Coyote Blog

I have not blogged for a while but recently I have allowed all the election advertising to get under my skin.  The solution sets being discussed -- to the extent any solutions are discussed rather than just promoting fear of the other team --are so divorced from any sensible analysis of cause and effect that it is almost intolerable to even listen.

For this article, I have taken real things people have expressed concern about in this election cycle and I have proposed six meta issues that are closer to the true causes of people's concerns.  Of course, none of this is being discussed by anyone on either side in this election.  So, not to imply there are not other meta problems, here are my six:

1. The US Federal budget deficit, source of inflation, high mortgage rates, and even the trade deficit
2. Federal Reserve Policy, which has created the recent K-shaped binodal prosperity profile
3. K-5 public education, which has hurt everyone but particularly people of color
4. Conflation of race with culture, which hinders discourse on everything from immigration to education
5. Complete misunderstanding about how political power works
6. Special Bonus Meta Issue: Wars of choice.

All of these are amenable to government action, they are not just things like "eliminate the evil that lurks in men's souls."

1. US Federal Budget Deficit

Affordability has been a big issue in this election, and many of the solutions proposed are just outrageous.  Mamdani in NYC proposes to create government grocery stores, because I guess nationalizing the part of the food delivery chain that has sub-5% margins makes total sense.   Many jurisdictions want to ban new data center construction to keep a lid on electricity prices, though none to my knowledge are also proposing to ban or stop using the cloud-based services these data centers support.  Both parties have proposed banning 3^rd party real estate companies from buying single family homes, in yet another Federal effort to preference buying homes over renting.  Many have pointed to Trump’s tariffs as a source of costs to consumers – OK, I have to give them that one, that is likely true though inflation and affordability issues pre-dated his tariffs (ditto Trump’s war in Iran).  And Donald Trump himself frequently proposes to deal with affordability issues by sending checks to taxpayers (at first as a share of the tariff “windfall” and more recently as a bribe to vote Republican in the coming election) – because Biden sending similar checks out during COVID had nothing to do with the 9% inflation that followed.

There can be many causes of any particular price going up in some moment of time but anyone who is running for Congress and makes an issue of affordability without discussing the Federal deficit is totally unserious.  Our now $2 trillion Federal deficit is high on a historic scale and we have never sustained deficits of this size for so long as we have over the last 15 years, growing our total debt to 120% of GDP, leading to interest charges of $1 trillion a year.  A decade ago deficits could have been mostly cured by simply slowing spending and letting growth increase the revenue side, but unfortunately we are beyond such easy solutions.   These outsized Federal budget deficit has at least three negative effects:

• It is inflationary. We can argue about a lot of things in economics, but nothing has been proven so thoroughly as the inflationary effect of governments borrowing to spend more money than they have.
• It raises borrowing costs including mortgage rates. Don’t like mortgage rates over 7%?  People like to point to the Federal Reserve but that’s like blaming the guy who changes to price stickers at Walmart for higher prices.   In the US this year, there will be about $600-$800 million of net new mortgages, but the US Treasury will have to issue $2 Trillion of net new debt.  This competition for available funds drives up the cost of borrowing for everyone.
• It makes the trade deficit worse. The trade deficit is not something I care a lot about – I think it is a pretty meaningless number that ignores all kinds of economic activity.  But for those folks who do care, including Donald Trump, the Federal budget deficit has far more to do with the trade deficit than tariff levels (note that after two years, the trade deficit today is not much different than when Trump began his random number tariff campaign).  When the government issues $2 trillion of new debt, a lot of that debt is bought by non-Americans.  To buy the debt, they have to convert their local currency to dollars, which in turn raises the value of the dollar, which in turn makes imports cheaper and exports more expensive. Another way to think of this is that dollars don’t just pile up somewhere unused and uninvested – if foreigners buy a lot of our debt, that money has to return somehow and one way is in the form of our buying their exports.

It probably goes without saying, but Trump and the Republicans have shown zero interest in controlling spending or cutting the deficit and it is unlikely the Democrats and extremely unlikely the DSA will focus on this at all.  So anything any of these folks say about affordability can largely be ignored as bullsh*t.

