The Week That Matters (11-15 Nov, 2024)

"The business of America is business." Calvin Coolidge

Podcast #1

Apologies for the delay this week. The author was hoping to launch his Discuss the Tape Podcast with this edition but he’s having technical issues!

It’s the first one of many (the author hopes). We were lucky to be joined by Steve Allan, a veteran of Silicon Valley. We discussed the success and demise of Silicon Valley Bank, the impact of President Trump on tech investment, the opportunities in AI and the prospects for the Australian tech eco-system. Steve has a ton of experience in venture, and it was a pleasure to hear his thoughts.

The plan is to get it out to the public soon! Steve was awesome btw. The author, on the other hand, is still working on his interview skills. He is usually the one doing all the talking! It’s a learning curve.

The Glorious 2020s

A famous painter once said, “good artists copy; great artists steal.” Great ideas are rarely original, and neither are political slogans. For instance, Ronald Reagan coined the phrase “Let’s make America Great Again,” when Donald Trump was just an ambitious real estate guy back in the early 1980s.

There were three Republican presidents in the 1920s: Warren Harding, Calvin Coolidge and Herbert Hoover. Like the politicians of today, all three loved a rallying cry. Warren Harding used to regurgitate William Randolph Hearst’s motto, “America First” whenever he could while Calvin Coolidge loved to say, “the business of America is business.”

If the words sound familiar, they should. The campaign that the Republican Party ran echoed the campaigns of the 1920s, which were based largely on laissez-faire politics. Big government was frowned upon. Unions were despised. Protectionism was celebrated. And trusts and cartels were tolerated. Isn’t that more or less the mantra of the forthcoming administration?

With the election of Donald Trump as President, those who believe in small government are in ascendancy just as they were back then. The author strongly believes we will repeat what happened in the 1920s. That means it will be a great period for the haves and a terrible decade for the have nots.

End of the road for Janet Yellen’s Masterplan?

This newsletter noted frequently how the Biden administration, at least before the outbreak of the Ukraine War, represented something new. The rhetoric was a clear break from recent past. Some of what was said sounded like it could have come from Kennedy or Roosevelt. For example:

• Biden gave an almost Kennedy-esque speech at the UN, where he talked about peace and cooperation. It marked a step change from the neo-con approach to foreign policy.

• Biden suggested he would strengthen the unions. Better wages were seen as one way to improve the wealth poor divide. He even talked of a new deal with labor!

• Biden said he would take on Big Tech and appointed Lina Khan, whose paper in The Yale Law Journal, Amazon’s Anti-Trust Paradox, suggested we should go back to a broader definition of the problem of monopoly, a throwback to pre Reagan times.

• Biden talked about strengthening the IRS. We spend a lot of time talking about spending but the collection of taxes is far from efficient. Six previous Treasury Secretaries even got behind the initiative with an op-ed in the New York Times.

• And importantly, he talked about spending on infrastructure and education as an investment! You have to go back a long way to hear anything like that from either side of the aisle.

The architect of the plan, the newsletter argued, was Janet Yellen. With her employment economics background, the author suggested it wouldn’t be too surprising if she believed the US might need a modern-day New Deal. Government played a role in saving the economy in the past. Why couldn’t it now? The US economy was, to be fair, not in great shape:

1. The monetarist experiment was looking tired.

2. Growth, if you ignore the COVID period, had been lackluster since 2008.

3. The wealth poor divide was extreme.

4. Tech companies were earning excessive economic rent.

5. There had been no public investment in housing, education or infrastructure for years.

The author made the mistake of thinking that the US was ready for an idea like a New Deal. It clearly wasn’t. It didn’t help that the Democrats alienated a number of their traditional supporters, such as the powerful lobby group that is Silicon Valley. As Steve noted in the podcast, behind all the performative statements like Google’s “Do no evil,” Silicon Valley is a rational economic player. And four more years of the Democrats might have just been too costly for them.