Tyranny of the Living
Tradition… is the democracy of the dead.
[ed note: this article is from Bill Bonner’s archives, originally published June 20, 2003]
Yesterday’s news brought word from Deputy Defense Secretary Wolfowitz that U.S. troops would be in Iraq for the next 10 years. Also came an estimate of the cost: An extra $3 billion would have to be added to the defense budget for Iraq… and an extra $1.5 billion for Afghanistan.
“Avoid foreign entanglements,” cautioned the father of the country. But corpses have no voice and no vote, neither in markets nor in politics. They might as well be dead.
Wolfie, back when still protected
Cartoon by Steve Bell
BALTIMORE – The Dow rose on Wednesday morning… after Janet Yellen made soothing remarks about a “gradual” return to normal interest rates. Then investors must have realized that returning to normal is not on the Fed’s agenda. The Dow finished the day down 99 points.
We haven’t seen normal central bank policy since the Nixon years. Normal is a currency backed by gold, not by PhD economists. Only briefly and episodically, over the last 2000 years, has the world flirted with pure paper or “fiat” money. Every time, the affair was over in a short time… and regretted for a long time.
The result of the usurpation of money by government
“On this side of the law
On that side of the law
Who is weak? Who is wrong?
Who is for and who’s against… the law”
Were We Unfair to the Oregon Protesters?
We return our attention to the freedom fighters holed up on the high plains… and their standoff with the law in a federal bird sanctuary in Oregon.
On the plains of Oregon…
Photo credit: Nancy & Steve Ross
A Dangerous Spot
SANTORINI, Greece – “Gods were gods. Men were men,” explained our tour guide, Spiros.
“The ancient Greeks thought there was a difference. Men had to realize they weren’t gods. They couldn’t do the things gods could do. If they tried, it provoked a disaster. The gods got jealous and punished them.”
What has changed? There are still things humans can and can’t do. When men get too big for their britches, the gods still punish them. The disaster we were looking at had nothing to do with the hubris of mankind. The problem was geological.
Santorini – world improvers from Hollywood have apparently found housing there.
Photo via kiklamino.com
Chockablock with History
ON THE WINE DARK IONIAN SEA – We drove from Palermo to Agrigento, thence to Syracuse and finally Catania. This was a quick visit to Sicily, not enough to learn very much.
Sicily is complex. It deserves time. If we had more, we would rent an apartment and get to know it better. But now we are on a ship, headed to the Greek island of Santorini.
Photo credit: fmh
Looking at the Big Picture
Step back. Look at the big picture. Stocks are near record highs. Investor sentiment has never been more bullish. The VIX, which shows the options market’s expectation of 30-day volatility in stocks, is near record lows.
But the US stock market – broadly measured by the S&P 500 – is “above the line” of our Simplified Trading System (STS). It’s trading above 20 times reported earnings. The index could go much higher. But our simple approach tells us that the safe gains are behind us. It is better to be out than in.
Or: Who Knew The F***ing Lions Could Swim?
I found myself in a Northern one-horse town some 20 miles west of Aquilea with no apparent means of getting back to Rome. No, let me amend that, from my personal perspective, it might as well have been a no-horse town. Romans and their money! With every new emperor the denarius becomes worth less than before. And so the ten denarii I still called my own (which of course were all new denarii) wouldn't even buy me a horse. Thanks much, emperor! Actually, when I left Aquilea – rather in a mad rush on the spur of the moment – I had a lot more money with me than ten denarii. Little did I know that pillaging gangs of Marcomanni had already invaded the empire. I learned about this the hard way, as I encountered a troupe of these bandits three leagues to the West of Aquilea. I can thank Glycon – all hail Glycon!- and probably several of the other gods profusely that I actually survived the encounter. After all, it is well-known what these Germanic brutes are capable of when they are putting their mind to it. Unfortunately this inadvertent crossing of paths with the barbarian hordes cost me my horse and most of my money. Not to mention my coat and my boots. The only reason why I was left these 10 denarii was that they didn't find my spare purse, which I wear affixed in a place that robbers don't check most of the time, unless they're really hard up. In a way it is an example of poetic justice, or injustice, depending on one's viewpoint. I probably should accept my fate without demur though, since I had to agree with Alexander that to remain in Aquilea was simply no longer an option.
