All About Evo
The Daily Reckoning PRESENTS: The ironic thing about so-called “world improvers” – the world would be better off without them. Bill Bonner explains…
ALL ABOUT EVO
“Go, go, go, said the bird: human kind/
Cannot bear very much reality,”
From Burnt Norton, by T. S. Eliot.
The State Department is said to be alarmed. We are merely amused. An admirer of Ernesto ‘Che’ Guevara has taken over the country that shot his hero dead.
Evo Morales was elected president of Bolivia in December 2005. He won a landslide victory at the polls, proving once again that voters too get what they deserve, not what they expect.
The new president – a full-blooded Aymara Indian, according to press reports – came into office wearing a colorful sweater that marks him as a reformer, and talking the faded claptrap of generations of activists. That is what has got the U.S. State Department in a buzz.
Of course, when a new man takes office, there is always a bit of speculation about what kind of scalawag he will be. Will he use force or fraud to get his way? Will he murder those who oppose him or will he be content with mere larceny? Will he be a popular demagogue like Castro? An ideologue, like Hugo Chavez? Or a dirty dog, like Fulgencio Batista?
I will “follow in Che’s footsteps,” announced Evo Morales. I will be a “nightmare” to the United States, he added gratuitously. “I like Che because he fought for equality, for justice,” Morales explained. “He did not just care for ordinary people; he made their struggle his own.”
Poor Evo – the man does not seem to know whereof he speaks. We have already seen what Che really did; he murdered people, set up concentration camps, and helped run Cuba’s economy into the ground. He would have done the same for Bolivia, had he the chance. Thankfully, a firing squad got to him before he had an opportunity to do much more damage. Now, with Evo Morales, many worry that Che is back and in control of the Bolivian armed forces this time, not simply doing battle with them. “You have a revolution going on in Bolivia,” said an advisor to Donald Rumsfeld, exhibiting the same keen strategic intelligence that was brought to bear on Iraq, “a revolution that potentially could have consequences as far reaching as the Cuban revolution of 1959. Che Guevara …is back.”
I will “follow in Che’s footsteps” sounds like claptrap enough, of course. But, the U.S. State Department can stand down. Evo is the more respectable kind of demagogue. He can be bought. He may be a fraud, but he looks to be more of the Hilary Clinton persuasion, not the Che Guevara. He will not drag Bolivia down fighting, although he may drag it down gaming. He is more likely to cheat the voters than kill them. More fraud than force…more opportunism than ideology. Evo would feel right at home in the U.S. Congress – although, of course, he hasn’t declared war on anyone yet.
We write about Evo not because we have any particular interest in Bolivia or the man himself. True, the country’s southern border lies only a few hours from the property we recently bought in Argentina. But we don’t feel in danger of a popular uprising. Our little corner of South America is largely empty. It has no oil pipelines to blow up. It doesn’t even have any windows to break. Besides, as absentee landlords, we’ve never even been there. The locals have not gotten to know us well enough to despise us.
No, our interest in Evo – it flows from our interest in all world improvers. And the burden of this little essay, as so many others, is that the world would be better off without them.
“But shouldn’t a person try to do good?” asked a colleague yesterday. “What about the good Samaritan?”
Yes, we reply. But there’s a world of difference between doing good and being a do-gooder. The person who does good, does so at his own risk and expense. The do-gooder’s good is at someone else’s expense. A person does good, when he adopts a child. The do-gooder limits families to one child only, and sets up orphanages at public expense. A person does good, when he cleans up a junky lot. The do-gooder sets up a Department of the Environment and then sets it on his neighbors. A do-gooder runs for public office…invades foreign countries…makes money by spending other people’s money.
A person does the most good when he minds his own business. Governments, by definition, are in the business of minding everyone’s business.
Bolivia seems to have had more than its fair share of them. It has been a kind of laboratory for government. Since it gained independence from Spain 182 years ago, Bolivia has had 190 different governments with Evo Morales merely the most recent in this long line of experiments.
What has been learned from all this experimentation is hard to say. You’d think the country would have tried everything by now. An impartial observer might venture a guess: another government is not going to cure whatever it is that ails the country. A cynic might even leap to a conclusion: government itself is probably the real problem.
But, there are some things people never cease trying to make a go of – central banking, marriage, and bossing other people around. Now, with Evo Morales pulling the strings and greasing the palms, Bolivia is about to try a new government for the 191st time.
We wonder, what will really be new about this new government? In addition to all the rhetoric about Che Guevara (Cuban flags fly at Morales’ rallies; people wear Che T-shirts just as they do in Manhattan), foreign journalists have noticed two things: one of them irrelevant, the other illegitimate.
