02/03/11 Los Perros, Nicaragua – Stocks were flat yesterday. Gold was down $8.
Just noise, in other words. Doesn’t mean a thing…
But wait…sugar at a 30-year high…cotton at a record high…oil at a 28-month high…
What’s going on?
Could the markets have been so wrong last year…and the year before…and the year before? All of a sudden, they’re discovering that commodities are a lot more valuable than they had thought.
How could they have been so wrong before? Or are they wrong now?
Or is it just more noise?
And what’s this?
“Fed passes China in Treasury holdings,” says The Financial Times. So, who’s the biggest holder of US debt? The Fed! And since the Fed doesn’t have any real money to speak of, how did it get all those US bonds?
It simply created the money to buy them. Out of thin air.
In other words, the US didn’t really borrow the money at all. It just printed money.
Whoa! Isn’t that what Zimbabwe did? Isn’t that what the Reichsbank did? Isn’t that what Banana Republics do…just before they go bust? They can’t pay their expenses honestly, so they just print up some extra currency and hope nobody notices. But people do notice, eventually. And they dump the currency.
Well, maybe this time it is different. Hope so. Because the Fed just keeps printing money. It has a mandate to buy $600 billion of US Treasury debt in the first half of this year.
Surely that isn’t just noise, is it? No, it’s something important. Something you need to pay attention to. It’s something that affects the value of every dollar you’ve ever managed to save. Maybe it’s why commodities are so high. And maybe it’s why the euro is back up to $1.38. And maybe it’s why the smart money is buying gold.
Gold is what you buy when you fear the authorities are up to no good. But so far, very few people own gold. Ask your friends and neighbors. Many will have never considered buying gold…and they’ll look at you as though you were a kook for suggesting it.
In the average man’s mind – at least the average mind of the average citizen of one of the average mature social welfare states – the government controls the money. And he thinks he can trust the government. Because government is a good thing. It is there to ease his suffering…
…it will make sure that the rich don’t get too rich…
…and that he will have a retirement pension, public libraries, fire departments, and food tasters. If his car has a defect, he’ll count on the feds to make sure it gets called in and fixed too.
…and his money? Despite the evidence of 100 years of Fed stewardship – in which the dollar lost 97% of its purchasing power – he still believes that the feds are on the case, and that they’ll make sure the US dollar is a valuable and reliable way to store wealth.
And if he’s wrong? Then, the feds will turn out to be less reliable than he believes. And he’ll be out beaucoup dollars.
The average man doesn’t care much what kind of government he has. He has a foggy view of the whole thing…a bit of Mystic Knights of the Sea combined with the Rights of Man, Democracy, and supporting the home team.
To say that he doesn’t think clearly about it is misstating the situation. He doesn’t think about it at all.
And why should he? He has better things to do – like earning money and watching television.
But he still expects things of government. At the most basic level, he wants the feds to keep order. Nobody likes disorder…except for people who cause it. And even their appetite for anarchy is limited and temporary. They like it only until they have a chance to impose some kind of order of their own.
Today’s modern governments have struck a bargain with the common man. They keep order, of course. But there’s more to it than that. Keeping order doesn’t cost very much. And governments today, as Paul Krugman puts it, are “big, ambitious and expensive.”
What do they do? They promise to look after the voter…to ease his pains…to succor him and support him in all his endeavors. That is, the voter looks to the government as he once looked to the church – to salve his sufferings.
But what does he suffer from? Not from want. There are very few – if any – people in America or the other developed nations who suffer from real want. Instead, having too much is likely to be their problem. They eat too much. They have too much stuff. They’ve spent too much. And they have too many things to do and not enough time to do them.
They suffer from plenty, not from want.
Then, what suffering does the government alleviate? What itch does it scratch? What hurt does it make go away?
As we discussed yesterday, people do not necessarily want to be richer. What they want more than that is not to be too much poorer than their neighbors. It’s relative wealth that counts.
There was a wise and silly report in The Financial Times earlier this week. The writer criticized Barack Obama’s drive to make America more “competitive.” He pointed out that being competitive is not the same as being rich. You get richer by becoming more productive. You don’t get richer – necessarily – from becoming more competitive. Someone may be even more productive than you are. So what? As long as you’re able to produce more goods and services, more efficiently, you will be richer.