2. Federal Reserve Policy

Starting around 2010,  the Federal Reserve began expanding its balance sheet in a program called quantitative easing (QE), using essentially printed money to buy and hold government debt.  This put cash back in the economy, specifically onto the balance sheets of then-struggling banks.  At that time interest rates were close to zero but since then as rates have risen it also helped ameliorate some of the interest rate effects of government borrowing – adding such a large buyer of debt to the system would inevitably lower or at least put a cap on interest rates.

Back in 2018, in answer to a question about why -- with low interest rates, QE money printing, and a large budget deficit – we didn't see more inflation at the time  I wrote:

Is it possible that inflation exists but it shows up mainly in financial assets (stocks, bonds, perhaps real estate) that don't really factor into standard inflation metrics?  Every step the Fed has taken, as well as other western central banks, appears to me to be crafted to pump money into securities markets rather than into main street.  Certainly we have seen a huge inflation in the value of financial assets and real estate over the past several years.

In this election there is a lot of concern, really anger, from some Americans that the economy looks K-shaped to them.  Meaning that the wealthy are doing very well while others are at best treading water.   I tend to find people's dissatisfaction with their level of prosperity odd on a world or historical scale -- even low income Americans are so much better off than their peers around the world or particularly as compared to past centuries.   But folks don't see what life is like for similarly situated people in Africa or in the 18th century -- and don't care.  What they see is a lot of other folks getting rich with apparently little effort while they remain in place.  The fact that many of the newly rich techbros and Wall Street guys act like douchebags when they strike it rich does not help.

While normally I push back on this kind of narrative – for example the “hollowing out of the middle class” meme was largely unsupported by the data  – I do think this concern is at least partially true.  People who owned tangible and financial assets over the last 15 years, particularly with leverage, have made fortunes and I believe that the Fed’s QE and balance sheet expansion programs have been largely responsible for much of the excesses.  Go to any regional bank or private equity company over the last 10 years and they would lament that their biggest problem was “deal flow” – which is merely euphemism for their having a ton of hot money the wanted to spend somewhere and couldn’t find enough places to pump it into.  Much of this hot money started at the Fed and if you were in a position to benefit from the hot money, you could get rich.

3. K-5 public education

If there is a true example of systemic racism in this country it is the crime against black children perpetrated by the public k-12 education system, and probably in K-5 (once kids get to 6^th grade without reading or math they are likely never going to recover).  There has been no worse crime committed against African Americans in this country since Jim Crow.   And the craziest part is that some of the worst examples are in cities with all-black mayors, city council, and school board members.

Take the example of East St Louis.  Here is the school board in E. St Louis -- not many proud boys there.   East St Louis spends over $25,000 per student and has a 12:1 teacher ratio  (the national average is about $18,000 per pupil and 14:1).    Teachers earn beetween $70,000 and $80,000 a year before benefits for about 9 months a year of work.  The student body is 96% black and US News report that in E. St Louis  "4% of high school students tested at or above the proficient level for reading, and 7% tested at or above that level for math."  Well no surprise that Blacks are struggling when freaking 96% of them graduate from public school systems like this without being able to read.  This is a f*cking crime, and it has nothing to do with white leadership or funding.

This has to be fixed, but in large part the various governments in this country have focused on working hard to NOT fix it.  That is because every time there is a standardized test that points out this failure to educate black children well, it is first dumbed- down, and then made optional, and then eliminated.  Which is insane – its like deciding that the solution to too many cancer diagnoses in some particular area is to stop testing for cancer.

Politicians are often susceptible to cargo-cult thinking and nowhere is this more obvious than in education.  At some point years ago politicians looked at successful people and noticed that successful people typically had college degrees.  Most of us would have said, “Sure, that is because a college degree means they have gained some knowledge, demonstrated critical thinking, can write and do math at some minimum level, can be focused and complete tasks responsibly, and have dedicated themselves to achieving difficult goals over long periods of time.