“The new president of Bolivia has inspired a fashion sensation in La Pas and beyond,” says the New York Times. Morales wears a large, striped sweater, typical of the Andes, even when he is visiting foreign heads of state. Some people think it refreshing and liberating. Others think it is a disrespectful gimmick. “Is there no one who might lend Mr. Morales a dark suit?” asked a Madrid newspaper.
But, Morales is not the first one to wear such a get up. A president of Peru, named after a city in Ohio, Toledo, used to wear a poncho for his election campaigns.
Another thing different about Morales’ victory: this is the first time Bolivians have selected a president on the basis of race. Evo is an indigene. He doesn’t speak either of the two major Indian languages of Bolivia – Aymara or Quechua – but he seems to think that his genes give him a special insight into many things. He claims to be the first Indian elected to high office in South America, which is not exactly true. The aforementioned Toledo claimed Indian origins, too. Morales claims that this background helps him understand a whole new form of economics. “Another world is possible,” he says. In this other world, people practice the ancient culture of the Andes, where sharing was more important than individualism, he says. He promises a new deal for his people, based on Andean capitalism…or Andean socialism, depending on which audience he’s talking to.
A ll the evidence thus far suggests that this government will not be too different from the other 190 that preceded it. “Even before taking office,” writes James Petras, “Morales gave the green light to the privatization of MUTUN, one of the biggest iron mining fields in the world.” Why? He was bought, say his critics.
After the election was won, Morales proceeded to appoint the usual hacks – many of them holdovers, has-beens, and power brokers from previous governments. He assured his indigenes that he was building a new society for them based on a new form of socialism. Meanwhile, he assured business leaders that real socialism was not on the agenda for another 50 to 100 years. He promised to “tax the rich,” then took most of them out of the target group. And in private talks, he is said to have assured the U.S. ambassador that things in Bolivia will remain more or less as they have been.
What the indigenous voters in Bolivia are likely to get is what they always get – but at least this time they will get it done to them by one of their own. Whether that is salutary or not remains to be seen.
The Daily Reckoning
March 17, 2006
Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).
In Bonner and Wiggin’s follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount – just click on the link below:
Well, another week has passed away. What history was made this week?
As reported yesterday, the U.S. current account hit a new record. American economists brushed it aside, but it is a warning of more history to come.
Neither a person, nor an economy, nor even an empire can spend more than it makes forever.
But what history are we talking about? An epic on the U.S. economy such as: American Wealth: Gone with the Wind? Or, a sentimental narrative of Ben Bernanke’s role: Catcher at the Fed? Ah, there’s the trouble with history. You can only read it after it has been written. We don’t even know the title. There are no sneak previews, advance releases, no outlines or summaries. When we write a book, everyone knows months in advance what it will say. The publisher has the gist of it in his hands even before we begin writing. And then, when the manuscript is completed, we send it around to friends and colleagues to see how they react to it. If they are not too appalled, we send the thing to press.
Not so history. No mortal eyes see it until after the fact, until after it has happened, until after the damage has been sustained. Until then, we just guess and whisper to one another with nothing more to go on than what history has written before. Is this war in Iraq going to be like Britain’s war in Iraq of the 1920s? Or like France’s war in Algeria of the 1950s? Will the next bear market on Wall Street be like the bear market of 2000-2001 or the bear market of 1966-1982? Yes, like Jacqueline Suzanne or Tom Clancy, history has her favorite plots, her habitual characters, her familiar twists and turns. But, she has to keep us guessing too or we will stop reading.
How will the current account story play out? We look at history’s previous works and we find little to help us. Usually, it is a ThirdWorld banana republic that runs deficits of this magnitude not an empire that has gone bananas. When the deficits reach 5% of GDP, the world’s investors typically won’t stand for it. They sell off the nation’s currency and its bonds and vow never to go near the country again, not even for a holiday.
Meanwhile, in the homeland, things turn nasty. In Argentina, for example, the middle class was practically wiped out in the last chapter of that South American classic, Greenspan of the Pampas. The rich had their money in Miami – in dollars. The poor had nothing to lose, but those who trusted the government, its money, and its promises, were cleaned out.
But what’s this? Since 2001, the Argentine Peso has risen 7% against the dollar. How’s that for a plot twist? Now, whose money is in danger? The American middle class’s money, no? The U.S. is running a current account deficit of 7% of GDP – and rising. If we could tell anything from reading history’s other financial farces, we would guess that what awaits the U.S. dollar is inflation and then hyperinflation. The Bank of Ben Bernanke is in favor of it. U.S. consumers – deep in debt – desperately need it. So does the U.S. government, also deep in debt. And all over the world, central bankers are doing their level best to create it.
No one wants a rising currency.