Trouble is, people are naturally competitive. They judge their own wealth and status in comparison to that of others. Without a point of reference, wealth – beyond what you need to survive – is irrelevant.
You’re probably wondering where we’re going with this. And to tell you the truth, in all the excitement, we kind of lost track ourselves…
…but here’s the point: what the common man really wants is for the government to beat down the rich…and humble the powerful. His suffering is the kind of suffering the Bible condemns: envy.
He wants what isn’t his. He covets his neighbor’s ass. Not because he needs another ass, but because he thinks it isn’t fair that the neighbor has it.
He only wants what is “fair”…unless he can get an unfair advantage himself.
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.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
(1) Yes, Zimbabwe….and Japan. Maybe the hole to be filled is bigger than even the Feds think?
(2) There are lots of other things you can buy besides gold. But admittedly it is whole lot easier to keep around gold than barrels of wheat or oil or piles of uranium!
“You’re probably wondering where we’re going with this. And to tell you the truth, in all the excitement, we kind of lost track ourselves…”
Bravo! This quote alone was worth the price of my subscription.
What Bill said:
“…He covets his neighbor’s ass. Not because he needs another ass, but because he thinks it isn’t fair that the neighbor has it.”
Hey – keep Barney Frank out of this.
If man would only figure out that we serve the gov and not the other way around the world might be a better place. Well, at least until democracy kicked it into high gear again. Then we would just be back where we started.
Many have figured this out, but feel powerless against such a large institution. That is true at least until it fails, which it always does.
Damn history and its cyclical nature.
breaking news: the rich are taking the average man’s wealth. i think… through the goobermint. or, maybe the ave. joe IS just too lazy and dumb to take care of himself.
who knows?
ok about the envy; what do the wealthy envy? social recognition? sitting at the head table? long phylacteries or pearls? good tee times? gated communities?
but, as you say, if one has his daily bread, he or she may be able to value a few of the other basics, also, top dog OR bottom.
works for me.
if you confused yourself, a bit, you got thru it, well, sir.
or, again, w/ one’s daily bread, many just use the energy to nurture the us v. them thingy. when times get tough, the poor can become a mob. like in egypt? maybe, maybe not. square o’ the distance.
looks like trickle-down didn’t work very well, over there, tho. chalk it up as another failure of the miltary-industrial empire?
we’re all here, together, till we die.
many want to look OUT for answers; many look IN.
some try to do both.
that is, unless they don’t.
…but here’s the point: what the common man really wants is for the government to beat down the rich…and humble the powerful. His suffering is the kind of suffering the Bible condemns: envy.
The tune is totally off track. What a common man wants is a justified environment. I don’t think many would like to play with envy. When a non-moron set his judging eyes on a rich, the first thing is he will trace his sources and application of fund. More conspicuously how he had derived his glittering fortunate. A crook may just has a multi function array of colluding, treacherous act of behaviour in cornering all assets.
Treacherous act cements the ties to become a traitor. A traitor is the one who will sell you, your family, your son/daughters and nations off without discount. The 4 little tigers in your eyes is valued becuase they serve you as master, but it may just be opposite in the eyes of their very own motherland.
Irregularites are the most effective ways to garner huge profit within the shortest span of time. Unless you are born with exceptional talents to create or invent some specialities out of your throbbing cells, the road lies ahead to richess is
no less rocky.
Admittedly, the once solidly rich west has fallen prey to no other than influence of irregularites. These negative elements generate immense force sending destructive wave across the globe. Perfect competition is still the keyword.
What additional words would you like to utter?
Can you discuss about the effect of money airborne, casino economics or lottery economics in perspective?
A drowning, suffocating man start to show all downgraded posture regardless of his civilisation and high grade education demeanor.
Amen Brother !
if at first you don’t succeed…, why not just give up…?
looks like everybody else did…
although i do find the ad hominems somewhat flattering, esp. from you, 2 funny, perhaps dialogue would be more appropriate.
Randy and T went w/ humor.
GC, phelps and i went with content.
mr. b. said he wasn’t sure where his ideas were leading him, himself, for a while.
and he put in a pretty big scoop of raisins, today, i would say.
i don’t see this as being about education, but understanding.
maybe i misunderstood; wouldn’t be the first time. this was not easy for me to digest, but i tried to work with his ideas, which i found quite complex, today.
possibly, 1-3 of you find what i wrote easier to understand, or misunderstand, than what mr. b. wrote.
what do you think of what he wrote?
huh?