But politicians don’t think this way – they are not very good at parsing cause and effect.  So if successful people have college degrees, they figured that if we handed out lots more college degrees then there will be more successful people.  But since the K-12 education system could not produce enough qualified people to get into college, then standards had to be lowered, testing requirements eliminated, and high school grades inflated.  To help unprepared folks graduate, new majors with absurdly low standards were invented, grades were inflated and use of AI was winked at.  Not surprisingly, none of this has helped black well-being very much.  All the college DEI and affirmative action in the world is not going to help most black kids because it is 10 years too late -- they were failed by the system way back in K-5.

To complete the sad irony, the very traits that contribute to prosperity and for which college degrees were a proxy – hard work, focus on long term goals, critical thinking, discipline, deferring gratification – have now been labeled by supposed “supporters” of the Black cause as representing whiteness and to be avoided as racist.  Had the KKK come up with a plan to screw the black race in this country, I don’t think they could have done a better job.

Unfortunately, change is difficult since the teacher's unions have an iron grip on public education and many blue state politicians who owe their elections to union cash and get-out-the-vote manpower.  All the extra money we have poured into public education over the last 20-30 years, and there has been billions of it, has mostly been captured by public school employees, both teachers and especially the growing cadre of administrators.  The only possible way is to break the monopoly -- a monopoly far more destructive than companies like Comcast Cable ever were -- is with school choice.  Parents have got to be empowered to move their kids out of the failing monopoly schools.  As a bonus, school choice would quiet the culture war in that parents who want their kids taught there are 53 genders or just 2 can find appropriate schools for their children.

4. Conflating Race with Culture.

Comedian John Cleese said it as succinctly on Twitter:

I'm not a racist. I'm a culturalist I believe some cultures are superior to others.   For example, I prefer cultures that do not encourage wife beating, paedophilia, clitorectomies, stoning and constant inflation of the male ego

Mr. Cleese by the way is potentially in trouble with the British government for pointing to ugly things in Islamic culture and religion (as practiced today in many places).  This is ironic since the folks most upset about his comments on Islam were silent, even mostly supportive, when he nuked Christianity from orbit in several different movies and spoke out directly against the head of the English state church.

I should be clear that by “culture” I don’t mean the traditional foods a group eats or the clothes they wear or how they braid their hair.  All of this adds richness to a society, at least until the “cultural appropriation” morons start howling.  But criticism of a culture is fine, even warranted, when their “cultural practices” include mistreatment of women, sexual minorities, or anyone outside the clan group.  Many of the world’s people live in low-trust societies that are highly clannish or tribal.  These cultures show very little respect for the people, property, and laws outside their clan.  Rightful criticism of these cultures have nothing to do with race – Sicilians around 1900 would have fitted this description and their culture clash with 20^th century America fills the pages of books and movies.

I can't think of anything that has screwed up discourse more in this country than the attempt to respond to cultural (or even individual) criticisms as racist.  It is absolutely toxic, and undermines the whole concept of racism.  Folks on the Left talk about the unbroken progress on social issues since the 1950's but on race I have seen nothing but retrograde deterioration since about they year 2000.  In 1995 things were not fixed but hopeful, so much better than when I grew up in the 60's and 70's.  It was understood by the core of civilized society that judging individuals solely by their race was wrong and to be avoided.   But over the last 25 years, our schools and universities have flushed this all down the drain and have taught exactly the opposite.

5. Compete misunderstanding of how political power works.

Long-time readers of this site will be familiar with Coyote’s Law:

Don't give the government a power that you would not like your worst political enemy to wield

The reason for this should be obvious but apparently isn't -- unless you intend to be the last one in power, ie your goal is to initiate a totalitarian coup with yourself left in charge -- then in the normal course of the political cycle in democratic countries, your group will eventually be out of power and your hated political enemies ensconced in your place.

Let’s focus on speech restrictions – by no means the only example but a good one to see how this works.  Everyone who wants to restrict speech (and those numbers seem to be approaching a majority even in the US) implicitly imagines that they will be the ones defining what can and cannot be said.  But how do you have that confidence in a democracy?

A great example is from the pandemic when then-Democratic Senator Amy Klobuchar proposed the Health Misinformation Act.  The legislation, never passed fortunately, would have given the director of the HHS immense new powers to regulate health-related speech.  Her justification was to end “misinformation” about vaccine hesitancy, COVID treatments, and even COVID origins.  Forget for a minute that some of the speech she wanted banned turned out to be correct.  Forget about the totalitarian impulse here to muzzle those who disagree with you.  The point I want to focus on is that today the head of the HHS who would have been given all this power to regulate health-related speech is RFK, Jr., a person whose beliefs in the health realm likely horrify Ms. Klobuchar.   Per Coyote’s Law, her proposed new powers DID end up in the hands of her worst political enemy.

