The Wall Street Journal - 30.07.2019

THE WALL STREET JOURNAL. Tuesday, July 30, 2019 |A

W

ill the world’s curren-
cies face a reckoning
in 2019? This year
gold has risen 10%
against the U.S. dollar.
Alternative currencies like bitcoin
have risen about 160% against the
dollar. All other major currencies
have also fallen by similar magni-
tudes against both gold and bitcoin—
troubling signs. The larger story is
that an unnecessary return to fiscal
and monetary stimulus, signaled over
the past few weeks by the Federal
Reserve and the European Central
Bank, may produce a crisis of confi-
dence in fiat currencies, including
the U.S. dollar.

Since President Nixon abandoned
the gold standard in 1971, the U.S.
and other major economies have had
unlimited supplies of money, unan-
chored to any physical commodity.
Almost five decades on, many central
banks employ quantitative easing to
inject money into their economies.
This continues despite the diminish-
ing returns to growth. A $12 trillion
wall of money from quantitative eas-
ing after the 2008 financial crisis re-

A Fed Reversal Will Store Up Trouble

mains in the global financial system.

As a result a record-breaking 40% of

global bonds yield less than 1%, and

$13 trillion of debt offer negative

yields. These low yields signal a be-

lief that inflation will be absent de-

spite the central banks’ measures.

In late 2015 the Federal Reserve

acted prudently to hike interest rates

and embark on a $600 billion quanti-

tative tightening of its balance sheet

to begin reversing the unconven-

tional easing measures from 2008.

At last the world’s most important

central bank had started to take the

lead in normalizing monetary policy.

A disciplined Fed helped preserve

the world’s faith in the fiat currency

system.

Or so it seemed. Since December

2018, President Trump has become

increasingly vocal in urging the Fed

to abandon prudence for profligacy.

He believes keeping interest rates

close to zero and resuming quantita-

tive easing are free options that the

U.S. is silly not to exercise.

Proponents of ultra-easy mone-

tary policy believe countries such as

the U.S., with floating exchange rates

and debt denominated in their own

currencies, cannot go bust. If that’s

true, fiscal spending can continue to

be funded by printing money so long

as inflation remains low. Japan argu-

ably has been implementing an ultra-

easy policy since 2013 without nega-

tive side effects.

The sustainability of ultra-easy

policy, however, rests on one further

assumption. Domestic and interna-

tional savers need to continue to ac-

cept government backed IOUs for

central banks to continue printing

the money necessary to finance fis-

cal spending.

Ultimately, faith in the fiat-cur-

rency system relies on the percep-

tion that central banks are acting re-

sponsibly. Should there be a loss of

confidence in the U.S. dollar as a

store of wealth, there could be sig-

nificant capital flight, even a collapse

in the currency. While this seems far

off, continued U.S. monetary and fis-

cal profligacy will eventually test the

faith in the fiat-currency system.

Stimulus is making a comeback.

The European Central Bank clearly

signaled its intent Thursday to cut

short-term interest rates, which it

has not done since 2016. It also sig-

naled that a new asset-purchase pro-

gram may be imminent. In the U.S.,

the Federal Reserve is poised to cut

interest rates for the first time since

2008. Some members of the Federal
      Open Market Committee signaled in
      June that they were willing to cut in-
      terest rates twice by year’s end.
      Only three months ago Chairman
      Jerome Powell indicated that the Fed
      would remain disciplined and “pa-
      tient,” since downside inflation risks
      were “transitory.” What changed?
      We suspect it is Mr. Trump’s increas-
      ing criticism, calling for rate cuts
      and another round of quantitative
      easing. Further, the escalating U.S.-
      China trade war had led bond mar-
      kets to price almost three rate cuts

by the end of 2019 at one point, sig-

naling that the Federal Reserve will

do whatever it takes to maintain GDP

growth.

By folding to these external pres-

sures and cutting interest rates while

U.S. equity markets are at all-time

highs and unemployment is at multi-

decade lows, the Fed is putting its

credibility at stake. In the fiat-cur-

rency era, the U.S. has experienced

12 interest-rate-cut cycles. Only four

have been initiated when U.S. equi-

ties were at all-time highs at any

point three months before the rate-

cut decision, and all had other valid

justifications.