That cheeky little git Commodus – what is he, 10 years old? 11? – even made up a limerick about some unnamed 'Greek fraud and his Roman butt-boy' that he kept reciting all day long and it was pretty clear to everyone whom he meant. I swear that rascal has a glint of Caligula in his eye, it's probably no coincidence that he shares his birthday. Of course the auguries all pronounced a glorious future for the git when he was born, regardless of that unmistakable hint the date of his birth provided them with. I actually doubt that he is the emperor's son, he's much too healthy for that. Faustina must have cuckolded Marcus, the gods know she had plenty of opportunity. To think that this naughty and cruel child could one day become emperor makes me shudder. Anyway, that very same day, when we had retired after dinner, Alexander called for me, inviting me to a night-cap. We inevitably turned to discussing recent events with a good helping of trepidation and Alexander pointed out that it was probably rather significant that no-one had attempted to discipline the boy. His tutors made as though they hadn't heard anything, a number of people were giggling as if he had told the joke of the year and the emperor himself reacted mainly by occasionally fixing us with that rather cold glare he sometimes affects.
The ANC, Communism and Umkontho we Sizwe
A veritable flood of articles has been published in the mainstream media in recent days on occasiom of South Africa's first black president, Nelson Mandela passing on recently. We want to take a look at a few aspects of Mandela's and South Africa's history that have not received as much attention as they probably deserve. Most of the world is understandably (and rightly) fawning over Mandela and his achievements, but the US state department had him designated as a terrorist until 1990 and for several decades regarded him as a communist sympathizer. Of course every feted revolutionary leader who has managed to vanquish the oppressors of his people was a 'terrorist' at some point in the past. Anyone who leads an armed revolt against a government is designated a terrorist by those he fights.
How to Deal with Economic History
In a recent article at the NYT entitled 'Incredible Credibility', Paul Krugman once again takes aim at those who believe it may not be a good idea to let the government's debt rise without limit. In order to understand the backdrop to this, Krugman is a Keynesian who thinks that recessions should be fought by increasing the government deficit spending and printing gobs of money. Moreover, he is a past master at presenting whatever evidence appears to support his case, while ignoring or disparaging evidence that seems to contradict his beliefs.
Among the evidence he ignores we find e.g. the 'stagflation' of the 1970's, or the inability of Japan to revive its economy in spite of having embarked on the biggest government deficit spending spree ever in a modern industrialized economy. Evidence he likes to frequently disparage is the evident success of austerity policies in the Baltic nations (evident to all but Krugman, one might say).
Something Is Cooking
By now it has made the rounds that both Super Mario and Thomas Jordan, chairman of the 'Zimbabwe of the Alps' (h/t Jim Grant) suddenly have found out they are either too busy with urgent work or have prior engagements that keep them from appearing at Jackson Hole.
This is potentially quite significant, as whenever these guys postpone long awaited public appearances at important meetings, they are hatching out something big, which they then spring on us mere mortals at the earliest opportunity. The Jackson Hole pow-wow certainly qualifies as an important meeting, as all the CB bigwigs tend to go there, accompanied by a gaggle of academic apologists for central monetary planning who give them new ideas. Everybody gets to hold a speech or present a paper, and we can be fairly sure that the informal gatherings are inter alia used to talk about policy coordination.
… or Why Trying to Prove a Point about Economics with 'Just Two Charts' is a Really Bad Idea
The Gold Standard Debate Revisited
The discussion over the GOP's gold standard proposals continues in spite of the fact that everybody surely knows the idea is not even taken seriously by its proponents – as we noted yesterday, there is every reason to believe it is mainly designed to angle for the votes of disaffected Ron Paul and Tea Party supporters, many of whom happen to believe in sound money. As we also pointed out, there has been a remarkable outpouring of opinion denouncing the gold standard. Unfortunately many people are misinformed about both economic history and economic theory and simply regurgitate the propaganda they have been exposed to all of their lives. Consider this our attempt to present countervailing evidence.
Most read in the last 20 days:
- Alan “Bubbles” Greenspan Returns to Gold
Faking It Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. […] The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. — Alan Greenspan, 1961 He was in it for the power and the glory... Alan Greenspan gets presidential bling...
