• Trump the Democratic Leader?

    Politics, and democratic politics in particular, is a messy business.  There are multiple bottom lines to aim at, endless competing claims as to how scarce resources should be reconciled, differing views as to whose interests should take priority, and there are never any final victories – every battle has to be fought over and over again.

    It is a miracle that we bother with all those complexities.  But we do so because we know that it is better and fairer than any other system – particularly when the only real alternative is to allow the powerful just to grab what they want.

    But that does not stop critics from asserting that things would be better, if only we could hand the whole business of government over to those who know how to run things – and that sentiment often boils down to a simple wish for a “strong man”, usually a businessman, who will brook no nonsense and just get on with the job.

    That was in effect the pitch that worked for Donald Trump.  Put me in the White House, he seemed to say, and I will bring to the task of being President the experience and knowledge I have gained from heading a successful business empire.  I will cut through all the red tape, face down the agents of government and the elected legislature (which I will describe first as a “swamp” and now a “cesspool” that must be drained), sack those officials whom I do not like or who displease me, override the attempts of an independent judiciary to enforce the limits to my power prescribed by the Constitution, bemoan and attack the role of a free press.

    I alone will decide what is best for the country, just as if I were running my own business.  I represent in my own persona, in other words, all that is necessary to provide an effective democracy.

    But President Trump is not the first businessman to learn the hard way that the techniques that worked in business can creat an unholy mess when applied to running the country.  In business, at least in the Trump view, there is a very obvious single bottom line to aim for.  People, mainly employees, do as they are told if they want to keep their jobs.  The absence of even a scintilla of self-doubt is everything – if people don’t like it, they can lump it.  The only rules are that winners make the rules and that the market always prevails.  Ethical behaviour has no value in itself but is worthwhile only if it is rewarded by the market.  Success comes to those who can get away with as much as they can.

    Politics, though, is altogether more complex and subtle.  In politics, people do not leap to it when they are told what to do.  They need to be persuaded, cajoled; positions must be changed, other views accommodated, compromises reached, alliances formed and broken.  Lessons are learned and voices from all quarters are heard and listened to.

    And that is just as well.  Politics, democratic politics, is meant to be complex and confused.  If governing the country was just a matter of following the prescriptions of one person, or of allowing an allegedly value-free market always to decide how the dice should fall, then what would be the point of electing those who represent us?  Why would we bother to consult the people if each issue could be resolved by the decision of a single business leader or must follow the dictates of the market?  Why hold elections or debate policy issues if a Donald Trump or the like, convinced he is right about everything, can simply settle every issue for us?

    The whole point of democracy, in other words, is to ensure that important decisions about the society we live in reflect a wide range of interests and are not taken by a small handful of people, acting as though they were running their own businesses.  The legitimacy conferred by the democratic mandate is intended to offset and restrain what would otherwise be the overwhelming power of those who dominate the market place.

    If we allow that small number with real economic power to seize control of the political process as well, and bend it to serve their particular interests, we end up with a society that most people do not want. The last thing we need is the single-minded self-obsession of the profit-focused business leader – as the Americans are in the process of finding out.


    Bryan Gould 26 July 2017




  • What’s In It for Putin?

    As Donald Trump starts to sink into that quicksand of his own making that the vexed issue of Russian involvement in his election has now become, one question – among the many others that arise in this context – may not have an obvious answer.  If Vladimir Putin really did intervene in the election campaign with the intention of increasing the chances of a Trump victory, what was in it for him?

    A number of possible answers to that question suggest themselves.  It may be that the Russians have something on Trump – perhaps arising from one of his frequent visits to Russia, either to promote a Miss Universe contest or to pursue one of his other business interests – and are looking to bend him to their will with threats of disclosure.

    Or, perhaps, there was a genuine meeting of minds and Putin saw the chance to advance Russia’s interests by installing a President in the White­­ House who sees the world as he does.  But there is a simpler, and altogether more likely explanation.

    It must never be forgotten that Putin is an old-fashioned Russian nationalist and imperialist.  In his early career, he served what was then the Soviet Union as a senior figure in the KGB and, as many observers testify, was deeply unhappy at the Soviet Union’s demise – an observation strongly borne out by his subsequent efforts, as in Crimea, to rebuild the Russian empire.

