Out of Style
BALTIMORE – Dow up again yesterday! According to Wall Street analysts, investors were front running a non-event. The Fed is in a credit “tightening cycle”, but without the tightening. On Wednesday, it announced it was leaving short-term rates unchanged at 0.5%.
One was already too much…we simply cannot have too many of these sad scenes.
Cartoon by Richard Cline
Since not tightening is what investors are counting on, stocks rise… at least a little… in anticipation. But investors should watch out… We may be in a tightening cycle that goes way beyond the Fed’s control.
“Germany is a disaster right now,” says Donald J. Trump A lot of Europeans would agree with him. Chancellor Angela Merkel’s open-door refugee policy is leading to widespread discontent. Her political position is “becoming weaker,” says the Financial Times. Why?
Because she represents the spirit of a different age. Once the most popular leader in Europe, if not the world, Ms. Merkel is now the Lady for Whom Time Stopped. She is an anachronism from a more optimistic era, when people believed in free trade, democratic government, and ever-rising prosperity.
Angela Merkel: out of touch, out of style…
Photo credit: Markus Schreiber / AP
Now, the zeitgeist has changed. Ms. Merkel is out of style and out of step. In Britain, France, the Netherlands, Slovakia, Hungary, and the U.S., the candidates getting the most enthusiastic support are those who urge closing borders, restricting trade, and looking to protect themselves from all that is threatening, different, or new.
Forget free trade! Forget freedom of travel! Stop immigration… especially of the Muslims and Mexicans! Build a wall! Torture your enemies! Stop trying to expand the empire!
Gone is the brave optimism of the 1980s (remember “Morning in America”?)… and the bumptious corruption of the 1990s (remember Monica Lewinsky?). Now, we are old, tired, fearful, cowardly, and cranky. We want a strong leader to protect us – one who promises to take us back… to make us strong again… to make us young again.
Here at the Diary, we do not believe the “Great Man” theory of history. Look closely at the great men of history… and they don’t look so great. They are just as flawed as the rest of us – bumbling along from victory to disaster, with little real insight into what they are really doing or what role in history they are playing.
But a democracy must find a leader to express its soul. Unwittingly, he moves the country in the direction it was going anyway. Then, unaware of his limits, he goes too far. Marcus Licinius Crassus (the richest man in Roman history) attacked the Parthians… and died at Carrhae. Napoleon had Europe at his feet… and invaded Russia. Japan rolled over Southeast Asia… and bombed Pearl Harbor.
The battle of Carrhae (53 BC) cost Rome seven legions plus one Marcus Licinius Crassus, member of the first triumvirate and the richest man in Rome.
We all breathe in and breathe out. Economies. Markets. Societies and human beings. Now, after at least a generation of globalism, imperial expansion, and EZ money, the world is ready to exhale.
Trump may be fulfilling the empire’s destiny… helping us retreat from promises that can’t be kept, delusions that can’t be financed, and commitments that never should have been made.
Butterfly on a Wall
It has taken us a long time to understand The Donald. We have been studying him, reading his books, listening to him talk… He is not a conservative… but he is the conservatives’ choice. He is not a religious man… but he is getting the born-again Christian vote.
He is a Republican in name only… but the Republicans have him as their standard bearer. Go figure. We think we have figured him out… and now we have him… like a butterfly pinned to the wall.
In France, Britain, Japan… and to a lesser extent the U.S… populations are getting older. They no longer want more; they just want to hold onto the privileges and benefits that they feel they have earned.
Some of those benefits are purely monetary, and some are not. Pensions need to be protected. Drugs need to be affordable. Borders need to be stiffened. Tomorrow needs to be kept in its place – in the future.
There is actually a Trump caterpillar, here seen ambling about in the rainforest in Peru.
Tuesday brought news that “U.S. drug prices doubled in five years.” How could that happen? No voter is going to think too hard about it… or connect it to the real cause: the insiders’ control of the pharmaceutical and medical service industries.
Instead, he is going to look for someone to blame… and someone strong enough to fix the situation. Ms. Clinton was quick to jump on the case. Calling aggressive pricing by drug-maker Valeant “predatory”… adding: “I’m going after them.”
But voters know Hillary will cozy up to anyone – Wall Street, the NSA, the military, Big Pharma – if it gains her money or power; they know she will sell them out.
Donald Trump, on the other hand, appears to be a man who can’t be bought. He’s got enough money already. And his “straight-talking” style suggests he might shoot straight, too. When he talks, voters believe he means business.
The End of Growth
The typical voter has no way of knowing what is going on. He is a ball ricocheting off the bumpers. When hit by a contraction… he shrinks, too. We all come to think what we must think when we must think it. And when it is time to sink, we are ready to drown.
In the U.S., median incomes are lower today than they were 10 years ago. In his book, The Rise and Fall of American Growth, economist Robert Gordon argues that it’s over. The growth spurt that began in 1870 has ended. It can’t be repeated.
But it is not just a matter of money. The temper of the times has changed. The credit system is just part of it. We want what we have lost: a growing economy, growing wages… growing hair! Give up our liberty… and our dignity… to get it?
It seems a small price to pay! Says The Donald: “Make America Great Again.” Yeah… just like it was before.
One has to hand it to Trump…it is simple, and yet, it is the most effective election slogan of any of the candidates. Can you remember any of the others?
Charts by: StockCharts
Chart and image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
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