But what if one is assuming that we are coming to a sort of political end of time, where one political party remains in power permanently?  This is where people really do not understand history.  Everyone assumes that if their movement takes over, the well-intentioned people like themselves who are the intellectual vanguard of the movement will be in charge.  But that never happens.   Once one creates a one-party rule backed by increasing power, the nice people do not remain in charge, they end up against a wall.  The ruthless people like Stalin and Mao and Pol Pot grab power.  There is no outcome where nice, well-intentioned people end up at the top of a country with one-party rule.

6. Bonus Selection: Wars of Choice

It is a delusion, perhaps a hubris, that has infected all Presidents in my lifetime.  It goes like this:  with by FAR the strongest military in the world, wouldn’t it be great to use it to topple bad regime  ___ [fill in the blank].  I will confess the US seems to have some success at decapitating regimes if we put our mind to it -- the Diem coup (and execution) in South Vietnam, the lukewarm (at best) support for the Shah of Iran that contributed to his ouster, Saddam Hussein in Iraq, the Afghanistan invasion, Gaddafi in Libya, Maduro in Venezuela, Noriega in Panama, and now much of the previous leadership of Iran.  The problem is that we don’t have a very good history of putting something better in place following  that leader.  The Gaddafi killing and its aftermath is a great example – he was a bad guy that did bad things but the country is in undeniably worse shape after the chaos that followed his death.

There are several reasons we are seldom successful

1. We almost never really understand a country, how its power structures work, and how strong the opposition parties might be. In Iran the US vastly overestimated the strength of the opposition and underestimated the tight grip the Republican Guards have on the government
2. While US military strength may be much greater than that of the target country (though drone warfare may be evening the odds), we tend to have asymmetric pain tolerance. We can impose painful embargos and bomb the cr*p out of their facilities, but what accountability do Iranian leaders face for all this?  Why would they suddenly give up?  In fact the bombing is probably building loyalty among parts of the citizenry.  On the other side, US leaders have only limited pain tolerance.  Nobody from the US is dying and no one is getting bombed but some tankers get botted up in the Straights of Hormuz and diesel prices go up by a buck or two a gallon and the Republicans are in a panic about their midterm chances.  Iran’s driving up diesel costs, a trivial outcome compared to what we have done to them, has even caused us to think about changing sides in an entirely different war (Russia and Ukraine).

The current war, entirely a war of choice (perhaps of whim) is already tremendously expensive and the costs will be born for years as we either have to pay for restocking expensive munitions inventory or else we lose the next battle because the cupboard is bare.

In what has become something of an annual tradition, here is this year's response to Princeton's annual giving request

My short answer is that I am not interested in donating to the University. 

What follows is the longer answer.  I probably should have found a previous year’s version of this letter that was better organized and sent that again, but lacking access to my files here are a few thoughts.

When I was at Princeton, the University used to reject the idea that it was a “trade school” whose sole mission was to teach future professionals the details of their craft.  Instead, the University insisted its mission was to create better citizens – and I bought into that when I was there in the 80’s.  But I no longer believe this is true.   I don’t see many graduates of any Ivy League school participating in our polity in a reasoned and mature manner or bringing to bear a sophisticated understanding of history, economics, and political theory to public discourse.  Heck, in many cases I don’t even see them acting like adults.

I suppose it will be easy to write this off to being more of the same from supporters of the current US President, except that I am not a supporter of the current Administration and have been sending these same concerns in letters to both the current and former Princeton presidents.

