Capitol crimes: one year after America’s insurrection

Hello and welcome to The Intelligence from The Economist. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. Few things in finance are as solid as the notion that gold is a safe asset in an uncertain world. So why, with all the uncertainty that's around, has gold just had a terrible year? And shopping districts all over the rich world are desperate to bring back the customers they've lost to e-commerce and then to the pandemic. We examine London's ill-fated plan to lure them in with a big, shaky, raggedy pile of earth. But first—

March on Congress directly after Trump's speech. March on Congress, baby. March on Congress. March on Congress.

One year ago today, then-President Donald Trump addressed the March to Save America.

We have come to demand that Congress do the right thing and only count the electors who have been lawfully slated, lawfully slated. I know that everyone here will soon be marching over to the Capitol building to peacefully and patriotically make your voices heard. Today we will.

Many attendees of that rally would go further, descending on the Capitol building.

Take that house, take it down, take it down.

We were just told that there has been tear gas in the rotunda, and we're being instructed to each of us get gas masks that are under our seats.

Fight for Trump! Fight for Trump! Fight for Trump!

Mr. Trump eventually told rioters to leave.

This was a fraudulent election. But we can't play into the hands of these people. We have to have peace. So go home. We love you. You're very special.

5 people died. 140 police officers were injured, and several more died by suicide in the following weeks. How could America move on from this tragedy at the actual heart of its democracy?

When the world saw supporters of Donald Trump streaming into the Capitol and disrupting democratic process in the hopes of basically overturning a fair election result, many people thought that this would be the moment that the dam broke. This would be the moment that the Republican Party reformed its ways, gave up on Donald Trump, and basically made amends. And that turned out to be wishful thinking.

Idris Khaloun is The Economist's Washington correspondent.

The moment of clarity that Republican leaders had at the time really lasted only a week or so. And one year on, there is no sign that the Republican Party is any different in terms of its personal degree of fealty to Donald Trump, or indeed is all that repentant about what happened on January 6th.

Well, what about the Republicans who then went on to vote to impeach Mr. Trump? What's happened to them?

There were 10 Republican House members who voted to impeach Donald Trump over his actions on January 6th. All of them have attracted primary challengers, often stirred up by Donald Trump himself. Very few of them are likely to survive post the midterms. Liz Cheney, who was a steadfast Republican leader, daughter of Dick Cheney, the vice president, has been ejected from her position leading the party in the House because of her willingness to say that what Donald Trump did was wrong. I will do everything I can to ensure that the former president never again gets anywhere near the Oval Office. We have seen the danger that he continues to provoke with his language.

And away from the Washington machinery, what about voters?

For Republican voters themselves, there's also not that much sign of change in the last year. The entire event of January 6th was precipitated by the idea that the election that was held was stolen and fraudulent. And at the time, 70% of Republicans said that they believed that the election had been stolen. Joe Biden was the illegitimate winner. If you poll Republicans one year later, you see basically the same percentage. 70% say that the last election was fraudulent. And if you poll Republicans on whether or not violence is ever permitted, for political means, 4 in 10 say that it is, which is obviously a sign that the deeply divided and rancorous politics in America show no sign of healing.

And President Joe Biden will be marking the anniversary today and will reportedly say that Mr. Trump was singularly responsible for what happened on January 6th. What kind of impact do you think all of this has had on the first year of his term?

When President Biden came to office, he also thought that the events of January 6th had been so singularly awful that they would provoke a reformation of the Republican Party, that the new Republicans that disavowed the old way would be more likely to be agreeable, that there would be more bipartisan compromise as a result, and that the two of them could, even though they still have deep disagreements, lead the country forward in a way that was a bit healthier. There is no sign yet that that optimism has borne out. He's gotten very little support on the legislation that he's managed to sign. He started off the year with a good success, which was the passage of a very large stimulus package.

