It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute – Larry Summers is wrong about almost everything. Could he be right about this?
Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed. Believe it or not though, in very rare instances Larry is actually right about something. For example, the politically incorrect comments that got him fired from his post as Harvard president definitely shouldn’t have been dismissed out of hand. Is it possible that he is actually right about something again?
Photo credit: Chip Somodevilla
Worst in Class
BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things.
Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
Image credit: Disney
Life is one long struggle in the dark.
BALTIMORE – In January of this year, the Empire Herald reported that a “meth-addled couple” had eaten a homeless man in New York City’s Central Park. Later, Now8News reported that a can of cookie dough had “exploded in a woman’s vagina”; the woman was alleged to be shoplifting.
The fellows depicted above certainly mesh perfectly with the image of meth-addled cannibals conjured by our imagination… A few interesting questions regarding this event remain unanswered to this day. Did they marinate their meal? Fill it with stuffing? What were their wine and salad choices? Was their dinner roasted on a spit, cooked in a jungle wok the traditional way, or were these pale gourmets connoisseurs of wino tartare?
BALTIMORE – Who’s the biggest winner so far? “Government Sachs!” Fortune magazine reports that the winningest person since Trump’s election is Goldman Sachs CEO Lloyd Blankfein. Goldman’s stock price is back to where it was just before the last crash in 2008. And Blankfein is back in high cotton, too; his holdings in the firm have gained $140 million in the last four weeks.
GS actually trades at a new all time high. It is really difficult to find pictures of Lloyd Blankfein in which he is not laughing or at least grinning, but his perpetual good mood is certainly understandable. People like him are often said to be “laughing all the way to the bank”. The saying would have to be slightly modified in his case, since he basically is the bank – click to enlarge.
BALTIMORE – When we left you last time, we were in the middle of describing the crooked hind leg of crony capitalism. We used billionaire businessman Wilbur Ross – Donald Trump’s pick for the Department of Commerce – for illustration purposes. Not that there is anything wrong with Mr. Ross. He plays the game, just as everyone else does. He’s particularly good at it.
The steel magnate in his command center. He is one of a number of particularly alert entrepreneurs who were able to make the most of the bubble era ushered in by Nixon’s adoption of the confetti money system. And he even has a crystal ball! Obviously, that explains a lot.
Photo via timschaefermedia.com
Setting the Financial Course – Crimes and Great Fortunes
BALTIMORE – “Behind every great fortune is a crime,” said French novelist Honoré de Balzac. Even our modest little pile owes much to a crime, though not our own. But what is behind Wilbur Ross’ billion-dollar fortune?
Today it’s Honoré de Balzac’s turn to provide us with a pithy quote. Balzac failed in his many attempts at getting a business off the ground. He tried various careers, from lawyer to publisher, to printer, to merchant… at one point he even tried his hand at becoming a professional politician. He mainly left small mountains of debt behind in these endeavors. He never could let go if this obsession: even though he had long made it as a writer, he still tried to import wood from Ukraine to France shortly before his death, in the hope of making a quick buck. These experiences contributed to making him a great writer though. His work has influenced quite a few famous writers, both contemporaries and later ones – and not only in France. He died just five months after getting married, so marriage apparently didn’t agree with him.
Photo credit: Louis Auguste Bisson
Running Out of Time and Money
BALTIMORE – We are looking ahead. And coming together is not only a clearer picture of how Trump’s reflation might turn out – but also a better understanding of what has gone wrong with the whole economy.
The famous Sears Tower (now Willis Tower) dominates the Chicago skyline. Its former owner Sears Holdings is on the ropes after being in business for 130 years. What happened?
Photo credit: Carol Highsmith
The Nasty Habits of Reality
BALTIMORE – People never intend to bring disasters upon themselves. But they sometimes put themselves in situations in which disaster is the only way out.
The War Between the States was supposed to be quick and decisive. The glorious histories of the war were already written – at least in the minds of the combatants – by the time of the First Battle of Bull Run.
General Thomas “Stonewall” Jackson inspects the action at the First Battle of Bull Run. Confederate observers were suitably impressed. We’ve got this in the bag, they said to themselves. Let’s start writing the history books!
Donald vs. the Swamp
BALTIMORE – Judging by the Diary mailbag, dear readers would like to see a more positive attitude towards the president-elect. We would like to take a more positive approach; we like wishful thinking as much as anyone. In particular, we’d like to see Mr. Trump do away with the inheritance tax.
A message from the swamp thing: all you’ll get is a maw-full of muck – it is knitting itself back together already. And besides, it is ticked off.
