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Tag: Wall Street

  • Regional bank stock plunge creating key entry point for investors, top analyst says

    Regional bank stock plunge creating key entry point for investors, top analyst says

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    The dramatic drop in regional bank stocks is a key entry point for investors, according to analyst Christopher Marinac.

    Marinac, who serves as Director of Research at Janney Montgomery Scott, believes the group’s decline over the past week provides an attractive entry point for investors because underlying business fundamentals remain intact.

    “We have definitely slipped on a banana peel as it pertains to this deposit worry and scare,” Marinac told CNBC’s “Fast Money” on Monday.

    The SPDR S&P Regional Banking ETF dropped by more than 12% on Monday after regulators shuttered Silicon Valley Bank and Signature Bank. They’re the second- and third-largest bank failures, respectively, in U.S. history.

    “The main lending in America is still mid-size and small community banks,” he added. “Those companies are excellent plays.”

    When asked which regional banks look most attractive, Marinac recommends Fifth Third Bank. The stock is off more than 27% over the past week.

    “They’re a very innovative company in the fintech arena, which still has merit as we go forward,” he said, adding that CEO Timothy Spence has an “excellent” handle on interest rate risk and credit.

    Marinac also named Truist as a top sector pick, saying the company has a competitive advantage among regional banks after selling a portion of its insurance unit. Truist stock has dropped 30% over the past five sessions.

    “That’s going to help them pass the stress test in June, so that company certainly is not only a survivor, but a thriver,” he said.

    On the longer-term outlook for regionals, Marinac expects the group to pare its losses.

    “Eventually, the storm will calm and the seas will part such that banks can go back to trading at book value and higher as we go forward,” Marinac said.

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  • Regulators may still try to find a buyer for Silicon Valley Bank, source says

    Regulators may still try to find a buyer for Silicon Valley Bank, source says

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    Customers wait in line outside of a Silicon Valley Bank branch in Wellesley, Massachusetts, US, on Monday, March 13, 2023. 

    Sophie Park | Bloomberg | Getty Images

    Regulators could make a second attempt to sell collapsed Silicon Valley Bank after the auction over the weekend led nowhere, according to a senior Treasury official.

    There’s still an opportunity to sell Silicon Valley Bank, according to the official, saying that’s not off the table.

    The Federal Deposit Insurance Corp. struggled to find a buyer for the failed bank’s assets during the weekend. CNBC previously reported that PNC, which expressed interest initially, decided not to place an official bid after conducting due diligence.

    The Wall Street Journal first reported that regulators are planning a second auction, citing people familiar with the matter.

    The collapse over the past several days of Silicon Valley Bank and Signature Bank — the second- and third-largest bank failures in U.S. history — are worrying many that there could be a contagion effect in the broader banking system.

    On Sunday evening, the Federal Reserve, FDIC and Treasury Department announced a plan to guarantee the uninsured depositors at SVB and Signature. The Fed also announced an additional funding facility for troubled banks.

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  • Wall Street pummels regional banks, despite Biden’s assurances | CNN Business

    Wall Street pummels regional banks, despite Biden’s assurances | CNN Business

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    New York
    CNN
     — 

    Wall Street’s confidence in regional banks remained shaky Monday, despite emergency measures from the Biden administration to protect customer deposits.

    First Republic shares fell more than 60% and were briefly halted for volatility. Western Alliance Bancorp’s stock also fell 60%, and PacWest Bancorp fell more than 34%.

    The SPDR S&P Regional Banking exchange-traded fund fell 11%.

    Monday’s turmoil for bank stocks stems from the collapse Friday of Silicon Valley Bank, which came unglued last week as customers panicked and yanked their deposits.

    Rather than bailing out the bank, the Biden administration and federal regulators on Sunday night said they would to backstop customers’ deposits — even those that weren’t insured. The same protections would be in place for customers of Signature, a New York regional lender that folded when depositors were apparently spooked by SVB’s demise.

    By guaranteeing all deposits — even the uninsured money that customers kept with the failed banks — the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations.

    The Fed will also make additional funding available for eligible financial institutions to prevent runs on similar banks in the future.

    Despite those emergency measures to avoid a 2008-style crisis, investors sold off shares of regional banks that are seen as having similar risk potential.

    “It’s a good thing that we have the backstop, and it’s a good thing that the depositors were protected,” said Mike O’Rourke, chief market strategist at Jones Trading. “But it doesn’t change the fact that there’s still problems — you’re just basically buying time to sort the problems out in a better way.”

    The intervention from the Biden administration and the Fed does not amount to a 2008-style bailout, meaning investors in the banks’ stock and bonds will not be protected.

    O’Rourke said he’s not concerned about the health of the banking system.

    “It’s a confidence-crisis risk,” he said. “If we get through the next 24, 48 hours without the regulators having to close anymore banks, we should be fine.”

    First Republic lists $213 billion in assets. The lender reached out to customers over the weekend in a bid to reassure them.

    “In light of recent industry events, the last few days have caused uncertainty in the financial markets,” First Republic senior executives said in an email to clients viewed by CNN. “We want to take a moment to reinforce the safety and stability of First Republic, reflected in the continued strength of our capital, liquidity and operations.”

    —CNN’s Matt Egan contributed reporting.

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  • Bill Ackman says U.S. did the ‘right thing’ in protecting SVB depositors. Not everyone agrees

    Bill Ackman says U.S. did the ‘right thing’ in protecting SVB depositors. Not everyone agrees

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    A sign hangs at Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023.

    Noah Berger | AFP | Getty Images

    Billionaire investor Bill Ackman said the U.S. government’s action to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system.

    In his latest tweet on SVB’s collapse, the hedge fund investor said the U.S. government did the “right thing.”

    “This was not a bailout in any form. The people who screwed up will bear the consequences,” wrote the CEO of Pershing Square. “Importantly, our gov’t has sent a message that depositors can trust the banking system.”

    Ackman’s comments came after banking regulators announced plans over the weekend to backstop depositors with money at Silicon Valley Bank, which was shut down on Friday after a bank run.

    “Without this confidence, we are left with three or possibly four too-big-to-fail banks where the taxpayer is explicitly on the hook, and our national system of community and regional banks is toast,” Ackman added.

    Ackman further explained that in this incident, shareholders and bondholders of the banks will be mainly the ones affected, and the losses will be absorbed by the Federal Deposit Insurance Corporation’s (FDIC) insurance fund.

    This is in contrast to the great financial crisis in 2007-2008, where the U.S. government injected taxpayers’ money in the form of preferred stock into banks, and bondholders were protected.

    The decisive government action was seen by some as a critical step in stemming contagion fears brought on by the collapse of SVB, a key bank for start-ups and other venture-backed companies.

    Not everyone agrees.

    Peter Schiff, chief economist and global strategist at Euro Pacific Capital, said the move is “yet another mistake” by the U.S. government and the Fed.

    He explained in another tweet: “The bailout means depositors will put their money in the riskiest banks and get paid higher interest, as there’s no downside risk.”

    The result?

    “… all banks will take on greater risks to pay higher rates. So in the long-run many more banks will fall, with far greater long-term costs,” Schiff said.

    Clear roadmap

    In a statement late Sunday — issued jointly by the Federal Reserve, Treasury Department and the FDIC — regulators said there would be no bailouts and no taxpayer costs associated with any of the new plans.

    “Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.

    Along with that move, the Fed also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.

    The statement — also said New York-based Signature Bank will be closed due to systemic risk. Signature had been a popular funding source for cryptocurrency companies.

    Ackman said in the tweet that had the government “not intervened today, we would have had a 1930s bank run continuing first thing Monday causing enormous economic damage and hardship to millions.”

    “More banks will likely fail despite the intervention, but we now have a clear roadmap for how the gov’t will manage them.”

    ‘Lost faith’

    “Right at this moment, I don’t think you would expect to see the Treasury Secretary, the head of the Fed and the head of the FDIC, making a public joint statement — unless they understood clearly the risk that the banking system and the American in America is facing right now,” he said.

    Bove pointed out the U.S. banking system is at risk for two reasons.

    “Number one, the depositors have lost faith in American banks: Forget the people who may or may not have been taking money out of SVB. Deposits in American banks have dropped 6% in the last 12 months,” he noted.

    “The second group that has lost faith in the American banking system are investors,” he added. “The investors have lost faith because the American banks have a whole bunch of accounting tricks that they can play, to show earnings when earnings don’t exist, to show capital when capital doesn’t exist.”

    He went on to say that accounting practices for the banking industry are “totally unacceptable,” and that banks are using “accounting gimmickry to avoid indicating what the true equity is in these banks.”

    “The government is now on its back feet. And the government is trying to do whatever it can to stop what could be a major, major negative thrust,” Bove said.

    Political support

    The White House said President Joe Biden will address the nation on Monday morning on how to strengthen the banking system.

    “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” Biden said in a statement

    Jeremy Siegel, Wharton School of business professor, noted the government’s intervention will “fortunately” stem the losses from SVB’s fallout.

    He said SVB is more like a regional bank unlike other big Wall Street players. As a result, the government is unlikely to take a political hit from its latest action.

    “They’re more in the category we call regional banks. And actually,  politicians love regional banks, in contrast to the big names, which are easy to target, to … hit politically,” Siegel told CNBC’s “Street Signs Asia.”

