Swamp Critters

BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp.

What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best bet: Sell stocks and bonds (debt). Buy GDP. How? To be addressed in due course.

 

SGG! The “something’s gotta give” chart: total US credit market debt, federal debt, the Wilshire Total Market Index an GDP. Unless something gives, we will need a microscope in a few years in order to detect GDP on this chart. Consider also that GDP has been “upgraded” numerous time in recent decades, most recently less than two years ago (these upgrades involve adding hundreds of billions of dollars to economic output no-one has ever spent or received – they are merely statistical artifacts. It is slightly different with debt; we can simply count that) – click to enlarge.

 

But let’s not get distracted. We’re applying a revolutionary new formula, S = rv (w-w – w-l), that will tell us whether President Trump is making America great… or not.

 

[Satisfaction (S) equals the real value (rv) of win-win deals (w-w) minus win-lose deals (w-l).]

 

As you can see, in order to do the job, the president must follow through on his vow to “drain the swamp.” Because that’s where the win-lose deals come from.

The swamp is home to the Deep State swamp critters – the major beneficiaries of regulations, wars, politics, government spending, bureaucracy, deficits, debt – and, importantly, the Fed’s fake money.

The bigger, deeper, and thicker the swamp – the less real wealth and satisfaction for everyone else. Swamp critters – in Lower Manhattan or the upper Potomac – do not add wealth; they live at others’ expense. They are always on the win side of win-lose deals. If you’re not one of them, you’re on the other side.

And if President Trump is really looking out for you, he must cut those win-lose deals. We’ve gotten a lot of mail on the subject already. Not all of it flatters your editor’s inflated ego or his fragile opinion of himself. But he reads all the mail with interest and curiosity before going into the bathroom to cry.

 

Editors are human too…

Image vua twitter.com

 

Now, back to the subject at hand.

 

Super Bowl World

People don’t willingly enter win-lose deals. That’s why they need the government – to force people to take the other side of the bad trade.

Most people instinctively know that if you’re forced to do something, it’s a losing proposition. But they think we live in a Super Bowl world, where one side always wins and another must lose.

That is, more or less, the way the pre-civilized world worked for thousands of years. Competition was a zero-sum game: One group won at another’s expense. But since the invention of money, property rights, and the “do unto others as you would have them do unto you” code, capitalistic win-win deals have made the world richer.

People hustle. They produce. They trade. Everyone is better off. We’ve also seen that the only way you can identify real value is by looking at what people really want.

Some choose gold. Some choose leisure. Some choose illegal drugs or Elvis outfits. People don’t necessarily get what they want, but they get what they deserve.

 

Seduction vs. Rape

Government evolved in the pre-civilized era. It doesn’t trade. It insists. It doesn’t take “no, thanks” for an answer. Government is not a seducer, not a sweet talker; it is a rapist. (and here we draw a veil over the psychological perversities of the human race – the Patty Hearsts who fall in love with their kidnappers… the Soviet Gulag inmates who cried when Stalin died).

 

The bizarre spectacle of North Koreans responding to Kim Long Il’s departure for the eternal hunting grounds.

Photo credit: APTN / AP

 

This is not to say that the government produces nothing of value. There are a lot of good people working for the feds. Many do good work: Teachers. Doctors. Police and judges. If the fire department gets your cat out of a tree, for example, that is a win for you.

But wait… Nothing the feds produce is subject to the discipline of price and quality competition or the need to satisfy a customer. So, how do you know that more resources weren’t consumed getting the animal out of the tree than it was really worth?

And why should your neighbors – whose taxes support the firefighters – pay to get your mangy pet out of your damned tree?

 

Simple Test

Nothing is ever as neat and clear as we would like. There is always some ambiguity and much doubt. Here at the Diary, we take it as a fact of life that nobody really knows anything. Including us. We see through the glass darkly, along with everyone else. But at least our new formula wipes off some of the dust.

