The Supreme Court Adds Straws To The Camel's Back

June 24, 2021

The Supreme Court Adds Straws To The Camel's Back

How the SCOTUS ruling and a Waters “fistbump” signal the decline in conservatism

This week we explore:

• The Supreme Court gets progressive and facilitates the Biden agenda.

• The massive blow dealt by the Supreme Court to the NCAA and what it says for the future of minimum wage.

• How one “fistbump” reeks of a politically motivated Federal Reserve.

“When nothing seems to help, I go and look at the stonecutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. ...Yet at the 101st blow it will split in two, and I know it was not the blow that did that, but all that had been done before.”

— Jacob Riis

Dear {first_name},

On Wednesday, the conservative leaning Supreme Court passed a surprisingly progressive decision, ruling to keep control of lending giants Fannie Mae and Freddie Mac squarely under government control.

The court ruled that the director of the Federal Housing Finance Agency (FHFA) can be fired by the president for any reason, allowing President Biden to replace Mark Calabria, the Trump-appointed head of the FHFA.

One of Calabria’s main goals while in office was to move mortgage giants Fannie Mae and Freddie Mac -- which are regulated by the FHFA -- out from under government regulation and back into the hands of private investors and shareholders.

What’s surprising about the ruling is that this is a heavily right-leaning Supreme Court, with 3 out of 9 Supreme Court Justices (Neil Gorsuch, Brett Kavanaugh, Amy Coney Barrett) nominated by President Trump.

Appointing a Supreme Court Justice is one of the most impactful and influential legacies a US President can have. Justices sit for life, and are nominated by presidents based on their political and moral views, which generally reflect those of the sitting president and his party.

Trump was extremely right leaning, and widely regarded as a “pro-business” president. He selected conservative justices with his nominations.

But this wasn’t the Court's only big decision. Today the Supreme Court ruled in favor of student athletes and supported the idea that they should be compensated for the billions of dollars they make for the NCAA.

So the fact that a Trump appointed court...

Issued two major progressive leaning decisions...

Allowing for the removal of a Trump appointed agency head…

And keeping the massive Fannie Mae and Freddie Mac mortgage giants under government regulation…

And then ruled in favor of student athletes against one of the biggest businesses in the world in the NCAA...

This should come as a wakeup call as to the ongoing mindset shift occurring at the highest levels of government.

We believe it signals that sweeping progressive reform is a directional shift well underway, and evidence that The Great Devaluation is playing out in front of our eyes at the very highest levels.

The BIG Picture

Wednesday’s ruling gave a boost to big government in what should have been an easy win in big business’s mission to move Freddie Mac and Fannie Mae out of government control and into the privatized arena.

Instead, that crusade just ran into an unexpected wall presented by SCOTUS, leaving us to question:

1. How big a government is too big?
2. Has the pendulum already swung too far?
3. Could this all be a result of the Federal Reserve’s policy manipulation?

Big business and big government have been at odds with one another almost as long as our country has existed.

Typically the bigger the government gets, the more challenging it is for private business to grow. Regulations, higher corporate taxes, and smaller profit margins are the order of the day when the size of government continually expands.

So when a heavily right leaning SCOTUS (which favors the Republican agenda) brings down an unexpected and progressive ruling, what does it say about the Republican agenda as a whole, and its position on the field?

No sooner than one day after this first progressive leaning decision was made this week, the Supreme Court made another heavily slanted progressive decision, one which poses a big challenge to the way the NCAA will continue to do business moving forward.

The Court cleared the way for education related compensation for student athletes, such as tutors and internships, in a decision that is especially bad news for the multi-billion dollar business of the NCAA.

Justice Neil Gorsuch wrote, “this order may encourage scholastic achievement and allow student-athletes a measure of compensation more consistent with the value they bring to the schools.”

Justice Kavanaugh took it a step further than even that, suggesting that the NCAA was suppressing the pay of student athletes that generate billions of dollars of revenue for the schools.

“Nowhere in America can a business get away with agreeing not to pay workers their fair market rate,” Kavanaugh wrote. “Under ordinary principles of antitrust law, it is not evident why college sports should be any different.”

The decision, while narrow on the immediate implications, is a warning to the mindset shift that is The Great Devaluation.

Gradually then Suddenly bundle

We lay it out in detail in our Gradually Then Suddenly bundle

Taking the balance sheet from $4 trillion to $8 trillion essentially overnight, with no apparent negative consequences to date, has sent a false signal of health and growth to Americans, investors, and elected and appointed government officials.

