Aurelia Butler

Last week the US took another step on its journey towards autocracy, as Liz Cheney lost the Republican primary for her Wyoming district. Her father is former vice-president Dick Cheney, who masterminded the Iraq war under George W Bush. She is also unimpeachably conservative. Yet she has become anathema to Republicans. Her crime? She believes that accepting the outcome of fair elections is a higher duty than promoting the lies of their “great leader”. (See charts.)The Republican party has adopted the Führerprinzip (“leadership principle”) of the Germans in the 1930s. This is the notion that loyalty to a leader who defines what is true and right is the overriding obligation. The Republicans’ embrace of Trump’s Big Lie that he won the last presidential election is a perfect instance of this principle. Here, moreover, it is directly set against a core value of liberal democracy, that of fair elections. Ten years ago, most of us would have thought such a development inconceivable in the US. But with the ascent of Donald Trump it became likely. Now, the reaction not so much of Trump to his defeat as of his party to his lies provides another decisive moment.As Harvard’s Steven Levitsky and Daniel Ziblatt argue in their splendid book, How Democracies Die, it is not hard to subvert a democracy. It has happened many times, in both the past and more recently. First, subvert the electoral system. Second, capture the referees (the judiciary, tax authorities, intelligence agencies and law enforcement). Third, sideline or eliminate political opponents and, above all, the media. Supporting all such assaults will be a fierce insistence on the illegitimacy of the opposition and the “fakeness” of information that does not align with the lies the leader finds most useful today.

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In his first term, Trump made much progress with establishing his lies as the truth for his supporters. But neither he nor his subordinates had yet worked out how to re-engineer the electoral system or the government, partly because he did not yet have the “right” — that is fanatical, competent and devoted — assistants. He was surrounded by people now judged “disloyal”, namely those who had at least some principles.This has changed. He has now made the party largely his own. Cheney’s defenestration is proof of that. As important is the widely shared conviction among Republicans that he is above accountability for his behaviour to the law or, for that matter, Congress. He and his party have, as Robert Kagan has argued, also exploited the lies about the “steal” to justify the subversion of US elections, on which much progress is being made.The crucial next stage for Trumpism is the replacement of the leaders and staff of core institutions of the state by people loyal to him personally. For that to happen, he must first become president. This is why progress in subverting elections is important, as is keeping him out of prison. But in two recent articles, Jonathan Swan of Axios has described something else that would be vital: a plan to ensure that the government will be staffed by true loyalists from top to bottom. A crucial aspect of this, he suggests, is to replace the permanent staff of agencies of the government with carefully vetted loyalists. If the Republicans managed to control Congress, this may become not that hard to imagine.Suppose then that Trump loyalists headed and staffed the FBI, CIA and Internal Revenue Service. Suppose loyalists were also placed in all senior military positions under a devoted secretary of defence. Suppose loyalists were put on the board of the Federal Reserve and all significant regulatory agencies. Imagine what this would mean for the rule of law and civil rights. Imagine, too, the pressure such agencies could put on independent businesses, notably including those of the media.The logic of the market under autocracy is one of crony capitalism. Would the US be so very different? Maybe the federal system and judiciary would protect personal independence. Yet if people whose only principle is loyalty to the leader were to staff the federal government, his will would be hard to resist.Despotism means unaccountable rule. It does not mean competent or intrusive rule. It is possible that the despotism would be incompetent and lazy. There are countless examples of this. But it would be despotism, all the same.

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What would a second Trump administration of such a kind mean for the world? What would it mean above all for its allies? What would rule by an “America-first” nationalist with the sort of administration described above mean for the residual credibility of the liberal international economic system? What would it mean for global co-operation? “Nothing good” is the answer to all these questions. The end of “American exceptionalism” is likely to mean the formation of distinct spheres of interest as the basis of global order. Some might like that. But it would also be a transformation — a catastrophic one, in my view — towards a world of despotism.In 27BC, the Roman republic transformed into the military dictatorship we call the Roman empire. It is not impossible that a similar transformation is under way in the US. That may still seem inconceivable to most people. I hope that is so. Trump is old, after all. He may have no suitable replacement. Yet every day he is exploiting and so displaying the demoralisation of the American republic. American conservatism has become a radical nationalist movement loyal to the truths invented by one man and dedicated to the overthrow of the “Deep State”, by which is meant their own government. Dick Cheney says that Donald Trump is the “greatest ever threat to our Republic”. On this we should believe Cheney: he [email protected] Martin Wolf with myFT and on Twitter More

