Thanksgiving

When people think of Thanksgiving, they think of Pilgrims and Indians, sitting down at the same table to give thanks…but in this DR Classique, first run on Thanksgiving Day, 1999, Bill Bonner gives us a lesson in the real history behind the holiday…

I turned to my trusty assistant…Beirne White…this morning.

"Beirne," I said gravely, "tell me about Thanksgiving in Mississippi."

Beirne proceeded to tell me about a Mississippi bluesman named "Son" House, who lived to be 102 by doing what bluesmen tended to do…chasing bad luck, bad liquor and bad women.

"What has that to do with Thanksgiving?"

"Nothing," he replied…whereupon he drew on the resources generously provided by Britannica.com, formerly of Chicago, lately of cyber space, to get me the research I requested.

Beirne hails from Mississippi. And while Mississippians will sit down with the rest of the nation…and tuck into their turkeys with equal relish…perhaps only substituting Bourbon Pecan pie for the sweet potato or pumpkin pie enjoyed in Maryland…it was not always so. Somewhere deep in the most primitive part of his medulla oblongata, the part of the brain where race memories are stored, Beirne resists Thanksgiving. It is, after all, a Yankee holiday.

Thanksgiving in France: Commemorating the Northern Victory

In the middle of the War Between the States, both sides would proclaim days of "thanksgiving," following the progress of the war as we now follow the progress of the stock market. After each of the first and second battles of Bull Run – which sent the Yankees fleeing back to Washington – the Confederates proclaimed days of thanksgiving. But it was Lincoln’s day that stuck. Declared after the battle of Gettysburg – the last great Napoleonic charge of military history – Thanksgiving was set for the third Thursday in the month of November, commemorating the Northern victory.

Beirne doesn’t say so…but this fact must stick in his craw. It doesn’t help that the original celebration took place in Massachusetts. And that it was hosted by a dour bunch of Puritans, who probably wouldn’t have been able to enjoy a good dinner if their lives depended on it. But they certainly had a lot to be thankful for.

As the Wall Street Journal reminds us annually, they nearly exterminated themselves in typical Yankee fashion – by wanting to boss each other around. They had arrived in Massachusetts by accident and bad seamanship, intending to settle in the more hospitable climate of Virginia, which had been colonized more than 10 years before. Once in Massachusetts, they proceeded to set up such a miserable community that surely most of them, had they lived, would have longed to return to England. The Soviets could have learned from their example and spared themselves 70 years of misery. Only after the "witch-burners and infant-damners" abandoned their communal form of organization, and allowed people to work for themselves, did the colony have a prayer of survival.

But victors write the history books. And now this precarious celebration by a feeble group of religious zealots has turned into the most American holiday. After Appomattox, the South was helpless. Its natural leaders, the plantation aristocrats, were either dead, bankrupted and/or discredited.

Many of them went to Northern cities, like New York or Baltimore, where, Mencken tells us, they "arrived with no baggage, save good manners and empty bellies." They enriched the North. But back home, they were sorely missed. "First the carpetbaggers," says Mencken, "ravaged the land…and then it fell into the hands of the native white trash…" Scars of war can take a long time to heal. But 130 years later, the South is the most economically and culturally robust part of the nation.

Thanksgiving in France: A Unified, National Myth

Thanksgiving was declared a national holiday in 1931. Through the Depression, and then WWII, Thanksgiving grew in importance. In a country where roots meant almost nothing, where people were ready to pick up and move at the drop of a hat, where there were huge differences in what people thought and how they lived, Thanksgiving served to provide a unified, national myth… most popularly expressed in Norman Rockwell’s Thanksgiving cover for the Saturday Evening Post. Roots mean more in Mississippi than they do in California.

"No man is himself," said Oxford, Mississippi’s most celebrated alcoholic, "he is the sum of his past." Unlike so many other American writers of the 20th century, Faulkner stayed home. The forward to the Encyclopedia of Southern Culture has a passage from Faulkner, saying: "Tell about the South. What’s it like there. What do they do there? Why do they live there? Why do they live at all?"

Even in Faulkner’s Mississippi…Thanksgiving is now part of everyone. Where Beirne goes…it goes too. And so, all over the world, Americans, gathering in small groups, like pilgrims on distant shores, celebrate the holiday (if not on the actual day…perhaps the weekend following…as we will do.) This can require a little ingenuity. Americans in France have to search for the ingredients. Pumpkins are hard to pronounce-citrouilles-and hard to find. Cranberry sauce is unknown.