    “They have a lot of political support. All the Congress men and women, are going to be hearing from their people and their district,” Siegel said. “The smaller banks are not the JP Morgans, Goldman Sachs and all those. These are the banks that we use … getting down to the regional level.”  

     — CNBC’s Jeff Cox contributed to this report.

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  • Can The Chaos From Silicon Valley Bank’s Fall Be Contained?

    Can The Chaos From Silicon Valley Bank’s Fall Be Contained?

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    NEW YORK (AP) — Can Washington come to the rescue of the depositors of failed Silicon Valley Bank? Is it even politically possible?

    That was one of the growing questions in Washington Sunday as policymakers tried to figure out whether the U.S. government — and its taxpayers — should bail out a failed bank that largely served Silicon Valley, with all its wealth and power.

    Prominent Silicon Valley personalities and executives have been hitting the giant red “PANIC” button, saying that if Washington does not come to the rescue of Silicon Valley bank’s depositors, more bank runs are likely.

    “The gov’t has about 48 hours to fix a soon-to-be-irreversible mistake,” Bill Ackman, a prominent Wall Street investor, wrote on Twitter. Ackman has said he does not have any deposits with Silicon Valley Bank but is invested in companies that do.

    Some other Silicon Valley personalities have been even more bombastic.

    “On Monday 100,000 Americans will be lined up at their regional bank demanding their money — most will not get it,” Jason Calacanis wrote on Twitter. Calacanis, a tech investor, has been close with Elon Musk, who recently took over the social media network.

    Silicon Valley Bank failed on Friday, as fearful depositors withdrew billions of dollars from the bank in a matter of hours, forcing U.S. banking regulators to urgently close the bank in the middle of the workday to stop the bank run. It’s the second-largest bank failure in history, behind the collapse of Washington Mutual at the height of the 2008 financial crisis.

    Silicon Valley Bank was a unique creature in the banking world. The 16th-largest bank in the country largely served technology startup companies, venture capital firms, and well-paid technology workers, as its name implies. Because of this, the vast majority of the deposits at Silicon Valley Bank were in business accounts with balances significantly above the insured $250,000 limit.

    Its failure has caused more than $150 billion in deposits to be now locked up in receivership, which means startups and other businesses may not be able to get to their money for a long time.

    Staff at the Federal Deposit Insurance Corporation — the agency that insures bank deposits under $250,000 — have worked through the weekend looking for a potential buyer for the assets of the failed bank. There have been multiple bidders for assets, but as of Sunday morning, the bank’s corpse remained in the custody of the U.S. government.

    Despite the panic from Silicon Valley, there are no signs that the bank’s failure could lead to a 2008-like crisis. The nation’s banking system is healthy, holds more capital than it has ever held in its history, and has undergone multiple stress tests that shows the overall system could withstand even a substantial economic recession.

    Further, it appears that Silicon Valley Bank’s failure appears to be a unique situation where the bank’s executives made poor business decisions by buying bonds just as the Federal Reserve was about to raise interest rates, and the bank was singularly exposed to one particular industry that has seen a severe contraction in the past year.

    Investors have been looking for banks in similar situations. The stock of First Republic Bank, a bank that serves the wealthy and technology companies, went down nearly a third in two days. PacWest Bank, a California-based bank that caters to small to medium-sized businesses, plunged 38% on Friday.

    While highly unusual, it was clear that a bank failure this size was causing worries. Treasury Secretary Janet Yellen as well as the White House, has been “watching closely” the developments; the governor of California has spoken to President Biden; and bills have now been proposed in Congress to up the FDIC insurance limit to temporarily protect depositors.

    “I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said on “Face the Nation” on Sunday.

    But Yellen made it clear in her interview that if Silicon Valley is expecting Washington to come to its rescue, it is mistaken. Asked whether a bailout was on the table, Yellen said, “We’re not going to do that again.”

    “But we are concerned about depositors, and we’re focused on trying to meet their needs,” she added.

    Sen. Mark Warner, D-Virginia, said on ABC’s “This Week” that it would be a “moral hazard” to potentially bail out Silicon Valley’s uninsured depositors. Moral hazard was a term used often during the 2008 financial crisis for why Washington shouldn’t have bailed out Lehman Brothers.

    The growing panic narrative among tech industry insiders is many businesses who stored their operating cash at Silicon Valley Bank will be unable to make payroll or pay office expenses in the coming days or weeks of those uninsured deposits are not released. However, the FDIC has said it plans to pay an unspecified “advanced dividend” — i.e. a portion of the uninsured deposits — to depositors this week and said more advances will be paid as assets are sold.

    The ideal situation is the FDIC finds a singular buyer of Silicon Valley Bank’s assets, or maybe two or three buyers. It is just as likely that the bank will be sold off piecemeal over the coming weeks. Insured depositors will have access to their funds on Monday, and any uninsured deposits will be available as the FDIC sells off assets to make depositors whole.

    Todd Phillips, a consultant and former attorney at the FDIC, said he expects that uninsured depositors will likely get back 85% to 90% of their deposits if the sale of the bank’s assets is done in an orderly manner. He said it was never the intention of Congress to protect business accounts with deposit insurance — that the theory was businesses should be doing their due diligence on banks when storing their cash.

    Protecting bank accounts to include businesses would require an act of Congress, Phillips said. It’s unclear whether the banking industry would support higher insurance limits as well, since FDIC insurance is paid for by the banks through assessments and higher limits would require higher assessments.

    Philips added the best thing Washington can do is communicate that the overall banking system is safe and that uninsured depositors will get most of their money back.

    “Folks in Washington need to be forcefully countering the narrative on Twitter coming from Silicon Valley. If people realize they are going to get 80% to 90% of your deposits back, but it will take awhile, it will do a lot to stop a panic,” he said.

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  • Final Trades: M, JPM, DHI & KO

    Final Trades: M, JPM, DHI & KO

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    The final trades of the week. With CNBC's Sara Eisen and the Fast Money traders, Tim Seymour, Courtney Garcia, Jeff Mills and Steve Grasso

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  • Why the housing market is in increasingly big trouble

    Why the housing market is in increasingly big trouble

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    CNBC’s Diana Olick on why the housing market is in deep trouble. With CNBC’s Sara Eisen and the Fast Money traders, Tim Seymour, Courtney Garcia, Jeff Mills and Steve Grasso

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  • Meet the woman who wrote a shocking account of her life on Wall Street

    Meet the woman who wrote a shocking account of her life on Wall Street

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    Jamie Fiore Higgins interviewed on TV on Wednesday, August 31, 2022. Her book, Bully Market, exposed shocking behavior by some Goldman Sachs employees.

    Nbc | Nbcuniversal | Getty Images

    Jamie Fiore Higgins didn’t leave her job at Goldman Sachs planning to reveal the most personal, demeaning and, at times, outright scary moments from her 18 years at the investment bank.

    But after resigning in 2016, having risen through the ranks to become a managing director — the second-highest role behind partner — conversations with people from outside of that world made her realize how shocking some of the things she’d experienced were.

    And so in the book “Bully Market: My Story of Money and Misogyny at Goldman Sachs,” published last summer, she chronicled them.

    Some anecdotes, from her early days in the late 1990s but also later, were sexist comments and inappropriate actions she characterizes as the “white noise of Wall Street.” She says a colleague created a spreadsheet ranking the body parts of female recruits. She recalls being told she had only been promoted “because of [her] vagina,” and a series of junior male colleagues making clear they would not respect her authority.

    She also says she witnessed sex and drug-taking in the office, and work socials being held in strip clubs (she notes at the start of the book that some of the people featured in it, who are all given pseudonyms, are composites of various people she knew and the timing of some events has been compressed).

    A Goldman Sachs spokesperson said the company “strongly disagrees” with the characterization of its culture described in the book, and what it called “anonymized allegations.”

    “Had Ms. Higgins raised these allegations with our Human Resources department at the time we would have investigated them thoroughly and addressed them seriously,” the spokesperson told CNBC. CNBC could not independently verify any of the accounts made in the book.

    Fiore Higgins also says that, despite the company offering rooms for breastfeeding, she was once told that using them would hold back her career. And that when she did use them after having a child, colleagues made “mooing” noises at her, performed crude gestures, and left a stuffed cow on her desk.

    In another story, she recounts removing a colleague (who was having an affair with his client) from an account. She says he responded by pinning her against a wall and shouting into her face, spraying her with spit as he threatened her.

    The response

    “I received hundreds and hundreds of messages from people, even now six months out, every day I get one or two saying thank you for telling this story, there’s so much of what you have experienced that resonates with me,” she told CNBC.

    Fiore Higgins is also up front about the fact that she was there for so many years, in a senior role reached by far fewer women than men, writing that she was “tolerating and perpetuating harassment and abuse” and being “complicit in a broken system.”

    “For those 18 years, I cared more about Goldman Sachs than I did my husband, my kids, my parents,” she told CNBC.

    Staying for so long despite being pushed near breaking point multiple times came down to a variety of factors, she said. Contributing to her working-class family’s finances, and making her immigrant parents, who had faced their own struggles and placed pressure on her to succeed, proud.

