 2009. (See: Wealth Inequality Caused the Great Recession.)

The very existence of extreme inequality of income and wealth provides a red flag warning of an impending catastrophe.

What have we learned from this analysis of the Megacycles of the Second Industrial Revolution and Computer Revolution?

The continued growth of the economy where the rich gather up all the marbles depends on a constant, unsustainable increase in household debt, becoming intolerable as the growing burden of debt service eats into budgets limited by stagnant wages. Household spending cuts and defaults follow, housing prices collapse, credit dries up, the economy slumps, as do corporate sales and profits, stock prices plunge. Companies then lay off workers, and a vicious cycle ensues as businesses faced with slumping demand for their products lay off yet more workers, further reducing demand and undermining capital investment in new plant and equipment, causing yet more layoffs and defaults. Rinse and repeat.

A similar downward spiral can occur if the stock market crashes due to a sudden shift in investor sentiment, sparked by shrinking profits either from diminished demand, described in the previous paragraph, or from diminishing returns from over-investment in the new technology, like the Dot-Com bust in 2000-2003. With sophisticated insight into the coming shakeout, savvy Big Money investors usually initiate the shift in investor sentiment, deciding it’s time to pull out of the market, leaving small investors holding the bag, and then scooping up stocks of the survivors at bargain prices when the market bottoms and rebounds. Bernard Baruch famously decided it was time to cash out before the 1929 Crash when he got a stock tip from his shoeshine boy.

It’s the recurring nightmare of unbridled capitalism. Not fatal, as it turns out, and, as Schumpeter points out, “creative destruction” is ultimately salutary as weak enterprises are weeded out, and surviving companies emerge stronger when the economy recovers. But there’s a steep cost to be paid.

The Artificial Intelligence Revolution (ca. 2015 - ????)

The situation today: Well, guess what? The present neoliberal plutocracy remains dominated by Reaganomics despite President Biden’s best efforts to override it. Legislated inequality initiated by the Reagan administration inducing the maldistribution of profits from productivity gains spurred by new technology remains with us today in spades, and so is the rampant greed of the oligarchs, irrational exuberance in the stock market reflected in unusually high stock valuations associated with the rush to invest in new technology, unaffordable housing prices and rents, and a near-record ratio of total U.S. debt (household, corporate, and government) to gross domestic product – all signs echoing conditions in 1928 pointing to an approaching stock market crash and severe economic contraction.

The AI Revolution Phase I: Soaring Stock Market 2016 to December 15, 2024

The graph above shows the Dow Jones Industrial Index response to the progress of the first phase of the Artificial Intelligence Revolution beginning around 2015:

• The Phase I bull market begins in 2016 with the Deep Learning Era as productivity soars with transformative applications such as AI-powered chatbots, translation tools, and automated documentation. Additional productivity gains stem from automation at scale with AI tools like robotic process automation in factories and automating repetitive tasks in banking and insurance, tools for design, video editing, and content generation in creative industries.

• The bull market suffers a setback in 2020 caused by the Coronavirus/COVID pandemic (an exogenous variable, like the Oil Shocks of the 1970s, referred to in Wall Street as a “black swan” event), producing an immediate panic, stock market crash and recession in 2020-early 2021 followed by a recovery.

• In 2022, stocks swoon again due to worldwide inflationary COVID supply-chain disruptions driving up interest rates, slowing the economy, and cooling the overheated housing market.

• The stock market then recovers in late 2022 following the introduction of Generative AI (Open AI’s GPT series and DALL E), shifting into high gear in late 2023 as money floods into AI-related companies, propelling stocks skyward into the euphoric, “irrational exuberance” stage similar to that of 1928 and the Dot-Com boom in the late 1990s. And that’s where things stand today. You will know the end of the bull market is near when the cry goes up on Wall Street: “This time it’s different.” (You heard it in October 1929 when Yale economist Prof. Irving Fisher famously declared, “Stocks have reached a permanently high plateau,” and in 1999 at the height of the Dot-Com bubble.)

As is typical with the introduction of all new technology, over-investment in AI will eventually produce winners and losers (remember the Blackberry?), causing a shakeout and plunging stock market, as it did in 1929 following the boom in the manufacture of electromechanical products like cars, appliances, and radios and again in 2000 when the Dot Com bubble burst.

Phase I: TOO MUCH DEBT

As previously argued in these pages, the existence of TOO MUCH DEBT, as a result of inequality in the distribution of income and wealth, inevitably causes major economic contractions.

As of June 2024, the ratio of total U.S. debt to Gross Domestic Product at 730% is hovering near record highs (except for the Covid-related surge in the early 2020s), roughly the same as the level in 2008 precipitating the G.W. Bush-era stock-market crash, banking crisis and Great Recession. (N.B. The beginning of the sharp climb of this ratio coincides with the introduction of Reagan’s economic policies in the early 1980s serving his rich donor class: tax cuts mainly for the wealthy, deregulation, de-unionization, and bloated military spending. Since wealthy individuals own most debt instruments (e.g. bonds, bank deposits), the rise in the ratio reflects their soaring fortunes thanks to The Gipper, producing today’s extreme levels of financial inequality.) Forewarned is forearmed. Remember what I stated earlier: “The overriding flaw in the system precipitating the collapse of the stock market and economy was TOO MUCH DEBT” as a consequence of income/wealth inequality.”

BOTTOM LINE:

If past is prologue, as I have argued, the U.S. and world stock markets and economies will undergo another crash and major contraction, plunging the AI Revolution into the economic, financial, and political turmoil of Phase II of the current Megacycle. The warning signs of this impending calamity include:

• Gross inequality in the distribution of income and wealth

• A dangerously high level of total debt

• Skyrocketing stock prices reaching dangerous levels of overvaluation, coupled with euphoria and low levels of fear on Wall Street

• High prices and rents for housing

• Potentially destabilizing fiscal and monetary policy changes to be discussed in the next installment

The dominoes are set to fall. The next question, therefore, is not if but when.

Anyone who claims to know for certain when the stock market will turn down, or the economy will contract either doesn’t know what they’re talking about or doesn’t know that they don’t know. The first rule of forecasting is (tongue in cheek) “If you give a price, don’t give a date.” If you must give a price and a date, then the second rule is . . . “forecast often.”

Since this exegesis is already long, sorely trying your patience and attention span, I’ll defer until the next part of this series consideration of the timing of these events, which is heavily dependent on the reactionary policies of the incoming administration. This will segue nicely into an analysis of the political consequences of the predicted economic and financial turmoil. From there, we will move into more pleasant subject matter: how we will get out of this mess and what constructive policies would, if implemented, repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era. Stay tuned.

END NOTE

A return to the more equitable income/wealth distribution pattern of the post-World War II period is clearly desirable for the Life, Liberty and pursuit of Happiness of We the People, by and for whom the republic was founded. Ironically, it is the end result desired both by liberal Democrats and MAGA Republicans. Their disagreement is over how to achieve it (to be addressed in subsequent parts of this series).

There exists within the ranks of the moneyed class a substantial philanthropic fellowship recognizing the dangers of extreme inequality and the necessity of achieving a more equitable distribution of the fruits of prosperity. (See Part IIIA) However, they are presently outnumbered and outspent by a cabal of oligarchs hellbent on running up a big score in wealth and power by blocking more egalitarian policies with a stranglehold on government through the Republican party. Ironically, in its overzealous primordial quest for limitless wealth and unrestrained power, the oligarchy has created the very economic and financial configuration for another Great Depression, undermining their wealth and ultimately producing the revolutionary change in political will to depose them and right the foundering ship of state. Sadly, given the agitated state of American politics these days, there seems little prospect of the oligarchy recognizing the self-defeating consequences of their quest and joining their philanthropic brethren in their support for a rising tide that lifts all boats.

It’s a recurring pattern of behavior as old as the institution of government itself. Whether the people will exercise their right to alter or abolish a Form of Government destructive to Life, Liberty and the pursuit of Happiness peacefully at the ballot box or with pitchforks remains to be seen, as does the prospect of civil or foreign war instigated by the oligarchy and their minions in Washington seeking to preserve their wealth and power under the pretext of unifying the country.

Will we remember the past or be condemned to repeat it?

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I’m grateful for the surge of new subscribers in response to Parts I and II of this series. I hope you recognize the importance of what is written on these pages, and, if you think well of the idea, follow Mike Monett’s recommendation:

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REFERENCE:

REAGAN’S LEGACY: “It Ain’t Just a Question of Misunderstood,”

LEGISLATING INEQUALITY OF INCOME AND WEALTH – How Reaganomics Produces Long-term Economic, Financial and Social Chaos.