Higher prices in the UK will not only squeeze the pocketbook of the average Briton. It will also hit the government hard. Talk of double-digit inflation this winter — Citigroup now thinks the rate could surpass 18 per cent — comes as energy prices continue to soar. But the country’s over-reliance on inflation-linked debt will mean punitively higher financing costs too. Britain pioneered the issuance of index-linked bonds, or “linkers”, in the 1980s with the rationale that the government’s commitment to reducing inflation directly lowers borrowing costs. This would remove any temptation to inflate away debt. That premise has proved flimsy in 2022. UK government debt now equals its annual economic output, one of the highest proportions of any developed economy. Soaring inflation, through inflation adjusting, has exacerbated the pain of excessive debt. Linkers make up almost a quarter of total UK central government debt of £2tn. Compare that with just 8 per cent in the US and less than 5 per cent in Germany. UK government interest payments in June more than doubled to £19.4bn this year. This increase was entirely due to the rise in semi-annual linker payments connected to a surging retail price index (which includes mortgage rates). This measured inflation rising at 12.3 per cent in July. In March the UK’s Office for Budget Responsibility had forecast interest costs to hit £83bn this fiscal year, about double what it expected at the end of last year. That burden will continue to pile up. Capital Economics expects an extra £30bn to be paid on top of that. An average RPI rate of 15 per cent next year would boost the cost to almost £130bn, Lex calculates. And that does not include the impact of any additional interest rate rises by the Bank of England. Even without these, borrowing costs alone would equal about 5 per cent of GDP. That could push spending on debt servicing above that of Europe’s most indebted country Italy if the latter’s interest costs rose by 3 percentage points, thinks S&P. Those kinds of numbers should send a message to UK policymakers to clamp down on inflation, and soon. More

Nigel Hollyer, the broker to the Admiralty marshal of the supreme court of Gibraltar who led the auction, told the Guardian newspaper last week that there had been an “unexpected late surge by prospective buyers” around the world, with more than 30 flying to Gibraltar to inspect the yacht in person.Given the yacht was being sold through the courts, he said, prospective buyers seemed to believe they could pick up a “bargain.” The boat, which can sleep 12 people in six cabins, has a swimming pool, a jacuzzi, a spa, 3D cinema, jet skis and scuba diving equipment.According to court papers seen by Reuters, JP Morgan lent 20.5 million euros to British Virgin Islands-listed Pyrene Investments Ltd which was owned by Furdberg Holding Ltd. Furdberg’s owner was Pumpyansky, who acted as guarantor for the loan. The papers said Pyrene Investments defaulted on the terms of the loan after Pumpyansky on March 4 transferred all his shares in Furdberg to a third party, and was then covered by sanctions. The 58-year-old, who has an estimated fortune of $2 billion according to Forbes magazine, was sanctioned by Britain and the European Union shortly after the invasion of Ukraine.”The occurrence of the guarantor’s sanctions listing constitutes an event of default under…the loan agreement since it renders the guarantor a prohibited person, making it unlawful for him to perform any of his obligations under the finance documents,” the papers read. The Axioma is the first seized luxury yacht known to be auctioned since sanctions were imposed by the West on powerful Russians following the invasion of Ukraine in February, which Russia refers to as a special military operation.JP Morgan did not immediately respond to a Reuters request for comment. Pumpyansky was, until March, the owner and chairman of steel pipe manufacturer OAO TMK, a supplier to the Russian state-owned energy company Gazprom (MCX:GAZP). The company said he had since withdrawn from the firm. More

The ECB raised rates back to zero from negative territory in July and will likely hike again in September, fearing that inflation, now approaching double digits, is at risk of getting embedded in a hard-to-break wage-price spiral. “We may have to adjust our monetary stance further, but …. we have to be fully aware that the probability of a recession is increasing.” Panetta told a financial conference in Milan. “If we will have a significant slowdown or even a recession, this would mitigate inflationary pressures,” Panetta said.Exposing a rift among policymakers, Panetta also argued that interest rates, once adjusted for inflation, are “not too far away” from what is considered neutral, which neither stimulates nor holds back growth. Fellow board member Isabel Schnabel, however, last week argued that real short-term rates remain deep in negative territory and the ECB was “quite far” from becoming restrictive.While the ECB has not said where rate hikes will stop, it said that further “normalisation” will be needed, commonly understood as moving towards the neutral rate.Markets currently price in 62 basis points of rate hikes in September and a combined 131 basis points of moves for the rest of the year, suggesting that a rate hike is seen at each remaining policy meeting. The top of the rate hike cycle is now seen at around 205 basis points above the current level. More