Something Wicked This Way Comes

Bill often mentions that he makes a point to read Thomas Friedman’s NY Times column – not because agrees with the imperial columnist’s musings…but because he finds that that Friedman’s "hollow thoughts" always seem to brighten his day in their absurdity…

The force of a correction is equal and opposite to the deception and delusion that preceded it. Alan Greenspan, George W. Bush, and all the great nabobs of positivism assure us that there is nothing to fear. Our favorite imperial columnist, Thomas L. Friedman of the New York Times, explained, "the next big thing almost always comes out of America . . . [because] . . . America allows you to explore your own mind."

Friedman believes the world would be a better place if America were more aggressive about "empowering women" and "building democracies." He also thinks that technical innovations give America a permanent advantage. Americans are always innovating, always figuring things out. Heck, we even invented outsourcing, says Friedman:

"This is America’s real edge. Sure Bangalore has a lot of engineering schools, but the local government is rife with corruption; half the city has no sidewalks; there are constant electricity blackouts; the rivers are choked with pollution; the public school system is dysfunctional; beggars dart in and out of the trafficand so forth.

Among the things Mr. Friedman seems to lack is a feeling for verb tenses. He goes to Bangalore and notices that it is backward. His conclusion is that it will always be so. "Is" is forever in Friedman’s mind. "Will be" has no place. It is as if he looked at the stock market in 1982. "Stocks are cheap," he might have said. "Stocks elsewhere are expensive," he might have added, without it ever occurring to him that they might change places.

And yet, why else would anyone outsource work from Baltimore to Bangalore unless Bangalore was relatively, though not necessarily permanently, cheaper? Let us imagine that Bangalore had no electricity blackouts or pollution or beggars. Let us imagine that it was like Beverly Hills or Boca Raton. We might just as well imagine that stocks were expensive in 1982. Of course, if they had been, there never would have been the bull market of 1982 to 2000. It is only because they were cheap in the past that they had the potential to be expensive in the future. And it is only because Bangalore is a Third World hellhole that it is cheap enough to take work away from overpaid Americans 10,000 miles away.

Thomas Friedman: So Gloriously Naive and Clumsy

Whether it will, neither Friedman nor we can know.

We always try to get our day off on the right foot by reading Friedman’s column before breakfast. There is something so gloriously naïve and clumsy in the man’s pensée, it never fails to brighten our mornings. It refreshes our faith in our fellow men; they are not evil, just mindless. We have never met the man, but we imagine Friedman as a high school teacher, warping young minds with drippy thoughts. But to say his ideas are sophomoric or juvenile merely libels young people, most of whom have far more cleverly nuanced opinions than the columnist. You might criticize the man by saying his work is without merit, but too that would be flattery. His work has negative merit. Every column subtracts from the sum of human knowledge in the way a broken pipe drains the town’s water tower.

Not that Mr. Friedman’s ideas are uniquely bad. Many people have similarly puerile, insipid notions in their heads. But Friedman expresses his hollow thoughts with such heavy-handed earnestness, it often makes us laugh. He seems completely unaware that he is a simpleton. That, of course, is a charm; he is so dense you can laugh at him without hurting his feelings.

Friedman writes regularly and voluminously. But thinking must be painful to him; he shows no evidence of it. Instead, he just writes down whatever humbug appeals to him at the moment, as unquestioningly as a mule goes for water.

One of the things Friedman worries about is that America will "go dark." As near as we can tell, he means that the many changes wrought after 9/11 are changing the character of the nation, so that "our DNA as a nation…has become badly deformed or mutated." In classic Friedman style, he proposes something that any 12-year-old would recognize as preposterous: another national commission! "America urgently needs a national commission to look at all the little changes that were made in response to 9/11,"three he writes. If a nation had DNA and if it could be mutated, we still are left with the enormous wonder: What difference would a national commission make? Wouldn’t the members have the national DNA? Or should we pack the commission with people from other countries to get an objective opinion – a U.N. panel and a few illiterate tribesman-and achieve cultural diversity?

Thomas Friedman: Jaw-Dropping Simplicity

But this is what is so jaw-dropping about Friedman’s ideas: Even mules and teenagers have more complex views. His work is a long series of "we should do this" and "they should do that." Never for a moment does he stop to wonder why people actually do what they do. Nor has the thought crossed his mind that other people might have their own ideas about they should do and no particular reason to think Mr. Friedman’s ideas are any better. There is no trace of modesty in his writing-no skepticism, no cynicism, no irony, no suspicion lurking in the corner of his brain that he might be a jackass. Of course, there is nothing false about him either; he is not capable of either false modesty or falsetto principles. With Friedman, it is all alarmingly real. Nor is there any hesitation or bewilderment in his opinions; that would require circumspection, a quality he completely lacks.