Three were in swift response to

significant financial crises, including

Black Monday in 1987, Russia’s de-

fault and the bailout of Long-Term

Capital Management in 1998, and the

rapid deleveraging caused by the

2007 subprime-mortgage crisis. Even

in 1995, the Federal Reserve’s “insur-

ance cuts” followed two consecutive

months of job losses.

The Federal Reserve appears to be

flip-flopping today, and only time

will tell whether it pre-empted a

slowdown. The lack of conviction by

the most important central bank in

the world will continue to test the

market. Given how alternative stores

of wealth such as gold and crypto-

currencies have outperformed all

major currencies in 2019, we could

well be at the cusp of a crisis of con-

fidence in fiat currencies.

Mr. Yong is founder and chief in-

formation officer of Dymon Asia. Mr.

Srinivasan is CIO of PartnerRe.

By Danny Yong
And Nikhil Srinivasan

PHIL FOSTER
The central bank may

cut interest rates when

asset prices are high and

unemployment low. Why?

California Wants to Teach Your Kids That Capitalism Is Racist

C

alifornia’s Education Depart-
ment has issued an “Ethnic
Studies Model Curriculum” and
is soliciting public comments on it
until Aug. 15. The legislatively man-
dated guide is a resource for teachers
who want to instruct their students
in the field of “ethnic studies,” and
was written by an advisory board of
teachers, academics and bureaucrats.
It’s as bad as you imagine.
Ethnic studies is described in the
document as “the interdisciplinary
study of race, ethnicity, and indige-
neity with an emphasis on experi-
ences of people of color in the United
States.” But that’s not all it is. “It is
the study of intersectional and an-
cestral roots, coloniality, hegemony,
and a dignified world where many
worlds fit, for present and future
generations.” It is the “xdisciplinary
[sic], loving, and critical praxis of
holistic humanity.”
The document is filled with fash-
ionable academic jargon like “posi-
tionalities,” “hybridities,” “nepantlas”
and “misogynoir.” It includes faddish
social-science lingo like “cis-hetero-
patriarchy” that may make sense to
radical university professors and ac-
tivists but doesn’t mean much to the

regular folks who send their children

to California’s public schools. It is dif-

ficult to comprehend the depth and

breadth of the ideological bias and

misrepresentations without reading

the whole curriculum—something

few will want to do.

Begin with economics. Capitalism

is described as a “form of power and

oppression,” alongside “patriarchy,”

“racism,” “white supremacy” and

“ableism.” Capitalism and capitalists

appear as villains several times in

the document.

On politics, the model curriculum

is similarly left-wing. One proposed

course promises to explore the Afri-

can-American experience “from the

precolonial ancestral roots in Africa

to the trans-Atlantic slave trade

and enslaved people’s uprisings in

the antebellum South, to the ele-

ments of Hip Hop and African cul-

tural retentions.”

Teachers are encouraged to cite

the biographies of “potentially sig-

nificant figures” such as Angela Da-

vis, Frantz Fanon and Bobby Seale.

Convicted cop-killers Mumia Abu-Ja-

mal and Assata Shakur are also on

the list. Students are taught that the

life of George Jackson matters “now

more than ever.” Jackson, while in

prison, became “a revolutionary

warrior for Black liberation and

prison reform.” The Latino section’s

people of significance include Puerto

Rican nationalists Oscar López Ri-

vera, a member of a paramilitary

group that carried out more than 130

bomb attacks, and Lolita Lebrón,

who was convicted of attempted

murder in a group assault that

wounded five congressmen.

Housing policy gets the treatment.

The curriculum describes subprime

loans as an attack on home buyers

with low incomes rather than a mis-

guided attempt by the government to

help such home buyers. Politicians—

Republicans and Democrats—im-

posed lower underwriting standards

on the home-loan industry. Republi-

cans billed it as a way to expand the

middle class, while Democrats crowed

that it would aid the poor.