    In the book, when she first tells them about her six-figure salary in their New Jersey living room, her grandma drops her knitting needles in shock. Within a few years Fiore Higgins is on a million-dollar salary (though this, she says, was just one dollar more than a man working below her was earning at the time).

    On top of that was the dangling carrot of a mammoth bonus, common across the financial industry.

    Then there was the fear of recrimination; the normalization in the office of things that would appal an outsider; and addiction to the prestige of being “Jamie from Goldman.”

    “What I realized that Goldman was so good at was really making you feel you were nothing without them, nothing without their name, nothing without their money,” she said.

    Going against the family

    Eyes wide open

    Amid the #MeToo movement, wider societal forces and efforts from some senior managers, companies around the world have been making efforts, at least on paper, to promote diversity.

    In Fiore Higgins’ view, things have improved in some areas, and there is a genuine desire among the C-suite to prevent systemic and casual discrimination. But institutions like Goldman could still apply the full force of their analytical and metric-setting skills to boost the number of women making it to partner level, she said, and create the kind of inclusive environment studies have shown can boost a company’s bottom line.

    She’s also conscious of the importance of sending a message to some of her readers, including finding a trusted advisor well removed from the company.

    “I’ve had the opportunity to talk at a couple of universities. I’ve spoken to people who were like, ‘I got a job offer, I read your book, I’m afraid to go’,” she said.

    “It’s like, no, that’s not the answer. When I first started working at Goldman … their marketing thing was Minds Wide Open. I was lapping it up — and it was just a marketing pitch. It wasn’t what I saw in the lived experience.”

    “So I say to these students that I’ve been talking to, men and women, you want to go in with your eyes wide open, you want to be very clear of what is possible. Be prepared with language around it, know how to respond and react when these things happen.”

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  • No exit ramp for Fed’s Powell until he creates a recession, economist says

    No exit ramp for Fed’s Powell until he creates a recession, economist says

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    Federal Reserve Chair Jerome H. Powell testifies before a U.S. Senate Banking, Housing, and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress” on Capitol Hill in Washington, March 7, 2023.

    Kevin Lamarque | Reuters

    The U.S. Federal Reserve cannot disrupt its cycle of interest rate increases until the nation enters a recession, according to TS Lombard Chief U.S. Economist Steven Blitz.

    “There is no exit from this until he [Fed Chair Jerome Powell] does create a recession, ’til unemployment goes up, and that is when the Fed rates will stop being hiked,” Blitz told CNBC’s “Squawk Box Europe” on Wednesday.

    He stressed that the Fed lacks clarity on the ceiling of interest rate increases in the absence of such an economic slowdown.

    “They have no idea where the top rate is, because they have no idea where inflation settles down without a recession.”

    Powell told lawmakers on Tuesday that stronger-than-expected economic data in recent weeks suggests the “ultimate level of interest rates is likely to be higher than previously anticipated,” as the central bank looks to drag inflation back down to Earth.

    The Federal Open Market Committee’s next monetary policy meeting on March 21 and 22 will be critical for global stock markets, with investors closely watching whether policymakers opt for an interest rate hike of 25 or 50 basis points.

    Market expectations for the terminal Fed funds rate were around 5.1% in December, but have risen steadily. Goldman Sachs lifted its terminal rate target range forecast to 5.5-5.75% on Tuesday in light of Powell’s testimony, in line with current market pricing according to CME Group data.

    Bond yields spiked, and U.S. stock markets sold off sharply on the back of Powell’s comments, with the Dow closing nearly 575 points lower and turning negative for 2023. The S&P 500 slid 1.53% to close below the key 4,000 threshold, and the Nasdaq Composite lost 1.25%

    “There’s going to be a recession, and the Fed is going to push the point and they’re gonna get the unemployment rate to at least 4.5%, in my guess it probably ends up getting up to as high as 5.5%,” Blitz said.

    He noted that there are “rumblings” of an economic slowdown in the form of layoffs in the finance and tech sectors and a stalling housing market. Along with weakness in U.S. stock market, Blitz suggested an “asset crunch and the beginnings of the potential for a credit crunch,” in the form of banks pulling back on lending, could be underway.

    “Either you get a recession mid-year and the top rate is 5.5% or there is enough momentum, the January numbers are right, and the Fed keeps going and if they do keep going, my guess is that the Fed’s going to get up to 6.5% on the funds rate before things really start to slow down and reverse,” he said.

    “So in terms of risk assets, it’s not a question of whether, it’s really a question of when, and the longer this thing goes, the higher the rate has to get to.”

    The January consumer price index rose 0.5% month-on-month as rising shelter, gas and fuel prices took their toll on consumers, indicating a potential reversal of the inflation slowdown seen in late 2022.

    The labor market remained red hot to start the year, with 517,000 jobs added in January and the unemployment rate hitting a 53-year low.

    The February jobs report is due from the Labor Department on Friday and the February CPI reading is slated for Tuesday.

    Powell's bearish commentary implies a 50 bps hike in March is possible, says Gradient's Jeremy Bryan

    In the research note announcing its increase to the terminal rate forecast, Goldman Sachs said that it expects the median dot in the March Summary of Economic Projections to rise by 50 basis points to 5.5-5.75% regardless of whether the FOMC opts for 25 or 50 basis points.

    The Wall Street giant also expects the data ahead of the March meeting to be “mixed but firm on net,” with JOLTS job openings falling by 800,000 to provide reassurance that rate hikes are working, alongside an above-consensus forecast for a 250,000 payroll gain but a soft 0.3% rise in average hourly earnings.

    Goldman also forecasts a firm 0.45% monthly increase in core CPI in February, and said that the combination of likely data creates “some risk that the FOMC could hike by 50bp in March instead of 25bp.”

    “In recent months we have argued that the drag on GDP growth from last year’s fiscal and monetary policy tightening is fading, not growing, and that this means that the key risk for the economy is a premature reacceleration, not an imminent recession,” Goldman economists said.

    “Last weekend we noted that consumer spending in particular poses upside risk to growth that, if realized, might lead the FOMC to hike by more than currently expected in order to tighten financial conditions and keep demand growth below potential so that labor market rebalancing stays on track.”

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  • Fed funds rate to hit 6.5% without mid-year recession, economist says

    Fed funds rate to hit 6.5% without mid-year recession, economist says

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    Steven Blitz, chief U.S. economist at TS Lombard, shares his projections for the Federal Reserve’s monetary policy trajectory after Chairman Jerome Powell’s testimony on Capitol Hill rocked markets.

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  • Warren Buffett’s Berkshire Hathaway buys more Occidental Petroleum shares

    Warren Buffett’s Berkshire Hathaway buys more Occidental Petroleum shares

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    Warren Buffett

    Gerard Miller | CNBC

    Warren Buffett’s Berkshire Hathaway added to its already large Occidental Petroleum stake over the past trading sessions, a regulatory filing revealed Tuesday evening.

    The Omaha-based conglomerate bought nearly 5.8 million shares of the oil company in a few separate trades on Friday, Monday and Tuesday, paying prices in the range from $59.8 to $61.9, the filing showed.

    The latest purchase, totaling more than $350 million, marked the first time the “Oracle of Omaha” hiked his bet since September. Berkshire now owns 200.2 million shares of Occidental, worth $12.2 billion based on Tuesday’s close of $60.85.

    Occidental, now among Berkshire’s top 10 holdings, saw its stock retreat about 3% this year following a stellar 2022. The energy name was the best performer last year, more than doubling in price.

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    Occidental

    On Monday, Occidental CEO Vicki Hollub said in an interview with CNBC’s Brian Sullivan that she met with the 92-year-old investor “just a few days ago.” Hollub said they talked about the oil and gas industry and the technology involved in it.

    In August, Berkshire received regulatory approval to purchase up to 50%, spurring speculation that it may eventually buy all of Houston-based Occidental.

    Berkshire also owns $10 billion of Occidental preferred stock, and has warrants to buy another 83.9 million common shares for $5 billion, or $59.62 each. The warrants were obtained as part of the company’s 2019 deal that helped finance Occidental’s purchase of Anadarko.

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  • BlackRock says European companies are showing ‘surprise resilience’ — and better value than the U.S.

    BlackRock says European companies are showing ‘surprise resilience’ — and better value than the U.S.

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    A trader works as a screen displays the trading information for BlackRock on the floor of the New York Stock Exchange (NYSE) in New York City, October 14, 2022.

    Brendan McDermid | Reuters

    LONDON — European corporate earnings were surprisingly resilient in the fourth quarter of 2022, and the continent’s stock outperformance of the U.S. looks set to continue, according to BlackRock.

    With earnings season winding down, the Wall Street giant highlighted in a note Tuesday that European fourth-quarter earnings showed corporate health extended beyond the region’s bedrock sectors of banking and energy.

    “Companies in Europe surprised analysts with their recent earnings performance. Regional stock markets have been on a good run year-to-date but remain at a discount both on a historical basis and versus U.S. peers,” said Helen Jewell, EMEA deputy chief investment officer at BlackRock Fundamental Equities.

    Banks and energy enjoyed a bumper fourth-quarter, BlackRock noted that earnings on the pan-European Stoxx 600 index were up by around 8% annually by the end of February, even without the energy sector.

    “Europe is the only region globally where 2024 earnings revisions are just back in positive territory,” Jewell said.