    It is a safe assumption that Putin’s personal history has strongly affected his world view, and there is no doubt that he regrets the passing of the Cold War era when Russia, in its role as the prime mover in the Soviet Union, could slug it out with the USA in the battle for world domination.  The last few decades, when Russian power has been seen as greatly diminished, while the US has enjoyed its role as the only true super-power, have been keenly felt as a blow to Russian influence and prestige.

    Anything that would reduce American hegemony, therefore, particularly if it could be engineered by Russian intervention, would have seemed to be extremely welcome – and Trump’s frequent visits to Russia would have provided ample opportunity to the Russians and Putin in particular to make an assessment as to Trump’s personal qualities – the intolerance of criticism, the self-obsession, the vindictiveness – and what a Trump presidency might mean to America’s world role.

    What pleasure Putin must now derive from the success of his ploy.  Donald Trump’s ability to tarnish everything he touches has led to an immediate and catastrophic slump in America’s standing in the world – and this phenomenon is not “fake news” but is well attested to by reliable opinion polling across the globe.

    And what extra pleasure must be gained from the realisation that not only has the Trump presidency produced in spades and virtually overnight the desired and planned outcomes, but that even the mere (and delightfully satisfying) possibility that it was engineered by the Russians has embroiled the Trump administration in a miasma from which it seems there is no escape.

    Little wonder that Putin, almost alone among world leaders, was happy to spend time with Trump at the recent G20 meeting in Hamburg.  As Trump struggles for respect, Putin’s stock has risen.  Russia is again seen as a world power while American influence has withered away.  And there is of course another dimension which represents an enormous gain for Putin.

    Leading as he does an authoritarian regime, and criticised as he is for the ersatz democracy and subservient media over which he presides, Putin will always, by way of excuse, be quick to point out to his domestic critics the downsides and drawbacks of democracy as a form of government.

    How sweet to be able to demonstrate, through helping to engineer Trump’s election, the bizarre outcomes which democracy is capable of producing.  “Look,” he is able to say to the Russian public, “what would you rather have?  A strong leader like me, even if there is a small price to pay in the absence of civil liberties and a free press, or a dangerously deluded  buffoon like Donald Trump who is apparently the best leader that the much-admired American democratic process can produce?”

    Vladimir Putin may never have dared to dream that his stratagem would succeed so brilliantly.  He will enjoy every moment of that success – and he will go on enjoying each day that passes and that leaves the Americans lumbered with and incapable of reversing what they have done.

    Bryan Gould

    23 July 2017

  • Is Donald Trump Real?

    Many Trump supporters are no doubt bemused at reports that, as evidenced by opinion polls across the globe, the USA’s standing in the eyes of the world has fallen sharply under a Trump Presidency.  They will be further perplexed by the mixed receptions for the President delivered in countries usually friendly to the USA, and promised in those he is yet to visit.

    And, they will ask, was the President deliberately snubbed by the wife of the Polish president?  And why was he isolated by other world leaders at the G20 summit in Hamburg?

    They do not perhaps understand that these responses to Donald Trump reflect the widely held view that he is not even a halfway decent President – and, rather more importantly, the even more widely held view that he is even less a halfway decent human being.

    It is no exaggeration to say that America’s friends around the world are aghast at the fact that American voters apparently believe that such a person is fit to govern and represent them, let alone to lead the “free world”.

    Such views have been cumulatively confirmed as we learn more – from the President’s own actions and more particularly words (courtesy of Twitter) – as to exactly what kind of person he is.

    It was hoped that the Donald Trump we saw on the campaign trail was a fabrication designed to capture headlines and attention, but one that would be put to one side in the unlikely (so it seemed) event that he would take up the reins of office.

    Sadly, the man we saw during the campaign, having installed himself in the White House, has revealed himself to be the real Donald Trump, so far as there is one.

    We now know beyond peradventure that the man who is President has the mind of an overgrown and spoilt schoolboy – a self-obsessed schoolyard bully, a bigot, a braggart, vindictive, ignorant, living in a comic-strip world, and with a prurient interest in, but limited understanding of, the opposite sex.