Fundamentalists once seeking to hold the line are now throwing in the towel on their more conservative views due to the ‘Everything Bubble’ created by the Fed’s money printing, where everything looks like it’s working.

“How are we going to pay for it?” is simply not a question anyone seems interested in asking. Perhaps rightfully so.

If it ain't broke, why fix it? If we can go into extreme debt with no consequence, why not just continue to keep doing more?

But that’s the real problem with today’s sugar high. It feels good.

Stocks are at all-time highs, bonds are right there with them and everything looks fantastic from within the bubble.

In fact, the progressive left will highlight that these modern monetary theories work… and that the more they work, the more they will argue we need them to continue.

We remind everyone of the idea of the straw that breaks the camel's back. Each and every additional straw that doesn’t force the camel to collapse becomes further evidence that the camel is strong enough to support the weight.

Until one last piece of straw finally forces the camel to its knees.

The point is that If nobody is left to suggest we should slow down here, we won’t.

What’s ironic is that many voters elected Trump in order that he could select Supreme Court Justices that would serve as a line of defense against runaway big government and the socialist liberal agenda.

Instead his conservative appointed court is slipping into very progressive decisions.

It identifies a new direction...

We’ve charted out this progression in our Gradually Then Suddenly bundle and remind our readers that this is all supported by a new and progressive Federal Reserve working in conjunction with the left.

As if we needed further evidence, this week also witnessed Fed Chairman Jerome Powell give testimony before Congress. While we will discuss in great detail in this month's FFC what we believe the underlying story of his testimony represents, we first highlight what we see as signs of obvious collusion between the Fed and Democratic party.

We remind everyone that the Federal Reserve is meant to be “apolitical.” This means that they are not meant to support any political party, but rather are meant to preserve the economy and the stability of the U.S Dollar.

It’s why we found it really odd when Jerome Powell physically fistbumped Democrat Maxine Waters following his testimony before Congress on Tuesday.

Ms. Waters joined the hearing late and appeared just in time to commend Mr. Powell on his efforts, stating for the record:

“I’ve worked with Chairman Powell for quite some time now, and I was so very pleased with the way that he worked even with the treasurer during the pandemic, and of course now with Yellen, who is our Secretary of the Treasury now. The two of them work very VERY well together, and I was very pleased that at the beginning of this pandemic they both said ‘you have to go big, you have to think big’ and that’s quite unusual for a Fed chair who is usually more cautious and more careful about expenditures.”

Waters then spoke directly to Powell, telling him “I’ve never really been worried about inflation, but I want to keep an eye on that, and I want you to keep us informed about what is happening in our economy...”

Waters went on to add “We’ve got to answer some questions about employment, we’ve got to find out what is happening with the need to increase minimum wage, they’re looking for better wages and better opportunities.”

So… Maxine’s not worried about inflation, wants to raise the minimum wage, and wants Powell to work with the Treasury to oversee the administration’s pandemic response and the US economy as a whole.

In other words, let’s implement a highly inflationary deficit spending package that allows us to add wage hikes that then push the Fed’s desired inflation higher, and trust the man telling us that it’s all good to monitor the situation that he’s responsible for creating as he prints trillions of new dollars that will be necessary to make it all happen.

We fear this episode illustrates that The Federal Reserve has become a politically tilted body of the new big government, and are working hand in hand with, and acting as the pawn of, the Biden administration.

That fist bump represented even more as we see it.

We believe it was a public “well done for getting rid of Trump” silent message on a public stage.

Lest we forget, the main reason so many voters supported Trump to begin with was for his supportive stance on how to grow our markets and his staunchly pro business stance.

In fact, one of the big campaign messages from Trump during the campaign was that “if you don’t want your 401k to drop by 50% elect me, if you want to lose your hard earned savings, elect Joe Biden.”

But thanks to $4 trillion in freshly minted, newly printed dollars, the opposite has occurred.

The S&P 500 was at 3200 points on election day, and closed at historic highs of 4266 points today. That means the S&P is up 33% since the removal of the most pro business president this century. This in a matter of just eight months!

The net effect is that today the progressive policies being instituted look good. It’s why we are seeing the signs of erosion from even the most conservative corners.

This week's Supreme Court rulings are another sign of the erosion of the conservative mindset.

As we keep adding straws to the camel’s back with dollars we don’t have, and with no plan of paying back other than through inflation, we will witness an erosion unlike anything we’ve seen in America since the 1970’s.

Only this time, the camel won’t simply fall to its knees, it will more than likely collapse entirely, pinned to the ground with a weight of debt on its back that will keep it from ever rising again.

Best,

Adam Baratta

CEO

Brentwood Research