    “Earnings in the U.K. have also been a positive surprise, even when adjusted for the size of the financial and energy sectors.”

    Jewell suggested that the momentum for European banks, which have been buoyed by positive interest rates, is likely to continue, as valuations remain attractive.

    The Euro Stoxx Banks index was up almost 24% year-to-date as of Tuesday morning, but Jewell noted that earnings strength means price-to-earnings ratios remain below long-term averages for the sector.

    Price-to-earnings ratio determines whether a company is overvalued or undervalued by measuring its current share price relative to its earnings per share.

    “We turned favourable on financials in the middle of last year, and believe the sector is capable of further outperformance in 2023 as the European Central Bank remains committed to inflation control and higher rates may put more banks in a position to return cash to shareholders,” Jewell said.

    Energy majors in the U.K. and Europe posted record earnings in the fourth quarter on the back of soaring oil and gas prices, but a warmer winter has since led to lower-than-expected physical demand.

    Over the medium term, BlackRock still anticipates supply tightness and sees European oil majors continuing to generate massive cash flows.

    European Banks are more attractive due to American capitalism, says Smead Capital's Cole Smead

    “These companies trade at a discount to U.S. peers and continue to allocate substantial investment toward renewable forms of energy,” Jewell added.

    Despite the resilience thus far, she highlighted the importance of profit margins in 2023, as central banks continue to tighten monetary policy and bring to an end an era of cheap money.

    Around 60% of European companies beat fourth-quarter sales expectations, while only around 50% beat on profits, according to MSCI data compiled at the end of February. A similar picture is emerging in the U.K.

    “This tallies with what companies across sectors have told us about the growing impact of wage inflation at a time when slowing economic growth has made it harder to pass on costs. We believe that companies with a higher exposure to wage costs may continue to struggle in 2023,” Jewell said.

    “We see many opportunities for investors in the region, although it’s important to be selective as profit-margin pressure may bring dispersion across sectors and within industries.”

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  • The New Anarchy

    The New Anarchy

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    “Blood grows hot, and blood is spilled. Thought is forced from old channels into confusion. Deception breeds and thrives. Confidence dies, and universal suspicion reigns. Each man feels an impulse to kill his neighbor, lest he be first killed by him. Revenge and retaliation follow. And all this … may be among honest men only. But this is not all. Every foul bird comes abroad, and every dirty reptile rises up. These add crime to confusion.”

    — Abraham Lincoln, letter to the Missouri abolitionist Charles D. Drake, 1863

    I. ON THE BRINK

    In the weeks before Labor Day 2020, Ted Wheeler, the mayor of Portland, Oregon, began warning people that he believed someone would soon be killed by extremists in his city. Portland was preparing for the 100th consecutive day of conflict among anti-police protesters, right-wing counterprotesters, and the police themselves. Night after night, hundreds of people clashed in the streets. They attacked one another with baseball bats, Tasers, bear spray, fireworks. They filled balloons with urine and marbles and fired them at police officers with slingshots. The police lobbed flash-bang grenades. One man shot another in the eye with a paintball gun and pointed a loaded revolver at a screaming crowd. The FBI notified the public of a bomb threat against federal buildings in the city. Several homemade bombs were hurled into a group of people in a city park.

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    Extremists on the left and on the right, each side inhabiting its own reality, had come to own a portion of downtown Portland. These radicals acted without restraint or, in many cases, humanity.

    In early July, when then-President Donald Trump deployed federal law-enforcement agents in tactical gear to Portland—against the wishes of the mayor and the governor—conditions deteriorated further. Agents threw protesters into unmarked vans. A federal officer shot a man in the forehead with a nonlethal munition, fracturing his skull. The authorities used chemical agents on crowds so frequently that even Mayor Wheeler found himself caught in clouds of tear gas. People set fires. They threw rocks and Molotov cocktails. They swung hammers into windows. Then, on the last Saturday of August, a 600-vehicle caravan of Trump supporters rode into Portland waving American flags and Trump flags with slogans like TAKE AMERICA BACK and MAKE LIBERALS CRY AGAIN. Within hours, a 39-year-old man would be dead—shot in the chest by a self-described anti-fascist. Five days later, federal agents killed the suspect—in self-defense, the government claimed—during a confrontation in Washington State.

    What had seemed from the outside to be spontaneous protests centered on the murder of George Floyd were in fact the culmination of a long-standing ideological battle. Some four years earlier, Trump supporters had identified Portland, correctly, as an ideal place to provoke the left. The city is often mocked for its infatuation with leftist ideas and performative politics. That reputation, lampooned in the television series Portlandia, is not completely unwarranted. Right-wing extremists understood that Portland’s reaction to a trolling campaign would be swift, and would guarantee the celebrity that comes with virality. When Trump won the presidency, this dynamic intensified, and Portland became a place where radicals would go to brawl in the streets. By the middle of 2018, far-right groups such as the Proud Boys and Patriot Prayer had hosted more than a dozen rallies in the Pacific Northwest, many of them in Portland. Then, in 2020, extremists on the left hijacked largely peaceful anti-police protests with their own violent tactics, and right-wing radicals saw an opening for a major fight.

    What happened in Portland, like what happened in Washington, D.C., on January 6, 2021, was a concentrated manifestation of the political violence that is all around us now. By political violence, I mean acts of violence intended to achieve political goals, whether driven by ideological vision or by delusions and hatred. More Americans are bringing weapons to political protests. Openly white-supremacist activity rose more than twelvefold from 2017 to 2021. Political aggression today is often expressed in the violent rhetoric of war. People build their political identities not around shared values but around a hatred for their foes, a phenomenon known as “negative partisanship.” A growing number of elected officials face harassment and death threats, causing many to leave politics. By nearly every measure, political violence is seen as more acceptable today than it was five years ago. A 2022 UC Davis poll found that one in five Americans believes political violence would be “at least sometimes” justified, and one in 10 believes it would be justified if it meant returning Trump to the presidency. Officials at the highest levels of the military and in the White House believe that the United States will see an increase in violent attacks as the 2024 presidential election draws nearer.

    In recent years, Americans have contemplated a worst-case scenario, in which the country’s extreme and widening divisions lead to a second Civil War. But what the country is experiencing now—and will likely continue to experience for a generation or more—is something different. The form of extremism we face is a new phase of domestic terror, one characterized by radicalized individuals with shape-shifting ideologies willing to kill their political enemies. Unchecked, it promises an era of slow-motion anarchy.

    Consider recent events. In October 2020, authorities arrested more than a dozen men in Michigan, many of them with ties to a paramilitary group. They were in the final stages of a plan to kidnap the state’s Democratic governor, Gretchen Whitmer, and possessed nearly 2,000 rounds of ammunition and hundreds of guns, as well as silencers, improvised explosive devices, and artillery shells. In January 2021, of course, thousands of Trump partisans stormed the U.S. Capitol, some of them armed, chanting “Where’s Nancy?” and “Hang Mike Pence!” Since then, the headlines have gotten smaller—or perhaps numbness has set in—but the violence has continued. In June 2022, a man with a gun and a knife who allegedly said he intended to kill Supreme Court Justice Brett Kavanaugh was arrested outside Kavanaugh’s Maryland home. In July, a man with a loaded pistol was arrested outside the home of Pramila Jayapal, the leader of the Congressional Progressive Caucus. She had heard someone outside shouting “Fuck you, cunt!” and “Commie bitch!” Days later, a man with a sharp object jumped onto a stage in upstate New York and allegedly tried to attack another member of Congress, the Republican candidate for governor. In August, just after the seizure of documents from Trump’s Mar-a-Lago home, a man wearing body armor tried to breach the FBI’s Cincinnati field office. He was killed in a shoot-out with police. In October, in San Francisco, a man broke into the home of Nancy Pelosi, then the speaker of the House, and attacked her 82-year-old husband with a hammer, fracturing his skull. In January 2023, a failed Republican candidate for state office in New Mexico who referred to himself as a “MAGA king” was arrested for the alleged attempted murder of local Democratic officials in four separate shootings. In one of the shootings, three bullets passed through the bedroom of a state senator’s 10-year-old daughter as she slept.

    Experts I interviewed told me they worry about political violence in broad regions of the country—the Great Lakes, the rural West, the Pacific Northwest, the South. These are places where extremist groups have already emerged, militias are popular, gun culture is thriving, and hard-core partisans collide during close elections in politically consequential states. Michigan, Wisconsin, Pennsylvania, Arizona, and Georgia all came up again and again.

    For the past three years, I’ve been preoccupied with a question: How can America survive a period of mass delusion, deep division, and political violence without seeing the permanent dissolution of the ties that bind us? I went looking for moments in history, in the United States and elsewhere, when society has found itself on the brink—or already in the abyss. I learned how cultures have managed to endure sustained political violence, and how they ultimately emerged with democracy still intact.

    Some lessons are unhappy ones. Societies tend to ignore the obvious warning signs of endemic political violence until the situation is beyond containment, and violence takes on a life of its own. Government can respond to political violence in brutal ways that undermine democratic values. Worst of all: National leaders, as we see today in an entire political party, can become complicit in political violence and seek to harness it for their own ends.