But my mother discovered a store in Paris specializing in American groceries, named "the Real McCoy." She hastened thither yesterday, and brought back canned pumpkin, cranberry sauce and peanut butter. Thanks to this outpost of American culinary supplies, we will be able to have a very typical Thanksgiving dinner went we slide our chairs up to the table on Sunday. Art Buchwald has translated the Thanksgiving story for the French, deftly turning Captain Miles Standish into Le Capitaine Kilometre Deboutish. But no one has refashioned American Thanksgiving recipes for the metric measuring cups here in France. My wife, Elizabeth, descendant of the Puritan fathers…former resident of New York…a Yankee, in other words…and my mother – issuing from Southern Maryland tobacco farmers and the French bourgeoisie – will do their best.

And we will be thankful.

Regards,

Bill Bonner
The Daily Reckoning
November 27, 2008

Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis.

Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics, written with co-author Lila Rajiva, is available now.

Other Americans may take the day off.  But not us…not here at the headquarters of The Daily Reckoning.  We’ve got some reckoning to do.

But let us take a moment to bow our heads and offer this Prayer of Thanksgiving…

Thank you, good Lord, for everything.
We are still alive.  We are still solvent.
Help us stay that way.   If not both, at least the former.
Lead us not into temptation.  Keep us in gold and cash until this is over.

And thank you for bringing the man called Obama to the White House…he might not be any better, but he could hardly be worse; or could he?

Okay, we’ve said our prayers…now, down to business…

Yesterday, the stock market continued its recovery.  The Dow was up 247 points.  Oil sank to $54.  Gold lost $7.40 to come to rest at $811.

We have been waiting for a major rally.  Perhaps it is here.  But watch out.  It is probably temptation coming…

Wait…this is national holiday in America.  This is probably a good day to tell you:

What We Believe

Yes, dear reader, we may be cynics, scoffers and doubters here at The Daily Reckoning, but we’re not nihilists.  We have our beliefs.  And feelings too.  Really.

Here is what we think:

Financial markets are part of public life.  As a consequence they follow the rules of all public spectacles.  That is, they are one part rational and sensible…one part incomprehensible…and one part pure humbug.  You never know exactly which part it is you’re looking at.

But the markets are also moral, not mechanical.  That is, they follow moral rules, such as – Thou Shalt Buy Low and Sell High…Thou Shalt Save Thy Money…Thou Shalt Not Speculate Unless Thou Knowest Exactly What Thou Art Doing.

Break those commandments…and you’re on the road to money Hell.  No point in tinkering with the machine.  You can’t ‘fix’ it.  That’s just the way it works.  Financial sins are punished, one way or another.

But moral lessons – as opposed to mechanical knowledge – are cyclical, rather than cumulative.  One generation learns.  The next forgets.  That’s why the biggest market trends tend to follow great, long cycles – approximately generational in length.  In 1929, for example, stocks hit a generational high.  They didn’t recover until 1954 – 25 years later.  They reached a peak in 1966…and then declined until 1982.  They didn’t reach another major peak until 2000 – 34 years later.

We all know what has happened since.  The market tried to correct in 2001-2002, but the feds wouldn’t let it.  They inflated the biggest bubble of credit and speculation in history…

…that bubble has just burst.

What now?  Well, we can expect a long period of regret, reorganizing and repentance.  It takes time to undo mistakes.  It takes time to learn.  It takes time to correct the errors of a 25-year bull market.

If the real top of the bull market cycle came in 2000, we will probably see the next peak around 2025.  Meanwhile, there is a dark valley to cross.

But wait…there’s more.

Because while the private economy is reluctantly owning up to its mistakes…going into rehab…making amends…rebuilding balance sheets….and promising never to do such stupid things again…

…our leaders are doing all they can to stop the learning process.

"Here’s $800 billion," was yesterday’s temptation.  "Go out and have a good time."

"Rescue, Part 2" is how the International Herald Tribune describes it.  The plan itself has two features.  In the first, the feds will spend $200 billion to buy up loans made to consumers and small business.  In the second, another $600 billion will be offered to the mortgage industry.

Our colleagues at contrarianprofits.com describe the program:

"It’s an $800 billion slush fund aimed at loosening credit for homebuyers, consumers and small businesses.

