Exiles Eternal

The Daily Reckoning PRESENTS: Bill Bonner moved his family from their home in Maryland to Europe over ten years ago – but that doesn’t mean they don’t miss certain things about America. It’s just that the America they miss isn’t necessarily the one exists right now. But let’s let Bill explain for himself…


“Is the weather nice? How’s Aunt Gertie? And how’s Tempest, the dog? He must be getting up there in dog years. Are the tomatoes ripe yet? Did you have corn on the cob for the Fourth? Did the relatives come up from…Virginia, right? And is that old honey locust tree in bloom? How I remember that smell. It used to intoxicate me. On a warm spring day, I remember I used to lie in the hammock and suck so hard at the air I almost fainted. Couldn’t get enough of it, you know. People ask me what I miss over here, and that’s all I can think of is things that smell. Yes, I miss the odor of the beech leaves in late autumn. You know, under the big tree in the driveway, and the grass after the first time we mowed in May. And even the odor of the crisp northern wind before the snow flies.”

Exiled from our homeland…far from kith and kind…thus we write to our countrymen.

A man doesn’t choose what he is. His culture sinks in to him without his knowing, like the scent of the trees and the swamps. He can ignore it. He can disguise it. But he can never get the smell out of his nostrils, like Proust with his madeleines. Traveling in a strange country, even many decades after leaving home, he catches a faint aroma that seems to waft into some part of the brain that is normally closed off, like a room in an old house where the dearest memories are stored. And then it comes back to him. Not distinct images. Not words. Not even actions. But a feeling that picks him up and transports him thousands of miles to a place he once knew and had forgotten all about. And that is what he really is. He knows it. He is not necessarily happy or sad about it. But he cannot get away from it.

American tourists wandering the streets of Paris or London squeeze their passports tighter than their wallets. They can’t imagine anything worse than being cut off from the smell of home. When they go overseas it is as if they were visiting the underworld and in danger of getting trapped in hell forever.

They are not alone. There are many who would rather die than leave home. Socrates, for example. Told to shut up or face the consequences, he refused to stop philosophizing. His fellow citizens decided to put him to death. When his friend Crito asked why he did not simply leave Athens, he replied:

“Or is your wisdom such that you do not see
that more than mother and father and all other ancestors
the country is honorable and revered and holy
and in greater esteem both among the gods
and among humans who have intelligence,
also she must be revered and more yielded to and humored

“and suffer whatever she directs be suffered,
keeping quiet, and if beaten or imprisoned
or brought to war to be wounded or killed,
these are to be done,
and justice is like this,
and not yielding nor retreating nor leaving the post,
not only in war and in court but everywhere
one must do what the state and the country may order”

Socrates might have gotten away from everything. He could have run off to Rome, for example, as was the custom. In fact, 300 years later, there were so many Greeks in Rome that Juvenal complained that they were ruining the city. “I cannot abide…a Rome of Greeks…there is no room for any Roman here.” Nothing about the Greeks appealed to him.

Ovid, by contrast, didn’t have to worry about any Greeks crowding into Rome since he was exiled to the Black Sea for writing what was either naughty or critical, historians are not sure which. He couldn’t bear being away from Rome – even if it was filling up with low-life Greeks.

From his exile, he kvetched about the weather (too cold), the people (barbarians), the language (incomprehensible) – everything.

And to the poetry he continued sending back to Rome, he added plaintively, “I wish to be with you in any way I can.” He even concocted a few lies about the climate – complaining about the snow lying on the ground all year round and wine freezing in the bottle – to get Augustus to let him go back.

We began to have doubts about Socrates when we learned that the neo-conservative bunglers behind the Bush administration were inspired by the classics. It was a little like saying our broken-down pony was inspired by Man of War; the only thing similar about them may be that they have four legs. Still, it aroused our suspicions.

Of course, not all the ancients were homebodies like Socrates and Ovid. When the Cynic Diogenes, for instance, was asked where he came from, he replied: “I am a citizen of the world.” He meant he was not ruled by local concerns and customs but by a more universal code, what the Stoics elaborated as a “kosmou polites” – or worldwide citizenry.

