04/09/10 Baltimore, Maryland – Does anyone seriously think the feds can do a better job? These are the people who run the Post Office…and Amtrak, for Pete’s sake. Even with monopolies, they can’t make money. Now they’re the majority owners of auto companies, insurance giants and mortgage firms. Hardly anyone buys a house in America anymore without the help of a government-owned mortgage business. And soon, you won’t be able to get a doctor to take your temperature – assuming they still do that – without getting a bureaucrat’s approval.
In theory, the feds take charge of more of the economy, and spend more money, so they are able to keep the GDP from going down. The feds have been pumping about $4 billion per day of deficit spending (money they didn’t collect in taxes) into the economy. The bankers say ‘thank you very much’ for the business and pay themselves big bonuses. But this money doesn’t stimulate the private economy…it replaces it.
But it replaces it with zombie ‘growth.’ The government-driven part of the economy is largely brain-dead. It is a waste. What real, positive boost to prosperity comes from someone filling out health care forms for the feds? What benefit do we get from tax accountants? How about from the ambulance-chasing lawyers?
(Yesterday, driving to work, we saw an ad in Baltimore’s inner city: “Birth injury? Malpractice? Workplace injuries? You need a lawyer!”)
How about from any of these multitudes of mid-level bureaucrats…lobbyists…handlers…interveners…meddlers…?
The feds spend money. But the money is like warm water to a boat hull. It just stimulates the barnacles. Gradually, the boat slows…and sinks.
What can you do? Haul it out and scrape the barnacles off! That’s what Ben Bernanke is proposing. But wait…the barnacles vote!
And they make campaign contributions…
But here is Ben Bernanke talking tough. ‘If you don’t straighten up,’ he seemed to say, ‘you’re going to end up like Greece.’
Wait…this has a familiar ring to it. This is the same Ben Bernanke who is holding rates near zero to make it easier for the feds NOT to straighten up. Like those of his predecessor, Bernanke’s centrally-controlled lending rates are sending out just the wrong signal at just the wrong time.
And like Greenspan, he can get away with it…for now.
But maybe not for long. On Monday, US T-note yields ran over 4%. “The fun’s over,” said old-timer Richard Russell. It looked like the end had come for the long bull market in bonds. Bond yields have been going down since ’81. But they seemed to hit bottom near the end of 2008. What we’re seeing now – possibly – is the beginning of the long march in the other direction.
This seemed even more likely because at the end of March the Bernanke Fed lost one of its pumps. It can no longer buy up the toxic mortgage-backed bonds of Wall Street, thereby giving the banks money to buy US Treasury debt.
Still, on Wednesday, threats of more trouble from Greece sent investors towards US bonds for safety.
“Greece Rescue Not Going According to Plan,” was the headline at Bloomberg.
“Demand strong in US 10-year Treasury debt sale,” reported The Financial Times.
But by yesterday, it looked like the plan for US debt was not going well either.
“Treasuries decline after $13 billion auction of 30-year bonds,” said another Bloomberg report.
Jobless claims unexpectedly rose last week. What do you expect? This is a Great Correction. Learn to love it.
“China offers high-speed rail to California,” says The New York Times. Get used to that too. Who’s got the money? Who’s got the new technology? Who’s got the engineers…the people who actually know how to do something.
Hey China…let’s make a trade. We’ll give you 1 million lawyers for 100,000 engineers. Or, how about 20,000 lobbyists for one good metallurgist? Heck…we’ll throw in 535 members of Congress.
Hold the Congressmen? Okay…guess we’re stuck with them.
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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One simple response: Dow 11,000!! Heading north to 13k!
Absolutely, Harry!
It’s sunshine, lollipops, and rainbows here on out!
RH
ps. Bonner, start paying attention and come up to speed on the real economic state of affairs already.
http://www.msnbc.msn.com/id/36322393/ns/business-businessweekcom/
I live in France and I’d be the first to know if central planning worked, actually.
No one can do the job. No one. You ask for the impossible. Things are totally out of control and will only get worse. Everyone but Harry knows it. Maybe its true. Ignorance is bliss. Good luck.
Like .99 cents is so much lower than $1.00. Pathetic
Well, life is sure easier when you have your eyes glued in front of a few stock indexes and ignore reality in an autistic way.
Well, US is the biggest democracy in the world, with the highest educated citizen.
Why ? Can’t the voters vote the lousy government out of the office for good ?
Sure we can vote them out. The problem would be those standing to be elected in their place are just as dumb, just as greedy, and just as willing to be bought by the highest bidder. Good luck.
Like .99 cents is so much lower than $1.00. Pathetic.
Nothing to do but buy gold and silver and laugh at their stupidity and shame.
How about 1000 Maoists for 1000 environmentalists? Oops, they’re the same thing.
Tyranny-the only global equal opportunity system.
Your opening sentence said it all. How can the federal govt be expected to operate anything .. post office, trains, etc.
But, you forgot the most important one they failed at .. the worlds oldest profession … the house of ill repute in Nevada which they took on an IRS deal and utterly failed at operating.
Mr 99, as what is said, the only way to save the world is end of the world. If the world is to end up, thorough cleaning, overhauled, aligned ? Would it be better than wasting time in corrupt election ? Corruption is repetitive and there is no cure.
Mr Fran … what is the worlds oldest profession .. please elaborate.