WEALTH INEQUALITY CAUSED THE GREAT RECESSION IN 2008.)

You will find the reformatted Part IIIA by clicking on this link.

PART IIIB WILL BE PUBLISHED SHORTLY AFTER YOU RECEIVE THIS NOTICE.

A quick review and look ahead:

Part I of this series set the basic bad-news/good-news premise: 2024 is the new 1928 in terms of the surging economy, soaring financial markets, and politics. The rhymes of history suggest the aftermath of the 2024 election will include a rerun of the 1929 Crash and the Great Depression of the 1930s, prompting a backlash given the rise of the state-active Roosevelt administration. Such a shift in political sentiment would drive the liberal/progressive agenda needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era.

Part II reviewed the financial and economic record of the past two centuries in the U.S., dating from the end of the Agricultural Age (technically the Neolithic Revolution) to the present, revealing three completed revolutionary (and, ultimately, global) Megacycle transformations (the two Industrial Revolutions and the Computer Revolution) each unfolding in three phases: Phase I exponential economic growth and soaring stock markets; Phase II economic, financial and political trauma and war; Phase III sustained, mature postwar economic growth with normal business cycles. The current soaring stock market and continuing economic expansion (Phase I) of the fourth Megacycle, the Artificial Intelligence Revolution, ongoing for the past decade, suggests that the “good times” of its first phase may continue for a while longer. However, repetition of the earlier Megacycle patterns raises the expectation of another Phase II crash and great depression á la 1929 and 1930s. Whether the conclusion of such a Phase II includes domestic violence and war remains to be seen.

Just as Calvin Coolidge handed off a booming economy to Herbert Hoover, Joe Biden is handing off a similarly booming economy to Donald Trump. As we approach the most dangerous phase of the current Megacycle with the most dangerous president in U.S. history at the helm, what could possibly go wrong?

Part III below delves more deeply into the mechanics of the anticipated Phase II crash and great depression and reveals the structural economic and financial forces creating and triggering this trauma. Bear in mind: the repetitive nature of Megacycles reflects consistent, unchanging human nature expressed collectively in response to a global economy evolving through technological change. Humankind collectively possesses short memories and scant ability to learn from past mistakes, hence: “Those who cannot remember the past are condemned to repeat it.” (George Santayana) Individuals, however, can remember the past and, thus acquitted, thrive. I’ll show you how in future posts of this series.

WHAT MAKES A STOCK MARKET CRASH AND A GREAT DEPRESSION INEVITABLE? Income Distribution: The Mechanism Creating Turmoil in Phase II of Megacycles

Because the collective behavior demonstrated in Megacycles derives from fundamental laws of nature, let’s begin with first principles: All life depends on the successful exercise of its most fundamental instinct: survival, manifested as an irresistible impulse to live and aversion to death. In turn, the survival instinct to live depends upon “energy efficiency,” gaining as much or more “energy” through exertion than expended. This quest for life and aversion to death drives all life to seek the greatest possible reward for the least amount of energy expended. Every living organism, from a Mycoplasma bacterium to a blue whale and on up to a giant sequoia, abides by this principle until it doesn’t; then it withers and dies. This cycle of life from birth to death progresses in three phases: 1) Growth (in which the amount of energy gained exceeds energy expended), 2) Trauma, causing 3) Decline (in which energy expended exceeds energy gained), ending in death. Successful species achieve continuity by reproducing, usually in the growth phase, producing offspring capable of adapting to a changing environment through the process of evolution. Humankind is no exception to these rules of life and must, therefore, abide by that instinct, that principle, and that cycle, both individually and collectively, as enterprises and polities. Part II of this series revealed that fundamental cycle for the U.S. polity and, by extension, globally, as a Megacycle.

What has made humankind the most successful species on earth is its intellectual capacity to not only adapt to a changing environment over time but also to change its environment to its advantage in a process analogous to successful evolutionary reproduction ensuring continuity of species. Such changes occur through innovation: the development of tools (i.e. technology) increasing the production of “energy” (sustenance and other essentials and comforts of life) while reducing the exertion required to produce it. Economists call this phenomenon “gains in productivity.” Human beings and their enterprises and polities survive by producing goods and services (“energy” acquired through exertion), the value of which exceeds the costs of production (“energy expended”); the difference between the two is “profit” or “surplus.”

We humans thrive by innovating through the development of new technologies of production, creating spectacular gains in productivity manifested as economic “revolutions” (as in “Industrial Revolution”), each revolution progressing in three phases analogous to the previously described “cycle of life.” Beginning with the explosive growth of Phase I, a disproportionate share of extraordinary corporate profits and related stock appreciation derived from productivity gains accrue to the managers and owners of the new enterprises associated with the new technology, creating huge investable surpluses. However, as explained below, participation by the working classes invariably lags the lion’s share apportioned to the rich elite (variously called “Robber Barons,” “Malefactors of great wealth,” plutocrats, oligarchs, etc.). This lopsided distribution of the fruits of progress (i.e. “inequality.”) sets up the preconditions for Phase II, as described in the graphs below.

Labor’s share of the fruits of economic progress has varied considerably throughout the course of each Megacycle but, as previously stated, invariably lags the share of the gains apportioned to the rich elite.

• During the First Industrial Revolution, 19^th-century workers endured Dickensian “starvation wages,” as explained by Marx and Engels, largely due to the flood of farmers displaced by the mechanization of agriculture into urban factories and the concentration of economic and political power in the hands of factory owners.

• During the 1920s, in Phase I of the Second Industrial Revolution, workers benefitted unequally. Those associated with the earlier Megacycles (e.g. coal, steel, and agriculture), fared poorly, resulting in occasional strikes often suppressed with violence. Those workers associated with electro-mechanical technology, such as assembly-line work at factories producing automobiles, appliances, and radios, enjoyed rising real wages and standards of living, an 8-hour workday, company benefits, and participation in the burgeoning debt-financed consumer culture fueling the “Roaring Twenties.”

• Since the Computer Revolution, beginning around 1980 and coinciding with the “Reagan Revolution” (dedicated to the enrichment of the upper classes and immiseration of the rest), the rich became stupendously richer, the poor remained poor, and the middle class marked time with many joining the ranks of the poor. (See: “Distribution of Household Wealth in the U.S. since 1989”) Individually, the same disparity of reward exists between those workers associated with the new technology and those associated with older technologies who, predictably, constitute the core of the angry Right these days. Collectively, however, the working classes have not received a real pay increase (adjusting for inflation) since Reaganomics began cutting taxes for the rich, raising them for the rest, disbanding unions, underfunding education, rolling back regulations, and ginning up Department of Defense contracts. A distressing number of workers experience the Dickensian “starvation wages” of their forebears; living paycheck to paycheck; spending nearly everything they earn; not saving much, if anything; living under the threat of medical bankruptcy and homelessness (thankfully, they’ve done away with debtors’ prisons); struggling to pay down student loans, mortgages, and credit card debt bearing usurious rates of interest. At least, unlike their forbears, they can depend on Social Security to pay their basic bills in old age (although even that is questionable if die-hard Republicans get their way).

The Consequences of Income/Wealth Inequality

Even with extravagant spending on mansions, yachts, private jets, travel, jewelry, etc., members of the wealthy elite don’t spend everything they earn, leaving vast surpluses available to invest. Economists refer to this behavior as a lower marginal propensity to consume and a higher marginal propensity to save. Accordingly, the surpluses of the rich flow copiously into stocks and bonds and, through the intermediation of banks, into household credit and mortgages, driving real estate prices skyward while burdening the working classes with ever-increasing amounts of debt, as shown below.

The graph above shows one aspect of the flow of funds from the surpluses of the wealthy as they capture the lion’s share of economic growth, namely deposits in banks. Banks then lend about three-quarters of these deposits to homeowners as mortgages and the rest as consumer loans (credit cards, installment purchases, etc.) and to businesses (shown in the second graph below). This credit (i.e., consumer debt) fills the gap between workers’ stagnant wages and rising aspirations for consumption in fulfillment of the American Dream advertised by corporations eager to profit from satisfying these aspirations. With the passage of time, this geometry results in an ever-increasing debt burden, the associated debt service of which erodes spendable income until consumers either stop borrowing or default – either way, corporate sales and profits plunge, inducing a stock market crash, dragging the economy deeply into recession or, if particularly severe, depression.

