March 9—Contrary to the hyperventilation from major U.S. media, which claim the resignation of Gary Cohn is more evidence of the chaotic and dysfunctional character of President Donald Trump's presidency, a Washington insider described it is a major defeat for the City of London/Wall Street financial elite which have dominated U.S. economic policy for decades.
Further, he said, he is delighted by the news, as it opens the possibility that Trump can get back to the economic themes that helped him win the 2016 election. In particular, he pointed to restoring Glass Steagall banking separation, and the prospect for a "LaRouchian approach" to infrastructure development. Cohn, he added, has been the inside operative for those bankers and neo-liberal financial titans who fear Trump could follow the economic program outlined by LaRouche. Reading between the lines of the anti-Trump media, it becomes evident that this is the real reason Cohn's departure is causing so much angst on Wall Street.
Cohn, who served as the Chair of the National Economic Council, resigned in opposition to the tariffs on steel and aluminum imports announced by Trump earlier in the week. The New York Times on March 6 identified Cohn as the "strongest voice for free trade in Trump's inner circle," writing that, though a Democrat, he "served as a proxy for the business wing of the Republican Party"—a reference to the fact that among Cohn's closest allies in the fight to prevent Trump from reversing the free trade policies of his predecessors, Bush and Obama, are House Speaker Paul Ryan and Senator Orrin Hatch, the chairman of the Senate Finance Committee. Both Ryan and Hatch are Republicans.
More direct in its coverage, the Capitol Hill daily Politico began its article on Cohn's departure, "Wall Street is losing its main man in the White House."
Cohn came to the White House following a twenty-six year career with Goldman Sachs, most of it spent in its trading department, which had played a leading role in driving up the appetite for risky speculative investments, which went through the roof following the repeal of Glass Steagall in 1999. Goldman's trading department was at the forefront in "financial innovation", a Wall Street term for creating exotic-but-worthless assets, which were then bought and sold, with a profit made on each sale by the traders. This practice was largely responsible for the mortgage/backed securities bubble which crashed in 2008, wiping out hundreds of billions of dollars in pension and retirement funds, home values, and savings of small investors. While its clients suffered the losses, Goldman and other trading firms were saved, with huge bail outs from the U.S. government and the Federal Reserve. Cohn was the #2 man at Goldman when he left the firm, to work at the White House.
COHN VERSUS TRUMP
During his presidential campaign, Donald Trump repeatedly bashed Wall Street for the speculative excesses which led to the 2008 Crash, accusing both parties of doing Wall Street's bidding in return for campaign cash. He attacked the bailout policies of Bush and Obama, insisting that his Party's Platform include restoring Glass Steagall banking separation. In the last weeks of his campaign, this promise became more prominent, as he made the contrast with Hillary Clinton, who said she would never even consider bringing back Glass Steagall. Further, Trump also promised "HUGE" investments in modernizing collapsing U.S. infrastructure, while attacking free trade agreements, from NAFTA in the 1990s to Obama's Trans-Pacific Partnership, as examples of corporations and politicians "selling out" American manufacturing and workers, for the sake of higher profits from overseas.
These themes resonated with American voters, especially among blue collar workers in the former industrial heartland of the Middle West, which had become a "Rust Belt" due to the embrace of free trade, and the emphasis of economic policy on short-term profits over long-term investments in physical production. It was voters in these states, many of whom had been Democrats, that provided his margin of victory in the election. His appointment of Wall Street insiders Cohn, and Steve Mnuchin, another Goldman man, as Treasury Secretary, raised concern among his supporters, but Trump pledged that they would help him bring the banking and corporate sector along behind his policies.
This has turned out to be a colossal misjudgment, as Cohn and Mnuchin have been sabotaging each of his promises, in collaboration with Wall Street Democrats, and pro-free trade Republicans. Leading examples of this are:
- Dropping Glass Steagall in favor of further banking deregulation. Both Cohn and Mnuchin paid lip service to Glass Steagall in the lead up to their Congressional confirmations, but whenever Trump asks them about it, he is told this is "not the time", as it would interfere with the "booming economy", typified by the stock market bubble. Instead of real regulation, beginning with Glass Steagall, they are pushing Congress—backed by large sums from banking lobbyists—to remove the few regulations which were slipped into Obama's phony Dodd Frank "reform" bill. The cash from the lobbyists have assured that the impetus for further deregulation, which would primarily benefit the "Too Big to Fail" banks, has support from both Democratic and Republican Party Congressmen.
- Undermining Trump on infrastructure. Instead of adding $1 trillion to $1.5 trillion to the federal budget, as Trump repeatedly pledged, Cohn has been the leading advocate of using Public-Private Partnerships, for-profit scams, which would allow privatization of existing infrastructure, with minimal investment; and of foisting the costs on to state and local governments, which under Cohn's plan, must come up with 80% of the government funds expended, even though most have no money to allocate. Trump is known to be skeptical of PPPs. The bill produced by Cohn has little chance of passing Congress, thus condemning the U.S. to minor programs to patch up decaying infrastructure. His penurious plan has the full support of "deficit hawk" Republicans, who promote the ignorant view that infrastructure projects must "pay for themselves." LaRouche's proposal, to fund major projects through setting up an "Infrastructure Bank" as a separate capital budget, able to generate "Hamiltonian credit", is gaining support among some Congressmen. Cohn would have never allowed it.
