John Briggs of RBS Pens Open Letter to John Boehner below

Cross Asset Comment – A Letter for John Boehner

I’ll start right away saying this is not a market comment, for it’s very hard to write a Cross Asset piece whose intent is to guide investors to one asset class or another when markets are subject to the whims of US politics. This is one of my notes that I hope will be an “interesting read” for a Friday with no data, so stop there if that’s not for you.

I feel that we all are confident about where the current situation is headed – a compromise to avoid the debt ceiling and fund the government for some unknown set of time, so let’s get on with it already. For in the meantime, the majority of our investors are on the sidelines and I don’t blame them – the opportunity cost of waiting for this to resolve itself is low. For those of you looking for our medium term themes and trades, I published our multi-asset outlook in the RBS CIO Executive Brief yesterday, which attempts to look past the current turmoil towards the end of the year (click here to view).

Meanwhile, Gabriel Mann in Treasury Strategy pointed me to this very topical letter written to the NY Daily Advertiser on November 22nd, 1787, which I implore John Boehner to read: “Among the numerous advantages promised by a well constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of faction. The friend of popular governments never finds himself so much alarmed for their character and fate, as when he contemplates their propensity to this dangerous vice …

… There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects.

There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.

It could never be more truly said than of the first remedy, that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.

The second expedient is as impracticable as the first would be unwise. As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed.”

This was James Madison, in his then anonymous Federalist Paper Number 10. And yes, I probably could have only pieced in two lines of that to make my point, but the prose is just too good to resist (although it makes my writing look downright commonplace). In any case, I continue to be astounded by the vision and foresight of our founding fathers. Still, Madison probably did not envision a two party jerry-mandered system being held to the fire by a faction from within one of those parties. But even so, he felt the design of the Republic would prevent any faction from dominating.

Is he wrong? Can a minority faction, as we are seeing in the Tea Party now, potentially threaten the stability of the nation, despite our “well constructed Union”? I think not, and this is what John Boehner should think about, because one of the equalizers, indeed one of Madison’s equalizers, was how “numerous the representatives must be raised to a certain number, in order to guard against the cabals of a few.” It is in this that I hold my hope, that the other representatives will be able to help us avoid the debt ceiling, that yesterday’s proposed bill crafted between House Republicans Dent AND House Democrat Kind was a sign of things to come (yes it was a small show of bipartisanship that was shot down, but it’s a start). In fact, Mr. Speaker, I do think that if a clean CR is brought to the floor, it will pass due to enough of that “certain number” of representatives that would support it.

My colleagues think I am naïve; perhaps I am that. That and an optimist. But, I have to be optimistic, optimistic that as Madison said, somewhere “in the extent and proper structure of the Union, therefore, we behold a republican remedy for the diseases most incident to republican government.” For if I’m wrong, it will be a dark day indeed.

John Briggs, Head of Cross Asset Strategy