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The Democrat Patient - VDH

The Democrat Patient

Ignoring the symptoms, misdiagnosing the malady, skipping the treatment

By Victor Davis Hanson — January 31, 2017

If progressives were to become empiricists, they would look at the symptoms of the last election and come up with disinterested diagnoses, therapies, and prognoses.

Although their hard-left candidate won the popular vote, even that benchmark was somewhat deceiving — given the outlier role of California and the overwhelming odds in their favor. The Republicans ran a candidate who caused a veritable civil war in their ranks and who was condemned by many of the flagship conservative media outlets. Trump essentially ran against a united Democratic party, the Republican establishment, the mainstream media (both liberal and conservative) — and won.
He was outspent. He was out-organized. He was outpolled and demonized daily as much by Republicans as Democrats. Yet he not only destroyed three political dynasties (the Clintons, Bushes, and Obamas) but also has seemingly rendered the Obama election matrix nontransferable to anyone other than Obama himself.
Not that Hillary did not try to copy Obama’s formula. She brought on Obama politicos to staff her campaign. She supported all the Obama initiatives, from Obamacare and record debt to a collapsed foreign policy. She spoke in a faux-inner city accent the same way Obama had to get out the African-American vote. She outdid Obama’s clinger speech by her own twist of “deplorables” and “irredeemables.” She returned to her own hard-left phase of the 1990s. Yet she was trounced in the electoral college and saw the fabled “blue wall” crumble.

DIAGNOSIS
Any reasonable post-election autopsy for a party would identify certain inconvenient truths.
1) The African-American vote is vital to the Democratic party, but it is dubious to suppose that blacks will register, turn out, and vote in a bloc (as they did in 2008 and 2012) for a Democratic candidate other than Barack Obama. The very efforts to ensure that 95 percent of blacks will vote for other Democratic nominees might only polarize other groups in an increasingly multiracial and multiethnic America. Trump, of course, knows all this and will make the necessary adjustments.
2) Asians and Hispanics are less a monolithic voting bloc. Supposedly discredited melting-pot assimilation, integration, and intermarriage are still the norm and can temper tribal solidarities and peel away from Democrats a third of their assumed constituents — in an electoral landscape where there is already only a thin margin of error, given that Democrats have written off the white working classes. In the case of Latinos, red states such as Texas and Arizona are unlikely to be flipped soon by Latino bloc voting, especially if Trump closes down the border and ends illegal immigration as a demographic electoral tool of the Democratic party. And Latino electoral-college strength is dissipated in states that are likely to be blue anyway (California, Nevada, New Mexico).
3) The race/class/gender agenda so favored by coastal elites and promulgated by media, Hollywood, and popular culture is an anathema to Middle America, especially its strange disconnect between affluence and the mandate for purportedly progressive equality. Moralistic lectures from wealthy people are not a way to win over the working classes. Rants by Hollywood celebrities and racialist sermons by would-be DNC chairs will not win over 51 percent of the voters in swing states. The twin agents of progressive dogma, the media and the university, are themselves under financial duress, must recalibrate, and have lost support from half the country.
4) Fairly or not, the entire environmental movement, as represented by Al Gore’s campaign against global warming, has become elitist and often hypocritical, and is evident in the lifestyles of wealthy utopians who have the capital and influence to navigate around the irritating results of their nostrums. Building Keystone is a better issue than the Paris Climate Change protocols. There is little support for Bay Area environmentalism among blue-collar building trades and unions — largely because radical climate change is now a religion and skeptics are hounded as heretics.
5) For the foreseeable future, the blue wall of the Midwest seems more vulnerable than the red wall in the South. The small towns and cities in swing states are as electorally powerful as the large, blue cities.
6) What the media and Democrats see as Trump’s outrageous extremism now looks, to more than half the country, like a tardy return to normalcy: employing the words “radical Islamic terror,” or asking cities to follow federal law rather than go full Confederate, or deporting illegal aliens who have committed crimes, or building a wall to stop easy illegal entry across the U.S. border, or putting a temporary hold on unvetted refugees from war-torn states in the Middle East. In the eyes of many Middle Americans, all these measures, even if sometimes hastily and sloppily embraced, are not acts of revolution; they are common-sense corrections of what were themselves extremist acts, or they are simply continuances of presidential executive-order power as enshrined by Obama and sanctified by the media.

