Do-Gooders Gone Bad
Floundering amid the shifting sands of political intrigue, "good intentions" go all to easily awry…
Regular sufferers of the Daily Reckoning will recall that we’ve been digging down – into this bedrock of money- grubbing capitalism – for so long, we are developing a bad back.
But today, to the relief of readers and ourselves…we move on…and sink into the Sahara of contemporary politics…where our spade sinks in more easily.
Some will say that this is the problem with politics. The sands shift so easily and readily that you can make no headway. As soon as you have dug yourself a nice little position, along comes a wind change that collapses the sides and fills it up. But that is also what makes it entertaining – at least to onlookers with an appreciation for the absurd or the sordid.
Neocons: The Next Big Thing
Some people are irritated by the grit of politics. Others seem to take it in and, like an earnest oyster, roll it into a gaudy pearl. Before you know it, they are so thrilled with their little jewel, they want everyone to wear it.
You will recall, no doubt, our brief mention of the Cannibal of Rotenberg. The poor man thought his anthropophagism might catch on and become the Next Big Thing…a great pearl of a program…which would solve the problems of overpopulation and undernourishment in a single slice. "The Third World is ripe for the eating," he pointed out. And if his recipe for planetary improvement had not been interrupted by the polizei, who knows what might have happened?
But now the fellow is in the hoosegow making do with hamburger. And so is another of the world’s do-gooders gone bad: Saddam Hussein. We don’t know much about the Butcher of Baghdad, but we imagine that his defense will be little different from that of all ex-dictators; surely he thought he was building a better world. Iraq is a wild and wacky place…with different tribes and religious groups ready to slit each others’ throats. At least, that is Saddam’s story; without his firm leadership, the country would have been a mess.
Neocons: Paved with Good Intentions
Riccardo Orizio makes a habit of interviewing dictators. He goes after those who have retired, been deposed…or sent to jail. His book, Talk of the Devil: Encounters with Seven Dictators, is a like a travelogue of different highways to Hell…each one of them paved with good intentions.
It is a shame that do-gooders don’t set off some signal before they go bad…like a fire alarm that is running out of juice. Maybe some adjustment could be made.
But the most successful of them – such as Mussolini and Hitler – actually gain market share as they go bad. Their delusions are self-reinforcing, like the delusions of a debt bubble; the higher prices go, the more people come to believe they make sense.
We think of Il Duce. The clown thrashed around in typical leftist claptrap, looking for a program. When he finally got into office, he simply threw out the whole thing…and got a new program better suited to his ambitions: Put on silly uniforms. Strut around, telling the masses that you’re recreating the glory of ancient Rome. Spend a lot of money.
So many people came to admire the man that he came to admire himself…and began to believe that his program might do as advertised. Then, he invaded Abyssinia…and the bull market in Benito Mussolini was over.
Neocons: Neocon Stock Rising or Falling?
We wonder, too, at America’s latest breed of do-gooder, the neo-conservatives. Is their stock rising…or falling?
"These Cold Warriors were mostly liberals of a special, ideologically zealous variety," explains an article in The American Conservative. "Many of them had come for the extreme Left. They had opposed communism because they had universalistic objectives of their own and did not want any competition. These proponents of a single model for all societies were able to form an alliance with putative conservatives, who had come to believe during the Cold War that to be conservative was always to be hawkish and assertive in foreign policy. Used to "standing up for America," these nationalistic and saber-rattling conservatives found in the cause of a better world, a new outlet for their desire to "exercise American power."
The neo-cons preach a rousing sermon of "global democratic revolution," to quote George W. Bush. There’s nothing conservative about revolution, but that doesn’t seem to bother anyone. The sands shift, who cares?
Of course, President Bush is probably not a neo-con himself. But he seems ready to go along with just about anything. According to former Treasury secretary Paul O’Neill, the leader of the free world even had a little trouble following the foreign policy discussions in the White House. But he’s a shrewd politician who knows a good slogan when someone gives it to him and who saw immediately the advantages of attacking Abyssinia or Mesopotamia. It gave him cover to spend more than any president had ever spent…with hardly a peep of protest. Traditional conservatives were struck dumb by the audacity of it.
No do-gooder program we have ever heard of has been more ambitious than the neo-con scheme. Afghanistan, Iraq…next up are Syria, Iran and Saudi Arabia – all countries in need of "regime change," according to the neo-cons. But the program goes far beyond occupying a few hapless third world countries. These fellows think they have a panacea for everything bad; they believe they are delivering us from Evil.
The pompous absurdity of it is hardly noticed. Reagan dared to tag the Soviets as the "Evil Empire." A few years later, the empire was history.
That is why it is sometimes better to lose a war than to win one. Victory seems to bring out the worst in many people. After the Soviet threat was removed, the neo-cons found new a new source of evil…militant Islam.