By contrast, the graph below shows a sustainable, more equitable income distribution in which a rising tide lifts all boats, not just the yachts of the wealthy elite. This model would require a lesser share of the productivity gains in Phase I to go to the managers and owners and a correspondingly larger share to go to the working classes.

Such a pattern of income distribution would produce the following results:

• The extraordinary wealth generated by gains in productivity initiated in Phase I would be shared more equitably (as in the post-World War II period) between the rich and the rest rather than allocated disproportionately to the rich.

• In the post-World War II period from 1945 to 1980 the growth in national income (not the total national income) on average was shared 35% to the top 10% of income earners and 65% to the remaining 90%. About 30% of the workforce was unionized, and many workers had received extensive on-the-job training in wartime factories. College tuition at state universities was heavily subsidized by the states. The middle class comprised well over 60% of the population. The income tax rate topped out at 91% until the Johnson administration, following Kennedy’s initiative, lowered it to 75%. The economy thrived with only modest periodic recessions buoyed by strong pent-up demand from savings built up during the war through the purchase of war bonds. The federal government balanced its budget while building the federal highway system.

• All that changed, beginning with the neoliberal Reagan administration in 1981 dedicated to the enrichment of the wealthy and the immiseration of the rest. By cutting the top marginal tax rate from 70% to 28% and raising payroll taxes, Reaganomics shifted the tax burden toward the middle class. Deregulation and bloated military spending further redistributed income upward so that by the end of the Reagan administration, the share of the growth in national income garnered by the top 10% of income earners rose to 87%, leaving only 13% to be distributed to the rest. (The ratio increased to 98% to 2% during the reprise of Reaganomics under the G.W. Bush administration! Reagan also began de-unionization by breaking the PATCO strike so that today, only about 7% of the workforce is unionized. The middle class shrunk to well under 50% of the population. Reagan also initiated the defunding of state universities as Governor of California, a trend subsequently carried on by neoliberal federal and state governments, resulting in today’s massive student debt load. (For an excellent account of this upward redistribution of wealth, read Thom Hartman’s The Hidden History of Neoliberalism: How Reaganism Gutted America and How To Restore Its Greatness) In short, because of the continuation of neoliberal policies, the U.S. now exhibits the greatest inequality among advanced nations.

• The working classes would enjoy a rising standard of living supported by rising real wages, thereby reducing their need to borrow to sustainable levels and providing a chance to save for a change.

• Workers would no longer be trapped in a spiral of ever-increasing debt and could enjoy the security of savings for contingencies and retirement.

• A reconstituted, secure middle class would engender political tranquility. Thus, it would serve the long-term interests of wealthy corporate managers and owners.

• The rich would still enjoy substantial gains in income and wealth but with less money to spend on extravagances and smaller surpluses to invest.

• As the need for workers to borrow diminished, so too would the allocation of the surpluses of the rich as debt to the working classes, increasing the proportion of said surpluses allocated to productive capital investment to the benefit of all.

• Growth of the economy would no longer be based on unsustainable increases in the burden of debt imposed on the working classes, thereby reducing inequality and eliminating, or at least attenuating, one of the primary sources of significant economic contractions and financial trauma.

The graph above shows the complete picture of how the wealthy invest their surpluses now: What is not loaned to households flows a) into businesses either as direct loans from banks or into the stock and bond markets through the intermediation of investment banks, which are either independent or affiliates of commercial banks (inadvisedly ever since the 1999 repeal of the 1933 Glass-Steagall Act), and b) into commodities, precious metals, bonds, real estate, art, bananas (!), and in recent years, crypto tokens, etc. through the intermediation of corresponding brokers. The sheer volume of these surpluses flowing into financial and housing markets, coupled with “irrational exuberance,” eventually produces dangerous bubbles, the bursting of which triggers major economic contractions, evaporating much of the surplus that produces these calamities.

An economy dependent for growth on an ever-increasing burden of debt levied on the working classes must eventually collapse when the burden becomes intolerable both financially and politically. Democracy’s supreme virtue lies in the ability of an aggrieved population to find relief by changing rulers peacefully at the ballot box. Authoritarian systems, on the other hand, invariably resort to escalating repression when the collapse occurs, resulting in revolutionary violence in the population’s quest for relief.

Regrettably, the dominant cabal within the oligarchy today fails to recognize the ultimately self-destructive consequences of its primordial pursuit of unlimited wealth and unbridled power at the expense of the working classes upon which its wealth depends. I suspect these worthies genuinely believe the fate of the country best rests in their grasping hands, little realizing the dangers the inequality they embrace poses to themselves, their enterprises, the country, and indeed, the world. Notably, Czar Nicholas, King Louis XVI, Adolf Hitler, and Benito Mussolini suffered from the same myopia.

As I argue in the segment immediately above, a more equitable distribution of productivity gains would eliminate, or at least attenuate, economic and financial trauma; promote a prospering, secure, contented middle class; and engender political tranquility. Thus, more equitable sharing would serve the long-term interests of wealthy corporate managers and owners who depend on the middle class as customers. After all, Henry Ford, despite his faults, recognized that paying his workers well would provide them with the wherewithal to buy his cars.

Thankfully, there has always existed within the ranks of the moneyed class a substantial fellowship that recognizes both the dangers of extreme inequality and the necessity of achieving a more equitable distribution of the fruits of prosperity. They are conscience-driven, wealthy philanthropists like Andrew Carnegie, once the richest man in the world, who also, despite faults, funded 2,800 libraries around the world to promote education. “Saying that, ‘the man who dies rich dies disgraced,’ he reinvented himself as a philanthropist and spent his later years using his fortune for the betterment of society. Carnegie funded retirement pensions for teachers, established the Carnegie Institute of Technology (later Carnegie-Mellon University), and set up scientific research centers and organizations devoted to world peace. He also furnished towns across the globe with everything from music halls and swimming pools to church organs.” (Source: history.com.) Cornelius Vanderbilt, having amassed the largest private fortune in the U.S. at the time of his death in 1877, left an enduring legacy of philanthropy, including Vanderbilt University and generous support of churches, hospitals, and charitable organizations. Today Warren Buffett, Bill and Melinda Gates, and many other extremely wealthy individuals join the ranks of previous members of the fellowship of philanthropists. Whether with the wisdom of age and a break in the primordial fever of wealth accumulation, Elon Musk, Jeff Bezos, Mark Zuckerberg, Larry Page, Sergey Brin, and others will join them and help save the world, remains to be seen. Alas, I fear a similar regeneration of our next president is a bridge too far.

TO BE CONTINUED IN PART IIIB TOMORROW.

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Cartoonist Michael DeAdder captured the essence of the present moment brilliantly:

Do you get the feeling we’ve stepped into an episode of The Twilight Zone? Or maybe a remake of Terry Gilliam’s Brazil? Or anything by George Orwell?

Heather Cox Richardson’s December 13^th Substack post, limned the grim wackiness of Trump’s reelection as reported in the interview accompanying Time magazine’s Person-of-the-Year cover story:

• Time magazine’s interview with President-elect Donald Trump, published yesterday, revealed a man who was so desperate to be reelected to the presidency that he constructed a performance that he believed would woo voters, but who has no apparent plans for actual governance.

• The Time interview suggests that, now that he has won back power, Trump has lost interest in the promises of the campaign. [e.g. Bringing down the cost of groceries, forcing transgender women to use men’s bathrooms, denying protections for transgender children.]

• Trump’s planned appointments to office reveal that the actual pillars of his presidency will be personal revenge, the destruction of American institutions, and the use of political office for gain, also known as graft.

• The third pillar of Trump’s presidency appears to be graft for himself, his cronies, and his family.

• Mark Zuckerberg of Meta handed over $1 million as well, as did both the chief executive officer of OpenAI and AI search startup Perplexity. [Not to mention likewise Jeff Bezos, after killing The Washington Post’s endorsement of Kamala Harris, as did the L.A. Times; ABC’s $15 million capitulation; and Joe and Mika scurrying down to Mar a Lago for dinner.]

• Trump appears willing to reward cronies with positions that could be lucrative as well . . .

• Trump is also putting family members into official positions. . .

• If there is one major continuity between Trump’s campaign and plans for his administration, it is that his focus on shock and performance, rather than the detailed work of governing, still plays well to the media.

Incredulity over this culmination of the political surrealism of the past decade prompted me to reply to Heather’s piece with the following one-line comment: “The election of 2024 provides incontrovertible evidence that the U.S. is no longer a serious country.” It got more “likes” than most of my lengthy posts on Substack (www.davidlsmith.substack.com).