“War is the health of the state,” wrote American journalist Randolph Bourne. Swamp critters love it. Everyone else loses. But if a foreign army is invading your country, you accept the cost of defending yourself. You’re going to lose something – the question is: “How much?” And you’re happy to have the government take the lead in protecting you.

 

Randolph Bourne recognized that the State used war to arrogate more power to itself. Even after the war ends, the bloated Leviathan created to pursue it invariably remains in place.

Photo credit: Rare Book and Manuscript Library, Columbia University

 

Since the War of 1812, there has been only one invasion of the continental U.S. Then, the enemy burned down whole cities and shot everyone who stood in its way. Naturally, Americans did what they could to defend themselves. But it was lose, lose, lose… all the way.

The most recent estimates put the number of losers (the death toll) as high as a million, not to mention the economic loss, which was catastrophic. And the invader, of course, was the U.S. feds themselves, invading Virginia in 1861. The South was crushed. The swamp grew.

 

Critical moments in the swamp.

Which brings us, finally, to three of Mr. Trump’s proposals: a “border tax” to force the Mexicans to pay for the wall… beefing up the “defense” budget… and funding more infrastructure programs with deficit spending.

Win-win? Or win-lose? Making America richer or poorer? Draining the swamp – or adding more water?

 

Chart by St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

The above article originally appeared as “Why Trump Must Drain the Swampat 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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2 Responses to “Trump and the Draining of the Swamp”

  • wmbean:

    Yes, sports are an example of zero sum games where one side wins the game and the other loses the game. But not all of living is a win – lose proposition. If I trade my labor for a wage with which to feed, house, and clothe myself then I have still entered a zero sum game of living. That is, I hope to get as much out of my efforts to “play the game”. Will my employer receive more labor from me for the wage I receive? Very possibly. On the other hand, assuming that there is competition in the job market and I have skills that are in demand, I should be able to find better employment. Economics is a zero sum game in that growth only comes with the expansion of the number of consumers or at the expense of the consumers. With the latter, that expense tends to be short lived, one runs out of consumers willing or able to pay.

    But with government, the assumption is that bigger is always better and that the consumer will always be willing to pay the freight of big government, until it isn’t. Ask Louis XVI. The problem is that government is a monopoly and yet is never treated as one. You want to remodel your house or add an addition? Good lord, the city is not your friend unless you hire the required contractors. There is not another planning board or inspection department to compete for your business. And the codes get very stupid at times. Is it any wonder that some many homeowners decide not to get permits if they can get away with the work and not inform the city. Most of out teachers do not do good, test scores point that out. As for doctors, few are independent and thus must steer you into expensive tests that are often not needed and provide little benefit. Education is a monopoly and a racket as is healthcare, so don’t tell me these people do good. It’s not in their contract. I can’t complain too much about cops these days but firefighters are way overpaid. City, state, and federal workers are grossly overpaid as well. We have far too many of them doing a lot of useless work.

    What’s the answer? Close the Department of Education, the Department of Transportation, HUD, and many more of these useless services. Reinforce rule of law and end corporations as well as limited liability organizations. Becoming bigger without the increase in personal responsibility is not better. And talking about win – win like the outcomes are even is a myth. Some one always get a little more than the other fellow.

  • zerobs:

    Many do good work: Teachers. Doctors. Police and judges.

    This is grossly exaggerated and increasingly false.

    Teachers unions do everything they can to bilk taxpayers and ensure that bad teachers do not lose their jobs.
    Police unions do everything they can to bilk taxpayers ensure that bad police do not lose their jobs.
    Very few doctors are employed by government, and government generally gyps plenty of doctors on medicare payments.
    Fire departments are notorious for expanding the number of regulations. A tax increase by another name.

    I’ll leave generalizations about judges aside for now, but I’d venture to say that that the percentage of good ones to bad ones is no different than in any other walk of life.

    It’s time to wise up and start realizing these professions have too much power. This namby-pamby “many do good work” trope is the only opening they need to steal money. The free market would be the best judge of how good their work is.

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