Monty Pelerin, writing in The American Thinker, is thinking about the unthinkable. What would happen if the US held a bond auction..and no one bought any bonds? Even worse, what would happen if we were to default on the $16 trillion in bonds already outstanding?
What occasions this thinking is something he read in Bob Woodward’s new book on the Obama administration, a portion of which is excerpted in the Washington Post. This excerpt discusses last year’s debt ceiling crisis. In it Treasury Secretary Timothy Geithner tries to explain how bad it would be if credit markets stopped buying Treasuries.
But, here’s the thing:
Credit markets have (or nearly have) stopped US government debt financing. That’s why we have the Federal Reserve, the counterfeiter of last resort. If government can raise the debt limit, then it would be legal for the Treasury to issue new debt. The Treasury’s sibling, the Fed, would buy it by printing new money. That would allow the government to pay its bills for a while longer…
No one will buy US Treasuries other than the Federal Reserve. Raising the debt limit only puts the government more hopelessly in debt, ensuring that Treasuries will be even more difficult to sell. Without intending it, Geithner admits that Bernanke will be printing money until the electricity is shut off or until hyperinflation shuts everything economic down. In either case, we reach his "indelible, incurable" situation which will "last for generations."
Take a look at the monetary base of the United States, which I would describe simply as all the money of all types floating around in the economy. You know why that number has jumped massively since 2009? Because the Fed has been the major buyer of US treasuries, and it buys them by simply printing new money.
Now, the US Dollar is the world’s reserve currency. What that means is that it is expected to be strong, stable, and plentiful enough—though not too plentiful—to be used as the primary backup currency for the entire world’s global trade.
But, since 2009, we have essentially financed our massive debt, which is now at 104% of GDP by having the Fed print the money to buy the Treasury’s bonds. The chart you see here is the result of two separate rounds of Quantitative Easing of that sort, and the Fed is now considering QEIII.
Now, Greece, the sick man of Europe’s financial system, has a debt to GDP ratio of 128%. At the current rate of spending, we could reach that within a decade. But we won’t, of course, because at some point between 104% and 128% of GDP, we will have so much debt that the US will be the world’s financial sick man. At some point credit markets will simply not bid on US Treasuries, because the specter of inflation or default will loom so large that only the Fed would be stupid enough to show up at a bond auction.
When that happens, current foreign holder of US treasuries will face intense pressure to divest themselves of them. Prices will collapse, and interest rates will skyrocket. If the Fed steps in to buy those treasuries to support the price—which they almost certainly will, because politicians will demand it—we will then be clearly seen as fully monetizing the debt.
At that point, foreign holders of US dollars will demand that some other currency or asset be used as a reserve, at which point foreign holders of dollars will scramble to repatriate those dollars as quickly as they can.
The dollar will then become worthless in foreign trade, and we will face massive hyperinflation in the US.
On our current spending path, with our current level of debt, this is inevitable, and we have no idea when it will happen. We are literally a single bond auction away from a complete and utter collapse of the US financial and monetary system. We just don’t know when, exactly, that bond auction will be. It might be this week. It might be five years from now.
But, I repeat, at this point, barring a massive change to our fiscal and monetary policy, it is inevitable. There is no way credit markets will continue to buy US Bonds as our debt to GDP ratio climbs towards that of Greece. When that happens, we will either monetize that debt or default on it. Either way, the result will be years, if not decades, of American poverty.
And once that process starts, there will be no way to stop it. We can’t come back a week later and say, "hey, we fixed it!" Once it starts…we’re done.
After WWII, the US debt to GDP ratio was 124%. At the end of WWII, we slashed government spending by 50%, and eliminated the most onerous and confiscatory wartime taxes, and, though marginal rates were still high, offered a myriad of exemptions that essentially ensured that no one paid the marginal rates. We also scrapped the entire wartime system of industrial production regulation and eliminated rationing. And, of course, we had the only fully industrialized economy left in the world, as everyone else’s had been bombed, if not back into the Stone Age, at least into the Age of Reason, and we became the world’s chief industrial power, exporter, and global business leader.
To do something similar today, we’d have to completely eliminate the entirety of the Federal government, with the exception of the Departments of State, Defense, Justice, Interior, and Treasury, and cut Social Security, Medicaid and Medicare spending by at least 50%.