2 funny? Ham? Stacy?
huh?
what do you think about what i WROTE?
huh? huh?
can’t WAIT to see whether you are ready, willing and able to do with the actual ideas on this page. got a feeling abt it, tho.
ad hominems are fallacies, by definition.
people resort to them, frequently, because they are threatened by ideas, or just plain out of their depth.
any of you turd throwers wanna play?
i’m in, if ya are!
Master Steverino,
Jealousy is a sickness but envy is benign.
Jealousy is simply destructive. Envy presents a respect for those produces beauty.
All probably is not inclusive when someone wants to have the rich beaten. But, for a common folk he wants the devils slaughtered under all weather condition.
That is the purpose of education. First, to instil the right values, then comes the skill for survival. It doesn’t make sense businesslike to keep the fox thriving.
maybe mr. b would be kind enough to address
this.
i consider him much more businesslike than moi.
for me, i wonder if, for you, Xi Xi, envy would be considered a negative emotion, or not.
sounds like not, but i’m not sure how that works for you.
just steverino is fine.
thank you for addressing the question.
Gold is ideal, it’s valuable, portable, easily traded, universally accepted and hard to tax!
“Gold is what you buy when you fear the authorities are up to no good.” Actually there are a lot of things to buy if you have the cash sitting around. Fear is really not a very good promoter of good thought. It comes to no surprise that authorities are up to no good. Most of them are and have been for a very, very long time. People that have the desire to be in a position of authority are by nature authoritarian and always up to no good.
Without money, humans return to the jungle or at best live a life of meager existence.
The power to create, manage and control the money cannot reside in the hands of the state. Since the elemental purpose of money is to facilitate exchange of value for value, and only individuals can create such value (the State only confiscates it) then it is only the individual who can create money. In fact, it is only by the act of free exchange between buyer and seller does the concept of money spring forth. Honest, non-perverted money can only come into existence from those who create wealth. At this time I am but a mere tadpole regurgitating the words of a man whom I have just recently discovered. Perhaps some of you are familiar with his writings. His name is EC Riegel. The lack of honest money has plagued humanity for thousands of years. We must solve this riddle. Its our problem. Therefore, we are the ones with the solution.
ps: Gold is not money. It is a commodity like silver and oil. Weee, this investing stuff is easy.
well, R, t.y.
google went to 199K. on EC
hold it there: ya tryin to tell us the founding motherz didn’t have this right?
whee!
Very interesting perspective re: commodities especially since Bernanke basically stated he has no plans to discontinue stimulus. You should read the “How Do I Buy Gold & Silver” article written by Greg Hunter of USAWatchdog.com
richard: i looked at some of the EC stuff online. it seems quite different, so there are at least 2 tadpoles! hard to grok, indeed.
some of the local schools have a scrip system, which they use in the local communities, and that came to mind, but, not based on wealth creation, so not the same thing, obviously.
similar, maybe, in that folks trade their after-tax income paper for other paper, and use it in trade and to “purchase” stuff, locally. this benefits the school, somehow.
i’ve never participated.
kid comes home the first day of school with a sales kit for candy bars, wanting to “earn” a bike or a trip, and a proposition to use “school money”, to “help support education”, well…if anyone can understand how many people i’d like to kill over that, it might be you.
i’ll try again, later, after i feel better…
oh, i almost forgot!
EC uses accountants, and they set “valuations” for “expected income”.
they probably had adding machines when he put this together, maybe not. i wasn’t around.
i thought: oh! no problems THERE!
more exclamation points?
Misanthropic philosophy is for the world weary.
From Oct 2007 to March 2009 the Dow fell approximately some 53% (from approx. 14160 to 6620) but now is only 14% off its Oct 2007 peak (at approx 12,160).
If you can’t stay young, try to stay agile. The ball is always in play.
“Without money, humans return to the jungle or at best live a life of meager existence.” Gee how did we humans live for millions of years with out money. Barter, trade, etc. And as far as the jungle goes it is disappearing faster than ice on hot pavement. Get ready for meager and what ever your concept of that is.