By coincidence (or maybe not), I’ve been watching One Hundred Years of Solitude on Netflix, based on Nobel prizewinner Gabriel Garcia Márquez’s 1967 novel by the same name. I’ve reached the part of the story where civil war intrudes on the solitude of the peasantry in the fictional Latin American town of Macondo, several generations after its founding in a remote location between a swamp and a mountain range. The liberal townspeople revolt against the unwanted intrusion of the distant, conservative central government whose corrupt “Corregidor” (Corrector) official steals the town’s first election and imposes harsh restrictions and taxes enforced by brutal soldiers. The liberal townspeople’s revolution succeeds in displacing the Corregidor and his troops, replacing them with a liberal government headed by Arcadio, the illegitimate grandson of the founding Buendia family. However, power goes to Arcadio’s head. He affects a Napoleonic uniform and, commanding an armed militia, imposes taxes and restrictions much like his predecessor did. The horrified townspeople cower, and only Ùrsula, the Buendia matriarch angrily stands up to Arcadio.

As I toggled back and forth between One Hundred Years of Solitude and accounts of Trump’s behavior in the New York Times and a slew of Substack writers, it seemed like Marquez’s “magical realism” and the theme of political violence infused both narratives. The feeling of being trapped in a nightmarish American Macondo overwhelmed me and set me to thinking beyond “How will we get out of this mess?” (I had already worked that out in Part I of this UPSIDE OF THE DOWNSIDE series.) So, that left the remaining question: “Who will lead us out?” Who will be the new FDR?

My thoughts drifted back to Úrsula, the Buendia matriarch who seemed to be the only one with her wits about her and the gumption to stand up to her autocratic grandson. How about a woman as the new FDR? Democrats already agreed to the idea by nominating Kamala Harris in 2024. In fact, the idea of women leading a polity out of man-made messes has been around for more than 2,400 years since Aristophanes wrote Lysistrata. It was a comedy then but deadly serious now.

I then remembered writing the following in my 2013 book, The Predicament – How did it happen? How bad is it? The case for radical change now!:

• With more women than men now graduating from college, we have reason to hope women will succeed in reversing the traditional ratio of men to women in positions of power, thereby quenching the testosterone-fueled fires of perpetual war with a much-needed tidal wave of estrogen. Sara Palin, Michelle Bachmann, and Ann Coulter notwithstanding, I have long supported the premise that if the world is to be saved, it will be up to women to do it, bringing to bear their qualities of empathy, intuition, cooperation, nurturing and determination in a world now dominated by fear, greed, and aggression. We’re trending in the right direction. But will women make it in time?

Today I’m wondering when the day will come when Americans will vote for a woman because she’s a woman and not in spite of it.

Whaddya say, America?

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Part I of this series outlined an overarching theme: the U.S. election of 2024 reprises the election of 1928, when the well-meaning but misguided Republican candidate, Herbert Hoover, suffered the misfortune of ascending to the presidency a year before the stock market crashed and the economy sank into the Great Depression. I suggested that present conditions, echoing fundamental technological, economic, financial, and political developments preceding the 1928 election, presage a similar fate for Hoover’s malevolent doppelganger, Donald Trump. And, human nature being what it is, just as the backlash to Hoover’s Great Depression regenerated a new liberal political consensus in 1932 with the election of Franklin Delano Roosevelt offering a New Deal, a similar backlash to a disastrous Trump presidency will open the path to a new national agenda needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era. So, like I said: “It’s bad. It sucks, and it’s going to get worse before it gets better.” Buckle up.

Then, as now, technology transformed the economy, producing radical changes in almost every facet of the human enterprise: production methods and products; the occupational distribution of the labor force[ the content and processes of education and vocational training; the allocation of time for work and leisure; the source, distribution, and definition of wealth; the extension of credit; the methods of communication and travel; the location and architecture of workplaces and residences; diet; lifestyle; and, especially, politics. I lack the space to test your patience with descriptions of all the significant changes in the visual and performing arts, fashion, literature, entertainment, language, academics, and other aspects of human existence. Suffice it to say that virtually everything changes when new dominant technology and energy combinations emerge in what I call Megacycles, and others (like Kondratieff and Toffler) call “waves,” which I’m about to share with you.

MEGACYCLES

The common denominator of conditions in 1928 and 2024 is vast, rapid, global discombobulating change and explosive economic growth triggered by new technology and sources of energy, producing what I call Megacycles..” Historically, Megacycles have progressed in three phases with the following characteristics:

I. Exponential creation of new enterprises and jobs associated with the new technology, spurring explosive economic growth. “Good times” (The Great Gatsby) and the emergence of a new oligarchy and class structure (HBO series The Gilded Age), unsettling displacement of prior dominant enterprises and occupations (Schumpeter’s “creative destruction”) (The Grapes of Wrath) inducing simmering political discontent among those slow to adapt to the inevitable changes wrought by technology, in turn producing contentious division in society between those who successfully adapt to the new economy and those who don’t (Gone With The Wind). Euphoria generated by extraordinary profits from the new technology incites greed (Wall Street), eventually leading to over-investment in new technology and energy, creating dangerous, credit-fueled bubbles in stock, bond, and real estate markets underwritten by surging new wealth (The Wolf of Wall Street)).

II. Multiple crashes and panic in stock, bonds, and real estate markets as speculative bubbles burst (The Big Short), undermining investor confidence and capital investment, resulting in credit crunches (Too Big to Fail), great depressions, and skyrocketing unemployment, hunger, and homelessness (Modern Times). Political discontent boils over, leading to a sometimes violent, revolutionary shift in political consensus displacing the incumbents ( Hitler in Germany: Hitler, The Rise of Evil) and Roosevelt in the U.S.: PBS Documentaries: The Roosevelts, an Intimate History Episodes 5 and 6 (2014) and American Experience: FDR Season 7 Episodes 1 and 2 (1994)), followed, thus far, by war serving the dual purpose of unifying the country and reconstituting the economy (The War (2007), a documentary series by Ken Burns and Lynn Novick).

III. Postwar peace and prosperity based on sustained mature growth of the new energy-technology combination. Relatively benign economic and investment cycles trend upward in an extended period of generally “good times” (The Best Years of our Lives)—until the next Megacycle comes along.

Stock prices, as exemplified by the Dow Jones Industrial Average (reconstructed for the period before its inception in 1896), provide a useful surrogate barometer for the economy as a whole, illustrating this repeating 3-phase pattern during three competed Megacycles in the span of the last two centuries: The First and Second Industrial Revolutions and the Computer Revolution, the characteristics of which will be explained by the graphs below. NB: The first graph ends in 2008 with phases I and II of the third Megacycle, the Computer Revolution. The second graph below will pick up the Megacycle story from the tail end of Phase I of the Computer Revolution through Phases II and III, followed by the beginning of a fourth Megacycle, the Artificial Intelligence Revolution, beginning during the second decade of the 21st century, ten years ago. The second graph ends in the present, revealing the continuation of Phase I of the Artificial Intelligence Revolution, interrupted briefly by the exogenous perturbation of the Coronavirus/Covid Pandemic in the early 2020s, to be followed at some point by yet another turbulent Phase II, according to the Megacycle model. I’ll discuss the possible timing of the shift in Part III.

The history of the U.S. stock market from its inception in 1789 (three years before the Buttonwood Agreement of 1792 as the founding document of the New York Stock Exchange) to 2008 reveals the specific timing of the 3-phase Megacycle pattern: Two phases of technologically-driven growth bracketing a middle phase of economic, financial and socio-political turmoil.

• ·First Industrial Revolution (ca. 1780s in Britain, ca. 1820s in the U.S. to ca.1895) was driven when mechanical technology melded with coal as the prime mover. The steam engine, railroads, steel foundries, and mechanized textile production symbolize the “Gilded Age,” with “robber-barons-turned-philanthropists” Cornelius Vanderbilt (railroads) and Andrew Carnegie (steel) as leading innovators and tycoons of the period. Phase II began with the Crash and Depression beginning in 1837 and, followed by another in 1857 ending with the Civil War (1861-1865), followed by sustained growth in Phase III until the Second Industrial Revolution.

• Second Industrial Revolution (ca. 1895 to 1980, which I sometimes call the “Petro-Industrial Revolution”), was driven by electro-mechanical technology and hydrocarbons. Automobiles, oil, and electricity are emblematic of the age, with Henry Ford, Harvey Firestone, John D. Rockefeller, and Thomas Edison as the corresponding leading innovators and tycoons. The early stage of the Petro-Industrial Revolution, by some accounts, is divided into two or three separate revolutions marked by various improvements in production methods, panics, contractions, World War I, and the “Roaring Twenties.” However, since these perturbations, driven by the same electro-mechanical/oil combination, remain within an upward-trending stock-market channel, I group them within Phase I of the Second Industrial Revolution beginning in around 1895 until the Crash of 1929, signaling the beginning of Phase II followed by the Great Depression of the 1930s, culminating in World War II, during which Phase III began, lasting (with a pause during the exogenous perturbation of the Oil Shocks between 1973-1982) until the beginning of the Computer Revolution around 1980.