A partial list of these concerns include:

• Reduction of standards in admissions, grading, and even the seriousness and rigor of the academic material itself. To some extent the meta problem is the complete collapse of K-12 education (and more narrowly K-5 education) but rather than highlight and push back against falling levels of preparation, Princeton has joined the parade to mediocrity and lowered its own standards to paper over the problem.
• Hostility to certain races and ethnic groups that became so bad it caused me to quit participating in Princeton recruiting in 2017 because I could no longer look qualified Asian candidates in the eye and tell them honestly they had a chance
• Lack of intellectual diversity in the faculty and administration. I find it astonishing that a university – which is primarily an institution of ideas – would focus primarily on diversity of skin pigment and reproductive plumbing rather than diversity of ideas. Universities like Princeton refuse to admit that a diversity of ideas and political outlooks/assumptions might even be important.  Such a monoculture is never healthy.
• Rewarding virtue signaling over rational debate combined with a rejection of reason in favor of some sort of emotional calculus. Not only has the university developed a monoculture, but it is one based on a post-modern, anti-enlightenment, anti-rational philosophy that ironically rejects almost every principle on which modern universities were founded.  It is almost like a return to medieval scholasticism, where students are taught to torture facts into defined narratives and dogmas.
• Emphasis on promoting activism over other paths to living a productive life, an emphasis that starts in the admissions process
• Releasing graduates with no comprehensive understanding of history or economics but with fabulous AI- and consultant-polished application essays and theses based on personal lived experience. Why are schools training students to wallow in their own experience when their mission is supposed to be (or used to be) about broadening knowledge and awareness – exactly the opposite?   Is this education or mental health therapy? The one thing I did NOT need Princeton for was to contextualize how much it sucked to be a 16-year-old academically focused student at my high school.
• Making all the personal political, with 100% litmus test scores necessary to avoid exclusion. I remember at Princeton we had a table of 8-12 shifting members (“creatively called ‘the table’”) who ate together every day for two years.  The group had everything from Christian Conservatives to Marxists and we argued about everything, but we have all been friends for life. 
• Lack of any sane control on administrative spending, which has caused costs to skyrocket. I know that due to the generosity of Princeton alumni, these costs are manageable, but just because the school can afford this administrative bloat does not mean that it should.  I would never donate to a charity where more than half the money goes to administrative overhead.

All this ignores more recent issues with which I am less familiar, such as the horrifying return of overt antisemitism and student use of AI to thwart both learning objectives and the honor code.  Princeton’s response to both of these seem puzzlingly slow, but I have lost some of my connections on campus and don’t want to speak from ignorance.

When I graduated from Princeton in the 1980s, I would have gladly hired any 10 random people in my class for a corporate startup (if I had such a thing at the time).  After 2003, when I did own my own large company of about 1600 employees, I would never have hired an Ivy League grad.  Many of my managers had no degree at all (up to my COO and director of HR) and if we needed a college grad we would look for a scrappy young community college student long before someone from the Ivy League, even without considering the difference in price.  As a minimum, the local kid was less likely to hold a sit-in in my office.

I would love someday to support higher education again and would happily fund any institution that was demonstrably taking a shot at even some of these issues.

Yes, it is "systemic" not "systematic".  Oops.  I will not re-edit the post because I am past feeling the need to cover up my dumber moments.

I pretty much hate the term "systematic racism," which is a clever rebranding by the DEI folks of the Christian concept of "original sin."  Try to tell the Church that you have behaved ethically?  Doesn't matter, you still need us to remove the stain of your original sin.  Try to tell the DEI trainer you don't have a racism problem?  Doesn't matter how you act, you are part of the systematic racism.

I want to go on a brief (but typical of this blog) digression.

Years ago, probably in 2017 after the Charlottesville / proud boys kerfuffle, I had a Jewish friend express his concern about rising Right-wing antisemitism.  He and I don't really talk politics much but my sense is that -- like many Jewish voters in the Northeast -- he is a reliable Democratic vote.  I remember telling him that I really did not think the sort of knuckleheads at Charlottesville presented much of a threat.  He asked me why.

