America's Best and Brightest

Instead of setting out to improve the world one war at a time, Bill Bonner thinks U.S. presidents should take a page out of former President Harding’s book, and take up a hobby to keep out of trouble – like gambling or chasing women…

The benefit of royalty is that they are as variable as the gene pool itself. One king has a long nose, like Louis 14th. Another has a pert, little snoze the turns up and makes him look boyish even when he commanding executioners.

Occasionally, subjects of a kingdom get a rotten monarch who cannot leave well enough alone…and occasionally they get a bonnie prince and good king, who spends his time dallying with courtesans and leaves his countrymen in peace. Even a bad king like Charles I was better than a self-righteous hustler like Cromwell, who cut his head off. As long as Cromwell lived, England knew no peace; after he was gone, the whole country gratefully and eagerly brought back another Charles, dusted him off, and put him back on the throne.

Oliver Cromwell was more like a modern president; a leader by intention and design, rather than by dumb luck. This made him immeasurably less suited to lead, in our opinion, because he full of foolish ideas and ruinous plans – like Woodrow Wilson or Franklin. But having no royalty, Americans have only their elected presidents to bow before. Too bad, they always seem to choose the wrong ones.

An honest and upright man has no place in national politics. A man with his wits about him is too modest for the role. He suffers greatness as a sort of hypocrisy. He has no better idea of how the nation should be led than anyone else – and he knows it. Dissembling wears him down until he is shouldered out of the way by bolder liars and abject stoneheads. The former will say whatever the voters want to hear – and then go on with disastrous projects. The latter have no plans or fixed ideas of any sort…they merely shake hands and blabber whatever cockamamie nonsense comes into their heads. The former never make good presidents. The latter often do.

Warren Harding: The Best and the Worst

Many of the best American presidents – such as Garfield, Harding, and Arthur – are rarely even mentioned. Lincoln, Wilson, Roosevelt, on the other hand, are routinely described as national heroes. Nobody really knows which president was good for the nation and which was bad. We would have to know what would have happened if the man in the Oval Office had done something different. Would the nation be better off if Lincoln had not slaughtered so many southerners? Would world history have been worse if Wilson had not meddled in WWI? We can’t know the answers; we can only guess. But the historians who guess about such matters have a disturbing tilt – not towards mediocrity, but towards imbecility. Like crooked butchers, they advertise our biggest mutton-brains as prime beef – and push their thumbs down on the scales of history to give them extra weight. Those they select as "great" are merely those who have given them most meat – those who have made the biggest public spectacles of themselves.

Most historians rate Lincoln, Wilson and Roosevelt as our greatest presidents. But every one of them might just as well be charged with dereliction, gross incompetence and treason. For every one of them at one time or another betrayed the constitution, got the country into a war that probably could have been avoided, and practically bankrupted the nation.

The presumption that underlies the popular opinion is that a president faces challenges. He is rated on how well he faces up to them. But the biggest challenge a president will face is no different from that faced by a Louis or a Charles – merely staying out of the way. People have their own challenges, their own plans, their own, private lives to lead. The last thing they need is a president who wants to improve the world. Every supposed improvement cost citizens dearly. If it is a bridge, it is they who must pay for it, whether it is needed or not. If it is a law forbidding this or regulating that…it is their activities that are proscribed. If it is a war, it is they who must die. Every step towards phony public do-goodism comes at the expense of genuine private improvements.

That is why a president who does nothing is a treasure. William Henry Harrison, for example, was a model national leader. Rare in a president, he did what he promised to do. He told voters that he would "under no circumstances" serve more than a single term. He made good on his promise in the most conclusive way. The poor man caught pneumonia giving his inaugural address. He was dead within 31 days of taking the oath of office.

James A. Garfield was another great. He took office in March of 1881. The man was a marvel who could write Latin with one hand and Greek with the other – at the same time. He was shot in July and died three months later. "He didn’t have time to accomplish his plans," say the standard histories. Thank God.

Millard Fillmore was one of America’s greatest presidents. He did little – other than trying to preserve peace in the period leading up to the War Between the States. Preserving peace was an achievement, but instead of giving the man credit, historians hold up the humbug, Abraham Lincoln, for praise. America has never suffered more harm than on Lincoln’s watch. Still, it is the Lincoln Memorial to which crowds of agitators and malcontents repair, not the Fillmore Memorial. As far as we know, no monument exists to Fillmore, who not only kept the peace, he also installed the first system of running water in the White House – giving the place its first bathtub. Fillmore was a modest man. Oxford University offered him an honorary degree. But Fillmore couldn’t read Latin. He refused the diploma, saying he didn’t want a degree he couldn’t read.

If Fillmore couldn’t read Latin, Andrew Johnson was lucky to be able to read at all. He never went to any kind of school; his wife taught him to read. He too is often held up as an example of a failed presidency. Instead, he seems to have made one of the best deals for the American people ever – buying Alaska from Russia for $7.2 million. Who has added so much since? Who has actually made the nation richer, rather than poorer? Johnson did the nation a great service. Still, he gets little respect and practically no thanks.

