Government Spending Even the Tea Party Can Get Behind

Oh…the market update:

Yesterday, the Dow rose 7 points. Gold dropped back $6.

Nothing important, in other words. We still don’t have a clear picture of what this market will do…

…Is it “risk on” with a spree of higher inflation? A lower dollar? And a rally on Wall Street? Commodities seem to be anticipating it. They’re at their highest levels in two years.

…or “risk off”…with a sucker punch to investors – whacking commodities, knocking the dollar higher, while pummeling stocks…and even gold?

We don’t know. We wait. We watch. We wonder what will happen next…

…and we keep our money in gold and cash until Mr. Market declares his intentions.

On a lighter note, here’s deep thinking Thomas L. Friedman writing in The International Herald Tribune:

In recent years, I have often said to European friends: So, you didn’t like a world of too much American power? See how you like a world of too little American power – because it is coming to a geopolitical theater near you. Yes, America has gone from being the supreme victor of World War II, with guns and butter for all, to one of two superpowers during the cold war, to the indispensable nation after winning the cold war, to “The Frugal Superpower” of today. Get used to it. That’s our new nickname. American pacifists need not worry any more about “wars of choice.” We’re not doing that again. We can’t afford to invade Grenada today.

Is there anything the Sage of The New York Times doesn’t not know?

“Frugal Superpower?” Huh? The US is running a $1 trillion-plus deficit!

Can’t afford to invade Grenada? Is he kidding? We may not be able to afford NOT to invade Grenada. The US is running out of time and money. And the Tea Party activists are making themselves felt on American politics. They’re calling for “fiscal restraint.”

But government can’t deliver fiscal restraint. Not in this economy. Cutbacks to spending would probably produce even greater deficits, since economic activity would shrink up.

Besides there are too many zombie voters and lobbyists. And we have a printing press, for Pete’s sake. Serious cutbacks are out of the question.

But what kind of spending would get the support of the Tea Party activists…and all the other activists, chiselers, malcontents, Keynesians and blowhards? You guessed it. Military spending. Unfurl the flag, print up the money and bring out the cannons. Who objects?

What did Mussolini do when he found himself at the head of a bankrupt nation? He invaded Abyssinia.


Bill Bonner
for The Daily Reckoning