Illustration by Len Wein
BALTIMORE – Fidel Castro was regarded as a revolutionary and a “change agent.”
But he is better understood as a throwback, more of a counter-revolutionary than a real revolutionary. The real revolution in human affairs happened long before he was born… and is still going on – the revolution led by civilized free-market capitalism.
Finger-wagging Fidel Castro on the cover of TIME in 1965, which by this time accused his revolution of “decaying”. The US government initially continued to subsidize Cuba in the wake of Castro’s takeover as he had given less than truthful assurances that the “handful of communists” in his cabinet had no influence on Cuba’s policies. The Batista government’s economic policies had a great many statist features as well, so at first it seemed as though the differences between the two regimes would only be marginal – mainly, someone else would do the stealing. By the time the above cover story was published, the US was waging a full-scale economic war against Cuba. It is rare for a classical peasants’ revolt to actually succeed. Castro’s victory over Batista was quite a feat in that sense; not surprisingly, it elicited the admiration of Leftists the world over. Castro was not a Stalinist, presumably not least because Khrushchev had “de-Stalinized” the Soviet Union, but he did declare himself a Marxist-Leninist (which Stalin incidentally had claimed to be as well). The political Left’s misguided admiration for Castro never wavered though.
BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.
Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won the presidential election? That would have confounded expectations as well. Also, the S&P 500 declined for nine days in a row (even if not by much) just before the election – at the time Clinton was still widely expected to win. it remains to be seen whether and for how long the recent discounting of Nirvana will last – click to enlarge.
TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.
Lieutenants in Trump’s army: Bannon, Flynn & Sessions
Photo credit: Drew Angerer / AFP
Most read in the last 20 days:
- Gold - Ready to Spring Another Surprise
Sentiment Extremes Below is an update of a number of interesting data points related to the gold market. Whether “interesting” will become “meaningful” remains to be seen, as most of gold's fundamental drivers aren't yet bullishly aligned. One must keep in mind though that gold is very sensitive with respect to anticipating future developments in market liquidity and the reaction these will elicit from central banks. Often this involves very long lead times. Blackbeard's...
- Modi’s Great Leap Forward
India’s Currency Ban – Part VIII India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions. India’s Pride and Joy Indians are...
- Global Recession and Other Visions for 2017
Conjuring Up Visions Today’s a day for considering new hopes, new dreams, and new hallucinations. The New Year is here, after all. Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad. But what else will happen? Image of a recently discarded vision... Image by Michael Del Mundo Here we begin by closing our eyes and slowing our breath. We let our mind...
- The Great El Monte Public Pension Swindle
Nowhere City California There are places in Southern California where, although the sun always shines, they haven’t seen a ray of light for over 50-years. There’s a no man’s land of urban blight along Interstate 10, from East Los Angeles through the San Gabriel Valley, where cities you’ve never heard of and would never go to, are jumbled together like shipping containers on Terminal Island. El Monte, California, is one of those places. Advice dispensed on Interstate...
- A Trade Deal Trump Cannot Improve
Worst in Class BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things. Alice laughed. "There's no use trying," she said: "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for...
- Pope Francis Now International Monetary Guru
Neo-Marxist Pope Francis Argues for Global Central Bank As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated. Neo-Papist transmogrification. We highly recommend the economic thought of one of Francis' storied predecessors, John Paul II, which we have written about on previous occasions. In “A Tale of Two Popes” and...
- Where’s the Outrage?
Blind to Crony Socialism Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous. The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class. In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid. Believe me. I’ve been on both sides of this kind of dispute (except, of course, for the “failed”...
- Trump’s Trade Catastrophe?
“Trade Cheaters” It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute - Larry Summers is wrong about almost everything. Could he be right about this? Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed....
- Money Creation and the Boom-Bust Cycle
A Difference of Opinions In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard, the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote: I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud...
- Silver’s Got Fundamentals - Precious Metals Supply-Demand Report
Supply-Demand Fundamentals Improve Noticeably Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action. Photo via thedailycoin.org The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices. Prices of gold and silver...
- Trump’s Plan to Close the Trade Deficit with China
Rags to Riches Jack Ma is an amiable fellow. Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl. At a moment of peak inspiration, he executed his first search engine request by typing in the word beer. Jack Ma, founder and CEO of Alibaba, China's largest e-commerce firm. Once he was a school teacher, but it turned out that he had enormous entrepreneurial talent and that the world of wheelers, dealers, movers and...
- Side Notes, January 14 - Red Flags Over Goldman Sachs
Red Flags Over Goldman Sachs Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold. The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese's movie “The Wolf of...