    The juvenile behaviour, the “yah boo sucks” language, the trivial vendettas – most importantly, the inability to grasp what his role really entails, and the limitations which the constitution imposes on his powers – are all signs of arrested development, wrapped up in what passes for, just about, the body of an overweight male adult.

    These flaws make it difficult to take him seriously.  He was probably wise not to echo JFK’s famous salute to the people of Berlin – “Ich bin ein Berliner” – when he, Trump, arrived in Hamburg.

    But the problem is that American voters have entrusted him with serious powers – powers to decide between war and peace, powers to risk the future of the planet in respect of climate change, powers to deny 23 million Americans a semblance of effective health care for the sake of putting in place hundreds of billions of tax cuts for his rich friends.

    And he is intent on further using those powers to divide races and religions against other, to portray his opponents as enemies, to promote – using his powers as President – his family’s and his own business interests, and to issue threats to a free press and an independent judiciary.

    With each new self-inflicted wound, each new glimpse into a Presidential mind like a sewer, there is a sense of revulsion and disbelief.  America’s friends are unfamiliar with the intricacies of the American constitution, but they are increasingly desperate that “something should be done”.

    If the President’s state of mind gives cause for concern, as it does – if he often seems lost and confused – what remedies are available?  If he loses touch with reality – and seems often to be acting out the role of an imagined Donald Trump as though it was just a televisual image in a fantasy world – what can be done to restore a sense of reality before irreparable damage is done?

    The leaders of the Republican party bear a heavy responsibility.  Republican votes will be needed if effective action is to be taken.  They alone have the power to deliver those votes.  The question is – what takes priority, the interests of the party or the country – or, for that matter, the world?

    Bryan Gould

    7 July 2017



  • Abdicating Responsibility

    America versus the world!  For Donald Trump, it seems, the battle against global warming is a conspiracy against the US concocted by those who wish to do them down.  “I am the President for Pittsburgh,” he declares, “not Paris”.

    It does not seem to occur to him that the US – and Pittsburgh – are part of the world, and that if the battle to restrain global warming is lost, there will be no “get out of jail” card which will exempt the US from the consequences which the rest of us will also suffer.

    By pulling out of the Paris accord, the country which has emitted more greenhouse gases than any other is saying that it accepts no responsibility, and will pursue what it mistakenly sees as its own interests, irrespective of the damage done to others.

    As many of Trump’s critics, including Arnold Schwarzenegger – a fellow Republican and the former Governor of California – have pointed out, reducing greenhouse emissions is not a barrier to economic growth and employment, but is actually helpful to it.

    Trump’s decision, in other words, not only looks like a denial of the available scientific evidence about the causes and seriousness of the issue but is also a miscalculation of what is really in American interests.

    A United States that – joined only by Syria and Nicaragua – refuses to take action on climate change will not only be reviled around the world for its selfishness but will also be doing itself considerable economic damage.  Countries that apply themselves to finding alternative ways of going about their business without polluting the atmosphere will secure a long-term advantage over those that do not.

    So why has the American President arrived at what looks like an extremely short-sighted decision?  The most likely answer is also a very depressing one.

    Donald Trump secured his unexpected election victory by making a series of improbable promises to the American electorate.  The underlying theme of those promises was that they would supposedly “make America great again” by putting American interests first and hopefully, as a consequence, producing a growth in the number of American jobs.

    The uncertain and faltering start Trump has made to his Presidency, and the controversies that continue to swirl around the Russian involvement in his election, have made it all the more important, from his viewpoint, that he should be seen to be taking decisive action to fulfil his promises – and one of them, of course, was that he would pull the plug on the Paris accord, which he insisted was costing American jobs, particularly in the fossil fuel industries.

    Reneging on the climate change deal, unlike for example building the wall or the attempted ban on mainly Muslim arrivals, can be achieved by Trump simply deciding that it should be so.  Whatever the downsides, in other words, it has the great advantage that Trump cannot be deterred – and he can then proclaim that he has achieved one of his promises.

    We are forced to the unpalatable conclusion therefore that the new American President cares more about fulfilling campaign promises, however ill-advised, and in due course being re-elected, than he does about securing the best interests of the country he was elected to serve – to say nothing about the damage his decision will inflict on the rest of the world for generations to come.

