What should we expect after a financial crisis?

Today is September 11th, a sad day for many people including myself. I lived in New York City when the terrorists attacked that day. And I witnessed the Twin Towers fall. A college friend who worked there was killed in the attack. I don’t talk a lot about the personal impact 9/11 had on me and my life because I keep those things private. But 9/11 was as profound an event as any in shaping my life — for good and for bad.

I think the US and how Americans think about their collective vulnerability was forever changed by 9/11. And so, it makes a good segue way into today’s newsletter where the big topic is how crisis changes societies. And here, I want to focus on the Great Financial Crisis.

1 – Andrew Ross Sorkin on crisis

Let’s start with this:

The crisis was a moment that cleaved our country. It broke a social contract between the plutocrats and everyone else. But it also broke a sense of trust, not just in financial institutions and the government that oversaw them, but in the very idea of experts and expertise. The past 10 years have seen an open revolt against the intelligentsia.

I think that’s all true. Like 9/11, the financial crisis has had a deep and lasting impact on psyches of Americans, of Brits, Spaniards – around the world, it has had a deep and lasting impact.

Let me ask you this: if the financial crisis had never happened, would we have got Brexit in 2016? Would Trump have been elected? Would Le Pen have polled so well in France’s election last year? Would we have reacted so violently to immigration into the US and Europe? It’s hard to say. But I think we are less tolerant because of the crisis.

I’m not going to write a long piece here. But I did want to remind you what happened in other crises. I was just looking at the Wikipedia entry for the Long Depression that followed the Panic of 1873. It led to the Compromise of 1876, ended Reconstruction in the US south, and paved the way for Jim Crow. The Depression lasted until 1896.

Then, there’s the Panic of 1907, which led to the formation of the Federal Reserve System. That ended in Depression too.

And there’s the Crash of 1929, which became truly global in scale. Ending in Depression, it definitely fuelled the rise of Hitler and Mussolini. One could say, the crash sowed the seeds of war by enabling those two right-wing populists.

Read the Sorkin piece. I think it’s pretty good. Andrew says it led to Trump. I think we’re in store for still more populism, resulting from the ornery post-crisis mood. And, frankly, I wouldn’t rule out war.

2 – Trump launches fresh attacks on FBI and Justice on 9/11

As politicians and others went on Twitter on Tuesday morning to mark the 17th anniversary of the Sept. 11, 2001, terrorist attacks, President Trump used the platform to launch a fresh round of assaults on the FBI and Justice Department.

Trump — apparently seizing on allegations leveled the night before by one of his conservative allies in Congress — referred in particular two former FBI officials who have become infamous for trading anti-Trump texts: Peter Strzok and Lisa Page.

The president repeated a claim from Rep. Mark Meadows (R-N.C.) that the pair employed a “media leak strategy” to undermine his administration, then blamed the bureau and Justice Department for inaction on the matter.

That’s from the Washington Post.

It’s fitting that we are reminded on a somber day like today that Trump maintains his populist bona fides by launching an attack on his own agencies. I think his attorney general Jeff Sessions is toast. Trump is waiting until after the mid-term Congressional elections to sack him. And then, he will probably sack Deputy AG Rod Rosenstein too. That will allow him to shut down the Mueller probe.

Why?

Here’s how I put it in August:

Donald Trump played fast and loose with his real estate business. And given the lax environment for white collar crime, he got away with it for decades. But, now under scrutiny as the President, he can’t get away with it. All of the dirty laundry will come out. And likely we will see multiple criminal acts, particularly money laundering I suspect.

Trump was broke and untouchable in the 1990s. He turned to Russia to solve his financial problems. Likely, he engaged in significant white collar criminal activity, including money laundering. That’s why he hasn’t released his tax returns. And that’s why he wanted the Mueller investigation to steer clear of his finances.

But, of course, Trump was foolish to think he could become President without all of his misdeeds coming out. The question is whether people care, whether he gets prosecuted. In August, Marshall Auerback made some good points on why he might not get prosecuted.

Even so, Trump is desperate to consolidate power. And once the mid-terms are over, wait and watch.