TREATMENT
As a result, one might have thought that Democrats would look in 2017 to bread-and-butter economic issues and try to find candidates who are 21st-century updates of Hubert Humphrey or Harry Truman, or perhaps populist minority nominees or a younger version of Joe Biden. Or is it even worse? The Democratic party of 2017 is nothing like the party of 2008, when Hillary Clinton in the primaries ran as a guns-rights Annie Oakley, with a boilermaker in one hand and a bowling ball in the other, and Barack Obama kept assuring the nation that gay marriage was contrary to his religious principles.
Instead of seeing Barack Obama (both his successful two elections and his failed two terms) as the wave of the future, Democrats would be wise to reassess his electoral legacy as a unique phenomenon. In truth, Obama’s legacy is twofold: He took the party hard left, and he downsized it to a minority party of the two coasts and big cities. And then he faded off into the sunset to a multimillionaire retirement of golf and homilies.
The progressive movement, the Democratic party and its cultural appendages in entertainment and the media seem to be doubling down on a failed electoral strategy. Instead, they all hope that either Donald Trump will crack and spontaneously implode after some new sort of Access Hollywood disclosure, or that their own unrelenting invective will eventually grind him down, as it did with Richard Nixon.
Consider a potpourri of left-wing reactions to Trump. Would-be Democratic National Committee chairwoman Sally Boynton Brown pontificated: “I’m a white woman. I don’t get it. . . . My job is to listen and be a voice and shut other white people down when they want to interrupt.” Ashley Judd gave an incoherent rant at the Inauguration Day protest marches. In reading a bizarre poem, she variously compared Trump to Hitler, alleged that he had incestuous desires for his own daughter. and then indulged in rank vulgarity
Another Hillary Clinton bedrock supporter, Madonna, told the assembled thousands, “I’m angry. Yes, I’m outraged. Yes, I have thought an awful lot about blowing up the White House.”
Secret Service agent and loud Hillary Clinton supporter Kerry O’Grady wrote on her Facebook page that she would “take jail time over a bullet or an endorsement for what I believe to be a disaster to this the country.” Making her presidential preference clear, she ended her post with “I am with Her.”
BuzzFeed’s rumor mongering about Trump did not meet National Enquirer standards. Time magazine’s Zeke Miller decided, on no evidence whatsoever, that Trump had suddenly removed the bust of Martin Luther King Jr. from the Oval Office. Miller reported the scoop as breaking news — after all, it would confirm Trump’s alleged racism — before retracting the story.
None of these reactions will convince those in the swing states that they erred in voting for Donald Trump.

PROGNOSIS
In sum, the architects of Democratic-party reform are themselves the problem, not the solution. On key issues, they represent a minority opinion, one confined to the entertainment industry, academia, race/class/gender elite activists, and the wealthy scions of Silicon Valley, Hollywood, and Wall Street. In addition, minority activists themselves do not get out in the heartland and mistakenly believe that the demeanor, mindset, and, yes, guilt of white urban liberal elites in their midst characterize the white working and middle classes in general. And they mistakenly assume they themselves cannot be out-of-touch elites, given their ethnic and racial heritage, when in fact many most certainly are. Do Eric Holder and Colin Kaepernick know more about poverty and hardship than a West Virginian miner or an out-of-work fabricator in southern Ohio? Does an affluent Van Jones visit depressed rural Michigan to lecture out-of-work plant workers and welders about their endemic white privilege?​
The current Democratic reset plan certainly does not resemble the 1976 strategy of nominating a governor from the South in order to avoid another 1972 McGovern catastrophe; nor does it share the 1992 wisdom of nominating Bill Clinton to fend off a second Dukakis disaster.
For now, the Democratic-party strategists are doubling down on boutique environmentalism and race/gender victimhood, while hoping that Donald Trump implodes in scandal, war, or depression.  They are clueless that their present rabid frenzy is doing as much political damage to their cause as is the object of their outrage.
— NRO contributor Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and the author, most recently, of The Savior Generals.