I promised the American people that help was on the way, but today, with the American Rescue Plan, now signed into law. We've delivered on that promise. And I don't—

And after that, the initial success wore off and his approval rating has fallen pretty dramatically by 25 percentage points because there's been a series of crises ever since. Inflation has been incredibly high. The pandemic is not over. The withdrawal from Afghanistan looked terrible. And he's been unable also to whip his party into passing the legislation that it needs to. Republicans are unified in opposition. If Democrats were unanimous, they'd be able to get quite a lot done, but they're not able to. And the president has shown little ability to actually marshal his forces in Congress in the way that, for someone who was a senator for 36 years, you might have expected differently.

And to your mind, what does that mean for the midterm elections that are coming this year?

It is almost a law of American politics that presidents lose seats during their first midterm election. and given Biden's relatively low approval rating, he's unlikely to escape that fate. Democrats have a margin of 0 seats in the Senate. Kamala Harris is needed to break ties in that chamber, and only 5 seats in the House of Representatives. In 2010, Barack Obama lost 53 House seats, and in 2018, Donald Trump lost 35. You can see that even a much smaller loss would be enough to spoil Biden's chances of really making any legislative progress for the last 2 years of his first term.

And given that, what do you think his party is trying to get done before those midterms?

Chuck Schumer, the Democratic leader in the Senate, says that they will focus their efforts first on voting reform legislation.

There is no better way to heal the damage of January 6th than to act so that our constitutional order is preserved for the future. If we do not act to protect our elections, the horrors of January 6th will risk becoming not the exception, but the norm.

And along with that, they will be trying to finally pass legislation that they've been stuck on since April, which hit a very sizable roadblock right before Christmas when Joe Manchin, who's the holdout Democrat, said that he had serious issues with the bill. So it's likely to drag on for months more as well.

So one year on today, where do the events of January 6th, 2021 leave the Republican Party today?

That leaves Republicans unrepentant and unreformed. The electoral strategy of ignoring the events of January 6th and hoping that voters move on will have been validated. Kevin McCarthy, who is the leader in the House for Republicans, will probably ascend to the speakership. The American people have spoken.

But unfortunately, Madam Speaker, the Democrats have not listened.

Which has been his goal for quite a while now. And it also means that the Republican Party that emerges after the midterms will be one that is purged of almost everyone who had criticized Trump deeply. It sets him up incredibly well to be the nominee in 2024, or if not that, then to be the kingmaker as well. The idea that one year after January 6th, the Republican Party would remain to be fashioned in the image of Donald Trump might have been unthinkable almost a year ago, but that's the reality that we're in.

Idris, thanks very much for your time.

Thanks for having me.

This week, Checks and Balance, our show on American politics, will be asking what the congressional committee investigating the January 6th insurrection has discovered so far. Our Lexington columnist James Astill is joining the team.

We've been told some interesting things about the debate inside the White House in the run-up to the insurrection.

We know that schemes to steal the election from Joe Biden had been bandied around in the most brazen way by senior Trump officials. That was kind of shocking, kind of new. We might have imagined it, but we've seen some evidence.

Of that.

That episode of Checks and Balance will be out tomorrow wherever smoothly run and uncontested podcast selections take place.

I see the world in financial crisis. I've become very concerned, and that's why I buy gold every chance I get.

I even like the feel of gold. Some people really, really like gold, even those who aren't shilling for companies that trade in it. As a solid store of value, it's got real history. When geopolitical conflicts heat up, when the papery stores of value start to look shaky, whenever markets get good and jittery, people pile into gold. It's as safe as it is shiny. Inflation has eclipsed the coronavirus as their number one concern.

Up 4.2% would be the biggest month-over-month increase on headline year-over-year since September, get this, 2008.

So you'd think with rising inflation, central banks' money printers whirring as loud as ever, and global superpower competition ratcheting up by the day, gold would be skyrocketing. Nope.

Gold has had its worst annual performance in 5 years. That was in 2021.

Mike Bird is The Economist's Asia and Business Finance editor.

It's not doing as well as you might expect given everything that is going on. We've seen a big burst in inflation in the last year, which is typically what gold investors say they're protecting themselves against. And there's a good sign that it's becoming less appealing to investors for a couple of important reasons.

But gold is, is like the original safe haven asset. How is it not performing well amid all of this?

