The Hunter Biden story is a troubling tale of privilege

For all his barking and hucksterism, Rudy Giuliani is having limited success drawing the gullible into his sideshow tent. But the fact that Giuliani’s spectacle involving the Biden family is as phony as a horse that does arithmetic does not mean there is no story worth examining. The real story of Joe Biden and his troubled son Hunter is full of pain and littered with questions and deeply relevant to our populist moment.

I claim no intimate knowledge of this story beyond the soul-baring that Hunter performed with reporter Adam Entous of the New Yorker — an airing of family laundry without precedent, that I can recall, in the rollout of a presidential campaign. To that text I add the widely shared experience of an addict in the family, plus several decades spent listening to Americans talk about the people who seek to lead them.

It’s likely you already know the beginning of the story, at least through Joe’s eyes. The high point of his young life, his election to the U.S. Senate, collided fatally with the low point: a car wreck in which his young wife and daughter were killed. Two young sons, Beau and Hunter, survived the wreck — to live with the wreckage. Because let’s be real, folks, as Joe Biden likes to say: The crash took their mother, but in a real sense, that election took their father. I don’t care how many Amtrak trains the ambitious young senator caught to kiss his sons’ foreheads as they drifted off to sleep, or how many rides the boys took on the Capitol Hill subway as Dad worked. Politics is a punishing life for the children involved — presidential politics especially. And Joe Biden has always been running for president.

Beau Biden coped by making himself into a chip off the old block. That left Hunter to find his own lane. As Entous details it, the youngest Biden tried the arts, law, finance, political influence peddling. The consistent themes are booze and cocaine. The profile groans under a litany of failed rehabs.

There’s an old saying about addiction. The man takes a drink (or a sniff), then the drink takes a drink, until the drink takes the man. It will take the bystanders, too, if they let it. Addiction is ravenous. But there was always someone in Joe Biden’s life to help him out with Hunter. It’s heartwarming when family and friends swoop in to care for the boys while Daddy serves the people of Delaware. But little boys have little needs, while big boys have bigger needs.

Soon enough, directionless Hunter has a six-figure job at a bank run by Biden supporters. When Hunter grows bored, there’s another lucrative job under the tutelage of a former Biden staffer. When Hunter wants a house he can’t afford, he receives a loan for 110 percent of the purchase price. And when he goes bust, another friendly banker mops up the damage.

Then his brother Beau contracts fatal brain cancer, and the last wobbly wheels come off Hunter Biden’s fragile self. At this point, the New Yorker piece becomes a gonzo nightmare — much of it narrated by Hunter himself — of hallucinations, a car abandoned in the desert, maxed-out credit cards, a crack pipe, a strip club and a brandished gun.

If, as the magazine headline put it, Hunter Biden now jeopardizes his father’s campaign, the article makes clear Joe Biden feels a share of the blame. Yet, by the time the senator was vice president, the folks still willing to help Hunter were of a sketchier variety. There was a Chinese businessman who, Hunter said, left him a large diamond as a nice-to-meet-you gift. And a Ukrainian oligarch who hired Hunter at a princely sum to do nothing much. (Neither the firm nor Hunter Biden identified any specific contribution he made). Joe Biden’s response, according to his son, was: “I hope you know what you are doing.”

Hope! What family of an addict hasn’t fallen back to that last trench? Denial, they say, is not just a river in Egypt.

In sum, the story of the Bidens, father and son, is more pathetic than nefarious. Yet it might do damage anyway. Less privileged Americans can’t be faulted if they wonder why their addicted loved ones are on the streets or in the morgue while the vice president’s son is blessed with diamonds and sinecures. Multitudes locked up for years under Joe Biden’s crime bill might ask why the author’s son traveled the world scot-free. And sober working people making $50,000 a year may be skeptical of a system in which a vice president’s addicted son reportedly collected that sum every month.

Why We Should Fear Easy Money

Cutting interest rates now could set the stage for a collapse in the financial markets.

To widespread applause in the markets and the news media, from conservatives and liberals alike, the Federal Reserve appears poised to cut interest rates for the first time since the global financial crisis a decade ago. Adjusted for inflation, the Fed’s benchmark rate is now just half a percent and the cost of borrowing has rarely been closer to free, but the clamor for more easy money keeps growing.