    II. SALAD-BAR EXTREMISM

    If you’re looking for a good place to hide an anarchist, you could do worse than Barre, Vermont. Barre (pronounced “berry”) is a small city in the bowl of a steep valley in the northern reaches of a lightly populated, mountainous state. You don’t just stumble upon a place like this.

    I went to Barre in October because I wanted to understand the anarchist who had fled there in the early 1900s, at the beginning of a new century already experiencing extraordinary violence and turbulence. The conditions that make a society vulnerable to political violence are complex but well established: highly visible wealth disparity, declining trust in democratic institutions, a perceived sense of victimhood, intense partisan estrangement based on identity, rapid demographic change, flourishing conspiracy theories, violent and dehumanizing rhetoric against the “other,” a sharply divided electorate, and a belief among those who flirt with violence that they can get away with it. All of those conditions were present at the turn of the last century. All of them are present today. Back then, few Americans might have guessed that the violence of that era would rage for decades.

    In 1901, an anarchist assassinated President William McKinley—shot him twice in the gut while shaking his hand at the Buffalo World’s Fair. In 1908, an anarchist at a Catholic church in Denver fatally shot the priest who had just given him Communion. In 1910, a dynamite attack on the Los Angeles Times killed 21 people. In 1914, in what officials said was a plot against John D. Rockefeller, a group of anarchists prematurely exploded a bomb in a New York City tenement, killing four people. That same year, extremists set off bombs at two Catholic churches in Manhattan, one of them St. Patrick’s Cathedral. In 1916, an anarchist chef dumped arsenic into the soup at a banquet for politicians, businessmen, and clergy in Chicago; he reportedly used so much that people immediately vomited, which saved their lives. Months later, a shrapnel-filled suitcase bomb killed 10 people and wounded 40 more at a parade in San Francisco. America’s entry into World War I temporarily quelled the violence—among other factors, some anarchists left the country to avoid the draft—but the respite was far from total. In 1917, a bomb exploded inside the Milwaukee Police Department headquarters, killing nine officers and two civilians. In the spring of 1919, dozens of mail bombs were sent to an array of business leaders and government officials, including Supreme Court Justice Oliver Wendell Holmes.

    All of this was prologue. Starting late in the evening on June 2, 1919, in a series of coordinated attacks, anarchists simultaneously detonated massive bombs in eight American cities. In Washington, an explosion at the home of Attorney General A. Mitchell Palmer blasted out the front windows and tore framed photos off the walls. Palmer, in his pajamas, had been reading by his second-story window. He happened to step away minutes before the bomb went off, a decision that authorities believed kept him alive. (His neighbors, the assistant secretary of the Navy and his wife, Franklin and Eleanor Roosevelt, had just gotten home from an evening out when the explosion also shattered their windows. Franklin ran over to Palmer’s house to check on him.) The following year, a horse-drawn carriage drew up to the pink-marble entrance of the J. P. Morgan building on Wall Street and exploded, killing more than 30 people and injuring hundreds more.

    From these episodes, one name leaps out across time: Luigi Galleani. Galleani, who was implicated in most of the attacks, is barely remembered today. But he was, in his lifetime, one of the world’s most influential terrorists, famous for advancing the argument for “propaganda of the deed”: the idea that violence is essential to the overthrow of the state and the ruling class. Born in Italy, Galleani immigrated to the United States and spread his views through his anarchist newspaper, Cronaca Sovversiva, or “Subversive Chronicle.” He told the poor to seize property from the rich and urged his followers to arm themselves—to find “a rifle, a dagger, a revolver.”

    Galleani fled to Barre in 1903 under the name Luigi Pimpino after several encounters with law enforcement in New Jersey. He attracted disciples—“Galleanisti,” they were called—despite shunning all forms of organization and hierarchy. He was quick-witted, with an imposing intellect and a magnetic manner of speaking. Even the police reports described his charisma.

    Left: Mug shot of the anarchist leader Lui­gi Galleani, 1919. Right: The aftermath of the Wall Street bombing outside the J. P. Morgan building, 1920. (Paul Spella; source images: Paul Avrich Collection, Rare Book and Special Collections, Library of Congress; Bettmann / Getty)

    The population of Barre today is slightly smaller than it was in Galleani’s day—roughly 10,000 then, 8,500 now—and it is the sort of place that is more confused by the presence of strangers than wary of them. The first thing you notice when you arrive is the granite. There is a mausoleum feel to any granite city, and on an overcast day the gray post-office building on North Main Street gives the illusion that all of the color has suddenly vanished from the world. Across the street, at city hall, I wandered into an administrative office where an affable woman—You came to Barre? On purpose?—generously agreed to take me inside the adjacent opera house, which, recently refurbished, looks much as it did on the winter night in 1907 when Galleani appeared there before a packed house to give a speech alongside the anarchist Emma Goldman.

    Galleani almost certainly could have disappeared into Barre with his wife and children and gotten away with it. He did not want that. In his own telling, Galleani’s anger was driven by how poorly the working class was treated, particularly in factories. In Barre, granite cutters spent long hours mired in the sludge of a dark, unheated, and poorly ventilated workspace, breathing in silica dust, which made most of them gravely ill. Seeing the town, even a century after Galleani was there, I could understand why his time in Vermont had not altered his worldview. In the foreword to a 2017 biography, Galleani’s grandson, Sean Sayers, put a hagiographic gloss on Galleani’s legacy: “He was not a narrow and callous nihilist; he was a visionary thinker with a beautiful idea of how human society could be—an idea that still resonates today.” For Galleani and other self-identified “communist anarchists” like him, the beautiful idea was a world without government, without laws, without property. Other anarchists did not share his idealism. The movement was torn by disagreements—they were anarchists, after all.

    In Galleani’s day, as in our own, the lines of conflict were not cleanly delineated. American radicalism can be a messy stew of ideas and motivations. Violence doesn’t need a clear or consistent ideology and often borrows from several. Federal law-enforcement officials use the term salad-bar extremism to describe what worries them most today, and it applies just as aptly to the extremism of a century ago.

    When Galleani had arrived in America, he’d encountered a nation in a terrible mood, one that would feel familiar to us today. Galleani’s children were born into violent times. The nation was divided not least over the cause of its divisions. The gap between rich and poor was colossal—the top 1 percent of Americans possessed almost as much wealth as the rest of the country combined. The population was changing rapidly. Reconstruction had been defeated, and southern states in particular remained horrifically violent toward Black people, for whom the threat of lynching was constant. The Great Migration was just beginning. Immigration surged, inspiring intense waves of xenophobia. America was primed for violence—and to Galleani and his followers, destroying the state was the only conceivable path.

    The spectacular violence of 1919 and 1920 proved a catalyst. A concerted nationwide hunt for anarchists began. This work, which culminated in what came to be known as the Palmer Raids, entailed direct violations of the Constitution. In late 1919 and early 1920, a series of raids—carried out in more than 30 American cities—led to the warrantless arrests of 10,000 suspected radicals, mostly Italian and Jewish immigrants. Attorney General Palmer’s dragnet ensnared many innocent people and has become a symbol of the damage that overzealous law enforcement can cause. Hundreds of people were ultimately deported. Some had fallen afoul of a harsh new federal immigration law that broadly targeted anarchists. One of them was Luigi Galleani. “The law was kind of designed for him,” Beverly Gage, a historian and the author of The Day Wall Street Exploded, told me.

    The violence did not stop immediately after the Palmer Raids—in an irony that frustrated authorities, Galleani’s deportation made it impossible for them to charge him in the Wall Street bombing, which they believed he planned, because it occurred after he’d left the country. Nevertheless, sweeping action by law enforcement helped put an end to a generation of anarchist attacks.

    That is the most important lesson from the anarchist period: Holding perpetrators accountable is crucial. The Palmer Raids are remembered, rightly, as a ham-handed application of police-state tactics. Government actions can turn killers into martyrs. More important, aggressive policing and surveillance can undermine the very democracy they are meant to protect; state violence against citizens only validates a distrust of law enforcement.

    But deterrence conducted within the law can work. Unlike anti-war protesters or labor organizers, violent extremists don’t have an agenda that invites negotiation. “Today’s threats of violence can be inspired by a wide range of ideologies that themselves morph and shift over time,” Deputy Homeland Security Adviser Josh Geltzer told me. Now as in the early 20th century, countering extremism through ordinary debate or persuasion, or through concession, is a fool’s errand. Extremists may not even know what they believe, or hope for. “One of the things I increasingly keep wondering about is—what is the endgame?” Mary McCord, a former assistant U.S. attorney and national-security official, told me. “Do you want democratic government? Do you want authoritarianism? Nobody talks about that. Take back our country . Okay, so you get it back. Then what do you do?”

    III. CREEPING VIOLENCE

    In another country, and in a time closer to our own, a sustained outbreak of domestic terrorism brought decades of attacks—and illustrates the role that ordinary citizens can sometimes play, along with deterrence, in restoring stability.

    On Saturday, August 2, 1980, a bomb hidden inside a suitcase blew up at the Bologna Centrale railway station, killing 85 people and wounding hundreds more, many of them young families setting off on vacation. The explosion flattened an entire wing of the station, demolishing a crowded restaurant, wrecking a train platform, and freezing the station’s clock at the time of the detonation: 10:25 a.m.

