All Men Are Created Equal

The Daily Reckoning PRESENTS: Why is it you can hold a perfectly intelligent conversation with a person about any various number of things, but when the topic is changed to the “War on Terror”, or global warming, an otherwise clever person begins parroting nonsense they heard yesterday on MSNBC? Bill Bonner explores…


“It is largely a matter of scale…in fact, it could all be reduced to a matter of scale,” said a visitor yesterday.

We were talking about the way things work…and why there is such a big difference between the way people are able to function reasonably well in small groups and the way they seem to blow themselves up in large ones.

“Yes,” our friend went on, “Once you get beyond what is usually known as the ‘human scale,’ things lose all their meaning.”

It is a question that has puzzled us for years: how is it that a reasonably intelligent man can perfectly well drive through traffic without killing himself, but ask the same man his thoughts on global warming, the war on poverty or public education…and what you get is such preposterous nonsense you can barely believe your own ears?

We have mentioned many times that there is a world of difference between a New England town meeting and the U.S. federal government. The size of the New England town meeting is one that the human brain is prepared to deal with. At the town meeting, a man can know which of the people he is dealing with is a moron and which is a self-interested hustler.

But when it comes to national politics, the same man is totally ill-equipped…like a mechanic who shows up with a pair of pruning shears…or a veterinarian with a wrench in his hand. He is ignorant of the facts…innocent of the procedures…and completely helpless in front of the controls. He can’t tell the connivers from the honest bumblers. He has lost the points of reference that are meaningful to him. He is like a driver who looks ahead and sees only fog. He turns the steering wheel to the left…but the car lurches to the right. He puts on the breaks and the car speeds up!

What can the poor fellow do…but resort to lies and such uber-simplifications as take your breath away. “If we don’t fight the commies in Vietnam,” he said in 1965, “we’ll have to fight them in California!” “If you want better educated people, you have to spend more on public education,” he said in 1975. “If we don’t stand up to the Evil Empire, it will take over the world,” he said in 1985. “If you invest in a balanced portfolio of stocks, you will always make money over the long run,” he said in 1995.

What can he do? He replaces local knowledge and experience with empty slogans. He replaces the detailed evidence before his own eyes with broad categorical generalizations. Meanwhile, the precise figures and intricate calculations that he would make on his own give way to statistics and averages.

The world on TV becomes the woodcutter’s world too…a world where the local details are washed out and replaced by caricatures and national averages. It gives rise to a whole new understanding of things. Standards are set, not according to local custom or individual experience…but according to the great wash of national broadcasting and advertising in which particularities are bleached out…. local colors faded. Everything comes to be seen through the grayish, white light of national broadcasting.

Instead of speaking his local dialect, he is soon speaking the lingua franca of the nightly news. Instead of wearing the clothes he likes, he is dressed to suit The Gap or Brooks Brothers.

As the scale of his world increases, local nuance and particularities lose their appeal. The man begins to see himself and his world in new terms. It no longer matters whether his house is comfortable and attractive on his terms; now it has to be acceptable in national terms. He comes to realize that many people are lodged in ‘substandard’ housing. Of course, the whole idea makes no sense whatever without a standard. And the standard is hardly one that the man can set for himself. Instead, it is a standard set by people with no detailed knowledge whatsoever. It is a standard based on averages…generalities…and public information. How many square feet per person? How much heating? How much air-conditioning? Then, to make sure that all houses meet their standards, rules are imposed – building codes…zoning rules…materials standards. The owner can no longer ask himself – ‘is this house safe enough for me?’ Now, the question is: does this house meet modern safety standards? By the new standards even the Sun King, Louis 14th, probably lived in ‘substandard’ housing.

Education, too, takes on a new look. It is not enough to learn things; in any case, the busybodies are incapable of organizing real, individual learning. What they can organize is education… with the learning removed or standardized to fit into some new larger national standard. ‘Educators’ can’t be bothered with individual students as they actually are, nor even with local curricula. Everyone has to learn the same thing. And they have to learn it the same way. The world may be infinitely complex and detailed but in the national educational program, the details have to be knocked off…like the fine detailed trim work from an old house…so that all that is left is measurable, standardized space, which can be quantified and allocated by bureaucrats, who may have never met a single student in their entire lives. Are educational standards falling short? Spend more money to increase the space!

Who cares if anyone is actually learning? The critical thing is that all students get the same claptrap pounded into their poor heads, so that they leave the machinery with the same prejudices and illusions.