Gold has been seen as a pretty solid investment by a very dedicated core of buyers for a very long time, but it's also been a part of mainstream investment portfolios as well. And the idea with gold is that it's meant to protect you against rising inflation. It became very, very popular in the late '70s, early 1980s when inflation was rampant as protection against that, and it has been seen that way ever since. The important thing to realize with gold is that over the last 15 years or so, there has been a fairly close relationship between gold and real interest rates. Now, real interest rates is just a complicated way of saying the level of interest rates and the level of inflation combined. Again, it's meant to protect you against inflation. The problem is that the last year, it simply hasn't been doing that very well. You've seen a very large pickup in inflation. But gold basically went nowhere last year.

So what is it that's changed?

Demand for gold is pretty much entirely speculative. Unlike other investments, it doesn't have a yield. It isn't like a company that produces a revenue. It's not going anywhere. It's basically the demand for it is based on what you think other people will pay for it, which is what we call speculative. So its value is very closely linked to inflation-protected treasuries. That's debt issued by the US government in particular in this case. And it's basically a promise, an investor purchases one of these treasuries, and the government says, we will pay you this amount back in this many years or months at this rate. What has happened with inflation-protected treasuries in the last year is again, not very much. You get about a -1% return. If you buy those, those are 10-year treasuries, it means that you're going to lose a very small amount of your money over time, but that you're protected against big swings in inflation. That hasn't moved very much, and nor has the value of gold. There have also been some other disadvantages in the last year, some bank funding regulations that have started coming into play that mean banks have to have more secure and stable funding to hold gold. And that's relative to other safe assets, again, like US Treasuries, which raises the question for some sort of conservative mainstream investors of if this thing performs in almost exactly the same way as US Treasury bonds do, why should I hold gold? And it's a good question and there isn't a good answer. And that is, I think, to some extent why gold has performed very poorly.

I mean, perhaps an answer to that question is historical performance. People have been hoarding gold since, since ever.

Absolutely. And this, I think, is part of the very core appeal of gold. The US dollar is a little bit over 150 years old. The British pound, even a much older currency. You're talking about hundreds of years. Gold goes back through all of recorded history and back into prehistory. So if you're someone who's a natural sort of skeptic, if you think that maybe paper currency is on the way out, then gold is a very popular investment. Now, the problem there is that it's now not the only thing in that space. Cryptocurrency, much newer thing, is starting to eat into the universe of investments for people who are very, very skeptical of central banks, of fiat money, of paper currency. It's a real competitor to gold in a way that it hasn't had competition in previous years.

But isn't cryptocurrency kind of like the opposite? It's a volatile thing. It swings all over the place. They come and go.

Definitely. It's very volatile. But the thing that a lot of cryptocurrency investors like about it, and it is very similar to gold depending on the cryptocurrency, is it's got this fixed monetary unit. So Bitcoin, for example, less and less of it is mined every year, and eventually there'll be a fixed stock of it in the same way that people say about gold. Gold is great because the central bank can't just print twice as much of it the next year. It's got that same facet, and it's also speculative in the same sense that gold is. It's only really worth what the next guy is going to pay for it. As I say, Bitcoin is a lot more volatile than gold. That's something that's going to put more conservative mainstream investors off holding Bitcoin. But there are arguments that gold used to be a bit more like that as well as when it was becoming a more established asset class again in the 1970s and '80s. The daily moves in gold were very large. It would surge one year and then fall sharply the next year. And it took quite a long time for it to become a more institutionally accepted asset class. And that's precisely when it started falling into the sort of relationship with real interest rates and bond yields that we talked about before. Now, whether that can be the case with crypto remains to be seen, but it proves that there is a path to go from sort of a volatile asset class into one that's much more stable and reliable.

[Speaker:GHION.AI] So is that to say then that gold is perhaps permanently on the way out?

I think you'd probably be hard pressed to say it was permanently on the way out. Again, you're talking about tens of thousands of years of history. But I think it's fair to say that it's pressured on two sides in a way that it hasn't been in quite a long time. One on the side of people preferring a much more safe asset with better regulatory treatment, and one on the side of people preferring a much more fun speculative asset with a lot more potential upside.

