Economic Instability a Result of Extreme Imbecility

We were snowed in Tuesday, Wednesday and Thursday. By Thursday, essential supplies were running short. All we had left was two cases of red wine. Would that be enough to last until Friday? We had our doubts…

Cabin fever had set in. In desperation, we read the paper. Big mistake. The papers in Washington take themselves seriously. They tell us about congressmen, senators, agency heads, lobbyists, crooks, perverts and other politicos. One man has held up a liquor store. Another has waylaid an entire nation. These are the people who could be called the “power elite.” They are at the head of our government…they are leading and directing our great empire. Which only makes us wonder about the whole thing. Maybe a country isn’t so great after all…but just an accident…one that happens in spite of the dumbbells running it? And maybe an empire comes about not because of the drive and vision of the imperialists, but of its internal momentum…and on its own schedule…no matter what the nincompoops think.

This may seem like a trivial thought to you but it has its roots in a respectable intellectual tradition. Is it men who make history…or history that makes men?

Probably a little of both. But if we’re counting on the men (and by that we also refer to the distaff half of the population) in Washington to guide this empire on to greater glory…we’re going to be deeply disappointed. They aren’t capable of it.

Take the wars in Iraq and Iran…please! Everyone who’s ever cracked a history book knows that you don’t fight expensive wars in distant places with your own troops and your own money when you have nothing to gain from it. Especially not when you have to borrow the money! You get someone else to fight the war…at his own expense.

But our beat here at The Daily Reckoning is money…not war. Still, our opinions are the same about them both. America is overstretched…overextended…and overdue for a serious correction. Her wages are too high. Her debts are too heavy. Her expenses are too great. And her leaders have no idea what is going on.

As to most of the foregoing list, our opinions are probably no better than anyone else’s. But as to the last item, we speak with authority. We are connoisseurs of imbecility. We have watched it for decades. It amuses us. It fascinates us. It intrigues and perplexes us. How come people can drive down the highway at 70mph…making thousands of precise calculations with mortal stakes, but then ask them a question about economic policy or foreign policy or no-shirt, no-service policy…and psssht…their good sense goes out the window? We’ve studied this question for many years….

In other words, we know an imbecile when we see one. And when we see Ben Bernanke or Tim Geithner our eyes light up. Our nostrils flare. And our chest expands. Before us is a specimen we know very well. Boobus Americanus Economistica. It is a variety of imbecile that has gotten far too little attention from the academic world. Too little research has been done on them, in our opinion. That’s why it is left to us amateur imbecile-spotters to keep track of them.

Mr. Bernanke is a standout example. The former head of the Princeton University economics department knows all there is to know about a depression – except the important part. He doesn’t understand what causes them. And he completely misunderstands what the role of government should be in dealing with them. But we have already explained all this to you, dear reader, so we won’t repeat ourselves here…except to say that any truck driver and hair stylist knows you can’t spend your way out of debt. Mr. Bernanke doesn’t believe it. That’s the very definition of Boobus Americanus Economistica; he has educated himself out of his common sense.

Mr. Geithner, meanwhile, tries to make up for what he lacks in scholarly gravity with one heckuva nice wardrobe and a spiffy haircut. It’s definitely a plus to have such a sartorial crackerjack at the head of the Treasury Department, but it would be nice if he had some dim notion of how the bond market works too.

Moody’s warned that the US would lose its triple-A rating if it continues borrowing money at the present rate. Our old friend Marc Faber was on TV this week explaining what the consequences would ultimately be: the US will default on its debt, he said.

Mr. Geithner did not even bother with the idea of default. It was beyond his imaginative powers. As to losing the three As, he said that would “never” happen. Which is what set us to thinking about the quality of US leadership. Of course, the US will lose its bond rating…and will default. There is no question about it. No nation has ever existed, except for present company…whose histories have yet to be completed…that didn’t default, renege, collapse, go bankrupt, disappear, disintegrate, capitulate, or otherwise fall over and die. The only questions are when and how.

Enjoy your weekend,

Bill Bonner,
for The Daily Reckoning

The Daily Reckoning