• The Computer Revolution, Phase I began around 1980 with the introduction of the personal computer and related innovations driven by electronic technology (originating with the invention of the transistor by Bell Labs in 1947), with Steve Jobs, Bill Gates, Jeff Bezos, Mark Zuckerberg, Elon Musk, Larry Page, Sergey Brin, and many other familiar names as prominent innovators, tycoons and oligarchs.

  

  The Computer Revolution Megacycle traversed Phase II, beginning with the Dotcom Bust (2000-2003) and recession, followed by the 2008 Crash and Great Recession (2008-2009). Phase III then began in 2009 and lasted until the beginning of the Artificial Intelligence Revolution around 2015, give or take.

• The Artificial Intelligence Revolution began arguably with Phase I beginning during the second decade of the 21st century in the Deep Learning Era as productivity soared with transformative applications such as AI-powered chatbots, translation tools, and automated documentation. Additional productivity gains stemmed from automation at scale with AI tools like robotic process automation in factories and automating repetitive tasks in banking and insurance, tools for design, video editing, and content generation in creative industries. After a pause occasioned by the Coronavirus/COVID pandemic beginning in the early 2020s (an exogenous variable, like the Oil Shocks of the 1970s, referred to in Wall Street as a “black swan” event) producing an immediate panic, stock market crash and recession in 2020-early 2021 followed by a recovery and another market swoon in 2022 due to worldwide inflationary Covid supply-chain disruptions driving up interest rates. The AI Revolution shifted into high gear with the introduction of Generative AI in 2022 (Open AI’s GPT series and DALL E), propelling stocks skyward. If past is prologue, the U.S. and world economies will undergo another crash and great depression when the AI Revolution enters into Phase II for reasons I will explain in Part III. Forewarned is forearmed: Phase II is the Megacycle interval of maximum danger. Whether the accompanying political upheaval will be merely turbulent or marred by violent revolution and/or foreign war remains to be seen.

SUMMING UP:

In Part II, you were introduced to the concept of Megacycles: Profound transformations of the human enterprise wrought by changes in dominant technology, usually coupled with a change in the dominant form of energy. This concept provides context essential to understanding virtually all events in human history. In unifying science, economics, finance, and politics, Megacycle theory is the social sciences equivalent to the elusive “unified field theory” in physics, with similar predictive value. Megacycles unfold in 3 phases:

• Phase I: Exponential creation of new enterprises and jobs associated with the new technology, spurring explosive economic growth and soaring stock, bond and real estate prices. “Good times.”

• Phase II: Multiple crashes and panic in stock, bonds, and real estate markets as speculative bubbles burst, undermining investor confidence and capital investment, causing severe economic contractions and high unemployment: “Hard times” encompassing radical political change.

• Phase III: Postwar peace and prosperity producing sustained mature growth and relatively benign economic and investment cycles: “Good times,” often interrupted by “black swan” perturbations, such as the Oil Shocks of the 1970s and Covid-19 Pandemic of the early 2020s).

We reviewed the timing and consistent repetition of these phases in three completed Megacycles: the First and Second Industrial and Computer Revolutions, concluding with the beginning (Phase I) of the Artificial Intelligence Revolution currently underway. Repetition of the Megacyclical pattern suggests that we are approaching Phase II, the most dangerous interval of the current Megacycle with the most dangerous president in U.S. history at the helm. What could possibly go wrong?

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In Part IIIA,B and C, we will delve more deeply into the mechanics of Megacycles and likely timing of the Artificial Intelligence Revolution’s anticipated Phase II crash and great depression and reveal the economic and financial forces triggering this calamity, including an assessment of the impact of the president-elect’s announced policies.

In Part IV, we will address the political dimension of Megacycles, further exploring the notion that Newton’s third law of motion (Every action produces an equal and opposite reaction) applies to politics. Stay tuned.

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I’m grateful for the surge of new subscribers in enthusiastic response to Part I of this series and hope the many followers will subscribe (it’s free) and take Mike Monett’s recommendation (Thank you, Mike):

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For earlier posts explaining and debunking Reaganomics, see:

REAGAN’S LEGACY: “It Ain’t Just a Question of Misunderstood,”

LEGISLATING INEQUALITY OF INCOME AND WEALTH – How Reaganomics Produces Long-term Economic, Financial and Social Chaos.

WEALTH INEQUALITY CAUSED THE GREAT RECESSION IN 2008.

I know, I know. It’s bad. It sucks, and it’s going to get worse before it gets better.

But amid the hand-wringing, the-sky-is-falling, doom-scrolling despair, don’t panic, just take…a…breath.

Take the time to understand what’s happening and why. Learn the lessons of history because, as someone said: “History doesn’t repeat, but it rhymes.” Recall the words of Gottfried Leibniz: “The present is saturated with the past and pregnant with the future.” The bitter fruit of crisis contains the seeds of opportunity. Knowing this, you can adapt, improvise, survive, and even thrive, keeping in mind the first rule of improvisation: There are no wrong notes if you gracefully recover from a mistake.

With that in mind, consider the following:

Strangely, I’m relieved that Trump won the 2024 election convincingly. Taking the long view, ironically, it’s the shortest, surest pathway to enacting a new agenda needed to repudiate the oligarchy, rebuild the middle class, restore democracy, reform and rebalance the government, and reconstruct the economy to meet the necessities of the new technological era.

This seeming non sequitur makes sense if you understand the disturbing parallels between the elections of 1928 and 2024: Donald Trump is the malevolent doppelganger of a well-intentioned yet misguided Republican President Herbert Hoover, and present conditions echo fundamental technical, economic, financial, political, and cultural developments preceding the 1928 election, one year before the stock market crashed in October 1929.

Accordingly, the rhymes of history suggest we are facing the prospect of another stock, bond, and real estate market crash, credit crunch, and Great Depression likely during Trump’s second term in office, followed by a backlash regenerating a new liberal political consensus as occurred in 1932 with the election of Franklin Delano Roosevelt and the enactment of the New Deal. (I will explain the inevitability of the forthcoming crash in a later post in this series.)

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The pathway to progress invariably zigzags up and over a mountain of adversity, usually created by reactionary “conservative” politicians favoring wealthy donors and burdening households and corporations with debt. Newton’s third law of motion applies in politics: every action produces an equal and opposite reaction – never truer than in times of economic crisis. As previously mentioned, the principle was demonstrated in the aftermath of Hoover’s Great Depression, and more recently, following G.W. Bush’s Great Recession, improbably elevating Barack Hussein Obama (“Hope and Change”) as the nation’s first black president. Incumbents get thrown out, and the opposition comes into power when the economy tanks; it’s as simple as that. To get elected, savvy politicians will go so far as to invent a recession where none exists as Clinton did in 1992 (“It’s the economy, stupid”) and Trump did in 2024, convincing 3 out of 4 of his adoring followers that the country was in recession, when in fact it was growing faster than during his “best economy in history” administration.

If Kamala Harris had won, Democrats would have been mistakenly blamed for the inevitable financial/economic disaster engineered by Republicans ever since Reagan, resulting in a renewed political swing to the right after her presidency, ending any hope of a liberal renaissance possibly for decades to come, in much the same way as Germany got Hitler. With Trump’s convincing victory, when the inevitable collapse hits, there will be no doubt about the damage and dysfunction caused by his MAGA agenda, opening the pathway to liberal reform -- whether peaceful or violent is a fit subject of another post.

However, before I get to the pregnant future, those readers with unimpaired attention spans, curiosity and perseverance to get into the weeds of modern economics and finance need to revisit the past. (See THE UPSIDE OF THE DOWNSIDE PART II in two days and PART III shortly thereafter.) The remaining readers will have to wait until I eventually publish PART IV and beyond.

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It’s a competent piece, providing context for the revolutionary new era in 1870s France following the country’s humiliation at the hands of the Prussians in 1870-71. This was immediately followed by the revolutionary upheaval of the ill-fated Paris Commune, witnessed by Monet, Renoir, Pissarro, Morisot, Degas, Sisley, Cézanne, and Guillemin, core members of the Impressionist revolution who in 1874 mounted an alternative exhibition to the “Salon, the government-sanctioned annual art exhibition that had been France’s (indeed Europe’s) most significant showcase of new art for longer than two centuries.”