In a sample lesson on Native

Americans, the curriculum suggests

students offer their responses to a

fictional environmentalist speech by

Chief Seattle as well as an anodyne

quote about relationships from the

recently deceased rapper Nipsey

Hussle. The Chief Seattle error is

part of a larger problem. The curric-

ulum perpetuates the myth that the

Indians had the same values as pres-

ent-day ecologists. In truth, Native

Americans had a mixed approach to

nature. The curriculum writers

should have looked carefully at the

scholarly evidence presented in

Shepard Krech’s 1999 book, “The

Ecological Indian”—about, for exam-

ple, the setting of brush fires that

got out of control and the needless

killing of buffalo, beaver and deer.

The curriculum lauds bilingual

education, but it omits that this pro-

gram—in which teachers conducted

class mostly in Spanish until sev-

enth grade—failed in California and

was disliked by much of the Latino

community.

The curriculum is entirely wrong-

headed when it comes to critical

thinking. Critical thinking is de-

scribed not as reasoning through

logic and consideration of evidence

but rather a vague deconstruction of

power relationships so that one can

“speak out on social issues.” Think-

ing critically “requires individuals

to evaluate phenomenon [sic]

through the lens of systems, the

rules within those systems, who

wields power within systems and

the impact of that power on the re-

lationships between people existing

within systems.”

Such a curriculum presents a seri-

ous problem of fairness to students.

In a course titled “Math and Social

Justice,” will you be graded on hav-

ing correct answers on the math or

politically correct answers on social

justice?

This curriculum explicitly aims at

encouraging students to become

“agents of change, social justice or-

ganizers and advocates.” In the sam-

ple unit teachers are directed to have

students plan “a direct action (e.g., a

sit-in, die-in, march, boycott,

strike).” Teaching objective history

clearly isn’t the goal. Rather, it’s

training students to become ideolog-

ical activists and proponents of iden-

tity politics.

Mr. Evers is a research fellow at

Stanford University’s Hoover Institu-

tion. He served as assistant secretary

of education for planning, evalua-

tion, and policy development during

the George W. Bush administration.

By Williamson M. Evers

A new model curriculum

for ‘ethnic studies’ is a

handbook for classroom

propagandizing.

OPINION

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Environmental Extremists Favor Mosquitoes Over Mankind

A

child under 5 dies from malaria
about every two minutes world-
wide. Yet radical environmen-
talists are mobilizing against an im-
portant measure to stop mosquitoes
from spreading the disease.
Target Malaria is a Gates Founda-
tion-supported research effort to de-
velop genetically modified sterile
mosquitoes. Its approach is to drive
modified genes through a mosquito
population to produce sterile fe-
males or cause the breeding of only
males. The goal is to reduce mos-
quito populations so much that the
malaria parasite cannot be spread
from person to person.
This spring Target Malaria ran a
carefully controlled experimental re-
lease in Burkina Faso. The test fol-
lowed years of research and similar
successful releases in Latin America
and the Caribbean. None of that
mattered to the coalition of 40 lead-

ing environmental and “civil society”

organizations demanding the project

be shut down immediately.

The activist opposition to Target

Malaria is part of a larger and grow-

ing campaign against all modern ge-

netic technologies and pesticides

used in both in disease control and

agriculture. The campaign has been

promoted in recent years by United

Nations agencies such as the Food

and Agriculture Organization, as

well as by European governments

and European Union-funded nongov-

ernmental organizations.

Malaria deaths in Africa are de-

clining thanks to insecticide-treated

bed nets, spraying and better treat-

ment. But the disease remains stub-

bornly persistent in much of the

continent. The emergence of resis-

tant strains of mosquitoes and ma-

laria parasites means public-health

programs need new tools.

Field releases of genetically mod-

ified mosquitoes elsewhere—nota-

bly Oxitec’s trial in Brazil, aimed at

controlling Dengue fever—have

gone off without the dire conse-

quences environmentalists pre-

dicted. But several years ago during

the Zika outbreaks in Florida and

Texas, scare campaigns succeeded

in blocking mosquito tests that had

been approved by the Food and

Drug Administration.