- Turning tax reform into a new bailout! Instead of crafting a tax policy which would provide incentives to business and industry to create jobs and investment in new plant and equipment, the bill passed by Congress was favorably described by J.P. Morgan Chase's CEO Jamie Dimon as "QE4", a reference to the "Quantitative Easing" bailout policies which gave zero percent or low interest credit to the big banks, to provide liquidity for stock purchases by the banks and their favorite clients. When the Federal Reserve last fall began a slow move away from QE, the tax bill allowed corporations to bring offshore cash back to the U.S., not for new investments, but to continue buy-backs of their own stock! Thus, in spite of the proliferation of warnings that the stock market is a gigantic, over-priced bubble which could crash at any time, funds continue to flow into stocks of zombie corporations, which are loaded with debt and make little or no profits. Cohn was the principle force behind the bill, and has urged Trump to take credit for the stock market bubble, as a sign of a growing economy. Meanwhile, real average weekly wages are trending down again, and there was no gain in productivity in the fourth quarter of 2017, as productivity remains at historically low levels. Finally, Cohn's insistence that tax returns would create a large fund for private infrastructure investments has not, and will not, ever occur.
- Sabotaged Trump's battle against free trade. In one of his first acts as President, Trump took the U.S. out of the Trans-Pacific Partnership (TPP), which Obama had pushed as a counter to China's success in both trade and investment policies, which were gaining support throughout Asia. A strong backer of the TPP, Cohn opposed Trump's rejection of it, as well as his intention to take the U.S. out of the North American Free Trade Agreement—the notorious U.S. job-killing NAFTA—or substantially re-write it. Cohn is also known for his skepticism toward trade deals with China, while Trump repeatedly praises his friendship and collaboration with China's President Xi Jinping.
TIME FOR A "LAROUCHIAN RE-SET"
Unfortunately, Trump's tariff bill will not solve the problem of the U.S. trade deficit, as it does not address the actual cause of the trade imbalance. It is not unfair competition practices of foreign governments alone which are responsible for the shortfall. The trade deficit comes from a self-imposed, destructive set of axioms, which are behind a fifty-year commitment of American policy makers in government, banking and business, to impose neo-liberal free trade policies, under which the manufacturing base of the U.S. has been systematically dismantled, with production and jobs outsourced. Investment in real physical production and infrastructure development, which increase productivity, were rejected by Cohn and his neo-liberal allies as "not cost-effective." With the shift in economic policy in the 1980s away from physical economy, to money-making schemes using junk bonds to fund mergers and acquisitions, corporate raiders allied with investment bankers looted productive firms, stripped away cash from pension funds, and shut down investment in advanced research and development projects. This became worse when fake environmentalism attacked real science and scientists, and the quick-buck, quick-delivery mentality of "consumerism" replaced the strategy of long-term investments in physical production, which had always been the basis of American economic strength.
The hegemony of neo-liberalism, with its cult of the "bottom line" leading to mindless austerity and anti-government radicalism, promoted by well-funded "conservative" think tanks, allowed financial and allied corporate swindlers to take over both political parties and with them, the Congress and the White House. Many of those who supported Donald Trump rallied to him because they had experienced profound, often devastating losses caused by this nonsense, and Trump had the good sense to define a program which addressed their concerns. Some of those supporters subsequently have been demoralized by the negative effects generated by the regime change coup plotters against Trump, others by the compromises Trump has made with the City of London/Wall Street financial interests represented, inside his administration by Cohn and Mnuchin.
Now, with Cohn out, a triumph over the anti-American policies of globalist neo-cons and neo-libs is again possible.
Through this entire period of U.S. degeneration, one constant was American economist Lyndon LaRouche's exposure of this shift from its beginning, after the assassination of John F. Kennedy in 1963, as an outright assault against the American system. LaRouche's Four Laws, his most recent and concise economic program, provides the basis for bringing the U.S. out from under the nightmare of London-Wall Street economic destruction. President Trump indicated during his campaign, and as President, that he supports the American system of economics, and has incorporated bits and pieces of LaRouche's ideas into his stump speeches. He has also made clear he will not give up his vision. Despite the lies of Russiagate, he is pursuing collaboration with Russian President Putin. Despite war mongering versus China coming from establishment neocons, he has reasserted his commitment to work with China's President Xi. In the last days, he reminded people of the disaster of the GW Bush presidency, calling the Iraq war "the single worst decision ever made," and went after Obama for his role in launching Russiagate.
Too many Trump supporters are waiting for "men with white hats" to come in and rescue his presidency from the British-directed institutions now popularly called the "Deep State." Instead, if they wish this presidency to succeed, it were better that they master the science of economics embodied in LaRouche's Four Laws, and mobilize for them to be implemented. The resignation of Cohn opens a pathway, but offers no guarantees. That can only be provided by an impassioned and educated American electorate, which mobilizes Congress to break with the corruption of the present collapsing paradigm, and gives them the courage to work with the President, to realize the anti-Wall Street, pro-American System vision which led to his election.
There is no time to lose.