After Eight Years Military Casualties Are Front Page News Again

BREAKING. After Eight Years Military Casualties Are Front Page News Again

Posted at 10:00 am on January 29, 2017 by streiff

Via a New York Times news alert:

One American commando was killed and three others injured in a fierce firefight overnight with Qaeda militants in central Yemen, a senior American official said Sunday morning. The raid was the first counterterrorism operation approved by President Trump since he took office nine days ago.

Commandos flying in Osprey aircraft carried out the surprise dawn attack in Bayda Province in a ground raid that lasted just under an hour. The target was a building or series of buildings that contained information that counterterrorism officials had deemed valuable enough to warrant a ground operation rather than an airstrike, the American official said.

Gen. Joseph Votel, the head of the Pentagon’s Central Command, said in a statement: “We are deeply saddened by the loss of one of our elite service members. The sacrifices are very profound in our fight against terrorists who threaten innocent peoples across the globe.”

I’m not opposed to military casualties being given front page billing. If you get killed in the service of your nation the least you have a right to expect is some acknowledgement of your sacrifice. And in a society based on democratic principles, the public, acting through its elected representatives, has the right and the duty to decide whether our policy goals are worth the lives of the young men and women we send off to accomplish those goals. What I am opposed to is the media using military casualties as a cudgel to beat Republican presidents while failing to acknowledge that they even happen when a Democrat is in the the White House.It isn’t like the Obama years have been bloodless:

2016… 19 US servicemembers died in combat operations.
2015… 28 US servicemembers died in combat operations.
2014… 60 US servicemembers died in combat operations.
2013… 132 US servicemembers died in combat operations.
2012…314 US servicemembers died in combat operations.
2011… 467 US servicemembers died in combat operations.
2010… 559 US servicemembers died in combat operations.
2009… 459 US servicemembers died in combat operations.

At some point, shortly after January 20, 2009, deaths in combat ceased to be a concern to the US media. But now that there is a Republican in the White House, we can expect to be kept much more up to date on military casualties.

____________________________________________

Almost Everything Went Wrong': SEAL, U.S. Girl Die in First Trump-Era Military Raid

8 / 28

NBC News

Robert Windrem and William M. Arkin and Courtney Kube and Charlene Gubash5 hrs ago

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Fact check: Trump claims on travel ban wrong

  

In what an official said was the first military raid carried out under President Donald Trump, two Americans were killed in Yemen on Sunday — one a member of SEAL Team 6 and the other the 8-year-old daughter of Anwar al-Awlaki, the New Mexico-born al Qaeda leader who himself was killed in a U.S. strike five years ago.

The raid in southern Yemen, conducted by the supersecret Joint Special Operations Command, was intended to capture valuable intelligence, specifically computer equipment, according to a senior U.S. military official. Three al Qaeda leaders were killed, according to U.S. officials.

Contrary to earlier reporting, the senior military official said, the raid was Trump's first clandestine strike — not a holdover mission approved by President Barack Obama. The mission involved "boots on the ground" at an al Qaeda camp near al Bayda in south central Yemen, the official said.

"Almost everything went wrong," the official said.

An MV-22 Osprey experienced a hard landing near the site, injuring several SEALs, one severely. The tilt-rotor aircraft had to be destroyed. A SEAL was killed during the firefight on the ground, as were some noncombatants, including females.

© Yemeni media Image: An image of 8-year-old Nora Anwar Al-Awlaki, who was killed by an airstrike in Yemen ordered by President Trump.

Defense Secretary James Mattis had to leave one of Washington's biggest annual social events, the Alfalfa Club Dinner, to deal with the repercussions, according to the official. He did not return.

On Monday, he released a statement identifying the dead SEAL as Chief Petty Officer William "Ryan" Owens and said, "Ryan gave his full measure for our nation, and in performing his duty, he upheld the noblest standard of military service."

The senior military official said the 8-year-old girl, Nawar al-Awlaki, also known as Nora, was among the noncombatants killed in the raid, which also resulted in the death of several Yemeni women. U.S. officials said some of the women who were killed, however, were combatants and had opened fire on the SEALs as they approached the al Qaeda camp.

The girl's grandfather, Nasser al-Awlaki, Yemen's former agriculture minister, told NBC News a different story. He identified his granddaughter as the dead girl from a photo taken at the scene of the raid but based his description on what happened at the camp on conversations with what he characterized as Yemeni sources.