"This poses a much more serious threat than the Soviet Red Army," explained Thomas L. Friedman, a cheerleader for the neo-con team, "because these human bombs attack the most essential element of a society: trust."
Thus do they "have the potential to erode our lifestyle," he continues.
You and I, dear reader, might see less danger in a handful of fanatics with plastic explosives in their pockets than in a whole arsenal of thermo-nuclear warheads aimed at us by a determined enemy. But we lack the vision of the neo- con messiahs. What they see is an almost inevitable ‘clash of civilizations’ between the Arab world and the Western world.
And if one is not inevitable…it will at least be likely, after they get finished throwing their weight around.
The Daily Reckoning
January 16, 2004
Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the NY Times and international bestseller: "Financial Reckoning Day: Surviving The Soft Depression of The 21st Century" (John Wiley & Sons).
"Fed says recovery gaining momentum," a Washington Post headline tells us. Other headlines confirm what seems to be a trend: jobless claims came in at their second lowest level in 3 years, and retail sales were up again in December.
But "don’t count on it," is our reply. Which is not to say that we know anything. We know nothing at all…which is how we can be so sure of ourselves. We don’t know if the recovery is gaining momentum…but surely it is gaining popularity. Everyone is betting on it as if it were a sure thing.
What we’re sure of is that nothing is what everybody knows…and they know even less about the future than about anything else. And we also know that a lot of people think they do. Most are so sure they know the future that they don’t even have to think about it. Somehow they know that things will just get better and better forever and ever. These are the people we are counting on to put our children through college.
You don’t make money by knowing the future. You make money by knowing where your fellow investors have erred in the present. You can’t know which horse will win the race, we remind you, but you can make a fair guess about where the odds are miscalculated.
Reading the headlines, it is easy to pick out the favorites in this race. U.S. stocks are about as high as they’ve ever been. Emerging market debt, we recently discovered, is also selling at record highs. Debt itself is at epic levels, as Michael Hodges points out on our website (see: http://www.dailyreckoning.com/body_headline.cfm?id=3676 ). Bankruptcies, too.
Houses? Hard to tell…but in places such as San Diego, where the median house is said to sell for $600,000, and where fewer people than ever before are able to afford one, prices must be near some epochal peak.
On the other hand, there are a few nags in the race that no one seems to want to bet on. Gold, though in an obvious bull market, still trades at less than one half of its price 20 years ago. Adjusted for inflation, the metal still sells for about the same thing it did in the Eisenhower era – despite a furious explosion in debt, derivatives, deficits, unbacked paper dollars, EZ credit, Rent to Own, and all the other obnoxious proclivities of the last 50 years.
"Reagan proved deficits don’t matter," says Dick Cheney. Remarkably, sane people believe him.
And Japanese stocks? Who wants to bet on Japanese shares…after a bear market that has lasted 14 years?
"Is it time to buy Japan?" we asked MoneyWeek editor, Merryn Somerset Webb earlier this week.
"It may be too early," replied she, "but it is definitely not too late."
The lumpeninvestoriat is not interested in Japan. Or in gold. They are too cheap. Too early. Too invisible. Instead, they have erred on the side of recklessness – betting on U.S. stocks to go even higher than they are…betting on debt…on the ‘recovery’…on everything that is already so fully-priced…such odds-on favorites…that even if things work out as they expect, they are unlikely to make a sou on it.
Take the other side of these trades, dear reader. Take the other side.
Over to you, Addison:
– Quelle horreur!
– If there’s one thing the French are exceptionally snobby about…other than their wine, food, art, women, clothes, history, culture and way of life…it’s their coffee. They commonly refer to the American version of the hot elixir as jus de chausettes, or ‘sock juice.’ And when in France, the casual tourist may have had the occasion to note, it’s oooohhhh so gauche to take your coffee to go.
– What will they say, then, after this morning brings the first opening of a Starbucks to the rues of Paris? Quelle horreur? Peut-être pas. There is already a knock-off chain here called Columbus Café which has done well enough in the past few years to open 20 storefronts in Paris. We predict Starbucks will be huge success…and lament a little as France takes another step down the short road to ‘quick’ and ‘easy.’ Already, obesity rates among children are reaching par with the rest of the Western economies.
– "Germany in recession," announced headlines all over Europe this morning. The Esperanto Experiment’s largest economy slipped into recession last year, the first time since 1993. GDP shrank 0.1% in 2003, after adding just 0.2% the year before. "As a result," explains the FT, "high unemployment is likely to continue to undermine consumer confidence and depress private consumption."
– "All of which sounds like a pretty good definition of what should happen during a downturn to us," writes the Daily Reckoning’s London correspondent Adrian Ash. "Lay off workers, lock rampant consumerism in its cage, and allow savings to accumulate – ready to fund the next upswing in confidence and investment."