Marcus Aurelius extolled the virtues of the kosmous polites. “One must first learn many things before one can judge another’s action with understanding,” he said. But here at The Daily Reckoning, we have noticed that the more we learn, the less we know. Hardly have we got one idea down then another comes along to challenge it. We develop a taste for French wines, and then we discover Italian ones. We like living in London and then we fly off to Buenos Aires where we find we can afford twice the lifestyle at half the price. We were content in the paleo-anarcho-Christian wing of American conservativism – a voting block of at least two or three people – and then we discover that the French national health system actually works quite well. We finally master fundamental, deep-value stock analysis, and then we find someone who outperforms us using Vedic astrology. If we keep going in this direction, we wonder what will become of us.

In Socrates’ view, the masses need shared values to make the city-state work. Today, the lumpen can’t live without Social Security, central banks, and Major League Baseball, he might add. Certainly, the world’s governments would have trouble selling their bonds if the next generation showed itself unwilling to pay off debts incurred by the generation that preceded them. And maybe it is true; maybe most people need the warm embrace of familiar places, familiar people and familiar holidays, pastimes and rules.

Elizabeth came back from Paris last night. She reported on the madness in the streets:

“It was unbelievable. When the French beat the other team – I think it was Portugal – people went crazy. They leaned out of windows shouting and flying flags. Everyone was blowing his horn. It was amazing. We were trying to drive across town to the apartment, but there were mobs in the streets. They would come along and rap on the top of the car. It was kind of scary.”

A few days before, we were in a cab in London. The cab driver said, “I guess you were watching the game earlier.”

“What game?” we replied.

We cosmopolitans don’t know or care. We are cut off. Exiles from everywhere, and nearly everything. We work in the office on the Fourth of July, and miss the Super Bowl, too. We have no voice in local politics. We get involved in no local action committees. And we only read the local newspapers for entertainment. “What will those dumb frogs do next?” we ask ourselves. Meanwhile, the dumb things yanks do irritate us so much we can’t bear to read the headlines at all.

Are we lonely? Not so we’ve noticed. Do we miss the Rose Bowl? We never watched it anyway. Are we starved for information? On the contrary, at a distance, we see more clearly what goes down in the homeland than people living in the middle of it.

But who protects us? Who looks out for us? Whom can we turn to get our highways and speeding tickets fixed? We exiles are exposed to the harsh elements – always in danger of getting rounded up and shipped off. We are in danger of having our visas revoked, or having our property confiscated. But why would anyone want to get rid of us? We are no trouble. We do not vote. We do not ask for any services or benefits. We do not complain. What would be the point? We spend money and pay taxes. Who could ask for better citizens?

But the more cosmopolitan we become, the more we wonder about home. Out on the Maryland tidewater, the old families spoke their own tongue – derived from a 17th century dialect from Southwest England, we are told – for 300 years. With the language and time came history and eccentricities that made local life rich and interesting. But then came a homogenization that washed out the particularities. In a few decades, the place came to resemble every other suburb of America. Local accents were replaced by the English you hear on television. Tobacco and oysters yielded to government jobs. And local customs were replaced with national rules and regulations. You couldn’t smoke in a restaurant. You couldn’t build without a permit. You couldn’t drive without a seat belt. Toss an empty beer can into the river and it’s a federal case.

Ol’ Cap’n Earl used to live out on a pier in the West River. He had built himself a rickety cabin over the water to get away from his wife. He would sit outside, drink his beer and throw the cans into the water. In the summer, after work, when the river smells rose up so strong they were almost overpowering, men would gather out on the pier with him. They would talk. And drink. Sometimes they would pull a crab up out of the water. And the hours would pass.

But then some agency showed up. His cabin was condemned by about 12 different government agencies. Cap’n Earl, an old man by that time, was moved onto dry ground and died soon after. And then, the sailboats came, owned by Washington lawyers. They were soon so thick on the river that you could walk from one bank to the other, hoping from boat to boat.

No, all the baroque odors and smells have been scrubbed away. Now, the Maryland tidewater is no different from any other place in America. Our friends have grown up and become middle class Americans. There are no front porches, no rocking chairs, and no screens in the windows – no shutters. The old folks are almost all dead. No one speaks the local dialect anymore, except a few diehard watermen and unreconstructed tobacco farmers. And even the church seems to have been amalgamated into the general faith of America’s great religion – where the greatest sin is being “intolerant’ and the greatest virtue is recycling.

