… what a fool believes he sees, no wise man has the power to reason away."
-- The Doobie Brothers
The "Know Nothing" party, or the "Native Americans," are a historical party that is enjoying a resurgence among those who voted for President Trump. The two factions are similar because they have identical central issues: a vague but strong opposition to immigration of some foreign elements; and distrust of government information and its use by experts.
The Know Nothings began and ended as a political force over a period of less than fifty years' duration, during the first half of the 19th century, until the Civil War. The current version of this movement will have a similar duration. The reason the two are inherently temporary is the issues they have chosen. Immigration is a cyclical issue; opposition to the information government uses and produces is a self-defeating issue.
Implications for Market Securities Prices
The implications of Know Nothing politics for securities prices are so apparent that I am surprised I have not seen a clearer description elsewhere.
Social media obviously will gain. Talk, already cheap, will be almost free in short order. But since the truth will be defined on Twitter, the increase in the volume of talk will overtake the decrease in its value, making talk manufacture highly profitable.
Anything requiring physical labor will be more expensive. The manufacture of cars and other consumer goods will cost relatively more, the marketing of now-more expensive goods will be necessarily stepped up, and so the goods themselves will be less profitable to produce.
The dollar will weaken. The pace will depend on how quickly President Trump moves on the Fed. He will, if he chooses, control monetary policy within a year. All indicators to date are that he will want fiscal expansion and easy money. Only the data suggest that that is a long-term mistake. That, and stodgy old Republican dogma. The public will love the short-term abundance.
But if the president tweets his intentions for the Fed soon, the market will begin to build easy money into the value of the dollar almost immediately.
The big unknown is energy prices. The new administration will discover a strong America requires an energy policy backed by consistent predictable foreign policy. Foreign policy is something President Trump has not yet clarified. But on the other hand, the soaring oil prices that ineffectual foreign policy would produce has a big upside for the Trump administration. US oil production will go bonkers, leading to major US job creation. And coal will recover in the heartland of Trump's constituency.
The Know Nothing opposition to immigration will never be articulated clearly for a simple reason. There is a compromising fact opponents of immigration confront. Americans are all immigrants. Immigration is, and will always be, a vague issue. Immigration is bad except for my immigration.
Immigration will always have limits, and thus it is always good politics to oppose immigration at some level. Opposition is not a distinguishing issue - immigration was opposed at some level by both Obama and Trump. It would be foolish to simply open the borders. But the United States has a fundamental problem defining which immigrants are acceptable. We are all ancestors of people who come from somewhere else. The issue will come and go forever, with the availability of quality jobs.
It is the central significance of immigration to Trump Republicans that sets them apart and makes them like the Know Nothings.
Opposition to government data and its use
Trump Republicans' opposition to data is more interesting. Opposition to data is a position unique to the Know Nothings and Trump Republicans in the history of the United States. It is the source of the No Nothings' name.
Truth, for a Know Nothing, is found in tweets that trend on Twitter and YouTube. Data is unreliable, especially government data, manufactured by the elite who populate the government bureaucracy. Data is designed and created to support elite beliefs. The global trend of popular opposition to data is described by William Davies, here. He notes:
Shortly before the November presidential election, a study in the US discovered that 68% of Trump supporters distrusted the economic data published by the federal government. In the UK, a research project by Cambridge University and YouGov looking at conspiracy theories discovered that 55% of the population [of the UK] believes that the government 'is hiding the truth about the number of immigrants living here.'"
Those of us who depend on numbers to provide evidence, who devote years to asking the question, "How does statistical analysis appropriately use a collection of numbers to form a point of view and its policy implications?" will cease to be a part of the government decision-making process during the Trump administration.
And people such as many readers and contributors to SA, who live and die by the data - from market prices to economic data to income statements produced by accountants and financial specialists - will have decisions to make. That process is all regulated and controlled by government, and Trump repeatedly tweets that one price or another, most recently the value of the dollar, "is wrong."