That’s not going to happen. I believe the current Republican plan to attack the debt and balance the budget won’t even eliminate the budget deficit until sometime around 2040.
Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha!b That’s rich. Like we have 30 years available to fix this. It is to laugh.
Update: And, this morning, right on time, I see that House Speaker John Boehner says he’s "not confident" that Congress and the administration can reach a debt deal. In which case, Moody’s has already warned that they will downgrade the US credit rating by another step. Meanwhile, the rumor is that the Fed is now preparing for another $840 billion in quantitative easing.
That bond auction just keeps getting closer.
That’s the argument Ruchir Sharma makes in the Atlantic this week. It is one of those contextual or perspective arguments that says, “of course it’s bad, but look at the rest of the world”. He also, heaven forbid, makes the American “exceptionalism” argument, saying":
Evidence of an American revival, against both developed and emerging world competition, is mounting, driven by the traditional strengths of the American economy–its ability to innovate and adapt quickly.
But … there’s always a “but”:
America’s worst worries — heavy debt, slow growth, the fall of the dollar and the decline of manufacturing — will look much less troubling when compared to its direct rivals. While US growth has slowed by a full point so has growth in Japan and Europe, leaving the United States on top of the league of rich nations.
Sharma says manufacturing is looking up and slowly growing. As for debt? Well, private debt is being shed in record numbers:
Consider the key challenge of "deleveraging" or digging out from debt. A new study from the McKinsey Global Institute shows that the United States is the only major developed economy that is even loosely following the path of countries that successfully negotiated similar debt-induced recessions, like Sweden and Finland in the 1990s. Total debt as a share of GDP has fallen since 2008 by 16 percent in the United States, while rising in Germany and rising sharply in Japan, the United Kingdom, France, Italy and Spain. As in Sweden during the 90s, the fall in total US debt is due entirely to sharp cuts in the private sector, particularly the finance industry and private households.
Note the emphasized points in the last sentence – “private sector”, “private households.”
So what’s our biggest problem, our biggest worry, in fact our biggest economic drag that is likely keeping us bouncing along the bottom of this recession/depression?
Well Sharma doesn’t hesitate in identifying it:
The weak link in the U.S. response to the debt crisis is the government. The Scandinavian cases show that government needs to start cutting spending and debt roughly four years after the downturn — exactly the stage where the US is today. Washington has so far failed to put in place a plan for long-term debt reduction, in part because some politicians and pundits are still pushing for more borrowing to ward off "depression." The Scandinavian cases suggest this is exactly the wrong worry right now. The public debt is a big reason that long-term US growth is likely to slow, but even then, it is important to keep America’s debt problem in perspective. China is arguably worse off, with total debt equal to 180 percent of GDP. The more wealthy you are, the more debt you can carry, so America’s total debt (350 percent) is actually less of a challenge.
Don’t worry, be happy … our debt problems is less of a challenge? No, that’s not the point. It means, relatively speaking, we’ve been somewhat lucky because the strength of our economy and its size has helped ameliorate the drag increased government debt has placed upon our economic recovery.
Note what Sharma says, given the evidence of the “Scandinavian cases” – we should be cutting spending and debt “four years after the downturn”.
That would mean what? No QE3. No trillion dollar budget deficits as far as the eye can see.
However, that’s the plan right now.
President Obama has a campaign ad out talking about how we don’t need to repeat the “Republican plan” because, in his words, we’ve tried that and it didn’t work.
Well I hate to break it to you but what he has planned for the next four years, if he’s re-elected, is a reprise of his first term. Spend, spend, spend and expand government programs and services (to the tune of $46 trillion over 10 years, much of it debt).
And the Fed? It’s easing its way toward another quantitative easing (QE3), essentially ignoring the fact that the first two pushed about $10 trillion in cash out there which it is going to have too wring out of the economy at some future date. Adding even more doesn’t hit many as a very sound move.
One of those is Mitt Romney:
"I am sure the Fed is watching and will try to encourage the economy. But I don’t think a massive new QE3 will help the economy," Romney said, referring to a program called quantitative easing.
"I can absolutely make the case that now is the time for something dramatic and it is not to grow government,” he said. “It is the time to create the incentives and the opportunities for entrepreneurs – businesses big and small – to hire more people and that is going to happen.