We are happy here on the other side of the globe. And then, when the wind comes off the Atlantic, we sometimes get a whiff of it…a ghostly trace of what we once knew. We pause. We stagger. And then, we remember:

There are a lot of exiles in this world. Each one has his own reason; we have ours. Long before we left America, the America we knew left us. We travel not to get away from it, but to find it.

Bill Bonner
The Daily Reckoning
July 7, 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:

The Most Feared Book in Washington!

The Full-On Oil War of 2007

What would happen if oil soars past $100 per barrel…crashes through the $125 ceiling…and careens toward a history-making $150?

The dollar gets destroyed. Energy-dependent industry goes bust. Many stocks go down.

That’s the bad news. The good news is when energy is under the gun, the soaring oil price itself opens you up to all kinds of soaring investments…and there is a lot of money to be made.


“Retail Sales Growth Stalls in June,” said a headline yesterday.

The Ben Bernanke Fed is in a pickle. It is raising rates. But it is as terrified of rate increases as it is desperate for them. If it raises rates too high, it will exterminate the housing boom itself. No housing boom, no consumer spending. No consumer spending, no economic growth. Without the boom, there will be a bust.

Is the housing boom on the verge of going bust?

The National Realtors Association says sale prices are still running 10% ahead of last year. And stocks are holding up. The economy, say the weathermen, is still sunny.

But the Economic Cycle Research Institute says house prices are going down.

And the weathervane is pointing toward a storm. Gold is steadily recovering. The dollar is quietly giving way.

We repeat: The U.S. economy depends on consumer spending (70% of GDP). Consumers are not earning any more money. So, the only way they can increase spending is by borrowing. And what they borrow against is their houses. Any decline in housing will knock the wind out of the consumer…and out of the economy.

As much as 43% of the new jobs added since 2001 were added by the housing boom. America’s economy today is housing. And should the housing boom go down, it would be a double whammy for the economy – people will have neither jobs nor credit. And they will most need exactly what they most don’t have – savings.

What’s more, Ben’s Bank knows that there is a lag between its rate increases and the economic hit that follows. It knows that if it keeps raising rates it will eventually stumble over the quarter point that will break the back of the consumer. But no one will know until several months after the fact, which means our camel driver will have piled on another couple of “rate straws” in the meantime…before realizing that the beast’s legs are buckling.

Why raise rates at all under those conditions? Ah, here we have the perverse elegance of financial markets. While it may crush the housing market with rate increases, it may crush it even faster without them.

In the first place, buyers and borrowers may rush to take action now, anticipating tougher conditions in the future. For a few months at least, it will look like the boom continues. The second place is described by a Reuters report from yesterday:

“While mortgage rates are linked to long-term U.S. Treasury yields, higher short-term rates lead investors to recalibrate their long-term rate expectations. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.80 percent, down 0.06 percentage point from the previous week, which was its highest since April 12, 2002 when it reached 6.92 percent.”

Ben Bernanke must feel like poor King Harolde, the last of England’s Anglo-Saxon monarchs. In 1066, the man raced up to beat off an invasion of Norwegians in the North, and then had to make tracks for the South, where William, Duke of Normandy, was waiting for him at Hastings.

Like Harolde, Bernanke must fight inflation in the north, and then turn his forces to be ready for war with deflation when the economy sinks. We wish him well. But what we expect is success no greater than that of Harolde. He will win the first battle and lose the second, we predict.

A housing boom cannot last forever. But without one, homeowners cannot keep spending. And without more consumer spending…well, you know. In his battle against inflation, Bernanke has powerful allies: The Chinese are investing billions in order to make things more cheaply. All through Asia, cheaper labor is pushing down prices, and debt service takes more and more money out of the chase for consumer goods.

Approximately two trillion dollars in mortgage loans are being adjusted to higher monthly payments over the next 18 months. And, in yesterday’s news, our old friend Jim Rogers predicts that oil will go over $100 a barrel and stay there. In short, consumers have to spend more just to stay in the same place. With no increase in earnings on the horizon, they’re going to have to cut back on spending. The economy will slow; deflation will be Bernanke’s new enemy.

But this is a fight that Bernanke will have to take up by himself. His elite troops – the bond market, the stock market, the financial industry, the lenders, the housing industry – will all collapse or betray him. Even the Federal government, no longer able to borrow at conveniently low rates, may be unable to come to his aid.