Everyone wants the recovery to last and more easy money seems like the obvious way to achieve that goal. With trade wars threatening the global economy, Federal Reserve officials say rate cuts are needed to keep the slowdown from spilling into the United States, and to prevent doggedly low inflation from sliding into outright deflation.

Few words are more dreaded among economists than “deflation.” For centuries, deflation was a common and mostly benign phenomenon, with prices falling because of technological innovations that lowered the cost of producing and distributing goods. But the widespread deflation of the 1930s and the more recent experience of Japan have given the word a uniquely bad name.

After Japan’s housing and stock market bubbles burst in the early 1990s, demand fell and prices started to decline, as heavily indebted consumers began to delay purchases of everything from TV sets to cars, waiting for prices to fall further. The economy slowed to a crawl. Hoping to jar consumers into spending again, the central bank pumped money into the economy, but to no avail. Critics said Japan took action too gradually, and so its economy remained stuck in a deflationary trap for years.

Yet, in this expansion, the United States economy has grown at half the pace of the postwar recoveries. Inflation has failed to rise to the Fed’s target of a sustained 2 percent. Meanwhile, every new hint of easy money inspires fresh optimism in the financial markets, which have swollen to three times the size of the real economy.

In this environment, cutting rates could hasten exactly the outcome that the Fed is trying to avoid. By further driving up the prices of stocks, bonds and real estate, and encouraging risky borrowing, more easy money could set the stage for a collapse in the financial markets. And that could be followed by an economic downturn and falling prices — much as in Japan in the 1990s. The more expensive these financial assets become, the more precarious the situation, and the more difficult it will be to defuse without setting off a downturn.

The key lesson from Japan was that central banks can print all the money they want, but can’t dictate where it will go. Easy credit could not force over-indebted Japanese consumers to borrow and spend, and much of it ended up going to wastefinancing “bridges to nowhere” and the rise of debt-laden “zombie companies that still weigh on the economy.

Today, politicians on the right and left have come to embrace easy money, each camp for its own reasons, both ignoring the risks. President Trump has been pushing the Fed for a large rate cut to help him bring back the postwar miracle growth rates of 3 percent to 4 percent.

At the same time, liberals like Bernie Sanders and Alexandria Ocasio-Cortez are turning to unconventional easy money theories as a way to pay for ambitious social programs. But they might want to take a closer look at who has benefited most after a decade of easy money: the wealthy, monopolies, corporate debtors. Not exactly liberal causes.

By fueling a record bull run in the financial markets, easy money is increasing inequality, since the wealthy own the bulk of stocks and bonds. Research also shows that very low interest rates have helped large corporations increase their dominance across United States industries, squeezing out small companies and start-ups. Once seen as a threat only in Japan, zombie firms — which don’t earn enough profit to cover their interest payments — have been rising in the United States, where they account for one in six publicly traded companies.

All these creatures of easy credit erode the economy’s long-term growth potential by undermining productivity, and raise the risk of a global recession emanating from debt-soaked financial and housing markets. A 2015 study of 17 major economies showed that before World War II, about one in four recessions followed a collapse in stock or home prices (or both). Since the war, that number has jumped to roughly two out of three, including the economic meltdowns in Japan after 1990, Asia after 1998 and the world after 2008.

Recessions tend to be longer and deeper when the preceding boom was fueled by borrowing, because after the boom goes bust, flattened debtors struggle for years to dig out from under their loans. And lately, easy money has been enabling debt binges all over the world, particularly in corporate sectors.

As the Fed prepares to announce a decision this week, growing bipartisan support for a rate cut is fraught with irony. Slashing rates to avoid deflation made sense in the crisis atmosphere of 2008, and cutting again may seem like a logical response to weakening global growth now. But with the price of borrowing already so low, more easy money will raise a more serious threat.

By further lifting stock and bond prices and encouraging people to take on more debt, lowering rates could set the stage for the kind of debt-fueled market collapse that has preceded the economic downturns of recent decades. Our economy is hooked on easy money — and it is a dangerous addiction.

Prof. Adam Alter Discusses New Book, “Irresistible”, with Malcolm Gladwell

On 4/5, Prof. Elizabeth Morrison, Vice Dean of Faculty, welcomed Professor Adam Alter and esteemed author & journalist Malcolm Gladwell, for a conversation on Professor Alter’s latest book, “Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked.” Nearly 400 alumni, students and faculty set aside their phones to learn about the complexities of addiction and how it manifests in the modern age.