Mike, thanks very much for joining us.

Thank you very much again for having me, Jason.

With the holidays behind us, it's time for the January sales. Retailers are doing whatever they can to draw shoppers to high streets that have been struggling for years. The relentless shift to e-commerce was enough to strain plenty of big-name stores even before a global pandemic. City officials all over have wrestled with what they might do to reverse the trend. In London, they came up with an odd suggestion.

At the end of June in 2021, this large green mound pops up.

Margaret Kadifa usually writes about foreign affairs for The Economist, but was sent on a domestic mission.

It's got kind of some turf on it that's sort of a green-brown and some shrubs and some trees. And it's just off of one of London's busiest shopping streets, Oxford Street.

So why was this mysterious green-brown mound built?

So Oxford Street really suffered a lot during the pandemic. From March 2020 in the year following, footfall declined more than any other major European shopping district. And Oxford Street had been having problems even before the pandemic with low footfall. It really relies too much on kind of big traditional department stores that are losing customers to online shopping. And there was this idea that this could help solve some of that. It could create an attraction that would get people back to Oxford Street, but it's become a bit of a laughingstock.

How so?

Well, it's an eyesore. So I went over to it just before Christmas. And what you basically do is you walk up scaffolding that winds around this artificial hill, and the plants look kind of lackluster at this point, and there's, like, pigeons sitting on them. And once you get to the top, you're about 25 meters above the ground, and, you know, the view is decent. The day I was there, there were about a dozen people milling about, but you're just standing on a platform of bare scaffolding. You can see Hyde Park, and you can see the Shard, and you can see the London Eye in the distance. So of course, when I saw the London Eye, I thought to myself, why am I not looking at the view from over there? To exit, you actually have to walk back through the interior of the mound, and that's again just more bare scaffolding that creaks with every step you take. Despite the fact that it doesn't look so great, it was actually very expensive. So the cost was supposed to be about £3.3 million, and it ballooned to £6 million. That's $8 million. And it was supposed to be a paid experience. So in theory, some of that money would've been made up in ticket sales, but the design was so shoddy that the mound ended up being free. So a lot of people are looking at this thinking, what a waste of money.

So who's to blame for this thing ending up as a laughingstock?

Westminster Council commissioned the mound, and the deputy leader of the council actually resigned because of it. Opposition leaders really said the mound was an international embarrassment, and they were saying this should be taken down immediately. But instead, the mound is due to come down as originally planned on January 9th.

But what about the initial purpose, which was drawing more people towards Oxford Street? Did that work?

So it's not clear if the mound itself drew more people to Oxford Street, but it's had quite a few visitors. By December 13th, 215,000 people had visited the mound, and that's not far off what Westminster wanted. Of course, Westminster also wanted those people to be paying, which they weren't. Now, of course, we don't really know if the people that went to visit the mound went because they thought it was impressive or if they went for a laugh— most likely for a laugh— and we don't know if they would have been on Oxford Street anyway, But at least in some part, sure, there's more footfall in the area. But I guess regardless of who is or is not visiting the mound and for what reasons, sales and footfall are still below 2019 pre-pandemic levels, and department stores are still closing on Oxford Street.

So what solution is there then, besides possibly building a better mound?

Westminster Council's proposed solution to Oxford Street's problems was announced in February 2021, and this included the Mount. The Mount was the first flagship project, and it's essentially a £150 million facelift. So they're proposing things like public art and upgrading nearby parks, stuff like that. But what experts have said is really necessary is to change what businesses are there. So it needs to become more mixed-use, you know, less retail-heavy. Go shopping, sure, but you can also buy a pint afterwards or grab a coffee or go to the gym. There are some signs that things are moving in that direction. The department stores are planning to convert what used to be retail space over into gyms and pools and restaurants in addition to office space. So maybe the pandemic was just what Oxford Street needed, the shock that would make some necessary change happen.

Thanks very much for your time, Margaret.

Thank you for having me.

That's all for this episode of The Intelligence. If you like us, leave us a rating and a review, and you can subscribe to The Economist at economist.com/intelligenceoffer. The link is in the show notes. See you back here tomorrow.