Juggling Dynamite

In a world of populist leaders and half-baked 140-character-thoughts, a sober, law and constitution-focused judiciary, is critical in checking abuse of power.  Relentless efforts to block the long-delayed fiduciary standard for those giving retirement advice is classic.

Inspired by President Trump’s recent memo to the Department of Labor to review and possibly rescind its incoming fiduciary rule, financial trade groups brought yet another application to the courts seeking to overturn it. Fortunately, Chief Judge Barbara Lynn for the U.S. District Court for the Northern District of Texas was there to hear and reject their arguments.  This marked the second time that the federal district court has upheld the fiduciary rule. A third court, rejected an earlier effort to stay its implementation.

Judges and lawyers know all about fiduciary duty, it is a legal standard that was established by the courts of equity in hearing thousands of abuse of trust cases over centuries. Only those enriched selling risk to others and calling it ‘advice’ in name only, would argue against the obvious need to put the client’s financial interests before the seller’s profits. But unfortunately, the sales force remains fully in charge of governments at this point.

This was confirmed last week by ex-Goldman Sachs head Gary Cohn–now Trump’s new National Economic Council Director– who said, apparently without any embarrassment:

“We think it is a bad rule. It is a bad rule for consumers, this is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”

Good one.  Yep, predatory, destructive financial products and advice do sometimes kill people via heightened stress, trauma and harm to health, but more often they just destroy peace, stability, families and happiness while undermining the financial strength of a nation and the world. No big deal, right?

We are living today through the carnage this sales-based, responsibility-free system has wrought.  And we will be paying the price for the deficits and debts it’s created for years to come.  It will require a strong judiciary as well as public revulsion to finally push the self-serving financial cartel back in service to the economy, rather than the other way around.  A fiduciary standard and personal accountability are foundational to recovery.

Established by Republican President Nixon in 1970, the Environmental Protection Agency (EPA) was cutting edge from inception. Far from anti-business or green idealism, the agency was a calculated economic and public health decision that proved the catalyst for great technological innovation, job growth, improved health and prosperity since. True strength and progress don’t come from one side oppressing and silencing competing interests, but rather from finding balance between all stakeholders. This is as true today as ever.  Those seeking to gut or nullify this important agency should be opposed, not lauded.  See Why the U.S. Environmental Protection Agency reflects Patriotism:

“…the potential for job creation in green technologies is immense and is already much larger than generally recognized. Solar already accounts for the largest share of employment in the US power generation sector and the wind industry, which is heavily reliant on manufacturing, employs more than 100,000 Americans. The United States’ manufacturing renaissance that President Trump envisages can come on the heels of what Americans have already accomplished in environmental protection, pollution reduction, and clean energy transition.

The confirmation hearings for Scott Pruitt, the nominated administrator of the EPA, have raised serious concerns that the positive dividends of green investment might be ignored by the new administration. Mr. Pruitt has argued that his past lawsuits against the EPA were focused on letting States have more devolved control over pollution control. Yet, his reluctance to engage on the remarkably positive record of the EPA in spurring innovation should be a matter for concern to President Trump. Air and water pollution are inherently trans-boundary and state regulation of these sectors has its limits. Ultimately, having a clean environment should be a unifying element in our polity as Americans – protecting our land, water, and air should be a mark of truest patriotism.”

According to the Bank of Canada, Canadian household debt rose to $2.005 trillion dollars in December 2016, a year over year increase of 5.2%; accelerating even faster in December, at a rate of 5.8% annualized.

Consumer debt is now 9% higher than the total debt of all businesses in Canada. 18% higher than the national GDP, and 30% higher per capita than in the US. See:  Canadian consumers set a new debt record, over $2 trillion in December 2016. Here is the chart.

“…if someone says it’s not all that bad, make sure you don’t let them give you any investment advice.

The growing levels of debt is worrisome on its own, but the acceleration is terrifying. One of the slowest months for real estate sales resulted in an acceleration of consumer debt. Canadians are borrowing record amounts of debt to pay for shelter, diverting financial resources from the rest of the economy. No one’s sure when Canada’s real estate addiction is going to end, but it won’t be pretty when it does.”