    The Bologna massacre remains the deadliest attack in Italy since World War II. By the time it occurred, Italians were more than a decade into a period of intense political violence, one that came to be known as Anni di Piombo, or the “Years of Lead.” From roughly 1969 to 1988, Italians experienced open warfare in the streets, bombings of trains, deadly shootings and arson attacks, at least 60 high-profile assassinations, and a narrowly averted neofascist coup attempt. It was a generation of death and bedlam. Although exact numbers are difficult to come by, during the Years of Lead, at least 400 people were killed and some 2,000 wounded in more than 14,000 separate attacks.

    As I sat at the Bologna Centrale railway station in September, a place where so many people had died, I found myself thinking, somewhat counterintuitively, about how, in the great sweep of history, the political violence in Italy in the 1970s and ’80s now seems but a blip. Things were so terrible for so long. And then they weren’t. How does political violence come to an end?

    No one can say precisely what alchemy of experience, temperament, and circumstance leads a person to choose political violence. But being part of a group alters a person’s moral calculations and sense of identity, not always for the good. Martin Luther King Jr., citing the theologian Reinhold Niebuhr, wrote in his “Letter From Birmingham Jail” that “groups tend to be more immoral than individuals.” People commit acts together that they’d never contemplate alone.

    Vicky Franzinetti was a teenage member of the far-left militant group Lotta Continua during the Years of Lead. “There was a lot of what I would call John Wayneism, and a lot of people fell for that,” she told me. “Whether it’s the Black Panthers or the people who attacked on January 6 on Capitol Hill, violence has a mesmerizing appeal on a lot of people.” A subtle but important shift also took place in Italian political culture during the ’60s and ’70s as people grasped for group identity. “If you move from what you want to who you are, there is very little scope for real dialogue, and for the possibility of exchanging ideas, which is the basis of politics,” Franzinetti said. “The result is the death of politics, which is what has happened.”

    In talking with Italians who lived through the Years of Lead about what brought this period to an end, two common themes emerged. The first has to do with economics. For a while, violence was seen as permissible because for too many people, it felt like the only option left in a world that had turned against them. When the Years of Lead began, Italy was still fumbling for a postwar identity. Some Fascists remained in positions of power, and authoritarian regimes controlled several of the country’s neighbors—Greece, Portugal, Spain, Turkey. Not unlike the labor movements that arose in Galleani’s day, the Years of Lead were preceded by intensifying unrest among factory workers and students, who wanted better social and working conditions. The unrest eventually tipped into violence, which spiraled out of control. Leftists fought for the proletariat, and neofascists fought to wind back the clock to the days of Mussolini. When, after two decades, the economy improved in Italy, terrorism receded.

    The second theme was that the public finally got fed up. People didn’t want to live in terror. They said, in effect: Enough. Lotta Continua hadn’t resorted to violence in the early years. When it did grow violent, it alienated its own members. “I didn’t like it, and I fought it,” Franzinetti told me. Simonetta Falasca-Zamponi, a sociology professor at UC Santa Barbara who lived in Rome at the time, recalled: “It went too far. Really, it reached a point that was quite dramatic. It was hard to live through those times.” But it took a surprisingly long while to reach that point. The violence crept in—one episode, then another, then another—and people absorbed and compartmentalized the individual events, as many Americans do now. They did not understand just how dangerous things were getting until violence was endemic. “It started out with the kneecappings,” Joseph LaPalombara, a Yale political scientist who lived in Rome during the Years of Lead, told me, “and then got worse. And as it got worse, the streets emptied after dark.”

    A turning point in public sentiment, or at least the start of a turning point, came in the spring of 1978, when the leftist group known as the Red Brigades kidnapped the former prime minister and leader of the Christian Democrats Aldo Moro, killing all five members of his police escort and turning him into an example of how We don’t negotiate with terrorists can go terrifically wrong. Moro was held captive and tortured for 54 days, then executed, his body left in the back of a bright-red Renault on a busy Rome street. In a series of letters his captors allowed him to send, Moro had begged Italian officials to arrange for his freedom with a prisoner exchange. They refused. After his murder, the final letter he’d written to his wife, “my dearest Noretta,” roughly 10 days before his death, was published in a local newspaper. “In my last hour I am left with a profound bitterness at heart,” he wrote. “But it is not of this I want to talk but of you whom I love and will always love.” Moro did not want a state funeral, but Italy held one anyway.

    Illustration with 2 archival photos: dead person covered by white sheet lying in street next to car with open doors; people walking on sidewalk past large graffiti on side of building "Brigate Rosse!"
    Top: A bodyguard slain by the Red Brigades during the kidnapping of former Italian Prime Minister Aldo Moro, 1978. Bottom: Graffiti in Milan supporting the Red Brigades, 1977. (Paul Spella; source images: Gianni Giansanti / Gamma-Rapho / Getty; Adriano Alecchi / Mondadori Portfolio / Getty)

    The conventional wisdom among terrorism experts had been that terrorists wanted publicity but didn’t really want to kill people—or, as the Rand Corporation’s Brian Jenkins put it in 1975, “Terrorists want a lot of people watching, not a lot of people dead.” But conditions had become so bad by the time Moro was murdered that newspapers around the world were confused when days passed without a political killing or shooting in Italy. “Italians Puzzled by 10-Day Lull in Terrorist Activity,” read one headline in The New York Times a few weeks after Moro’s murder. “When he was killed, it got a lot more serious,” Alexander Reid Ross, who hosts a history podcast about the era called Years of Lead Pod, told me. “People stopped laughing. It was no longer something where you could say, ‘It’s a sideshow.’ ”

    The Moro assassination was followed by an intensification of violence, including the Bologna-station bombing. People who had ignored the violence now paid attention; people who might have been tempted by revolution now stayed home. Meanwhile, the crackdown that followed—which involved curfews, traffic stops, a militarized police presence, and deals with terrorists who agreed to rat out their collaborators—caused violent groups to implode.

    The example of Aldo Moro offers a warning. It shouldn’t take an act like the assassination of a former prime minister to shake people into awareness. But it often does. William Bernstein, the author of The Delusions of Crowds, is not optimistic that anything else will work: “The answer is—and it’s not going to be a pleasant answer—the answer is that the violence ends if it boils over into a containable cataclysm.” What if, he went on—“I almost hesitate to say this”—but what if they actually had hanged Mike Pence or Nancy Pelosi on January 6? “I think that would have ended it. I don’t think it ends without some sort of cathartic cataclysm. I think, absent that, it just boils along for a generation or two generations.” Bernstein wasn’t the only expert to suggest such a thing.

    No wonder some American politicians are terrified. “We’ve had an exponential increase in threats against members of Congress,” Senator Amy Klobuchar, a Democrat from Minnesota, told me in January. Klobuchar thought back to when she was standing at President Joe Biden’s inauguration ceremony, two weeks after the attempted insurrection. At the time, as Democrats and most Republicans came together for a peaceful transfer of power, she felt as though a violent eruption in American history might be ending. But Klobuchar now believes she was “naive” to think that Republicans would break with Trump and restore the party’s democratic values. “We have Donald Trump, his shadow, looming over everything,” she said.

    This past February, Biden sought to dispel that shadow as he stood before Congress to deliver his State of the Union address. “There’s no place for political violence in America,” he said. “And we must give hate and extremism in any form no safe harbor.” Biden’s speech was punctuated by jeers and name-calling by Republicans.

    IV. A BROKEN SOCIAL CONTRACT

    The taxonomy of what counts as political violence can be complicated. One way to picture it is as an iceberg: The part that protrudes from the water represents the horrific attacks on both hard targets and soft ones, in which the attacker has explicitly indicated hatred for the targeted group—fatal attacks at supermarkets and synagogues, as well as assassination attempts such as the shooting at a congressional-Republican baseball practice in 2017. Less visible is the far more extensive mindset that underlies them. “There are a lot of people who are out for a protest, who are advocating for violence,” Erin Miller, the longtime program manager at the University of Maryland’s Global Terrorism Database, told me. “Then there’s a smaller number at the tip of the iceberg that are willing to carry out violent attacks.” You can’t get a grip on political violence just by counting the number of violent episodes. You have to look at the whole culture.

    A society’s propensity for political violence—including cataclysmic violence—may be increasing even as ordinary life, for many people, probably most, continues to feel normal. A drumbeat of violent attacks, by different groups with different agendas, may register as different things. But collectively, as in Italy, they have the power to loosen society’s screws.

    In December, I spoke again with Alexander Reid Ross, who in addition to hosting Years of Lead Pod is a lecturer at Portland State University. We met in Pioneer Courthouse Square, in downtown Portland. I had found the city in a wounded condition. This was tragic to me two times over—first, because I knew what had happened there, and second, because I had immediately absorbed Portland’s charm. You can’t encounter all those drawbridges, or the swooping crows, or the great Borgesian bookstore, or the giant elm trees and do anything but fall in love with the place. But downtown Portland was not at its best. The first day I was there I counted more birds than people, and many of the people I saw were quite obviously struggling badly.