The woodchopper from New Hampshire may soon discover, too, that he lives not only in a ‘substandard’ hovel, but that he is ‘poor.’ Poverty is always a relative measure, but relative to what? A man may be perfectly happy with his lot in life. He may have no running water, no central heat, and no money. Imagine him tending his garden, feeding his chickens, and fixing his tattered roof. Out in the woods, he may even have set up a still for refining the fruits of the earth into even more pleasurable distillates. In fact, by all measures that matter to him, he could have a rich, comfortable and enjoyable life. But as the scale of comparison grows, the details that make his life so agreeable to him disappear in a flush of statistics. He finds that he is below the ‘poverty line.’ He discovers that he is ‘disadvantaged’ and ‘under-privileged.’ He may even be delighted to realize that he has a ‘right’ to ‘decent housing.’ Maybe he will qualify for food stamps.

The idea of being ‘poor’ may never have occurred to him before. He may live in a part of the world where everyone is about as poor as he is…and all perfectly happy in their poverty. But now that the spell is on him, it sits like a curse. Poverty seems like something he has to escape…something he has to get out of …something that someone had better to do something about!

His new scaled-up consciousness has turned him into a malcontent. The poor man, previously happy in his naïve particulars, is now miserable in his role as a poverty-stricken hick.

But the worst thing about it, TV and popular opinion twist him towards thinking that it is the public view of himself – not his own private view – that really matters. In a matter of months he has forgotten how content he really is. He might as well be a stock market investor; the public spectacle has turned him into a chump. He sees himself on television…as an unfortunate hillbilly. The national newspapers say he needs help. They even make fun of the way he talks. And now the revenuers are in the woods looking for his still!

All over the world, local customs, styles, manners, accents are disappearing. As the scale increases, with the expansion of the globalized market economy, people are being homogenized, leveled. Their food, their music, their clothes – all are becoming standardized, mongrelized.

While it is true that regional variations hang on in vestigial, folkloric form, whether you go to New Orleans, Nashville or Vienna, you will hear about the same music, find the same fashions in the same shops, and be able to eat the same McDonalds’ hamburger.

An investor in Bombay speaks the same language as one in New York. Yet, it is the particularities of investments that make the difference between investment failure and investment success, the very things the world financial media cannot be bothered with – the kind of precise, detailed, particular, local knowledge that you really need for investment success. Instead, what you get is the standardized imprecise broadcast news. And what the investor gets is the equivalent of a public school education; he knows nothing much…and thinks he knows everything.

And since all investors know pretty much the same thing – which is to say, they all share the same illusions and take them for wisdom – the markets tend to reflect the popular fashions as if they were the season’s latest blue jeans.

A man knows perfectly well that he needs to be able to defend himself. Around the hills of New Hampshire, he may judge the risk of attack so slim that he goes unarmed. But walking through the back alleys of Manchester he may wish he were packing heat.

But as the scale increases, he is unable to judge the risk. Give him a little TV news and he is ready to go to war with people he has never met, in places he has never been, for reasons he will never understand. Here again, the scale of the thing makes a mug of the man. He cannot know the facts, the people, or even the theory; he doesn’t know what he’s buying, but he’s ready to pay with his life.

Even in matters as personal as health, a man soon finds himself the victim of scale. The state of his health scarcely matters. What matters is statistics. He is overwhelmed by the slogans and prejudices of the national media. Does he weigh too much? Does he get enough exercise? Does he eat enough seafood? Should he have a check-up every year; what do the statistics say? What do the papers tell him?

The large-scale chatter doesn’t even stop at the bedroom door. He may have enjoyed a perfectly satisfactory sex life. But now he is confronted with comparisons…with averages…with the statistical expectations of the national press. Is he doing it often enough? Is he doing it well enough?

Before, these matters were personal and private. In the company of his wife, the two of them set their own standards. But now, there is no such thing as a private matter. There is scarcely anything that is so private, so personal, so detailed, so local, and so important that it does not yield to large-scale standardization.

No longer does he know what really matters except by reference to the public spectacle, from how frequently people make love to what kind of misgovernment they have in Iraq.

We are now all equal…all the same, all the time. We live in the same houses…we eat the same food and suffer the very same illusions as every one else. If we are unhappy, it is because the TV says we should be.

Bill Bonnner
The Daily Reckoning
December 29, 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:

Empire of Debt

And so, we arrive at the end of the year.

“Investors Ride Liquidity Wave,” says the FT.

Bank Credit Analyst takes it a step further into 2007: “Another Year of Riding the Liquidity Wave,” it forecasts.

Gold rose $6 yesterday – perhaps prefiguring this. Stocks were off slightly. And the dollar lost ground too…though, not much.

Investors, commentators, and kibitzers are beginning to catch on. In the last couple of days, we have read at least a half dozen reports – even in the Washington Post – making the connection between trade deficits, global liquidity, investor complacency, high-flying asset prices, derivatives, and the widening wealth gap.

We simplify for the benefit of readers with tight schedules or short attention spans:

The United States puts out dollars – trillions of them. U.S. consumers use the dollars to overspend, by buying products from overseas, approximately $1.06 worth of buying for every dollar actually earned. Foreign governments want the spending to continue. Instead of sending the dollars back where they came from by buying American goods, they issue local currencies to buy them and put them in their central bank vaults. All this extra money is then magnified…2…3…10 times…as it is lent, re-lent and used as reserves for various financial instruments.