– On the other side of the Atlantic, the ‘can do’ feel-good troupe called "Greenspan & Company" is busy trying to draft a dissimilar script. The Fed’s Beige Book came out on Tuesday and was…well, remarkable, in the sense that given the enormous amount of stimulus tickling the system, there’s almost no one getting excited about the economy. Except maybe blowhards in the financial media. The Beige Book, you’ll recall, summarizes comments the Fed has collected from businesses and "other contacts" around the grand ol’ U.S. of A. The Fed uses the Beige Book as a kind of litmus test to see if its monetary policy carries more weight than the hot air its governors routinely spew in public discourse.
– This week’s report measured economic activity over the holidays. As you might expect, temp workers were hired in response to increased consumer spending in the two weeks after Christmas. But the overall jobs picture remains "weak" in most areas. Wages are stagnant to falling across the country. We ask again obnoxiously: How will consumers continue to drive consumer spending if there is little improvement in jobs and wages? Regular Daily Reckoning readers will be shocked at today’s surprising answer: DEBT!!! "Americans build mountain of debt, savings rate slides" confirms a headline in the Kansas City Star.
– The markets yesterday were about as lackluster as the Fed’s book is beige. The Dow added 15 points to close 10,553. The Nasdaq lost a wimpy 2 points and closed up shop at 2,109. The S&P 500 gained about the same amount… which is to say hardly at all…and ended the session in the 1,132 range.
– "A sound currency reflects solid economic fundamentals," Jim Rogers wrote in these pages a while back. Quiet right too, but it’s "not exactly the picture you get when you look at the U.S. balance sheet," is it? No, it’s not. And yet, since he made his remarks, the U.S. balance has done nothing but deteriorate. Still, Mr. Market has never been one to worry about deeper truths – the almighty greenback completed its fourth day of recovery on Thursday.
– The U.S. dollar pushed the euro back to $1.25…the pound sterling "slipped" to $1.82 but is still a major rash on the backside of those Americans who frequent the city on the Thames. Gold got whacked for a massive $11 on the dollar rally closing at $410.75 – a retrenchment to levels first reached by the current bull run over a month ago.
– And here’s news…the Pension Benefit Guaranty Corporation reported that the two previous years’ bear market in stocks has left it with a hefty shortfall. "When stock prices fall," the NY Times bravely explains, "companies may be caught without enough money on hand to pay the pensions they owe." The PBGC then steps in and bails the poor sots out. Doing so, lately, has been rather costly. The corp’s operating deficit of $3.6 billion in 2002 lept up nearly $8 billion to $11.2 billion in 2003.
– No doubt, some of the money goosing the system’s derrière will find its way back to the PBGC, too. Don’t worry boys…the government’s here to help. After all, "when people are hurting, government has to act." (Who was the genius that said that, anyway?)
Bill Bonner, still in Paris…
*** Ah…good news! The price of gold fell $13.30 yesterday, Feb. contracts. Even the dollar is enjoying a winning streak – up 2 days in a row!
Go…go…go…Give us another chance to get rid of dollars at a decent price…and to buy more gold below $400 an ounce.
*** Where have all the winos gone, dear reader? Gone to graveyards every one. We felt the loss of our local oracle yesterday. The little bum passed away during the summer. We have missed seeing him sprawled on the cobblestones, liquor bottle in his hand. And now we miss his sage counsel. Not that he could look into the future any better than we could. But where else can you get guru-like wisdom for less than $2?
But around the corner, on the rue St. Martin, is a strange resident whom neither tourists nor residents seem to notice. Parked near the entrance to what used to be Marks and Spencer is a large white box about the size of an expensive refrigerator. It sits on wheels, but never seems to move. It is home to a curious man (what other kind of man would live in a box?) with a long white beard. We caught sight of him yesterday and wandered over.
He sat out in the rain, in front of his box, dressed in a very dirty pair of corduroy pants and enough sweaters to clothe a whole city of earthquake survivors. Paris is cold this time of year…but in his box, he has insulated himself against the cold with a number of layers of cardboard and enough blankets to make the place look like a squirrel’s nest. Or maybe it is his beard, which looks a little like a squirrel’s tail, that brings the animal to mind.
Or maybe it is the fact that the man is plainly nuts.
Nevertheless, on your behalf, dear reader, we struck up a one-sided conversation. Handing the man a copy of our book – which just appeared in French – we began to lay out our views on the upcoming dollar crisis…the problem of debt and deficits now facing U.S….the incredible reckless optimism of the American public…and a host of other issues, hardly stopping to wait for a reply. When finally our breath ran out…we put the question to him:
Well, what do you think?
"I think you are disturbing my peace," said our new oracle. "And if you don’t stop, I’ll call a gendarme."
Of course, gurus often speak in riddles. We are still trying to sort out his meaning. Stay tuned.