Their show was not a runaway success. Only 3,500 people bought tickets. (Attendance at the Salon that year: 400,000.) Some critics trashed the show — impressionism was a critic’s sneer for the whole group, mocking Monet’s sunrise over the sea for lacking composition and finish.

But the show had its defenders. Several receptive critics saw something vital in the lighter colors, the open brushwork. Camille Pissarro would describe his fellow exhibitors as lovers of “nature, the open air, the different impressions that we experience, all the things we are concerned with.” . . .

Farago singles out Monet’s “Impression, Sunrrise” “as among the most famous and influential in all of French art.” In promoting Farago’s article, the Times suggests that Monet’s painting, breaking with the rule-bound traditions of the Academie, launched the revolution in art that followed.

Torn between the Impressionists’ revolutionary substance and rose-tinted schmaltz, Farago asks three questions: “Can we rediscover what was so revolutionary about impressionism back in 1874? Can we still see the defiance in its beauty, and even its schmaltz?” and “Does loving Impressionism make me basic?”  To this admission of the guilty pleasure he and surely we derive from loving Impressionism, Farago replies:

Impressionism is all about how we live in that permanent contradiction. That’s what it can teach 21st-century audiences whose hunger for authenticity and antagonism keeps coming up short. And if you find Monet, Renoir, Degas too pretty and popular — if you think Impressionism is the artistic equivalent of a pumpkin spice latte — I want you to taste the espresso beneath the foam.

Nice touch. But I have a bone to pick with Mr. Farago: Like virtually all art critics, he misattributes the origins of Impressionism to the French when, in fact, Impressionism originated half a century earlier in Britain. Moreover, the initial driving force behind the Impressionist revolution was not painters but poets! To prove my point, I share with you the following slightly adapted essay written for an English Lit. class in 1998:

British Romantic Roots of French Impressionism

During the second half of the nineteenth century, the French Impressionists rocked the art world by roaming the countryside painting fuzzy pictures of nature and domestic scenes. Before the Impressionists, painters generally worked in studios illuminated by indirect northern light. Painting methodically within the confines of a studio, lacking strong sunlight and shadow, French Royal Academy painters who ruled the art world before Impressionism predictably created paintings of photographic resolution, dimly lit, in muted colors, usually depicting heroic scenes of antiquity with nature as a background. Landscape painting “suffered from the stigma of inferiority,” being regarded as a “minor pursuit.” Then, the Impressionists invaded the French countryside, towns, and cities, painting their impressions of what they saw in bright, colorful, fuzzy pictures. Rejecting heroic themes and bringing nature vividly to the foreground in seductively accessible form, they created a major turning point in art history. Soon the Impressionist movement outshone the work of those who consigned them to the Paris Salon des Refusés in 1863, opening the way for modern art and, a century later, commanding many millions of dollars more than their predecessors for recognizable works.

            British Romantic poets mounted an equivalent insurrection in poetry more than half a century before the Impressionists ventured into the outdoor light and air of France. Abandoning the heroic themes and stilted form of their neoclassical predecessors, Wordsworth and Coleridge created impressionistic word pictures of the English countryside, immortalizing the Lake District in northern Britain around the beginning of the nineteenth century, much as Cezanne and Van Gogh would immortalize Provence in the south of France late in the century. Fire a shot in any direction in the Lake District, and you are bound to hit a British National Treasure, duly marked as having inspired this Wordsworth or that Coleridge poem. The Romantic revolutionaries, using accessible themes and language, displaced their more formal predecessors, expanded poetry’s audience, and opened the way for the realist poets who followed. 

            Foreshadowing the Impressionists’ practice of creating while out in nature, both Wordsworth and Coleridge experimented with composing out of doors, notably Wordsworth’s Lines, Composed a Few Miles above Tintern Abbey. . .  along with Written in March, While Resting on the Bridge at the Foot of Brother’s Water and Composed upon Westminster Bridge, September 3, 1802, and Coleridge’s This Lime-Tree Bower, My Prison.  Tintern Abbey stimulates in Wordsworth primarily a reflective, philosophical bent of mind (“that blessed mood / In which the burthen of the mystery. . . is lightened” “the joy of elevated thoughts; a sense sublime”) These thoughts overshadow Wordsworth’s descriptions of nature in the poem. Coleridge’s experience in the lime-tree bower, on the other hand, prompts him to revel in the sensory joy of the moment (“A delight / Comes sudden on my heart”) and create vivid nature imagery, antedating the Impressionists’ fascination with light and shadow:

Pale beneath the blaze

Hung the transparent foliage; and I watched

Some broad and sunny leaf, and loved to see

The shadow of the leaf and stem above

Dappling its sunshine!. . .

Coleridge conveys a haiku-like sense of immediacy about the occasion. He uses various flying creatures to immerse his readers in the scene and the moment: “now the bat / Wheels silently by”. . . “the solitary humblebee / Sings in the bean-flower”. . . “the last rook / Beat its straight path along the dusky air. . . “now a dim speck, now vanishing in light”. The repeated use of “now” associated with the description of a moving creature compellingly induces that sense of temporal immediacy.  French Impressionists likewise became famous for capturing small, unheroic moments, whether it be Manet or Degas at the races and the ballet, or Monet by the seashore, for example.  

  Like the Impressionists, who painted still lifes and portraits indoors (particularly when it rained), Wordsworth and Coleridge also worked indoors, penning their “spontaneous overflow of powerful feelings . . . recollected in tranquility.” In moving indoors, however, both the poets and the painters, retained their emotional, impressionistic styles developed in the light and air of nature. For example, in Work Without Hope Coleridge impressionistically evokes nature en plein air (again using birds and bees) and emotion:

All Nature seems at work. Slugs leave their lair,

The bees are stirring, birds on the wing,

And Winter slumbering in the open air,

Wears on his smiling face a dream of Spring!

And I the while, the sole unbusy thing,

Nor honey make, nor pair, nor build, nor sing.

Wordsworth is similarly expressive in Resolution and Independence:

There was a roaring in the wind all night;

The rain came heavily and fell in floods;

But now the sun is rising calm and bright;

The birds are singing in the distant woods . . .

All things that love the sun are out of doors;

The sky rejoices in the morning’s birth;

The grass is bright with rain-drops; . . .

As high as we have mounted in delight,

In our dejection do we sink so low;

To me that morning did it happen so;

  The link between the British Romantic poets and the French Impressionist painters can be traced to the British Romantic landscape painters, notably John Constable and J.M.W. Turner. Both were slightly younger contemporaries of Wordsworth and Coleridge, who painted nature unheroically, sentimentally, en plein air with varying degrees of impressionism. They began producing their most notable works within a few years of the poets’ productive peak, bracketing the turn of the century, five decades before the French ventured outdoors. As educated Britons, Constable and Turner were doubtlessly familiar with and influenced by the poets’ revolutionary works. Underappreciated in Britain, the Romantic landscape painters were highly regarded by French painters, ranging from their contemporaries like Delacroix to the later Impressionists Monet and Pissarro.

  In short, by rejecting the heroic themes and stilted style of their predecessors, bringing nature to the fore, and developing their art out of doors, Wordsworth and Coleridge precipitated a virtually identical contemporaneous revolution in painting in Britain, and across the English Channel more than half a century later. In the process, both the British poets and the French painters displaced their predecessors, broadened their audience, and opened the way for further evolution of their art. In a very real sense, therefore, the astronomical sums recently paid for French Impressionist paintings at auctions in New York can be attributed in part to lines penned by two young British poets rhapsodizing in the English countryside two centuries ago. 

Epilog: Which of these did Monet paint?

Answer: None. They were painted by J.M.W Turner “Sunset” (1827) and “Rain, Steam, and Speed the Great Western British Railway” (1844), "The Fighting Temeraire, Tugged to Her Last Berth to be Broken Up, 1838." respectively.

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Here is the Chat GPT conversation on the subject:

You said:

Why are "Smash and Grab" incidents on the rise in California?

ChatGPT said:

ChatGPT

The rise in "smash and grab" incidents in California can be attributed to a combination of social, economic, and legal factors. Here's a breakdown of why these crimes are becoming more prevalent:

1. Changes in Law and Perception of Punishment

• Proposition 47: This 2014 law reclassified many non-violent felonies, such as shoplifting and theft of goods valued under $950, as misdemeanors. This lowered the penalties for theft, which some argue has led to a perception that these crimes have fewer consequences.