    On the gray afternoon when we met, Ross and I happened to be sitting at the site of the first far-right protest he remembers witnessing in his city, back in 2016; members of a group called Students for Trump, stoked by Alex Jones’s disinformation outlet, Infowars, had gathered to assert their political preferences and provoke their neighbors. Ross is a geographer, a specialty he assumed would keep him focused on land-use debates and ecology, which is one of the reasons he moved to Oregon in the first place. After that 2016 rally, Ross paid closer attention to the political violence unfolding in Portland. We decided to take a walk so that Ross could point out various landmarks from the—well, we couldn’t decide what to call the period of sustained violence that started in 2016 and was reignited in 2020. The siege? The occupation? The revolt? What happened in Portland has a way of being too slippery for precise language.

    We walked southwest from the square before doubling back toward the Willamette River. Over here was the historical society that protesters broke into and vandalized one night. Over there was where the statues got toppled. (“Portland is a city of pedestals now,” Ross said.) A federal building still had a protective fence surrounding it more than a year after the street violence had ended. At one point, the mayor had to order a drawbridge raised to keep combatants apart.

    On the evening of June 30, 2018, Ross found himself in the middle of a violent brawl between hundreds of self-described antifa activists and members of the Proud Boys and Patriot Prayer, a local pro-Trump offshoot. Ross described to me a number of “ghoulish” encounters he’d had with Patriot Prayer, and I asked him which moment was the scariest. “It’s on video,” he told me. “You can see it: me getting punched.” I later watched the video. In it, Ross rushes toward a group of men who are repeatedly kicking and bludgeoning a person dressed all in black, lying in the street. Ross had told me earlier that he’d intervened because he thought he was watching someone being beaten to death. After Ross gets clocked, he appears dazed, then dashes back toward the fight. “That’s enough! That’s enough!” he shouts.

    By the time of this fight, Patriot Prayer had become a fixture in Portland. Its founder, Joey Gibson, has said in interviews that he was inspired to start Patriot Prayer to fight for free speech, but the group’s core belief has always been in Donald Trump. Its first event, in Vancouver, Washington, in October 2016, was a pro-Trump rally. From there, Gibson deliberately picked ultraliberal cities such as Portland, Berkeley, Seattle, and San Francisco for his protests, and in doing so quickly attracted like-minded radicals—the Proud Boys, the Three Percenters, Identity Evropa, the Hell Shaking Street Preachers—who marched alongside Patriot Prayer. These were people who seemed to love Trump and shit-stirring in equal measure. White nationalists and self-described Western chauvinists showed up at Gibson’s events. (Gibson’s mother is Japanese, and he has insisted that he does not share their views.) By August 2018, Patriot Prayer had already held at least nine rallies in Portland, routinely drawing hundreds of supporters—grown men in Boba Fett helmets and other homemade costumes; at least one man with an SS neck tattoo. In 2019, Gibson himself was arrested on a riot charge. Patriot Prayer quickly became the darling of Infowars.

    photo of masked person running on street in cloud of tear gas
    Paul Spella; source image: Nathan Howard / Getty

    The morning after I met Ross, I drove across the river to Vancouver, a town of strip-mall churches and ponderosa pine trees, to meet with Lars Larson, who records The Lars Larson Show—tagline: “Honestly Provocative Talk Radio”—from his home studio. Larson greeted me with his two dogs and a big mug of coffee. His warmth, quick-mindedness, and tendency to filibuster make him irresistible for talk radio. And his allegiance to MAGA world helps him book guests like Donald Trump Jr., whom Larson introduced on a recent episode as “the son of the real president of the United States of America.” Over the course of our conversation, he described January 6 as “some ruined furniture in the Capitol”; suggested that the city government of Charlottesville, Virginia, was secretly behind the violent clash at the 2017 “Unite the Right” rally; and made multiple references to George Soros, including suggesting that Soros may have paid for people to come to Portland to tear up the city. When I pressed Larson on various points, he would walk back whatever he had claimed, but only slightly. He does not seem to be a conspiracy theorist, but he plays one on the radio.

    Larson blamed Portland’s troubles on a culture of lawlessness fostered by a district attorney who, he said, repeatedly declined to prosecute left-wing protesters. He sees this as an uneven application of justice that undermined people’s faith in local government. It is more accurate to say that the district attorney chose not to prosecute lesser crimes, focusing instead on serious crimes against people and property; ironically, the complaint about uneven application comes from both the far left and the far right. When I asked Larson whether Patriot Prayer is Christian nationalist in ideology, the question seemed to make him uncomfortable, and he emphasized his belief in pluralism and religious freedom. He also compared Joey Gibson and Patriot Prayer marching on Portland to civil-rights activists marching on Selma in 1965. “What I heard people tell Patriot Prayer is ‘If you get attacked every time you go to Portland, don’t go to Portland,’ ” he told me. “Would you have given that same advice to Martin Luther King?”

    Gibson’s lawyer Angus Lee accused the government of “political persecution”; Gibson was ultimately acquitted of the riot charge. Patriot Prayer, Lee went on, is “not like these other organizations you referenced that have members and that sort of thing. Patriot Prayer is more of an idea.” Gibson himself once put it in blunter terms. “I don’t even know what Patriot Prayer is anymore,” he said in a 2017 interview on a public-access news channel in Portland. “It’s just these two words that people hear and it sparks emotions … All Patriot Prayer is is videos and social-media presence.”

    The more I talked with people about Patriot Prayer, the more it began to resemble a phenomenon like QAnon—a decentralized and amorphous movement designed to provoke reaction, tolerant of contradictions, borrowing heavily from internet culture, overlapping with other extremist movements like the Proud Boys, linked to high-profile episodes of violence, and ultimately focused on Trump. I couldn’t help but think of Galleani, his “beautiful idea,” and the diffuse ideology of his followers. One key difference: Galleani was fighting against the state, whereas movements like QAnon and groups like Patriot Prayer and the Proud Boys have been cheered on by a sitting president and his party.

    When I met with Portland’s mayor, Ted Wheeler, at city hall, he recalled night after night of violence, and at times planning for the very worst, meaning mass casualties. Portlanders had taken to calling him “Tear Gas Ted” because of the police response in the city. One part of any mayor’s job is to absorb the community’s scorn. Few people have patience for unfilled potholes or the complexities of trash collection. Disdain for Wheeler may have been the one thing that just about every person I met in Portland shared, but his job has been difficult even by big-city standards. He confronted a breakdown of the social contract.

    “Political violence, in my opinion, is the extreme manifestation of other trends that are prevalent in our society,” Wheeler told me. “A healthy democracy is one where you can sit on one side of the table and express an opinion, and I can sit on the other side of the table and express a very different opinion, and then we have the contest of ideas … We have it out verbally. Then we go drink a beer or whatever.”

    When extremists began taunting Portlanders online, it was very quickly “game on” for violence in the streets, Wheeler said. In this way, Portland stands as a warning to cities that now seem calm: It takes very little provocation to inflame latent tensions between warring factions. Once order collapses, it is extraordinarily difficult to restore. And it can be dangerous to attempt to do so through the use of force, especially when one violent faction is lashing out, in part, against state authority.

    Aaron Mesh moved to Portland 16 years ago, to take a job as Willamette Week’s film critic, and since then has worked his way up to managing editor. He is sharp-tongued and good-humored, and it is obvious that he loves his city in the way that any good newspaperman does, with a mix of fierce loyalty and heaping criticism. Like Wheeler, he trained attention on the dynamic of action and reaction—on how rising to the bait not only solves nothing but can make things worse. “There was this attitude of We’re going to theatrically subdue your city with these weekend excursions,” Mesh said, describing the confrontations that began in 2016 as a form of cosplay, with right-wing extremists wearing everything from feathered hats to Pepe the Frog costumes and left-wing extremists dressed up in what’s known as black bloc: all-black clothing and facial coverings. “I do want to emphasize,” he said, “that everyone involved in this was a massive fucking loser, on both sides.”

    It was as though all of the most unsavory characters on the internet had crawled out of the computer. The fights were enough of a spectacle that not everyone took them seriously at first. Mesh said it was impossible to overstate “the degree to which Portland became a lodestone in the imagination of a nascent Proud Boys movement,” a place where paramilitary figures on the right went “to prove that they had testicles.” He went on: “You walk into town wearing a helmet and carrying a big American flag” and then wait and see “who throws an egg at your car or who gives you the middle finger, and you beat the living hell out of them.”

    Both sides behaved despicably. But only the right-wingers had the endorsement of the president and the mainstream Republican Party. “Despite being run by utter morons,” Mesh said of Patriot Prayer, “they managed to outsmart most of their adversaries in this city, simply by provoking violent reactions from people who were appalled by their politics.” The argument for violence among people on the left is often, essentially, If you encounter a Nazi, you should punch him. But “what if the only thing the Nazi wants is for you to punch him?” Mesh asked. “What if the Nazis all have cameras and they’re immediately feeding all the videos of you punching them to Tucker Carlson? Which is what they did.”

    The situation in Portland became so desperate, and the ideologies involved so tangled, that the violence began to operate like its own weather system—a phenomenon that the majority of Portlanders could see coming and avoid, but one that left behind tremendous destruction. Most people don’t want to fight. But it takes startlingly few violent individuals to exact generational damage.