Meanwhile a whole new industry has risen up to help with the lending, mortgaging, gambling that goes along with this explosion of money. Derivatives now equal seven times world GDP and are growing five times as fast. The new ‘liquidity’ is floating up financial assets all over the world.

Traditionally, more money in the system caused consumer price inflation – which was seen as a threat to the well being of the rich as well as the masses. Central bankers knew they had to get it under control or they would be swamped by it. But this new liquidity is different. People love it. The lumps never get a chance to use it to buy toilet paper. Instead, it sloshes around the hedge funds, banks, financial houses and rich financiers’…in a ‘wave of liquidity’ upon which so many super-wealthy are now riding. In 1980, the ratio of financial assets to GDP stood at about 1.5 to 1. Now, it is about 4 to 1.

Yes, dear reader, upon this ocean of liquidity rides a great Titanic of asset price inflation. It is why Picasso, Klimt and Pollack paintings sell for such absurd prices. It is why houses in Aspen, Greenwich and Kensington have reached such breathtaking prices. It is why Chinese stocks have doubled in the last year. And it is why the Dow is at an all-time high…and why Manhattan real estate is selling for such high prices that even the rats are having to pack up and move to New Jersey.

Yes…the Titanic is obvious…it is right in front of us. But where is the iceberg?

Oh, you say, there are no more icebergs. And you’re probably right. The geniuses who run hedge funds and central banks have it all figured out. They’ve got their radar screens. They’ve got their charts and graphs. They’ve got their formulae. Who are we to argue with them?

We won’t even try. Instead, strike up the band! Open up the bar! It’s the end of 2006 and we aim to have a good time. Damn the icebergs; full speed ahead!

Best wishes for the New Year. (Next week, a humbling look at our forecast for the year just past…and a look ahead, towards 2007.)

More news:


Byron King, reporting from Pittsburgh…

“…’Byron, you write a lot about strategy…Even when you write about George Washington and the French and Indian War, or Clausewitz examining the campaigns of Napoleon, you give me ideas that I can use’…”

For the rest of this story, and for more market insights, see the latest issue of Whiskey & Gunpowder


And more views, thoughts, and grumbles:

*** “Our son is American,” said a guest at last night’s dinner party. “But he’s also Belgian, French and Canadian. He has four citizenships. But we are thinking that he should give up his American citizenship as soon as possible, before he gets too far into the system.

“We were living in Canada…and drove down from Montreal so he could be born in New York. At the time, it was the Cold War, and having U.S. citizenship seemed like such an advantage.

“But now it seems like a big disadvantage. When we travel, we find that we have fewer problems when we show our Belgian passports. Fewer questions. Fewer hassles. And who wants to pay taxes to the United States? We’ve never lived in America. It doesn’t seem fair that we should have to pay taxes all our lives to the United States. We just don’t see any advantage anymore.”

*** “It’s the same in France,” said another guest. “Up until Giscard d’Estaing, the country was doing pretty well. When I got out of college in 1968, we had full employment; I had a lot of job offers. Life was fairly easy and fairly cheap. But then came the Oil Shock and France went into an economic slump. All of a sudden, there weren’t enough jobs, so the government imposed strict labor rules to protect jobs and workers.

“Naturally, each protective measure made it harder and more expensive to employ French workers, so more protective measures were needed. And then came Francois Mitterand who made the situation even worse. Now we have a system that is so rigid we dare not employ anyone casually…because every person on your payroll is a potential economic threat. What’s more, the relations between employer and employee are terrible…always tense and always on the verge of litigation.

“I ran a small factory with only about 100 employees. And thank God, because I knew everyone and we were generally able to settle disputes. But then the union representative came in. He was going to force us to do something that I knew most of the employees didn’t want to do. So, I demanded a vote right there…in the middle of the day…by secret ballot. The measure was defeated and 15 minutes later everyone was back at work. But you couldn’t do that in a big enterprise. You’d have to go into negotiations…it would cost a fortune…and most likely, you’d end up losing.”

“I know I had a problem on my farm,” another diner took up the conversation. “I let a couple live in a small house. They didn’t have to pay rent…but they were supposed to look out for the place when I wasn’t there. Well, they discovered that this was a form of ‘compensation’ that turned them into full-time ’employees.’ If that was so, they had the right to all kinds of things. So I told them to leave. And they demanded a lot of money. I had to go to a lawyer. And eventually, we settled…but it still cost me a lot of money.

How long can the country continue like this, we wanted to know?

“Oh…people are already fed up. But it is politics. Segolene Royal wants to force all employees into unions. But, on the other sides, there is a movement towards a less rigid labor market. Eventually, I think it is inevitable.”

The Daily Reckoning