• Reduced Deterrence: With lower risks of jail time or significant punishment, criminals may feel emboldened to commit theft, knowing that even if caught, the consequences will be minimal. Repeat offenders may face minor penalties, which fails to deter them.

2. Organized Crime Networks

• Coordinated Efforts: Many "smash and grab" incidents involve organized crime rings that plan these robberies for maximum effect. They often target high-end retail stores in groups, overwhelming staff and security, making it easier to escape with valuable merchandise.

• Reselling of Stolen Goods: The goods stolen are quickly sold on secondary markets (online marketplaces, social media, etc.), making it difficult to track and recover. This creates a profitable pipeline for thieves.

3. Economic Stress and Inequality

• Post-COVID Economic Struggles: The economic impact of the pandemic has led to increased financial stress for many individuals, especially those in lower-income areas. This may push some to turn to theft as a means of survival or to gain quick financial gain.

• Rising Wealth Inequality: High-end retail stores in wealthier areas are often targeted, as the disparity between rich and poor has grown, leading to resentment and, in some cases, theft as a response.

4. Law Enforcement Challenges

• Limited Police Resources: Police departments are often stretched thin, focusing on violent crimes over property crimes, which has led to fewer arrests and investigations of these incidents.

• Public Sentiment on Policing: In some cases, public pressure to reform policing practices has shifted law enforcement priorities away from aggressive tactics on non-violent crimes, resulting in less proactive policing around theft.

5. Social Media and Flash Mobs

• Coordination through Social Media: Many "smash and grab" robberies are coordinated through social media platforms, where individuals or groups organize quickly and show up en masse to commit the thefts. This flash mob-style approach makes it harder for law enforcement to anticipate or prevent these incidents.

6. Civil Unrest and Changes in Social Norms

• Impact of Protests and Civil Unrest: Some argue that the recent years of protests and civil unrest have led to a weakening of social norms around property rights, with a small subset of people feeling that they can engage in theft as a form of protest or economic justice.

In summary, the rise in "smash and grab" incidents in California can be linked to the combination of lighter penalties for theft, organized criminal efforts, economic stress, and challenges in law enforcement response. It’s a complex issue involving legal, social, and economic dynamics.

You said:

What solutions have been proposed to discourage "smash and grab" incidents in California?

ChatGPT said:

Several solutions have been proposed to address the rise in "smash and grab" incidents in California. These solutions range from legal reforms and increased law enforcement efforts to retail strategies aimed at deterring thieves. Here are some of the most prominent measures being considered or implemented:

1. Revisiting Proposition 47

• Reclassifying Theft Crimes: There have been calls to either repeal or amend Proposition 47, which lowered penalties for theft crimes involving property valued under $950. Advocates for change argue that stricter penalties, such as reclassifying theft over a lower threshold as a felony, could serve as a stronger deterrent.

• Creating Exceptions for Repeat Offenders: Some proposals suggest harsher penalties for repeat offenders or those involved in organized theft rings, as a way to target individuals and groups that are committing multiple offenses.

2. Increasing Law Enforcement Efforts

• Special Task Forces: In some areas, local law enforcement has created specialized task forces dedicated to combating organized retail theft. These units focus on investigating these crimes, collaborating with retailers, and tracking down organized crime rings responsible for multiple incidents.

• Increased Patrols and Surveillance: Some cities have increased police presence around high-risk retail areas, particularly during peak shopping seasons. Enhanced use of surveillance cameras and security personnel also helps law enforcement gather evidence more effectively.

3. Collaborations Between Law Enforcement and Retailers

• Retail Crime Partnerships: Retailers are collaborating more closely with law enforcement agencies to share data, improve response times, and coordinate strategies. Some retailers are providing real-time data to the police to help identify theft trends and hotspots.

• Private Security and Technology: Many stores have increased their investment in private security, including the use of guards, alarm systems, and advanced surveillance technologies such as facial recognition or AI-powered analytics to identify suspicious behavior early on.

4. Organized Crime Crackdown

• Focusing on Organized Theft Rings: Prosecutors and law enforcement are targeting the higher-level operators who organize "smash and grab" incidents. This includes targeting those who resell stolen goods online and on the black market, with efforts to shut down resale platforms that facilitate the sale of stolen merchandise.

• Federal Involvement: There has been growing discussion about involving federal law enforcement agencies in tackling organized retail theft rings that operate across state lines. The FBI and other federal agencies could assist in larger investigations that cross jurisdictional boundaries.

5. Retail Store Design and Deterrence Measures

• Securing High-Value Merchandise: Many retailers are implementing physical deterrents such as locking up high-value items in cases, keeping fewer high-end products on display, and limiting the amount of merchandise accessible on the sales floor.

• Anti-Theft Infrastructure: Some stores have installed anti-theft barriers, gates, and window grates to prevent vehicles from being used in smash-and-grab incidents. Additionally, retailers are exploring technologies like anti-shatter glass to make entry more difficult.

6. Increased Prosecution and Penalties

• Stricter Prosecution of Violent Theft: Prosecutors in some regions are prioritizing the prosecution of violent or organized theft incidents, imposing stricter penalties and advocating for stronger sentencing laws for those involved in these crimes.

• Coordinated Prosecution of Repeat Offenders: For repeat offenders, some prosecutors are working to impose harsher penalties under existing laws, such as gang enhancement charges or federal-level charges for larger organized crime rings.

7. Addressing Economic and Social Factors

• Community Programs: Some advocates believe that addressing the root causes of theft, such as poverty, unemployment, and social inequality, could help reduce the prevalence of "smash and grab" incidents. Investing in job training, educational programs, and social services in economically disadvantaged areas may reduce the incentive to engage in theft.

• Restorative Justice Approaches: In some jurisdictions, there is a push for restorative justice programs that focus on rehabilitation rather than incarceration, particularly for first-time offenders or juveniles involved in theft. This approach aims to reduce recidivism and create pathways to economic stability.

8. Strengthening Online Market Regulations

• Regulating Online Resale Platforms: Many stolen goods are quickly sold on online marketplaces or social media platforms. To combat this, lawmakers are pushing for stricter regulations that would require online resale platforms to verify the identity of sellers, track high-volume transactions, and report suspicious activity to authorities.

9. Public Awareness Campaigns

• Educating the Public: Public awareness campaigns are being developed to inform people about the consequences of buying stolen goods and the legal implications of being involved in organized theft. These campaigns also aim to promote better security practices for retailers and businesses.

In summary, solutions to "smash and grab" incidents in California involve a combination of legal reforms, enhanced law enforcement, retailer strategies, and social programs to address both the criminal elements and the underlying economic and social drivers of theft. Balancing tougher penalties with preventive measures is seen as key to addressing the issue in the long term.

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UPDATES AS HURRICANE MILTON CLOSES IN ON FLORIDA

THEY SOW THE WIND AND REAP THE WHIRLWIND:

Exxon minimized climate change internally after conceding that fossil fuels cause it.

Defense, Denial and Disinformation Uncovering the Oil Industry’s Early Knowledge of Climate Change

Big Oil CEOs deny lying to the public about climate change

Climate Deniers of the 118th Congress

How decades of disinformation about fossil fuels halted U.S. climate policy

How the oil industry made us doubt climate change

MORE ON THIS TOPIC

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In so doing, the Republicans on the Court bend themselves into pretzels to justify their opinions by claiming  to divine the framers’ intent through devices like “originalism,” “textualism,” citing writings by some Founders (notably Madison, Hamilton, and Jay in the Federalist Papers),  referencing precedents in English common law, the English Bill of Rights (1689), and even Sir Matthew Hale, a 17^th-century British jurist who conceived the notion that husbands can’t be prosecuted for raping their wives, who sentenced women to death as “witches.”

Let me suggest an alternative source of insight into the framers’ intent hiding in plain sight:

The Preamble to the U.S. Constitution explaining the goals and purpose of the government.

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

“In the years following the Constitution’s ratification, the Preamble has had a relatively minor role as a matter of legal doctrine, but an outsized role, particularly outside of the courtroom, in broadly embodying the American constitutional vision. With regard to the legal effect of the Constitution’s preface, in the early years of the Supreme Court, it did reference the Preamble’s words in some of the most important cases interpreting the Constitution.” (Click here.) Today, SCOTUS generally does not rely on the Preamble in formulating its decisions, and when cited (as Justice Scalia did in Heller (2008), the landmark 2^nd–Amendment case), justices summarily dismiss the significance of the Preamble as merely “providing context,” or “shedding light on the spirit in which the Constitution is written, without granting or limiting the powers of government.” The Court consistently maintains that the enforceable rights and powers of the government come from the specific articles of and amendments to the Constitution, not from the Preamble itself, and consequently, “it is not considered a legally operative part of the Constitution upon which decisions can be made.” (Emphasis mine.)