Key takeaway? Romney gets the proper role of government in the economy – “create the incentives and the opportunities for entrepreneurs – businesses big and small – to hire more people…”.
If government did that – became an enabler – then what should follow? You should see employment begin to rise.
We should be seeing 200, 300, 400,000 jobs a month to regain much of what has been lost. That is what normally happens after a recession, but under this president we have not seen that kind of pattern. We have just been bumping along with barely enough jobs to just hold the unemployment rate about the same – above 8% – 42 months like that. You have to have the Steve Jobs of the world beginning businesses, making products that want to be purchased around the world. That gets Americans back to work."
He’s right. Exactly right. And the current president is clueless. It isn’t about pumping more money into the economy and creating more debt and bigger government. If you want to see policies that continue to cripple what Sharma dubs the “traditional strengths of the American economy”, give the guy in charge 4 more years.
Government’s don’t produce wealth. The private sector does. Government spends that wealth.
(Oh, wait, the private sector “is doing fine”. Never mind.)
Romney gets that part and it is indeed the most important issue of this upcoming election. Getting government out of the way and into the enabler role of providing incentives and opportunities for businesses to grow and expand (while curtailing government spending and expansion) is what will get this nation on the road to recovery.
The current administration doesn’t understand that – at all.
And, for all practical purposes, that’s all you need to know to decide who should be sitting in the Oval Office next January 20th.
Hint: In case you somehow missed it, it isn’t the guy in there now.
How will this be spun?
By the end of the third quarter of fiscal 2012, the new debt accumulated in this fiscal year by the federal government had already exceeded $1 trillion, making this fiscal year the fifth straight in which the federal government has increased its debt by more than a trillion dollars, according to official debt numbers published by the U.S. Treasury.
Prior to fiscal 2008, the federal government had never increased its debt by as much as $1 trillion in a single fiscal year. From fiscal 2008 onward, however, the federal government has increased its debt by at least $1 trillion each and every fiscal year.
Bu … bu … but he has spent less money and created less debt than any president since Eisenhower.
Ever since the Fed began the first round of what is now called Quantitative easing, massively expanding the money supply, I’ve been worried about what would happen when demand began rising, and the Fed had to somehow try and draw all that extra cash out of the economy before it became inflationary—or even worse—hyperinflationary.
That’s still a worry for me, because I have, let us say, less than absolute confidence that Chairman Bernanke and his colleagues can pull that monetary sterilization off without a misstep.
Happily, that is becoming a secondary worry for me. Unhappily, that’s because it’s been replaced by a new worry, articulated by Paul Brodsky, bond market expert and co-founder of QB Asset Management. Mr. Brodsky maintains that the real inflationary danger lies elsewhere. I mean, it still lies at at the Fed and other Central Banks, but for a different reason.
The world has simply gotten itself into too much debt. There are creditors that expect to be paid, and debtors that are having an increasingly difficult time making their coupon payments. No amount of political or policy intervention is going to change that reality. (Unless a global "debt jubilee" transpires, which Paul thinks is unlikely).
Looking at the global monetary base, Paul sees it dwarfed by the staggering amount of debts that need to be repaid or serviced. The reckless use of leverage has resulted in a chasm between total credit and the money that can service it.
So how will this debt overhang be resolved?
Central bank money printing — and lots of it — thinks Paul.
The problem has been exacerbated by the fact that, when faced with an economic depression brought on by the collapse of a debt bubble—mainly in mortgages—the preferred policy solution pushed by governments all over the world, has been to try and re-inflate the debt bubble via stimulus spending. That is to say, overcoming the collapse of the mortgage debt bubble by creating a new, even bigger, sovereign debt bubble.
We have a pretty good idea of how much money there is in the world. We also have an idea of how much debt there is, from the sovereign debt of the united states, to credit cardholders in Finland. And it appears that there is not enough of the former, to pay off all the debts contained in the latter. If so, then that means a lot of banks—perhaps most of them—are in trouble. And we can’t have that.
What policy makers do not want to see is bank asset deterioration. That would lead to all sorts of bad things. You would see banks fail. You would see bank systems fail. You would see debtors fail and it would just feed on itself in an accelerating fashion. And so monetary policy makers have no choice but to deleverage in the other way, which is to colloquially print money; to manufacture electronic credits and call them bank reserves.