Warren Harding: Why Harding Is Our Favorite

But our favorite president is Warren Gamaliel Harding.

In his hit book, Blink, Malcolm Gladwell tells how Harry Daugherty (a leader of the Republican party in Ohio) met Warren Gamaliel Harding in 1899 in the back garden of the Globe Hotel in Richwood, Ohio…both were having their shoes shined.

Daughterty blinked and thought he saw a man who could be president

Journalist Mark Sullivan described the moment:

"Harding was worth looking at. He was at the time about 35 years old. His head, features, shoulders and torso had a size that attracted attention, their proportions to each other made an effect, which in any male at any place would justify more than the term handsome. In later years, when he came to be known beyond his local world, the world ‘Roman’ was occasionally used in descriptions of him. As he stepped down from the stand, his legs bore out the striking and agreeable proportions of his body; and his lightness on his feet, his erectness, his easy bearing, added to the impression of physical grace and virility. His suppleness, combined with is bigness of frame, and his large, wide-set rather glowing eyes, his very black hair, and bronze complexion gave him some of the handsomeness of an Indian. His courtesy as he surrendered his seat to the other customer suggested genuine friendliness toward all mankind. His voice was noticeably resonant, masculine, and warm. His pleasure in the attentions of the bootblack’s whisk reflected a consciousness about clothes unusual in a small-town man. His manner as he bestowed a tip suggested generous good-nature, a wish to give pleasure, based on physical well-being and sincere kindliness of heart."

Not only did Harding have the looks and the presence – he also had the bad-boy image. Gladwell writes, "Not especially intelligent. Liked to play poker and to drink…and most of all, chase women; his sexual appetites were the stuff of legend."

As he rose from one office to the next he "never distinguished himself." His speeches were vacuous. He had few ideas…and those that he had were probably bad ones. Still, when Daughtery arranged for Harding to speak to the 1916 Republican National Convention, he guessed what might happen.

"There is a man who looks like he should be president," the onlookers would say. Later that day, in the smoke filled rooms of the Blackstone Hotel in Chicago, the power brokers realized they had a problem. Who could they find that none of them would object to? Well, there was Harding!

"Harding became President Harding," writes Gladwell. "He served two years before dying unexpectedly of a stroke. He was, most historians agree, one of the worst presidents in American history."

On the surface, he sounds like one of the best. We have never heard of anyone being arrested and charged under the "Harding Act." We have never seen a building in Washington, or anywhere else, named The Harding Building. We know of no wars the man caused. We recall no government programs he set in motion.

As far as we know, the nation and everyone in it was no better off the day Warren Harding stepped into office than they were they day he was carried out of it.

Harding was a decent man of reasonable talents. He held poker games in the White House twice a week. And whenever he got a chance, he sneaked away to a burlesque show. These pastimes seemed enough for the man; they helped him bear up in his eminent role…and keep him from wanting to do anything. Another saving grace was that the president neither thought nor spoke clearly enough for anyone to figure out what he was talking about. He couldn’t rally the troops…and get them behind his ideas; he had none. And even if he tried, they wouldn’t understand him.

H.L. Mencken preserved a bit of what he called "Gamalielese," just to hold it up to ridicule:

"I would like government to do all it can to mitigate, then, in understanding in mutuality of interest, in concern for the common good, our tasks will be solved."

The sentence is so idiotic and meaningless; it could have come from the mouth of our current president. But the crowds seemed to like the way he delivered it. He said it with such solid conviction, it "was like a blacksmith bringing down a hammer on an egg," says Mencken.

Harding was so full of such thunderous twaddle that he stormed into office…and then drizzled away until he died. Bravo! Well done.


Bill Bonner
The Daily Reckoning

March 25, 2005 — Paris, France

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).

Inflation. Inflation. Inflation.

Everyone is sure they see inflation coming. Oil is $54 a barrel. February’s CPI ran at nearly a 5% annual rate. Interest rates are rising…some think Greenspan & Co. will add on 50 basis points in May, rather than the usual 25.

Gasoline is selling for record prices. Housing prices rise almost every day.

But Daily Reckoning readers are warned: Investors rarely get what they expect; most often, they get what they deserve. What debtors most want is relief from their obligations. Inflation erases a bit of debt each year. But investors can look ahead. Usually, it takes only a whiff of rising inflation rates for bondholders to recognize that they are going to take a beating. They dump bonds – driving up bond yields spectacularly. All of a sudden, the debtor is off the hook. He can pay back his loan at a fraction of what he originally borrowed.

In these Daily Reckonings we have tended to feel sorry for the borrowers. They’ve dug themselves in deeper and deeper, tricked by the Feds’ easy credit terms. But what about the poor savers? What about those who actually scrimped so they could have a little money to invest? What about the world’s capitalists?