"And it may get bigger…

"Treasury Secretary Hank Paulson has left the door open for more funds. He says, "The facility may be expanded over time and eligible asset classes may be expanded later."

"Why doesn’t this come as a surprise?

"So there is still no telling how much more money the government will throw at this crisis. But our back-of-the-envelope calculations puts the running total at over $8 trillion."

The Washington Post sums it up beautifully. "A year ago, the central bank had assets of $868 billion, of which about 90 percent was in Treasuries. Last week, it had assets of $2.2 trillion on its books, of which 22 percent was in Treasuries."

How this will end, we don’t really know.

But we know this: You can’t pump $8 trillion in funny money into the economy and not expect consequences."

Meanwhile, the Europeans don’t want to be left behind:

"The European Commission urged EU governments Wednesday to jointly combat the economic slowdown with euro200 billion (US$256.22 billion) in spending and tax cuts to boost growth and consumer and business confidence.

"If fully enacted, its two-year “European Economic Recovery Plan” would see the 27 EU governments spend 1.5 percent of the bloc’s gross domestic product to halt the slowdown that has already pushed some European nations into recession."

But let’s not get distracted by the details.  The markets are teaching people a lesson.  The feds don’t like it.  They want people to believe that the economy is a mechanical system…that they just need to find the right screws to turn…and the right levers to pull.

Since the "machine" is visibly slowing down, these simpletons think they can get it going again.  Just add more fuel!

Of course, as we saw in 2001-2007, the feds can certainly have a big effect on the economy.   Their "economy as a machine" theory often seems to work.  In fact, practically everyone believes it will work.  They just argue about which screw to turn…and who should do the screwing.

The Keynesians say you turn the screw marked "fiscal policy."  When private spending slumps, just replace it with government spending.  Pretty simple, no?  But when the feds turned that screw – arguably, too far – in the ’60s and ’70s, it didn’t seem to work.  Instead, they got stagflation.

So, Milton Friedman pointed to the lever marked "monetary policy."  Give that a pull, he said.  It will make sure that the economy always has just the right amount of credit at just the right price.  So, Maggie Thatcher and Ronald Reagan both pulled on the monetary policy lever.  And Alan Greenspan swore by it.  He yanked it so hard in the recession of 2001-2002, the handle practically broke off.  Milton Friedman was still alive at the time and actually approved of Greenspan’s handiwork, saying that he had ‘spared the economy a worse recession,’ or words to that effect.

Now the machine has broken down again.  It has thrown itself into reverse; the 3rd quarter showed an absolute decline in US output – and it’s speeding up in the wrong direction!  And now the terrified feds are ‘pulling out all the stops.’  Which means they using both Keynes and Friedman, and every other tool they can get their hands on.

But the real problem is this:  the "economy as a machine" theory is much too simple.  No theory, said the philosopher Godel, is ever complete.  In science, each one is a stepping stone, towards a fuller and more complete theory.  Even theories that take you in the wrong direction are useful – at least in science.  They are eliminated…and discarded, so science can take a new direction.

In economics, no theory is ever discarded.  Instead, they are merely recycled as market conditions change.  "Markets make opinions," say the oldtimers.  In a boom, it is the free market theories everyone wants.  "Leave the market alone…it will take care of itself," they say.  But in a bust, the cry goes up: "Help!"

For the moment, Mr. Market’s correction still dominates the economy.  One way or another, it will continue for many years.  But the Feds are turning the screws and pulling on the levers.  Keynes is in fashion…for the present.  But Friedman is still around too.  Between the lot of them, they ought to be able to do some spectacular damage

But there is plenty of room for surprises…and more mischief from the feds.  At some point, we presume the feds will succumb to the lure of the printing press.  By some accounts, they already have.  Then, we’ll really see some excitement.

So, enjoy your Thanksgiving turkey…and stay tuned.

*** Frugalista.  It’s the latest thing, dear reader.  Just as we predicted, being thrifty has become fashionable again…so fashionable they even have a word for it: frugalista.  It means someone who doesn’t like to spend money but it nevertheless very stylish.

Spending money is soooo 2007…appearing rich is soooo passé…..having a big car, a big house, a big bank account is soooo, like, yesterday.

Chic poverty.  Coming soon, to neighborhoods near you.