    The focus of the Trump Presidency is, so it seems, to put Donald Trump and his own personal interests – both commercial and political – first, second and third, front and back, and anything else nowhere.  Whatever pleas might be made by those who know what is at stake, the new President is not for turning.  It is his own survival that matters to him, not what serves the interests of those who elected him – to say nothing of those who will find themselves paying the price around the globe.

    New Zealand’s interests will count for little, but that should not deter us and our government from expressing our concern at the first opportunity.  That opportunity is likely to occur when the new US Secretary of State, Rex Tillerson, visits us in the coming week.  He, and Donald Trump, should be left in no doubt as to where we stand on the issue.

    Bryan Gould

    3 June 2017






  • What I would Have Said in the Herald

    I have received in the last couple of days a number of inquiries as to whether, when and how I will respond to Don Brash’s latest exposition in the Herald of his understanding (or lack of it) of the banks’ role in money creation.

    The answer is that the Herald – perhaps understandably – do not want to continue what they see as a “tit for tat” exchange.  The consequence is that Don Brash is left with the last word, and no further comment from me on this subject will appear in that paper.

    If I had been able to publish a response in the Herald, I would have, first, queried why they thought it was wise or helpful to publish Brash again, since he said nothing new and simply repeated his earlier errors.  It certainly did him no favours – he succeeded only in further damaging his own reputation and in compromising the Herald by ensuring that their readers were left at best confused and with the erroneous impression that the matter is not settled but is still one of contention.

    I would then have gone on to specify the precise errors and misapprehensions under which Brash seems to labour.

    First, he chooses to assert that the banks (or rather, he says, “the banking system”) does no more than operate in effect a Keynesian multiplier, with which all economically literate people are quite familiar, and that it is only in that sense that it “creates” money.  No one disputes that money in circulation will enable a large number of successive transactions as it passes from one hand (or deposit account) to another.  But that has nothing to do with the matter at issue, which is – how is money in circulation created in the first place, and what role do individual banks play in that process?

    On that subject, Don Brash has nothing to say, other than to deny (without any evidence or countervailing argument) what is now almost universally accepted – that the act of creating credit by an individual bank through placing a credit entry in a borrower’s account creates new money.

    His second error is to ask, if it is the case that banks create money, why would they bother to do anything other than write cheques to themselves?

    This simply betrays a failure to understand the process of money creation described authoritatively in the Bank of England paper.  As that paper says, “Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.”

    “For this reason”, says the Bank of England, “some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.”

    Commercial banks create money, in other words, by placing loans (or credits) into the bank accounts of borrowers.  They cannot of course write cheques to themselves (the money they create is by advancing credit to borrowers) and, in asking why they don’t do so if it is the case that they can create money, Brash is merely putting up a straw man so that he can apparently knock it down.

    The banks do of course need to have capital reserves of real money for prudential purposes in case of a run on the banks. They have no capacity to create money for this purpose, but, as the Bank of England explains, “The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the [central] Bank.”

    Brash’s third and most important error is to dismiss the increasingly weighty opinion of most of those – like the Bank of England – who have studied the role of the banks in money creation.

    In its 2014 paper, for example, the Bank of England says that “in reality in the modern economy, commercial banks are the creators of deposit money…Rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.

    Bank deposits make up the vast majority – 97% of the amount [of money] currently in circulation.  And in the modern economy, those bank deposits are mostly created by commercial banks themselves.”

    The paper’s conclusions are  accepted by almost all leading economists, including Lord Adair Turner (former Chair of the Financial Services Authority in London­­­) and Professor Richard Werner of Southampton University, and were foreshadowed (in a 2008 paper) by the Reserve Bank of New Zealand itself.

    Brash, however, seems unable to understand the process described by the Bank of England.  I had earlier thought that his denial that commercial banks were responsible for creating most of the money in circulation had to be either a deliberate attempt to mislead or the consequence of simple ignorance.  But, since he states that he “is aware” of the Bank of England paper (and has therefore presumably read it), I can only assume that his continued denial of what that paper tells us is the consequence of intellectual limitations.

    It is very frustrating that what is now a virtually undisputed truth has been continually confused by palpable errors in Brash’s contributions and that they have been lent some unjustified credibility by their publication in the Herald.

    I should be grateful if this posting could be given the widest possible circulation.

    Bryan Gould

    8 May 2017