I attempted this morning to determine my use of government numbers. It is far more extensive than I thought. A Know Nothing, like the rest of us, must choose which government numbers to trust. As I sat at my desk, I looked around the office more carefully than usual and discovered over 50 government numbers in plain sight, all of which I use without thought. Granted, on reflection, I have more faith in some than others. For example, the government gains nothing by manipulating my zip code (I think); but how about the amount of calcium in my yogurt?
The Know Nothing legacy
The Know Nothing Party elected one president: Millard Fillmore. And they ran the state of Massachusetts for a time. They were also an important source of support for Abraham Lincoln in his first campaign for president. Then they lost traction because of one of their two issues - immigration - and self-destructed because of the second - opposition to information.
The Know Nothings opposed Catholic immigrants from Ireland and Germany. That issue died as these immigrants assimilated into American culture and developed their own political power. The "Hiring - No Irish Need Apply" sign no longer appears in shop windows.
The Know Nothing Party was an organization that disliked the light of day. "Eye Nose Nothing" refers to the way one Know Nothing identified herself to another. A quick finger to the eye, touch to the nose, followed by the OK hand sign, for "zero" or "nothing." This gesture - seemingly a nervous tick unless you look for it - is how Know Nothings, who prized secrecy, self-identified. It's still in use today - the gesture by which one con warns another that a con game is being run. It means: I found this mark first; find your own mark.
Tweets and Jawboning
It is the Know Nothing opposition to data that is most important to those of us who have an interest in financial markets and institutions. To a Know Nothing, one anecdote, especially a presidential tweet, is worth ten statistics. This proclivity was evident even before President Trump assumed office. And it will make his Administration far less effective than it would otherwise be.
"Government by tweet" is not so new as Trump opponents suggest. The Trump administration will revive some words that have fallen into disuse - for example, "jawboning." Jawboning is a threat of action emanating from "the bully pulpit" (self-explanatory, "bully pulpit" was introduced into the American vocabulary by Theodore Roosevelt). Jawboning is even easier than former President Obama's presidential decrees, actions taken unilaterally by Obama using the power of the Office of President alone. In retrospect, the Obama presidential decrees were an almost authoritarian conceit - the notion being that someone "like Obama" would leave those decrees in place for the indefinite future. Oops.
Rather than policy formulation through analysis, proposals and legislation, the Trump tweet that produces a soundbite, such as the then President-elect's tweet about Ford's production of cars in Mexico and the subsequent soundbite from Ford pointing to a decision not to build a new production plant in Mexico, provides an example of government jawboning.
Popular movements are often anecdote-driven. But belief based on anecdote is what makes "popular" ineffective. Nothing is easier to produce than words.
If my company has been tweeted about hiring in Mexico, I can promise to close one manufacturing operation while breaking ground for ten more. And if I have an objective involving billions in profits that I wish to disguise, my avenue to victory is to provide you with stories of my cooperation while I spend my money as planned.
If you want to stop me, you need two things. First, you need a strong enforcement mechanism that requires my financial records to provide an accurate description of my activities. Second, you need laws that prevent me from achieving my goals.
In other words, your strength, if you control the government, is in laws and rules and the government numbers that measure my compliance. My strength, since I am out of power, is anecdotes.
This statistical aversion of Know Nothings, in short, would be the first thing a sincere politician would remove from her agenda upon taking power, if the objective were something like improving employment conditions. The president will want to know the true amount of unemployment, wages, and working conditions, somehow measured.
If, however, the president wants public awareness of his desire to reduce unemployment, that is best accomplished with a daily tweet to that effect. Hiring a team of professional statisticians to redesign the process by which unemployment is measured will simply not deliver instant approval. Months will be required to change the way unemployment is calculated, and years to implement the new plan. And if I do construct a trustworthy number, there is the risk that it will provide information that provides fuel for criticism of the powers that be.
Improving the quality of statistics is anathema to government by slogan.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.