Oh, Ben…consult an oracle…read the stars…read the paper! Abdicate before it is too late.

More news from our currency counselor…


Chuck Butler, reporting from the EverBank world-currency trading desk in St. Louis:

“I went back to the ECB meetings and saw that at each meeting prior to an ECB rate hike, Trichet would use the word ‘vigilant.’ This time he put the word ‘strong’ in front of it. Does this mean that the rate hike will be 50 BPS instead of 25 BPS?”

For the rest of this story, and for more market insights, see today’s issue of The Daily Pfennig


More thoughts from England…

*** Poor Ken Lay. The man is dead. But viva la muerte. At least he beat the rap.

Ken Lay was found guilty by a Texas jury. We wonder how well a jury can deal with complex issues of financial chicanery. Did not the founding fathers demand a jury of one’s peers? We didn’t follow the case closely enough to have an opinion. Nor have we any idea how the man will be received in heaven. But if the jury condemned an innocent man, it wouldn’t be the first time.

“God will save me,” said Ken when he heard the jury’s verdict. It looks like God did. The law presumes a man innocent until found guilty, and since God intervened before Ken had exhausted his appeals, we may presume him innocent, too.

*** This from a Dear Reader:

“Hello, Daily Reckoning.

“I thought I’d weigh in on your ongoing debate about Americans living inside or outside the US. Last year I moved out of the US with my wife and six children (the oldest 13 and the youngest one), to the island of Margarita off the shore of Venezuela.

“After spending a year outside the United States, I have to say I agree with Bill’s sentiments of the Fourth of July. As time passes, we don’t regret moving abroad. In fact, the more time we spend around the European expats we know, the more we realize just how limited and parochial our American experience was.

“When I did the genealogical research necessary to substantiate my claim to Italian citizenship, I gave a great deal of thought as to why my great-grandfather and great-grandmother left Italy in 1906 and sailed to New York. They headed for the coal-town of Pittston, Pennsylvania, where my great-grandfather died in a mining accident in 1920- but not before fathering five children, learning to speak English and proudly becoming an American Citizen.

“My wife’s parents got out of Cuba in 1970 with nothing more than the clothes on their backs. To call them cowards for leaving (my father-in-law had to serve two years of hard labor to ‘repay the state’ before the family could leave) is to be ignorant of the situation. My mother-in-law was a Fidelista during the revolution, but by 1968 she’d had a change of heart and they signed the list to leave and my father-in-law went to the labor camps with the rest of the ‘worms.’

“Both families were proud of the United States, happy to enter the United States, and glad of the opportunity that the United States offered. In both cases they gave more to the U.S. than the U.S. ever gave them.

“When we decided to leave, part of it was the example of our immigrant forbearers, and the fact that they had the courage to leave hearth and home and move to a new country, learn a new language and accept the handicaps of being immigrants in order to give their children a better life than they had. The major part of leaving the U.S., for us, was the fact that I did not believe that my children would have the same opportunities in the America of their generation that I had in mine.

“I do not agree with the reader who challenged Bill on his courage, patriotism and love of freedom. It’s the typical arrogant reaction of someone who doesn’t leave.

“Freedom? I’m far more free in Hugo Chavez’s Venezuela than in the United States.

“Courage? Think about it. Moving abroad with six rather young children…

“Other Americans? Sure- any expat one meets is apt to have more of a spirit of adventure and sense of humor than the people back home – it’s part of the reason why they’re expats in the first place!”

*** We have been thinking about it all week. What are we? What are we becoming? Until we were almost 40 years old we still lived in the wooden frame farmhouse our grandfather had bought a half century ago…near a farm that had been in the family so long the memory of man runneth not to the contrary. We went to church where we had been an altar boy 30 years before, and stepped into the grave yard on holidays to clean the graves of our ancestors going back five or six generations.

Our roots may not have been so long measured in European meters, but in American feet and inches, they were ancient. At least a part of the family had been there forever as far as we knew; we saw the evidence on the tombstones. In a matter of time, we expected to join them. But now, we’ve been away for a decade and have no intention of going back. We did not realize at first, and certainly did not intend it, but we have become “cosmopolitans.”

The Daily Reckoning