The poor capitalists buy stocks and are lucky to get a measly 2% in dividend yield – an amount less than consumer price inflation! And when they are nice enough to lend, the thanks they get is barely 6% or 7% – even on junk bonds and misbegotten sovereign debt. If they get anything at all back they count themselves lucky. Argentina defaulted on its obligation – paying bondholders barely 30 cents on the dollar. Take it or leave it, said the pampas bankers; the poor capitalists had no choice.

Which are the bigger fools, we wonder – the lenders or the borrowers? Who most deserves to go broke?

Our answer would be – both of them!

And so we count on the market gods. How will they ruin both?

We remind readers that the Fed’s loose credit did not go towards building a stronger, more efficient, and more productive economy. It merely raised asset prices and led consumers to spend more than they could afford.

But consumer debt does not beget consumer price inflation; it begets recession…and lower prices.

The wash of credit has soaked both borrowers and lenders. Consumers are now so soggy with debt they desperately need more credit just to continue to slosh around money. They’re counting on inflation to dry up their debts…and more credit to slake their thirst and allow them to continue to spend. We doubt that will happen. The consumer will not be resurrected by inflation without first being crucified by deflation, is our guess.

But foolish lenders will suffer too. Rising rates will put pressure on marginal borrowers – both corporate and consumer. Junk bonds will fall in price. Shaky borrowers will find much less on offer…and on much tougher terms.

The Dow is on a downtrend. Commodities seem to have peaked out. Wall Street is closed today, for Good Friday. We’ll have to wait until Monday to see what happens.

Have a happy Easter.

More news, from our team at The Rude Awakening:


Chris Mayer, reporting from Hagerstown, Maryland…

"Over toasted club sandwiches and lobster bisque, washed down with the club lager (brewed on the premises), I expected to get the skinny on the local scene. This time, however, the conversation was less about the business scene than it was about the business of banking itself. And my banker friend’s mood was darkened by what he saw as gathering storms on the horizon."


Bill Bonner, back in Paris:

*** "Christ is born. Christ is dead. Christ will rise again.," said the priest this morning.

Is. Was. Will be again

The verb tenses apply to just about everything. A bull market. A life. Institutions. And ideas.

Two hundred years ago, George Washington and Thomas Jefferson stood with both feet on the grounds of the Capitol and spoke of liberty. Now, it is from the mouth George W. Bush that the word billows out. The word is spelled the same. It looks the same. And it sounds the same. But the meaning it is has dried up and blown away. The sense of it has been conjugated out.

Washington and Jefferson referred to the liberty of a man to do as he pleased without interference from government…and to the right of a group of people to choose whatever government they wanted, without interference from other governments. Now, George W. Bush presides over more meddling officials armed with more pettifogging interdictions than the founding fathers ever could have imagined. And when he speaks of "liberty," he refers to it as the duty of Americans to force other peoples to have a government much like our own.

The virtues of the dead are celebrated in solemn deceit…and honored in humbug. America became rich and powerful by letting its citizens get on with their lives and their businesses. Now, we tell each other how much we appreciate free enterprise…and how happy we are to have such a "dynamic" economy. But our shrewdest businessmen set up their factories in China, Indonesia or Russia – where taxes are lower, and regulations are easier to deal with. Pay the right official with the right amount of money…and you can set up a new plant in China in six months. It would take years in America.

Congress still calls itself the "world’s greatest liberative body." But while once the claim was hyperbole, now it is an outright lie. To Congress and Congress alone is given the power of the nation’s purse. But the lawyers and lobbyists who make up today’s legislature can’t even remember where they left it. When Pete Petersen looked inside, he found it held no ready cash. Instead, it was stuffed with $54 trillion worth of I-O-Us… Those who now stand on the ground hallowed by pinchpennies such as Jefferson and Coolidge have so loaded up the nation with debt, there is no way out. And instead of deliberating the issue of how to avoid national bankruptcy – it never even comes up.

And, of course, there is the dollar. The founders learned what would happen to paper money. They had coined the expression, "not worth a continental." So, when it came to the new coin of the new republic they insisted that it have gold and silver behind it. The constitution is specific about it, defining the dollar as a measure of the two metals. The virtue of solid money – along with thrift and industry – helped lift the country from its raw, frontier beginnings and turn into the world’s greatest financial power. But where is the gold and silver today? There is none – zero – behind the dollar. The virtue of the currency now is past tense. It was a decent currency; it is no more.

*** Chris Mayer, with an update on his new service:

"We just wrapped up our first trade in CrisisPoint Trader, a 32% profit on Whirlpool calls in about 14 days. The system was right on in finding the underlying strength in this company’s shares, even while the market was down.

"We may be broadly classified as value investors, but our own spin on things is our focus on tangible assets. Put another way, we are less ‘earnings focused’ that some of our peers and pay more attention to actual cash flows and to what’s happening on a company’s balance sheet. We turn the lens on the less apparent aspects of a company’s business, the quality and quantity of what it owns, relative to what it owes. A company with a balance sheet that is substantially free of debt is a company that has the ability to generate wealth in ways unavailable to firms with greater financial leverage."

The Daily Reckoning