Friedman fears he may not approve of all the post-9/11 changes. But so what? Why would the entire world "go dark" just because America stoops to empire? The idea is nothing more than a silly imperial conceit. America is not the light of the world. Friedman can stop worrying. The sun shone before the United States existed. It will shine long after she exists no more. But, without realizing it, imperial conceits are what Mr. Friedman offers, one after another. He knows what is best for everyone, all the time.

But even at his specialty, Friedman is second-rate. It is not that his proposals are much dumber than anyone else’s, but he offers them in a dumber way. He sets them up like a TV newscaster, unaware that they mean anything, not knowing whether to smile or weep, out of any context other than the desire to make himself look good. He does not seem to notice that his own DNA has mutated along with the nation’s institutions . . . and that he does nothing more than amplify the vanities and prejudices that pass for the evening’s news. Is there trouble in Palestine? Well, the Palestinians should have done what we told them. Have peace and democracy come to Iraq? If so, it is thanks to the brave efforts of our own troops. Is the price of oil going up? Well, of course it is; the United States has not yet taken up the comprehensive energy policy he proposed for it. Friedman’s world is so neat. So simple. There must be nothing but right angles. And no problem that doesn’t have a commission waiting to solve it.

It must be unfathomable to such a man that the world could work in ways that surpass his understanding. In our experience, any man who understands even his own thoughts must have few of them. And those he has must be simpleminded.

But we enjoy Friedman’s insipid commentaries. The man is too clumsy to hide or disguise the awkward imbecility of his own line of thinking. The silliness of it is right out in the open, where we can laugh at it. His whole oeuvre can be reduced to the proposition that Arabs ought to shape up and start acting more like New Yorkers. If they don’t want to do it on their own, we can give them some help. He says we can send "caring" and "nurturing" troops to "build democracies" in these places and "protect the rights of women." But he doesn’t understand how armies, empires, politics, or markets really work. American troops can give help, but it is the kind of help that Scipio gave Carthageor Sherman gave Atlanta. Armies are a blunt instrument, not a precision tool.

Friedman urged the Bush administration to attack Iraq. But the man has a solution for every problem he causes. "So how do we get the Sunni Arab village to de-legitimize [we love these big words – every one of them hides a whole dictionary of lies, fibs, prevarications, malentendus, misapprehensions, miscalculations, guesswork, hallucination, conceit, and mendacity] suicide bombers?"

Simple. Propaganda! "The Bush team needs to be forcefully demanding that Saudi Arabia and other key Arab allies use their news media, government, and religious systems to denounce and de-legitimize the despicable murder of Muslims by Muslims in Iraq."

That ought to do it. What is wrong with the Bush team? Why didn’t they think of that? "Forcefully demand" that the Arab states do more propaganda. Yes, problem solved.

By the way, your authors have no position on foreign policy. We only notice that the people who do have them are idiots.


Bill Bonner
The Daily Reckoning

December 09, 2005

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).

"I don’t see any way out of this but World War Three…"

The voice was a caller on the Charles Goyette show on the Air America Network. (Bill Bonner is still practicing his Flemenco moves in Madrid… so we take this time to regale you with wild tales straight from the talk radio circuit.)

"Yep. The United States against the world! What do you think of that Mr. Wiggin?" The gentleman was weighing in on the $1 trillion plus in US debt that has ended up in foreign coffers since the beginning of this century.

A little background, Charles Goyette was fired from his previous network because he publicly opposed the US invasion of Iraq. Naturally, his listeners are of a decidedly anti-war bent. Surprisingly, at least to us, eight of ten or so callers, were also fellow Daily Reckoning sufferers.

[Ed. Note: Addison will be making weekly appearances on Goyette’s show every Monday morning from 9:30 – 10:00 am (EST). Make sure you tune in…]

When doing our research for Empire of Debt, we discovered that the one consistent steroid for the federal debt throughout the 20th century was a three-letter word: WAR. But not just the hot ones – World War I, II, Vietnam, Iraq – but also the wars fought through metaphor: The War on Poverty, The War on Drugs, The Cold War… the War on Terror. Uncle Sam has borrowed to finance them…and then borrowed some more.

That’s what America’s empire of debt has in common with all other empires in history. Debt has always been required to manage and expand war. Thirteen countries in Europe, for example, abandoned the Gold Standard in 1913 so they could finance their own involvement in World War I. That war brought about the demise of the British trading empire.