I had to think about if for a minute -- I had a gut feel my statement was true but I had not really thought about it carefully enough to understand why.  After pondering it for part of dinner I finally said that I didn't think the antisemites (and overt racists) on the Right were a threat because most of them were low-status.  They did not have the power to do anything.  It's not like they were hiring for Bank of America or on the admissions committee at Harvard.  People with any sort of status or authority on the Right did not respect or follow these people (they might shill for their votes, but politicians of all stripes pander to the most absurd fringes of their part for votes).  [Almost without thinking about it I said that if I were he, I would be more worried about antisemitism from the Left, because the folks in the BDS movement (for example) on universities are just the opposite of antisemites on the Right -- they are among the elite.  I seldom am very prescient on cultural trends, but at the time I was very involved with the issue of discrimination against Asians at Princeton, and I thought I saw some parallels with Jews.  I think we have all seen the explosion of antisemitism that has come out of the mainly Leftish elite over the last year].

When I grew up in the South in the 1960s and 1970s, racism was overt.  Things began to improve remarkably in the by 1980, though I remember at that point my dad could not get the Exxon CFO into our country club because he was Jewish and there was pushback when George Forman tried to buy a house in tony River Oaks.  By 2000, a generation later, much of that crap was gone, or at least way better.  But they key change that should have made these changes sustainable was that racism was not only isolated to lower-status groups, but it became seen as a marker for being low-status.  Demonstrating racism became the reverse of virtue-signaling -- it marked one as a loser.

If there is such a thing as systematic racism, then it has to be perpetrated by people who are part of the system.  People like the proud boys are outsiders -- I guarantee they are not on any country club membership committees.  They are not determining Ivy League admissions.  They are not hiring at Goldman Sachs.

I do think the system goes wrong for blacks but it is not in any arena controlled by the proud boys.  And I  have a strong opinion on where that system failure lies:  K through 12 education, and probably even more specifically K-5 education.  We have affirmative action in the workplace for blacks.  Why?  Because there do not seem to be enough prepared candidates so we give less-prepared candidates a leg up.  Before that we have affirmative action in college for blacks.  Why?  Because there do not seem to be enough prepared candidates so we give less-prepared candidates a leg up.  We keep changing the SAT test.  Why?  Because blacks historically struggle to score as well as whites and other races on the test.  We keep changing (lowering) high school graduation requirements.  Why?  Because to many black children fail to graduate with the higher standards.

All of this stuff are after-the-fact attempted work-arounds that avoid fixing the real problem:  K-12 education is totally failing black kids.  Any root cause failure analysis would get to this conclusion.  You want to say that systematic racism exists?  Well here is the place where the system is totally failing one race.  If I were more of an expert, I could probably tell you which grade it is where things go off the rails but my guess is that it is an early grade where reading and basic math are not getting taught.

If I were the biggest racist in history and wanted to come up with a Dr Evil scheme to destroy blacks in America, I could not come up with a better plan than the K-12 education system, particularly in many large cities.  So here lies systematic racism, right?

Well, here lies the systematic failure to help African-Americans towards prosperity.  But it is hard to call it racism when in most of these cities the entire school board, the city council, and the mayor are all black or mostly black.  Here is the school board in E. St Louis -- not many proud boys there.  Here it is in Chicago.  Both of these districts are lavishly funded -- East St Louis spends over $25,000 per student and has a 12:1 teacher ratio  (the national average is about $18,000 per pupil and 14:1).  The student body is 96% black and US News report that in E. St Louis  "4% of high school students tested at or above the proficient level for reading, and 7% tested at or above that level for math."  Well no surprise that Blacks are struggling when freaking 96% of them graduate from public school systems like this without being able to read.  No affirmative action plan ever invented is going to magically create a future for adults who can't read or do math.

This is a f*cking crime, and it has nothing to do with racism or funding.  Trump can make headlines getting rid of DEI programs -- fine, they were a fix for this problem that was never going to work.  But until we seriously talk about public school education, we are not serious about fixing the systematic problems blacks face.  And the system is going to fight back hard.  Already folks in the system are telling us that the testing that shows blacks doing poorly should be eliminated.  Why?  Well they say it is to help blacks but that can't possibly be true.  Its like telling me that I am better off not getting a cancer test and finding out I have cancer.  The push to eliminate testing is a push to cover up this absolute tragedy by the insiders who are a part of it.

Anyone think there are some smart people out there with access to capital that could provide a better education privately for $25,000** a year in a school choice system?

** Postscript:  $25,000 is an average.  Typically in most school systems elementary school costs might be half the average and high school 150-200% of the average.