- The Gold Situation
A Growing Bullish Chorus – With Somewhat Muted Enthusiasm A few days ago a well-known mainstream investment house (which shall remain nameless) informed the world that it now expects the gold price to reach “$1,500 by early 2017”. Our first thought was: “Now they tell us!”. You won't be surprised to learn that the same house not too long ago had its eyes firmly fixed in the opposite direction. Da bling be goin' somewhere, fellow rastas and homies! Photo via...
- End of an Era: The Rise and Fall of the Petrodollar System
The Transition “The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.” Ron Paul A new oil pipeline is built in the Saudi desert... this one is apparently destined for the Ghawar oil field, one of the oldest fields in Saudi Arabia...
- European Banks and Europe's Never-Ending Crisis
Landfall of a “Told You So” Moment... Late last year and early this year, we wrote extensively about the problems we thought were coming down the pike for European banks. Very little attention was paid to the topic at the time, but we felt it was a typical example of a “gray swan” - a problem everybody knows about on some level, but naively thinks won't erupt if only it is studiously ignored. This actually worked for a while, but as Clouseau would say: “Not...
- Writing on the Wall
Time to Sell... Maybe BALTIMORE – Yesterday, the S&P 500 hit a new all-time high. And the Dow just hit a new record close as well. If you haven’t sold yet, dear reader, this may be one of the best times ever to do so. It's still flying... sorta. Meet Bill Bonner's tattered crash flag Image credit: fmh We welcome new readers with a simple insight: Markets are contrary, pernicious, and downright untrustworthy. Just when the mob begins to bawl most loudly...
- Gold – Eerie Pattern Repetition Revisited
Gold Continues to Mimic the 1970s Ask and ye shall receive... we promised we would update the comparison chart we last showed in late November in an article that kind of insinuated that it might be a good time to buy gold and gold stocks (see: “Gold and Gold Stocks – It Gets Even More Interesting” for the details). We are hereby delivering on that promise. A Lydian gold stater from the time of the famously rich King Croesus, approx. 570 BC. It seems they already had this...
- Fat People for Trump!
Alphas and Epsilons BALTIMORE – One of the delights of being an American is that it is so easy to feel superior to your fellow countrymen. All you have to do is stand up straight and smile. Or if you really need an ego boost, just go to a local supermarket. Better yet, go to a supermarket with a Trump poster in the parking lot. The protest vote attractor with the funny hair. Image credit: Liberty Maniacs Trigger warning: In the following ramble, we make fun of...
- Destination Mars
Asset Price Levitation One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks. If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical. But, in certain economies, this is now standard operating procedure. The “Tokyo Whale” Haruhiko Kuroda explains his asset purchase madness with a few neat little slides. Photo credit:...
- America Has Become a “Parasitocracy”
Dread and Denial So, let’s return to the discussion you can’t have with your congressman, your mailman, or your barmaid. It’s the important one. It concerns what the Fed is really up to. Eight years after achieving independence, a State modeled after the British merchant state was established in the US. It took a while for the Deep State to consolidate itself within it, a process that was accelerated greatly in the run-up to and aftermath of WW I. Illustration by Ana...
- The Central Planning Virus Mutates
Chopper Pilot Descends on Nippon Readers are probably aware of recent events in Japan, the global laboratory for interventionist experiments. The theories of assorted fiscal and monetary cranks have been implemented in spades for more than a quarter of a century in the country, to appropriately catastrophic effect. Amid stubbornly stagnating economic output, Japan has amassed a debt pile so vast since the bursting of its 1980s asset bubble, it beggars the imagination. A...
- Planet Debt
Low Interest Rate Persons She is a low-interest-rate person. She has always been a low-interest-rate person. And I must be honest. I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems. — Donald Trump Two low interest rate persons! The Trumpsumptive president (Donald the Tremendous) can be seen here indicating the approximate size of the interest rate that will...
- Long Term Market Perspectives
Methuselah Tree When looking for a good theme for this post I pondered for a while and then decided to use a picture of a bristlecone pine, which are widely considered to be the oldest living trees in the world. Ye olde bristlecone Photo credit: Kosta Konstantinidis You can find them near the Nevada/California border and if you wind up traveling in the area then I strongly recommend that head over to Bishop and from there head up high up into the White...