"My granddaughter was staying for a while with her mother, so when the attack came, they were sitting in the house, and a bullet struck her in her neck at 2:30 past midnight. Other children in the same house were killed," al-Awlaki said. He said the girl died two hours after being shot.

"They [the SEALs] entered another house and killed everybody in it, including all the women. They burned the house. There is an assumption there was a woman [in the house] from Saudi Arabia who was with al Qaeda. All we know is that she was a children's teacher."

Al-Awlaki said the girl and her mother had fled the Yemeni capital, Sa'ana, where he lives, to escape the heavy shelling.

The child's mother, Anwar al-Awlaki's widow, survived the raid with a minor wound, according to Nasser al-Awlaki. However, Anwar al-Awlaki's brother-in-law was killed in the raid. The death toll varies according to the sourcing, with the Pentagon saying 14 militants died, along with "numerous" civilians. Nasser al-Awlaki said Yemenis were circulating a body count of combatants and civilians as high as 59.

In explaining the attack, the senior U.S. military official told NBC News: "Al Qaeda is probably stronger in Yemen than in any other country. The U.S. has mounted in intense effort for the past three years from ship, air and drone to go after a reconstituting core al Qaeda organization in Yemen."

The raid, said the official, was directed from a U.S. base in Djibouti, across the Gulf of Aden from the southern tip of the Arabian peninsula and the western edge of Yemen. Officially, the United States was searching for "information that will likely provide insight into the planning of future terror plots."

Karen Greenberg, director of Fordham University's Center on National Security, said the girl's death will be a boon to al Qaeda propagandists.

"The perception will be that it's not enough to kill al-Awlaki — that the U.S. had to kill the entire family," she said.

Nawar's father, Anwar al-Awlaki was killed by a drone on Sept. 30, 2011, not far from Sunday's raid. The U.S. Justice Department had approved killing him in a memorandum that was disclosed in 2014. The memo concluded, "We do not believe that al-Awlaki's U.S. citizenship imposes constitutional limitations that would preclude the contemplated lethal action" by the U.S. military or the CIA.

Al-Awlaki, who was born while his father was a graduate student in the United States, moved to Yemen and became a prodigious propagandist who, the United States said in the memo, had played "operational and leadership roles" with al Qaeda and "continues to plot attacks intended to kill Americans."

U.S. intelligence also believed al-Awlaki was a potential successor to Osama Bin Laden, who had been killed six months earlier.

Nawar al-Awlaki is the second of Anwar al-Awlaki's children to be killed by U.S. forces. Two weeks after Anwar was killed in late 2011, his 16-year-old son, Abdulrahman, was also struck in a drone strike. U.S. officials said the younger al-Awlaki was in the wrong place at the wrong time — that he was with their intended target, an al Qaeda leader.

Intentional or not, Greenberg said, the deaths of three al-Awlaki family members will enhance the al Qaeda narrative. She noted that as part of propaganda efforts, terrorist groups have begun to circulate photographs of children reputedly killed by U.S. forces. Photos of Nawar al-Awlaki alive and dead are already circulating widely in Arab media.

Al Qaeda in the Arabian Peninsula released a statement via online jihadi media referring to the raid as a "massacre," said U.S. troops had fired on women and children "in cold blood," and accused the SEALs of having "no human values."

Rima Abdelkader contributed to this report.

Be Careful What You Wish For (especially if it is Hitler)

Be Careful What You Wish For (especially if it is Hitler)

Posted January 29th, 2017 @ 11:50am in #Trump #immigration

As a trained persuader, I’m seeing a dangerous situation forming that I assume is invisible to most of you. The setup is that during the presidential campaign Trump’s critics accused him of being Hitler(ish) and they were sure other citizens would see it too, thus preventing this alleged monster from taking office.

They were wrong. The alleged monster took office.

Now you have literally millions of citizens in the United States who were either right about Trump being the next Hitler, and we will see that behavior emerge from him soon, or they are complete morons. That’s a trigger for cognitive dissonance. The science says these frightened folks will start interpreting all they see as Hitler behavior no matter how ridiculous it might seem to the objective observer. And sure enough, we are seeing that.

To be fair, Trump made it easy this week with his temporary immigration ban. If you assume Trump is Hitler, that fits with your hypothesis. But of course it also fits the hypothesis that he’s just doing his job. We’re all seeing what we expect to see. 

