Convenient Beliefs

by Bill Bonner

We have been wondering about the way people seem to play whatever role is offered to them.They adjust their beliefs to the role.Where the roles come from, we do not know, but we marvel at how people seem to come to believe whatever they need to believe when they need to believe it.

Alan Greenspan believed strongly in gold – until he became a central banker.Then, he believed he could do a better job than gold.The belief was necessary to the job, just like a wrench to a plumber.

In public life, for example, people generally believe in the system in which they live.We are all democrats in the United States.We believe in electing our leaders.There is no particular reason why this method should be superior to having leaders selected by lottery or hand-to-hand combat.Throughout most of human history, people believed in other systems…and lived in other systems.Are we smarter than they were?Maybe not.If we lived in a kingdom, we would probably believe strongly in monarchy.But circumstances change…and ideas change with them.

America became an empire without anyone noticing.But Americans came to believe in empire…so much so that they are willing to spend hundreds of billions of dollars on it.They maintain military bases all over the world – to protect a world economy that once served their own economic interests.Now, the pax dollarium serves the interests of their creditors and competitors…but Americans still believe in their empire.They believe they must meet challenges in Iraq, Iran, North Korea…all around the periphery of the empire.They might just as well think that the poor Iraqis, Iranians and North Koreans can take care of their own problems…but the thought wouldn’t be compatible with the imperial role.

A rich person plays the role of a rich person.He is the person who must find ways to get rid of his money.He cannot get richer and richer forever.Trees do not grow to the sky.There is no yin without a yang…no day without night…no boom without bust.Everything regresses to the mean – including the wealth of an individual or a group.Even our own lives regress.No one was ever born who was not destined to die.The mean is the grave – for which we are all bound.

When a man gets a certain amount of money, he has to find ways to spend it.And so he takes up the beliefs of a man who needs to spend money.He believes he needs a bigger house.He believes that more expensive wine is better than the cheap stuff.He may even take a course on wine…and bore his friends and neighbors with his sophisticated palette.He believes a Maybach is superior to a Honda.He believes he needs a mistress.Or a yacht.

He gives himself handicaps until he is able to get his wealth down to more reasonable levels – closer to the mean, that is.If he dies before his work is done – that is, while he still has some change in his pockets – he can be sure that the next generation will finish what he began.In a few years, the family will have average wealth rather than extraordinary wealth.

So, too, does a rich society need to give itself handicaps – so that its wealth and power can come back to a meaner level.America surpassed Britain as the world’s leading economy in 1910.Its lead gained over the next five decades – greatly aided by two devastating European wars, one of which it prolonged and made far more disastrous for Europe than it otherwise would have been.

But America’s handicaps increased.It now spends almost as much on its military asall the rest of the world combined.After 9/11 it might have put a few more cops on the case…instead, it launched a whole “war against terrorism” – another costly, distracting handicap.Over the years, it has also increased its expensive social welfare programs;the economic freedom that made the U.S. economy the leader of the world has given way to a rigged, controlled, and regulated economy.General Motors has the handicap of having to spend thousands of dollars worth of health and retirement costs for every car it builds.Its competitors in China have almost none.

The empire is still in business.But it is, like General Motors, wobbling under the weight of its handicaps…and headed for the graveyard.