That does not mean they won’t get it. For here is the dramatic tension in this story: while everyone wants inflation, other factors are working against it. China, India, the Internet, globalization, and Wal-Mart – all are pushing prices down, not up. And we wonder, too, if history would write a story with such an ambiguous moral lesson. Millions of middle-class debtors have borrowed money, confident that they will never have to pay it back. The Bank of Ben Bernanke will make sure of that, they told themselves when they stuck their hands out. The fed chairman has gone on record saying that he would drop money from helicopters, if necessary, in order to make sure that a 2006 dollar will be worth more than a 2007 dollar, which will be worth more than a 2008 dollar.
Yes, that is another illustration of how history grinds away. The dollar was once stable and solid and the Fed was set up to make sure it stayed that way. Instead, the Fed gradually destroys the dollar and provides speculators with an opportunity. Now, they can anticipate the Fed’s game and play their own. They can borrow more than they should, knowing that the money they pay back will be worth less than it should. They can join the Fed in cheating the savers and lenders (who, of course, have their own little hustles going). But, will history really let America’s borrowers off the hook? What kind of morality tale would it be if the all these gamers, opportunists, and chiselers got what they expected, rather than what they deserved?
We don’t know, but in today’s news we read that inflation is under control, which will mean an early end to the Fed’s tightening cycle. Investors are getting excited about that, says an analyst quoted in the International Herald Tribune. They might be less excited, and more worried, if they could read the next chapter.
More news from our currency counselor…
Chris Gaffney, reporting from the EverBank world currency trading desk in St. Louis:
“The dollar continued to fall yesterday and overnight with the euro and the yen both headed for the biggest weekly gain of this year. The dollar fell 2.3% against the yen and 2.2% versus the euro.”
For the rest of this story, and for more market insights, see today’s issue of The Daily Pfennig
Bill Bonner, back in Paris with more thoughts…
*** Welp, it looks like the government will be able to pay their bills after all. Yesterday the Senate approved a $781 billion increase in U.S. borrowing authority, heeding the “increasingly urgent warnings” made by Treasury Secretary John Snow.
“I am urging members of Congress in the strongest possible terms to resist coupling an increase in the debt ceiling with other issues,” Snow said.
“Rather, they should vote to raise the ceiling this week. It would be unthinkable for them not to take action,” he said, warning that the “full faith and credit” of the U.S. government was too precious to be compromised.
The Senate voted 52-48 to raise the federal debt limit to $8.965 trillion – and this is the fourth time since 2002 that the cap has been raised.
So, this begs the question – what’s the point of having a debt ceiling if we’re just going to continue to raise it to keep up with our “reckless fiscal policies,” as Senate Minority Leader Harry Reid puts it?
*** While it may be true that investors generally get what they have coming, we can’t easily know what that is. History has her own idea of justice, her own accounts to settle, and her own sense of humor. Some of the Nazi’s worst criminals lived to old age, raising cattle in Argentina or even receiving pensions in Vienna. But they must have been always looking over their shoulders, always wondering when a relative of one of their victims would send a letter bomb – always worrying that history would catch up.
*** Former Goldman Sachs investment banker John Talbott says in his new book, “Sell Now! The End of the Housing Bubble,” that many Americans could be facing a 50% decline in housing prices. He estimates that America’s top 40 cities will see an average 47.2% decline: Boston is 49.4%, Miami 44.8%, New York 44.6%, and Chicago 27.3%.
In the space of five years, Alan Greenapan’s cheap-money policies have added $30 trillion to housing prices worldwide, an unsustainable 75% increase, he says.
And this from Gary Shilling writing in Forbes:
“The current housing weakness will develop into a full-scale rout.It’s clearly a bubble and is nationwide…The house price collapse will induce a painful recession that will send U.S. stocks into a tailspin…China will suffer a hard landing…and weakness in the U.S. and China will spread worldwide.”
*** There are said to be demonstrations going on all over France. Well, we tried going down to one to get our fair share of abuse. But we’ve seen no sign of any so far.
*** And this from Elisabeth Donati, the woman who runs the Money Camp in Santa Barbara. She is agitated by the reaction of the press to her financial boot camp:
“Contact Reason: Editorial
“Message: Perhaps if you’d asked, you would have gotten even some of this correct. I am so disappointed with your commentary on what we do at The Money Camp for Kids I can’t begin to tell you.
“It’s not about being capitalists; it’s about taking responsibility for your own life and that includes taking responsibility for creating the money it’s going to take to fund your own retirement. We don’t need any more people dependent on any system and investing in stocks, real estate and building businesses is how the vast majority of people that are financially free do it. I suggest you giving me a call and asking what I’m doing before you print what you printed, which was terrible, untrue and just flat out stupid!”