And to the degree that that extends into the private sector where debtors begin to fail en masse, that would increase failures of the bank assets in turn. And it would end the mortgage bond securities market, for example, and the leveraged loan markets, and end the private sector shadow banking system. So it does not work for anybody to have credit deteriorate. The only way to deleverage an economy is as we are saying: to create new base money with which to do it.
In other words, if central banks want to prevent entire banking systems from failing due to the collapse of the debts they hold as assets, they have no choice but to ensure that there is enough money available for everyone to meet their debt payments. To do that, they have to start printing out long sheets of beautifully engraved C-Notes. This will, of course, lead to massive inflation that will allow everyone to pay off their mortgages for the cost of a nice hat, while, at the same time, destroying the value of the world’s life savings.
This will clean up everyone’s balance sheets, and allow the world to create a brand new monetary base—let’s call it New Dollars—which, central banks having learned their lessons, will be impossible to over-borrow or inflate.
Hahahahahahahahahahahahaha! Woohoohoohoohoo! Hehehehehehehehehe. Heh heh. Ahhh. Sometimes I kill myself.
I’m just kidding with you. Seriously, they’ll try to start a new fiat currency that they’ll borrow on and debase until it collapses on our grandchildren, and screws them, too.
My how things change over the course of 200+ years.
Back at the beginning of this experiment, people rejected a large and intrusive government. They’d been the victims of one and threw off that yoke. They acclaimed freedom as their goal and chose liberty as their battle cry.
When they finally got around to forming their own government, they carefully wrote a document which I’m sure they figured was an iron-clad guarantee that this country’s future would never see the same sort of tyranny they’d suffered under.
I just wonder what they’d think of this sprawling, debt ridden and intrusive mess we have now? I wonder what they’d think of over half the population getting some sort of compensation from government.
I wonder what they’d think of a Supreme Court Chief Justice more worried about what they’ll say about him and the court on the cocktail circuit and in the media than he is about upholding the Constitution, his sworn duty. I think I know.
And I’m pretty sure I know what they’d think of this:
Our nation’s current debt, nearing $16 trillion, and our annual budget deficit of $1.2 trillion, indicate that our government’s addiction to spending is nowhere near its limit.
Of that $16 trillion debt, the U.S. owes more than $5 trillion to foreign nations, an all-time high. So much for independence. We’re now a debtor nation, and unless we get our fiscal house in order, that debt will endanger our nation’s prospects for long-term growth.
If that sounds alarmist, consider this: In August 2011, Vice President Joe Biden visited China. This wasn’t just any diplomatic visit — it was the supplication of a debtor, in which Biden undertook to reassure our Chinese debtors that their investment is sound.
Biden assured his hosts that they had "nothing to worry about" when it comes to the U.S. honoring its obligations. It wasn’t the first time a high-ranking U.S. official has had to offer soothing words to our creditors, and at this rate it won’t be the last.
Let’s be clear. This administration isn’t the cause of all that debt. It’s just the latest (and the worst) to add to it, to the point that our debt now stands at more than our GDP. We are indeed a debtor nation.
That’s not at all how this began is it? Nor was that ever the plan.
I’m also pretty sure I know how they’d feel about the level of intrusion government now routinely practices (and increases) in this country. For example:
IRS officials on background tell FOX Business the U.S. Supreme Court ruling on health reform gives the IRS even more powers than previously understood.
The IRS now gets to know about a small business’s entire payroll, the level of their insurance coverage — and it gets to know the income of not just the primary breadwinner in your house, but your entire family’s income, in order to assess/collect the mandated tax.
Plus, it gets to share your personal info with all sorts of government agencies, insurance companies and employers.
And that’s just the tip of the iceberg. "We expect even more lien and levy powers," an IRS official says. Even the Taxpayer Advocate is deeply concerned.
As government takes more and more control of your lives, it intrudes deeper and deeper into them:
The TAO [Taxpayer Advocate Office] says that the “IRS will need to determine a taxpayer’s compliance with the individual [insurance] mandate and assess a penalty if coverage is inadequate.”
However, the penalty isn’t based on just your personal net income. The penalty will be based on an entirely different number that is more than just your paycheck earnings — your ‘household income.’