But lately I get the feeling that Trump’s critics have evolved from expecting Trump to be Hitler to preferring it. Obviously they don’t prefer it in a conscious way. But the alternative to Trump becoming Hitler is that they have to live out the rest of their lives as confirmed morons. No one wants to be a confirmed moron. And certainly not after announcing their Trump opinions in public and demonstrating in the streets. It would be a total embarrassment for the anti-Trumpers to learn that Trump is just trying to do a good job for America. It’s a threat to their egos. A big one.

And this gets me to my point. When millions of Americans want the same thing, and they want it badly, the odds of it happening go way up. You can call it the power of positive thinking. It is also the principle behind affirmations. When humans focus on a desired future, events start to conspire to make it happen.

I’m not talking about any new-age magic. I’m talking about ordinary people doing ordinary things to turn Trump into an actual Hitler. For example, if protesters start getting violent, you could expect forceful reactions eventually. And that makes Trump look more like Hitler. I can think of dozens of ways the protesters could cause the thing they are trying to prevent. In other words, they can wish it into reality even though it is the very thing they are protesting.

In the 3rd dimension of persuasion, the protesters need to be proven right, and they will do whatever it takes to make that happen. So you might see the protesters inadvertently create the police state they fear.

If you are looking for the tells that this dangerous situation is developing, notice how excited/happy the Trump critics seem to be – while angry at the same time – that Trump’s immigration ban fits their belief system. If you see people who are simply afraid of Trump, they are probably harmless. But the people who are excited about any Hitler-analogy-behavior by Trump might be leading the country to a police state without knowing it.

So watch for that.

POSTED ON JANUARY 29, 2017 BY SCOTT JOHNSON IN ISLAM, LAW, TED CRUZ, TERRORISM

THE MUSLIM BROTHERHOOD REVISITED

In significant respects the Muslim Brotherhood is the progenitor of the Islamic terrorism that hit us on 9/11. Lawrence Wright therefore began his account of al Qaeda and the road to 9/11 with Sayyid Qutb, the “intellectual godfather” of the Brotherhood.

The avowedly genocideal and terrorist group Hamas is an offshoot of the Brotherhood. The Brotherhood itself is a little cagier, but it takes a case of willful blindness to miss the nature of this particular beast.

Senator Cruz urges designation of the Brotherhood as a terrorist organization under federal law. The text of Senator Cruz’s 2015 bill sets forth the evidence in support of such a designation and is posted here. Andy McCarthy endorsed the bill here (additional helpful background is summarized here). The bill as reintroduced in the current session of Congress is posted here.

The purported civil rights organization CAIR resists Senator Cruz’s proposed law through a campaign of disinformation. Adam Kredo calls foul on CAIR in the Washington Free Beacon story here.

In his invaluable book The Grand Jihad Andy devoted a chapter to the origins and purposes of CAIR, its roots in the Muslim Brotherhood’s Hamas-support network, and its aim to silence critics of Islamic supremacism. NRO has posted a version of the chapter here.
CAIR’s defense of the Muslim Brotherhood with its false disparagement of the Cruz bill makes out the point in its own way.

Lawfare editor in chief Benjamin Wittes argues that designating the Brotherhood “as a whole” a terrorist organization would be illegal. The linked post appears solely under Wittes’s name, but the text of the post refers to “[o]ne of the present authors” and elsewhere also seems to denote plural authorship (“we would never argue…”). Either I am missing something or a co-author is missing from the byline.

As I say above, Senator Cruz’s bill urges designation of the Brotherhood as a terrorist organization. It should be noted, however, that Senator Cruz’s bill calls for the Secretary of State, in consultation with the intelligence community, to submit a detailed report to the appropriate congressional committees that (1) indicates whether the Muslim Brotherhood meets the criteria for designation as a foreign terrorist organization under section 219 of the Immigration and Nationality Act (8 U.S.C. 1189); and (2) if the Secretary of State determines that the Muslim Brotherhood does not meet the criteria referred, to include a detailed justification as to which criteria have not been met