    V. THE COMPLICIT STATE

    America was born in revolution, and violence has been an undercurrent in the nation’s politics ever since. People remember the brutal opposition to the civil-rights struggle, and recall the wave of terrorism spawned by the anti-war movement of the 1960s. But the most direct precursor to what we’re experiencing now is the anti-government Patriot movement, which can be traced to the 1980s and eventually led to deadly standoffs between federal agents and armed citizens at Ruby Ridge, Idaho, in 1992, and in Waco, Texas, in 1993. Three people were killed at Ruby Ridge. As many as 80 died in Waco, 25 of them children. Those incidents stirred the present-day militia movement and directly inspired the Oklahoma City bombers, anti-government extremists who killed 168 people at the Alfred P. Murrah Federal Building in 1995. The surge in militia activity, white nationalism, and apocalypticism of the 1990s seemed to peter out in the early 2000s. This once struck me as a bright spot, an earlier success we might learn from today. But when I mentioned this notion to Carolyn Gallaher, a scholar who spent two years following a right-wing paramilitary group in Kentucky in the 1990s, she said, “The militia movement waned very quickly in the 1990s not because of anything we did, but because of Oklahoma City. That bombing really put the movement on the back foot. Some groups went underground. Some groups dispersed. You also saw that happen with white-supremacist groups.”

    A generation later, political violence in America unfolds with little organized guidance and is fed by a mishmash of extremist right-wing views. It predates the emergence of Donald Trump, but Trump served as an accelerant. He also made tolerance of political violence a defining trait of his party, whereas in the past, both political parties condemned it. At the height of the Patriot movement, “there was this fire wall” between extremist groups and elected officials that protected democratic norms, according to Gallaher. Today, “the fire wall between these guys and formal politics has melted away.” Gallaher does not anticipate an outbreak of civil strife in America in a “classic sense”—with Blue and Red armies or militias fighting for territory. “Our extremist groups are nowhere near as organized as they are in other countries.”

    Because it is chaotic, Americans tend to underestimate political violence, as Italians at first did during the Years of Lead. Some see it as merely sporadic, and shift attention to other things. Some say, in effect, Wake me when there’s civil war. Some take heart from moments of supposed reprieve, such as the poor showing by election deniers and other extremists in the 2022 midterm elections. But think of all the ongoing violence that at first glance isn’t labeled as being about politics per se, but is in fact political: the violence, including mass shootings, directed at LGBTQ communities, at Jews, and at immigrants, among others. In November, the Department of Homeland Security issued a bulletin warning that “the United States remains in a heightened threat environment” due to individuals and small groups with a range of “violent extremist ideologies.” It warned of potential attacks against a long list of places and people: “public gatherings, faith-based institutions, the LGBTQI+ community, schools, racial and religious minorities, government facilities and personnel, U.S. critical infrastructure, the media, and perceived ideological opponents.”

    The broad scope of the warning should not be surprising—not after the massacres in Pittsburgh, El Paso, Buffalo, and elsewhere. One month into 2023, the pace of mass shootings in America—all either political or, inevitably, politicized—was at an all-time high. “There’s no place that’s immune right now,” Mary McCord, the former assistant U.S. attorney, observed. “It’s really everywhere.” She added, “Someday, God help us, we’ll come out of this. But it’s hard for me to imagine how.”

    The sociologist Norbert Elias, who left Germany for France and then Britain as the Nazi regime took hold, famously described what he called the civilizing process as “a long sequence of spurts and counter-spurts,” warning that you cannot fix a violent society simply by eliminating the factors that made it deteriorate in the first place. Violence and the forces that underlie it have the potential to take us from the democratic backsliding we already know to a condition known as decivilization. In periods of decivilization, ordinary people fail to find common ground with one another and lose faith in institutions and elected leaders. Shared knowledge erodes, and bonds fray across society. Some people inevitably decide to act with violence. As violence increases, so does distrust in institutions and leaders, and around and around it goes. The process is not inevitable—it can be held in check—but if a period of bloodshed is sustained for long enough, there is no shortcut back to normal. And signs of decivilization are visible now.

    illustration with photo of person in gas mask looking at camera with person behind in stars-and-stripes face mask and clouds of tear gas
    A pro-Trump demonstrator at the U.S. Capitol on January 6, 2021, when insurrectionists stormed the building (Paul Spella; source image: Brendan Smialowski / AFP / Getty)

    “The path out of bloodshed is measured not in years but in generations,” Rachel Kleinfeld writes in A Savage Order, her 2018 study of extreme violence and the ways it corrodes a society. “Once a democracy descends into extreme violence, it is always more vulnerable to backsliding.” Cultural patterns, once set, are durable—the relatively high rates of violence in the American South, in part a legacy of racism and slaveholding, persist to this day. In The Delusions of Crowds, William Bernstein looks further afield, to Germany. He told me, “You can actually predict anti-Semitism and voting for the Nazi Party by going back to the anti-Semitism across those same regions in the 14th century. You can trace it city to city.”

    Three realities mark the current era of political violence in America as different from what has come before, and make dealing with it much harder. The first—obvious—is the universal access to weaponry, including military-grade weapons.

    Second, today’s information environment is simultaneously more sophisticated and more fragmented than ever before. In 2006, the analyst Bruce Hoffman argued that contemporary terrorism had become dangerously amorphous. He was referring to groups like al-Qaeda, but we now witness what he described among domestic American extremists. As Hoffman and others see it, the defining characteristic of post-9/11 terrorism is that it is decentralized. You don’t need to be part of an organization to become a terrorist. Hateful ideas and conspiracy theories are not only easy to find online; they’re actively amplified by social platforms, whose algorithms prioritize the anger and hate that drive engagement and profit. The barriers to radicalization are now almost nonexistent. Luigi Galleani would have loved Twitter, YouTube, and Telegram. He had to settle for publishing a weekly newspaper. Because of social media, conspiracy theories now spread instantly and globally, often promoted by hugely influential figures in the media, such as Tucker Carlson and of course Trump, whom Twitter and Facebook have just reinstated.

    The third new reality goes to the core of American self-governance: people refusing to accept the outcome of elections, with national leaders fueling the skepticism and leveraging it for their own ends. In periods of decivilization, violence often becomes part of a governing strategy. This can happen when weak states acquiesce to violence simply to survive. Or it can happen when politicians align themselves with violent groups in order to bolster authority—a characteristic of what Kleinfeld, in her 2018 book, calls a “complicit state.” This is a well-known tactic among authoritarian incumbents worldwide who wield power by mobilizing state and vigilante violence in tandem.

    Complicity is insidious. It doesn’t require a revolution. You can see complicity, for example, in Trump’s order to the Proud Boys to “stand back and stand by” in the months ahead of January 6. You can see it in the Republican Party’s defense of Trump even after he propelled insurrectionists toward the U.S. Capitol. And you can see it in the way that powerful politicians and television personalities continue to cheer on right-wing extremists as “patriots” and “political prisoners,” rather than condemning them as vigilantes and seditionists.

    Americans sometimes wonder what might have happened if the Civil War had gone the other way—what the nation would be like now, or whether it would even exist, if the South had won. But that thought experiment overlooks the fact that we do know what it looks like for violent extremists to win in the United States. In the 1870s, white supremacists who objected to Reconstruction led a campaign of violence that they perversely referred to as Redemption. They murdered thousands of Black people in terror lynchings. They drove thousands more Black business owners, journalists, and elected officials out of their homes and hometowns, destroying their livelihoods. Sometimes violence ends not because it is overcome, but because it has achieved its goal.

    Norbert Elias’s warnings notwithstanding, dealing seriously with society’s underlying pathologies is part of the answer to political violence in the long term. But so, too, is something we have not had and perhaps can barely imagine anymore: leaders from all parts of the political constellation, and at all levels of government, and from all segments of society, who name the problem of political violence for what it is, explain how it will overwhelm us, and point a finger at those who foment it, either directly or indirectly. Leaders who understand that nothing else will matter if we can’t stop this one thing. The federal government is right to take a hard line against political violence—as it has done with its prosecutions of Governor Whitmer’s would-be kidnappers and the January 6 insurrectionists (almost 1,000 of whom have been charged). But violence must also be confronted where it first takes root, in the minds of citizens.

    Ending political violence means facing down those who use the language of democracy to weaken democratic systems. It means rebuking the conspiracy theorist who uses the rhetoric of truth-seeking to obscure what’s real; the billionaire who describes his privately owned social platform as a democratic town square; the seditionist who proclaims himself a patriot; the authoritarian who claims to love freedom. Someday, historians will look back at this moment and tell one of two stories: The first is a story of how democracy and reason prevailed. The second is a story of how minds grew fevered and blood was spilled in the twilight of a great experiment that did not have to end the way it did.


    *Lead image source credits from left to right: Kathryn Elsesser / AFP / Getty; Michael Nigro / Sipa USA / Alamy; Mathieu Lewis-Rolland / AFP / Getty; Alex Milan Tracy / AP; Michael Nigro / Sipa USA / Alamy; Michael Nigro / Sipa USA / AP; Mathieu Lewis-Rolland / AFP / Getty; Mark Downey / ZUMA / Alamy; Mathieu Lewis-Rolland / AFP / Getty

    This article appears in the April 2023 print edition with the headline “The New Anarchy.” When you buy a book using a link on this page, we receive a commission. Thank you for supporting The Atlantic.

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