There’s a long history of opposi-

tion to genetic technology, with seri-

ous human costs. Consider the de-

cadeslong effort to stop cultivation

of genetically modified golden rice,

which could save two million people

a year—many of them children—

from early death and crippling blind-

ness caused by vitamin A deficiency.

A petition signed by 144 Nobel laure-

ates calls on environmentalists to

end their campaigns and accuses

Greenpeace of a “crime against hu-

manity” for its leading role.

Opposition to modern technology

has deepened, and its highly politi-

cized ideology has captured much of

the development community under

the banner of “agroecology.” This is

a radical approach to food produc-

tion that excludes modern farming

techniques, including synthetic pesti-

cides and fertilizers, modern hybrid

seeds and even mechanization. Agro-

ecology explicitly promotes “peasant

agriculture” and the superior wis-

dom of “indigenous peoples.”

Agroecologists abhor free mar-

kets. A leader of the movement, Eric

Holt-Gimenez of Food First, asks,

“How can agroecology help us trans-

form capitalism itself?” La Via

Campesina, one of the groups pro-

testing Target Malaria, rails against

international trade and “profit at

any price.” The Third World Network

champions world-wide socialism and

blames the U.S. for Venezuela’s eco-

nomic and humanitarian crisis.

Now, with little debate, agroecol-

ogy dogma has been officially ad-

opted by the FAO, the U.N. Develop-

ment Programme and the U.N.

Environment Programme, and is be-

ing underwritten by European gov-

ernments through their development

agencies and support of environmen-

tal groups.

Like other radical “social justice”

movements, agroecology is based on

fraudulent history. FAO Steering

Committee member Miguel Altieri

describes the Green Revolution,

which saved a billion people from

starvation, as a “failed” project that

undermined the ability to address

“the root causes of hunger” and put

“global food production under the

control of a few transnational cor-

porations, bolstered by free trade

agreements.” According to the FAO’s

own data, however, the Green Revo-

lution increased the world-wide

food supply from 2,253 to 2,852 cal-

ories per person from 1961-2013,

when the global population more

than doubled.

A recent study promoted by agro-

ecologists acknowledges that their

policies would reduce food produc-

tion by 35% in Europe, which has not

given agroecologists pause. It is hard

to tell whether they champion these

policies out of sheer nostalgia or be-

cause they would prefer a planet

with fewer people. Allowing millions

to die from preventable diseases and

inadequate nutrition is certainly one

way to achieve that goal. The Nobel

laureates are right to call it a crime

against humanity.

Mr. Tren was a co-founder of Af-

rica Fighting Malaria.

By Richard Tren

Genetically altered insects

could save millions from

malaria but are anathema

to ‘agroecologists.’

From “Blame Taxes for Balti-

more’s Rot” by J.K. Walters and Steve

H. Hanke in the Journal, July 5, 2008:

If you’ve seen HBO’s “The Wire,”

you know why those of us who live in

Baltimore are often asked whether

our city really is the hellhole it is

portrayed to be on TV.

Our answer is, well, yes. Baltimore

deserves the Third-World profile it

has developed because it has ex-

panses of crumbling, crime-riddled

neighborhoods populated by low-in-

come renters, an absent middle class,

and just a few enclaves of high-in-

come gentry near the Inner Harbor

orinsuburbs....

To the extent that city officials

recognize the problem, they seem to

confuse symptoms with the root

cause of the economy’s disease. For

them, poverty, street crime or bad

schools are the problem. Their solu-

tion is always more social spending

and still-higher taxes, together with

targeted tax breaks and subsidies

aimed at bringing “big footprint” de-

velopment projects downtown. And

because the city has managed to en-

tice developers to build a few large

projects...thechampions of public

redevelopment argue that the city is

on the right track.

True enough, the ability to hand

out subsidies gives officials great

power. But it also gives them a reason,

and incentive, to dismiss the common

sense that if tax breaks for the well-

connected are a good idea, lower tax

rates across the board would lead to

broad-based redevelopment.

Notable &Quotable: Baltimore