What the MSM isn’t telling you about Trump’s immigration stay

What the MSM isn’t telling you about Trump’s immigration stay

JANUARY 29, 2017 BY BOOKWORM 7 COMMENTS

Because the media is working overtime to out-and-out lie, or just subtly misrepresent, Trump’s immigration stay, ordinary people are having to do the media’s job. That’s what my friend John did, and he came up with something simple, straightforward, and singularly illuminating:

SUMMARY

1. Yes, the MSM is dishonest BUT it’s more what they’re “conveniently” leaving out of the conversation that’s important.
2. All of Europe continues to have severe issues with Muslim’s unwillingness to assimilate.  They would love to put the “genie back in the bottle” and start anew.  They cannot.
3. We’ve had our own issues (9/11, Ft Hood, Boston Marathon, San Bernardino, The Orlando Nightclub, The Ft Lauderdale Airport, etc).  And according to the Pew Research Center… 7% of Muslims in America say suicide bombings are sometimes justified and 1% say they are often justified in these circumstances.  That means that 240,000 Muslims in America think suicide bombings MAY be OK .
4. Trump’s 120 day moratorium is a timeout to figure out how we can avoid the USA becoming Europe and how he can keep Americans safe. (that includes the majority of American Muslims).
5. I’m not sure it’s the “perfect solution”.  I’m not even sure there is a “perfect solution”.  But, there is unquestionably a SERIOUS  issue that needs to be addressed.

[Close it up again]

Is there really a problem in Europe?

Yes. Muslims are NOT assimilating anywhere in Europe.  And in their case, non assimilation equals violence.  Every country would LOVE to put the “genie back in the bottle” and figure out how to avoid the mess.

• In France, Muslims make up 10% of the general population but 60% of the prison population.  74 per cent of French citizens view Islam as “intolerant” and “incompatible” with French values.
• A 2016 poll of Muslims living in Great Britain shows: the following: 52% want homosexuality to be ILLEGAL, 47% think gays should not be able to be teachers, 39% say women should always obey their husbands, 1 out of 3 refused to condemn people who take part in violence against those who mock the Prophet Muhammad and one-quarter said they favored replacing the British legal system with Islamic law.
• A headline from a recent Swedish newspaper? 77% of the rapes in Sweden committed by 2% Muslim male population.
• And there’s a real reason why Merkel is in trouble in Germany.  From 2014 to 2015, police statistics show a 158.4% increase in crimes committed by NON-Germans.
• What does a spokesman for the Czech president think about Trump’s move? “Trump protects his country,” Ovčáček wrote in a tweet, “he’s concerned with the safety of his citizens. Exactly what EU elites do not do”.

What exactly happened on Saturday?

325,000 people from foreign countries came into the United States yesterday, and 109 people were detained for further questioning. Most of those people were moved out. We’ve got a couple dozen more that remain.

How did Trump pick those 7 countries for the immigration stay?

He didn’t.  Obama did.  According to the draft copy of Trump’s executive order, the countries whose citizens are barred entirely from entering the United States is based on a bill that Obama signed into law in December 2015.Obama signed the Visa Waiver Program Improvement and Terrorist Travel Prevention Act as part of an omnibus spending bill. The legislation restricted access to the Visa Waiver Program, which allows citizens from 38 countries who are visiting the United States for less than 90 days to enter without a visa.

Don’t the 7 countries listed in the ban make up pretty much all of the world’s Muslims?

HA!  Not even close!  When you add the Islamic populations of all 7 countries listed in the ban, we’re looking at 14% of the world’s Muslim population.

Where these facts about the immigration stay (which the MSM ignored) come from:

Pew Research

Globe and Mail

New York Times

Breitbart

Sputnik News

Breitbart (again)

Townhall

The Guardian

FICS Editors' Note

Inflation rose at a 2.2% annual rate in the fourth quarter, the government reported Friday — the highest reading for the personal consumption expenditure (PCE) price index, the Federal Reserve's preferred measure of inflation, since 2012.

Straight talk about inflation and the markets

History tells us that as inflation accelerates, share price gains don't keep pace.

• BY JAMES MACKINTOSH, 
• THE WALL STREET JOURNAL 
• – 01/26/2017

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Inflation is on the up, and shareholders are delighted. The post-election reflation rally was predicated on the new president's promise to reflate the U.S. economy with big fiscal spending, putting a booster under expectations for inflation that were already moving skyward.