“This determination is based on a concept of ‘household income,’” TAO has said, adding, “this may differ from the income reported on the taxpayer’s return, because it is a composite of all of the income reported by members of a taxpayer’s household — information that may not be readily accessible to the IRS."
If the IRS finds you have fallen short of the law, it would hit you with a penalty tied to your household income (which may be that of an individual or several family members).
Under the new health law, the IRS penalty would be based on “modified adjusted gross income,” not adjusted gross income that you normally report at the bottom of the first page of your tax form 1040, before you take deductions or personal exemptions.
The modifications add back in things like non-taxable interest and excluded foreign income to this number.
Health reform’s insurance mandate says if you do not have “adequate” insurance, you’ll have to pay a fine as part of your tax return. If your business doesn’t provide “affordable” coverage, that business may have to pay a fine to the IRS, too, as part of its tax return filings.
The TAO has noted Americans must now tell the IRS under the new law:
*Insurance plan information, including who is covered under the plan and the dates of coverage;
*The costs of your family’s health insurance plans;
*Whether a taxpayer had an offer of employer-sponsored health insurance;
*The cost of employer-sponsored insurance;
*Whether a taxpayer received a premium tax credit; and
*Whether a taxpayer has an exemption from the individual responsibility requirement.
The TAO has warned: “This is different from the type of information the IRS typically deals with, and some taxpayers may feel uncomfortable about sharing it with the IRS.”
In fact, it is incumbent upon you to prove to the IRS that you have “adequate coverage”, whatever that ends up meaning. And:
The TAO has also reported that “obtaining this new information will require the IRS to communicate with entities and government agencies that it may not deal with now,” including:
*New state-run insurance exchanges;
*Insurance companies; and
*Government insurance programs.
But remember the sales pitch – government will make health care simpler, more cost effective and better.
Congratulations to all the simpletons out there who bought into this scam and ended up foisting this intrusive monstrosity on the rest of us. In fact, thanks to all, who through out the 200 years it has taken us to to get to this point, worked so hard to achieve it “for the common good”. </sarc> Nice mess you’ve given us.
As for the rest of you, happy Dependence day!
Yesterday, this came out (and, most surprisingly, on Ezra Klein’s blog, although not by Ezra Klein):
What’s the real harm of a massive government deficit? Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff find that high public debt is associated with a significantly lower level of GDP in the long run.
In a new paper for the National Bureau of Economic Research, the researchers examined the historical incidence of high government debt levels in advanced economies since 1800, examining 26 different “debt overhang episodes” when public debt levels were above 90 percent for at least five years.
And what do you suppose they found?
The debt episodes included everything from Netherlands’ Napoleonic War debts and the Japan banking crisis of the 1990s to Greece’s current fiscal crisis. On average, the researchers found that growth during these periods of high debt were 1.2 percent lower on average, consistent with Reinhart and Rogoff’s findings in 2010. What they also found, however, was these episodes of high debt and lower growth were quite lengthy, averaging 23 years. And the accompanying long-term drag on GDP was substantial. “By the end of the median episode, the level of output is nearly a quarter below that predicted by the trend in lower-debt periods,” they explain.
Japan’s “lost decade” has lasted much more than a decade, hasn’t it?
And the policies being pursued by this president seem to be offering up an attempt to see if this country can’t move that average beyond 23 years.
Need a picture?
We’re at 101% of debt/GDP so, according to these folks, we’ll actually perform below the red line.
But hey, more spending please. Because, you know, we need more government jobs (the private sector is doing fine).
Forward (into economic oblivion)!
I’m in a series of meetings today so I’m unlikely to get any serious blogging done.
You guys talk among yourselves.
Suggestions: “flip-flop” is now “evolution”? Really?
And, dealing with just the politics of Obama’s gay marriage announcement, guess what we won’t be talking about again today?
It would seem that would be a fairly potent means of campaigning and keeping the issues most important to the forefront. It might take care of this.
Look, one of the reasons we’re going through this “I killed bin Laden” self-congratulatory orgy right now is a day spend doing the bin Laden back pat is a day not spent on having to discuss this awful economy.
It wouldn’t be hard to compile a list of problems a new president would “inherit” from Obama. That was (and still is) an Obama strategy – blame Bush. It may be time for Romney to begin to blame Obama:
-For 8.2% unemployment
-For doubling the debt
-For anemic GDP growth
-For large increases in major regulations
-For green energy boondoggles based in crony capitalism and a nonexistent energy policy
-For increasing dependency on government
-For the first credit downgrade in US history
And, that’s just a short list.