Say whaaaat?

These conclusions are illogical, cynically self-serving, and contrary to the framers’ objectives, demonstrating that SCOTUS has lost the plot. What sense does it make to assume the framers formulated “legally operative parts of the Constitution” at odds with their stated goals and purposes of government in the Preamble? If the former are not at odds, then they should be in agreement with the latter. There exists no clearer statement of the framers’ constitutional intent than the Preamble, written in plain English so that We the People can understand it and thereby insist on adherence to its precepts by SCOTUS, Congress, and the Administration. Not an appendage or afterthought but rather the leading thought of the Constitution, deserving the authority of first mention, the Preamble is an integral component of the Constitution signed by the framers, providing the precepts by which SCOTUS should be guided when called upon to interpret constitutional issues. (For the limits of SCOTUS’ remit, my post: “Is It Time to Reject Chief Justice Marshall in Marbury v. Madison?”)

Accordingly, to discern the framers’ intent, forget the malleable intricacies of textualism and originalism; the central government bias of Hamilton, Madison, and Jay; and the dubious precedents of 17^th-century British jurisprudence. (We fought the Brits to rid ourselves of their laws, didn’t we?)  These devices now serve only to give six Republican justices the latitude to bend the Constitution to serve their often unpopular, counterproductive ideological imperatives at odds with the framers’ purposes. Not surprisingly, SCOTUS chafes at the restrictions the Preamble imposes and dismissively cuts the cord of accountability imposed by adherence to it.  Linking SCOTUS’ mandates to the Preamble would severely restrict its decisions. For example, if required to conform to the Preamble impartially, arguably, SCOTUS could not have handed down the landmark decisions on Citizens United (2010 money in politics), Loper Bright Enterprises (2024 federal regulations), Dobbs (2022 abortion rights), Heller (2008 gun control), Trump v. United States (2024 presidential immunity). (See subsequent parts of this essay.)

I come from the world of business. When management presents a proposal to the board of directors, it begins with a statement of objectives followed by a plan to achieve them. The board will toss out any plan elements failing to support the objectives. Accordingly, the proposal succeeds or fails before the board to the extent that its elements support the objectives. It’s as simple as that.

Logically, the same principle and standard apply to decisions by SCOTUS. Let me say plainly: In stating the goals and purposes of government, the Preamble sets the framers’ standards by which the powers of government written into the Constitution should be interpreted by the judiciary and implemented by the legislature and executive. When disputes arise regarding issues raised in the Constitution, SCOTUS should resolve them with decisions in harmony with the Preamble. If SCOTUS fails in this assignment, as it has in the issues to be discussed in subsequent parts of this series, it is up to Congress to make it so through the normal legislative process, with authority bestowed by a) its first mention in the Constitution (Article I) as the preeminent branch of government, and b) specific clauses in the Constitution (see below). Therefore, the power to compel specific behavior of We the People must not rest ultimately with nine unelected individuals holding life tenure and axes to grind.  Instead, as the framers intended, ultimate power must be exercised by elected officials responsive to and representing the interests of the People (as I argue in my previously cited blog. Click here.) Presciently, Thomas Jefferson believed that Marshall’s arrogation of the power of judicial review in Marbury v. Madison concentrated too much power in the judiciary. Fearing SCOTUS’ judicial review could lead to judicial tyranny, Jefferson argued that the Constitution should be interpreted in a way that allows for the will of the people to prevail, and he was concerned about the judiciary interfering with legislative and executive powers, as indeed it has.

Sadly, the Republican majority (now a 6:3 supermajority), rather than “calling balls and strikes,” consistently exhibits naked partisanship, thereby undermining public confidence in the Court’s legitimacy, leading to the widespread perception of SCOTUS as an unelected political body rather than an impartial arbiter of the law. Polarization of the nomination and confirmation processes, where justices are often confirmed on strict party-line votes, adds to this perception. Arguably, beginning with Bush v. Gore (2000), Republican appointees to the Court have rendered decisions aligned with the interests of Republican elected officials who appointed and confirmed them, congruent with the interests of wealthy Republican donors, to the detriment of everyday Americans. Not surprisingly, a 2023 Gallup poll showed that only 41 percent of U.S. adults approve of how the Court is handling its job, within one point of an all-time low. Moreover, “Bucking their traditional reserve, judges from across the spectrum are publicly disagreeing with the Supreme Court justices and decisions.” (Newsweek)

It’s time for Congress to do its job: The “Necessary and Proper Clause” of Article I and Article III of the Constitution and grant Congress significant authority to regulate the Court’s jurisdiction, size, procedures, ethics, and processes.

Article I, Section 8, Clause 18:

[The Congress shall have Power . . . ] To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. (Emphasis mine.)

Article III, Section 2, Clause 2:

In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be a Party, the Supreme Court shall have original Jurisdiction. In all other Cases before mentioned, the Supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptionss and under such Regulations as the Congress shall make. (Emphasis mine.)

Requiring SCOTUS to render decisions conforming with the Preamble is a good place to start.

Accordingly, SCOTUS would be discouraged from resorting to tortured interpretations of the Constitution by other means to serve their ideological imperatives at the expense of judicial impartiality, the intent of the framers, and the interests of We the People. If SCOTUS fails to comply with this requirement, Congress should exercise its constitutional power to override such decisions through the constitutionally mandated process or, at a minimum, demand a rewrite by SCOTUS. These reforms would go a long way to aligning SCOTUS with the framers’ intent while preserving the separation of powers and checks and balances inherent in the Constitution.

Epilog

I am painfully aware of Congress's dysfunctionality in recent years, leading thoughtful readers to question the wisdom of proposing supreme congressional authority in deciding constitutional issues. In response to such concerns, I offer the following thoughts: 1) The framers entrusted such powers to Congress in Articles I and III, outweighing Chief Justice Marshall’s arrogation of SCOTUS’ supreme authority in such decisions without explicit constitutional endorsement, 2) Congress’ constitutional authority to create and regulate SCOTUS establishes the Court’s subordinate status. SCOTUS will doubtlessly howl “Separation of Powers” if Congress asserts its authority, at which point Congress need only to remind them that their job is to uphold the Constitution explicitly granting Congress the aforementioned powers, 3) Whereas Congress must account to the electorate whose interests the Constitution was established and ordained to serve, SCOTUS’ politically appointed justices with life tenure are under no such obligation. As mentioned earlier, SCOTUS’ lack of accountability often results in decidedly partisan decisions, contrary to the long tradition of impartiality of judicial proceedings, the intent of the framers, and the will of a majority of the electorate, according to recent polls. By placing their trust in the collective wisdom of We the People expressed through the democratic process and institutions, the framers, through bitter experience, sought to overrule unaccountable and often tyrannical judicial authority. Admittedly, Congress is an imperfect vehicle to fulfill the framers’ constitutional aspirations. However, unlike SCOTUS, under the Constitution, Congress’ errors are remediable through the democratic process, as Dr. King Jr. once said, bending “the arc of the moral universe toward justice.”

In subsequent posts, I will review the application of these proposals to specific issues and landmark cases: Citizens United (2010 money in politics), Loper Bright Enterprises (2024 federal regulations), Dobbs (2022 abortion rights), Heller (2008 gun control), Trump v. United States (2024 presidential immunity).

If you think well of the idea, kindly post a comment and share this post with receptive individuals and organizations.

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Opinions on who won the vice-presidential debate appear to reflect the partisan divide rather than thoughtful, objective analysis. In my view (hopefully thoughtful and objective), Governor Walz prevailed on substance, while Sen. Vance prevailed on style.

Walz wended his way through the weeds of policy, earnestly drawing on his experience as coach, teacher, congressman, and governor. On the other hand, by exhibiting a veneer of normalcy, Vance accomplished his primary assignment: to take the sting out of the "weird" epithet and distract voters from Trump's mounting discombobulation and venom, thereby holding the Republican base in place. “Oozing charm from every pore,” Vance “oiled his way across the floor,” smoothly evading nearly all questions on substance through disinformation, deflection, and "damning non-answers" while appearing collegial and reasonable.

Both contenders met the basic needs of their respective bases while disappointing the more bloodthirsty elements on both sides, lusting for a cage fight. I'd be surprised if the needle moved much, if at all.

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