As we have oft pointed out in these pages, the build up of debt (and desire to repudiate it) in Italy in the 1920s paved the way for Mussolini and the fascists in that country. (The details of which were detailed in John Flynn’s 1944 analysis As We Go Marching.)

This morning, as we hit send on this e-mail, the U.S. federal debt is a $$8.13 trillion dollars… $2.83 billion per day since September 30, 2005!

Who cares? Well, not very many economists or politicians do. After all, as the vice president so aptly put it: "Reagan proved that deficits don’t matter"… and by extension we assume he means the federal debt, too.

Back in the 1930s, when Roosevelt II was spending his way out of Great Depression, he needed some justification for going deeper into debt than all the prior chief execs before him. Believe it or not, the Democratic platform in the 1932 election called for both "sound money back by gold" and "a balanced federal budget."

Still in the ensuing years, Roosevelt violated both tenets of that plan. His National Recovery Act (for bailing the country out of the Great Depression) was deemed unconstitutional; "fascist" even, by one member of the Supreme Court. But along came a consortium of "7 Harvard and Tufts economists" under the spell of Dr. Alvin Hansen, who insisted that the public debt was owed to the people. And therefore it never had to be paid back.

Roosevelt embraced the idea. Dr. Hansen was installed at the Federal Reserve. And the New Deal was off to the races…

Ever since, the idea that "debt doesn’t matter" has been as much of the American political fabric as Wilson’s mantra "making the world safe for democracy." (More on this below…)

More now, from Aussie Joel and the crew at The Rude Awakening…


Dan Denning, reporting from Melbourne, Australia:

"What happens to global agricultural production when natural gas soars to an all-time high, like it did yesterday? Let’s query the experts…"


Addison and Kate back in Baltimore, with more news…

*** Just for laughs…we posit here one way that debt and deficit spending might begin to matter.

The Levy Institute estimates that the amount we owe to foreigners will hit $8 trillion dollars by 2008. If we WERE paying off that debt, that means 6 out of every 10 dollars made in America would go to paying off a loan overseas. Because of globalized financial markets, the first time in history foreigner investors and governments will own more debt than U.S. government, potentially putting U.S. financial interests in the hands of decision makers who might not necessarily have U.S. interests in mind when they make them.

"What can listeners do about it?" Mr. Goyette wanted to know. At the current rate… not much. Retire your debt as soon as possible. Increase your savings or start saving. Don’t count on the current value of your home for your retirement. Buy gold.

Above all, take control of your financial future – Washington and Wall St. won’t do it for you.

*** "A close friend of mine, Ray, works down the street from us at T. Rowe Price in Baltimore," our India expert, Sala Kannan, told us today.

"Yesterday, over dinner, he told me about an incident that happened a few years ago. Ray was at an investment conference in Chicago. Some of today’s top investment bankers and financial analysts were in attendance.

"At 9 a.m., all the delegates gathered in a huge hall for breakfast. Ray pulled his chair out and settled down beside a man with a pink tie. The man had brown hair parted to the left and a neatly trimmed mustache.

"Ray and the man got to talking. Like all financial people, they spoke about the economy, interest rates, real estate, the yield curve and Alan Greenspan’s monetary policy. Ray was enjoying himself; it was a stimulating conversation.

"After breakfast, when Ray was ready to leave, he realized he was so into the conversation he hadn’t introduced himself.

"’I’m Ray from T. Rowe Price by the way,’ he said, offering a handshake.

"’Bill Gross,’ said the smiling man.

"Even today, Ray goes red with embarrassment, thinking of the event. Last night at the dinner table, an animated Ray was recounting the incident, ‘I had BREAKFAST with Bill Gross and didn’t know it!!’ Then he put it another way: ‘I had breakfast with BILL GROSS and didn’t know it!!’

"Both versions sounded equally embarrassing.

"Bill Gross might be a humble man, but he is one of the smartest investors around. And when it comes to spotting macroeconomic trends, nobody can beat Bill. He is the director of PIMCO Bonds and is often called the ‘Warren Buffett of bonds.’ Gross’ fund, the PIMCO Total Return Fund, has beat 95% of its peers this year. And through the fund, he manages a massive $88 billion asset pool.

Bill recently made an important prediction, ‘Housing prices will cool/stop going up very much/even go down in some cities, when:

A. Interest rates rise to a high enough level to make the purchase of a new home a burden instead of a boon for first-time buyers.

B. Mild regulatory pressure begins to reduce the amount of funny-money lending.

C. Speculators sniff the beginning of the end.

"’Let me state categorically that the above sequence is barely questionable, almost inevitable, 99% unavoidable and in modern parlance – ‘slam-dunk.’"

The Daily Reckoning