I like the “inherit” scheme. It’s a good way to frame the debate and put the Obama campaign on the defensive. If and when the Romney campaign and certain elements of the GOP can stop shooting themselves in the foot over gay spokespersons that is.
Pew Research as a survey out today that is one taken after Romney became the presumptive nominee for the GOP. It compares its numbers to a survey taken while the GOP’s nomination was still contested.
Pew entitles it’s piece about the survey, “With Voters Focused on Economy, Obama Lead Narrows”. It subs it with “Social Issues Rank As Lowest Priorities”.
Hello out there GOP – are you reading this? There’s your campaign. What to stress. What to avoid.
Any chance they’ll actually figure that out?
I mean so far we’ve talked about sluts, contraception, race, wars on women, stay at home moms, even about dogs riding on roofs (well at least the Romney’s didn’t eat the dog).
We’ve been distracted by the outrage of the week – Rush Limbaugh, Hillary Rosen, Ted Nugent, Bill Maher, etc.
That’s the left’s game plan, for heaven sake – Obama has a dismal, in fact awful economic record. Horrible.
And yet the GOP is walking into every distraction trap the left sets like they haven’t a clue.
As I’ve been saying for months, once the nomination is settled, regardless of who the nominee is, and the focus begins to turn on Obama and his record, there will begin a shift in voter preference that should (note the word) carry the GOP nominee to the White House - if the GOP plays its cards right.
Here’s what I mean:
Obama’s lead over Romney has narrowed since last month, when he had a 12-point advantage, though it is comparable to margins from earlier this year. While Obama’s advantage has declined since March, there is little to suggest a specific problem or campaign event as having a critical effect.
While there have been debates over issues related to gender, the rise and fall in Obama’s support has largely crossed gender lines, with a fairly consistent gender gap over time. For example, since March, Obama’s support among both men and women has slipped five percentage points.
Independent voters remain up for grabs. In the current survey, 48% favor Romney while 42% back Obama. A month ago, it was 47% Obama, 44% Romney.
If anyone would not expect an incumbent president to have some sort of lead at this point, I’d say you don’t know much about American politics.
That said, as you can see by the change in a month, the lead is at best tentative, soft and narrowing.
But … there is still a way to absolutely screw up this chance at making Obama a one-term president and, unfortunately, I wouldn’t be surprised to see the GOP manage that.
That is, to concentrate on the wrong issues. They have a track-record of snatching defeat from the jaws of victory doing exactly that.
I’ll make it as simple as possible.
Limit the main issues of the GOP campaign to three themes: the economy, jobs and the debt. Talk about how to improve the first two and reduce the third. Talk about getting the hell out of the way while giving business the green light to lead us out of this economic morass. Declare the war on fossil fuel to be over. Talk about exploiting our natural resources and the jobs that will bring. Put confidence back in the business sector that expansion and hiring will be enabled and supported, not killed with more and more regulation. Talk about repealing ObamaCare and draconian regulations. Talk about bringing America back.
Once the incumbent has given his concession speech, talk about whatever else tickles your fancy then. But discipline yourself until then. Until then narrow the focus and be relentlessly on message. Refuse the distraction traps. Just flat refuse them.
Do that and the GOP has a shot. The numbers will continue to improve.
Fall into the distraction traps and kiss victory goodbye. If the other side is allowed to frame the campaign and establish the narrative and avoid examining Obama’s record, the GOP loses.
We’ll see which course they choose.
In case all this contraception talk has distracted you (as it surely was intended to do), you need to know that the deficit continues to grow and is on pace to go over a trillion dollars for the 4th year in a row:
The federal government set a new monthly record deficit of $232 billion in February and has notched a total of $581 billion in the first five months of the fiscal year, according to the Treasury Department’s official count released Monday.
February’s record is $8 billion more than the previous monthly record, set in February 2011, and came chiefly because of a drop in individual income tax receipts.
The overall deficit remains on pace to top $1 trillion this year for the fourth year in a row — but is down slightly from its pace last year …
Sorry to intrude with such boring reality.
Now back to “slutgate”.