So far the "Trumpflation" trade has run exactly as would be expected: Shares have risen, bond prices have tumbled (as yields have increased) and the values of the longest-dated bonds have been eviscerated. Investors have waved goodbye to deflation fears and embraced higher inflation.

Why interest rates matter

How Fed rate hikes and rising bond yields affect your investment strategy.

Read: Why rate hikes matter

For the moment, that looks like a rational response to the assumption that President Donald Trump's policies herald higher inflation. But shareholders should be keeping a watchful eye on consumer prices, as they often rise much faster than anticipated. Like alcoholic drinks (prices of which are up just 1.4% in the U.S. in the year to December), too much of a good thing can have nasty aftereffects.

The basic effects of inflation are well-established: Higher inflation means weaker real, or inflation-adjusted, returns from shares. Put another way, as inflation accelerates, share price gains don't keep pace. The ideal for investors is steady, reasonably low inflation; just enough to keep deflation worries away, but not so rapidly that the central banks will have to jack up interest rates quickly.

Richard Turnill, chief investment strategist at BlackRock Investment Institute, says higher inflation is supportive of corporate earnings despite higher wages, because those wages are spent. But he says it can push down the valuation of those earnings, and since share prices are the result of the earnings times the valuation multiple, that can offset the higher profits. "This tips from good reflation to bad reflation when the central banks really have to tighten and you start to worry about how far away the next recession is," he said.

Every cycle is different, but in the past there often has been a break in markets when inflation hits 4%.

"If inflation gets to 4% the Fed's really behind the curve," says Jason Trennert, chief investment strategist at Strategas Research Partners. "The good news is that we probably have some time before we get to 4%."

It would be misleading to say 4% inflation is guaranteed to be the point where the market going gets rough.

Yet, that level has often been a decent warning signal. In 1987, for example, inflation hit 4% in August and the market crashed in October. In 2000, the dot-com bubble burst with inflation at 3.75%, while stocks hit their pre-crisis peak in October 2007, the month before inflation broke through 4%.

It is easy to forget inflation can be that high. Consumer-price inflation in the U.S. is just above 2% at the moment and hasn't been above 4% since 2008, while the Federal Reserve's preferred personal consumption expenditure (PCE) measure is a little below its 2% target. Friday will bring figures for the fourth-quarter PCE which aren't expected to rise much, and investors are now pricing in U.S. inflation being broadly on target in the long run.

Inflation hurts valuations

There's a sweet spot of inflation when stock valuations tend to be high, and we're in it today. Valuations have typically been lower when inflation is above 4%.

Source: Thomson Reuters

The inflation rate implied by Treasury bonds for the five years starting in five years' time — a gauge designed to strip out near-term fluctuations — is up from a post-recession low of 1.4% in July to 2.2%. That would equate to PCE inflation almost exactly on target, suggesting few concerns about an overshoot.

Yet, in the past, inflation has rarely paused at 2%. Since Paul Volcker's Fed tamed the monster inflation of the 1970s, it has risen back through 2% a dozen times, including in December. A year after each of the previous 11 instances it had jumped to 4% twice, and above 3% four times.

Maybe this year will be like October 2002, the only time inflation was still at 2% a year later (although it did briefly jump to 3% in between.) But there has to be at least a decent chance that inflation overshoots.

If inflation does carry on up, history suggests that the price/earnings ratio will suffer, as the sweet spot for valuations has been with inflation in the range of 1% to 3%, and they have on average fallen sharply with inflation above 4%. Given that the market starts out already very highly valued compared with the past, the danger is that a sharp drop in valuation will more than offset the rise in earnings from a stronger economy.

This time might be different, if Mr. Trump's plans for corporate tax cuts and a bonfire of red tape boost earnings enough to mean that any drop in valuation doesn't matter. After a seven-year bull market and with valuations high, many fear the end can't be far away, but the rosy scenario is that Mr. Trump can take us back to 2005. A year after the Fed started raising rates, inflation broke 4% and the valuation of the S&P 500 began to drop. But earnings rose quickly enough to allow shares to carry on up for months before a brief pullback in 2006 — and then, as inflation dropped, to have a final run that took them up another 25% before the credit crunch hit in 2007. Just hope that we have learned enough to avoid a repeat of what followed.