The Best Thing About Money, Part Duex

Continuing a long, rambling reflection on the things that grubbing for money is better than…

"I like ‘Heatwave’ quite a bit," says Utah photographer Tom Forsyth. "’Heatwave’ is a Barbie doll inside a rotisserie oven, lit with an orange glow so that Barbie is basking and baking. Another favorite is ‘Sunbeams,’ where the doll is draped over a Sunbeam mixer with her posterior jutting into the air and the whisks of the Sunbeam whirring closely."

Describing his art in the Times of London, Forsyth reminded us of another thing that grubbing for money is better than.

"When I hear the word ‘culture’, I reach for my gun," said Hermann Goering. The German aviator was roasting in hell before Forsyth was even born, so he never had a chance to see ‘Heatwave.’ But had he seen it…and had you been present at the show…you probably would have wanted to duck.

Degenerate, gimmicky and foolish – ‘Heatwave’ is the sort of thing you would expect from European culture, at least from European culture in the 20th century.

Until fairly recently, Americans were too busy grubbing for money to pay attention. Culture was a European import…especially high culture. Europeans were refined, mannered, cultured. New ideas, new styles, new pleasures…all came from Europe along with the immigrants.

China’s Great Hunger: Paris 1909

It was the Paris expositions of 1909 and 1915 where the new ‘modern’ movement made its grand debut…with Marcel Duchamp’s famous urinal displayed as though it were a work of art. Nor was it on the banks of the Hudson that the new, ‘modern’ architecture of Le Corbusier emerged; it was in Belgium. Coco Channel carried no American passport. Nor did Else Schiaparelli.

In politics and philosophy, also, Europe was the hothouse of new, malign developments. There were Marx brothers in the U.S., but the Marx who changed the world was a German Jew living in London. Of course, there were syndicalists, anarchists, socialists, utopianists, too…you could find any kind of ist you wanted in Europe. In America, there were a few ists too…but they were usually lame immigrants always in danger of being rounded up by the cops and shipped back where they came from.

Most Americans were still too vulgar, too shrewd and too innocent to get involved with cubism, collectivism or ironicism. Most important, they were too busy money grubbing. But since then, the world has turned. Now, Americans no longer grub for money – they spend it. And now, Americans come up with the new fashions in the art world. Americans used to mind their own business while Europeans invented new ‘isms’ to justify bossing people around. Now, it is the Americans who have become the world improvers.

"It’s too bad," Irving Kristol was lamenting Americans’ residual instinct to mind their own business. "I think it would be natural for the United States…to play a far more dominant role in world affairs…to command and to give orders as to what is to be done. People need that."

China’s Great Hunger: Cowardly, Frivolous, and Decadent

Grubbing for money is no longer enough for America’s elites. They want to put Barbie in toaster ovens and Saddam in the dock, rather than risk a "preoccupation with one’s own petty affairs," as Francis Fukuyama put it in the
Financial Times.

Minding your own business is ‘cowardly,’ ‘frivolous,’ and ‘decadent,’ say the neo-conservatives. Besides, it is so much more fun to mind someone else’s. After years of pushing loopy domestic spending programs on the American people, the neo-cons finally wised up. Realizing that trying to reform the guy next door was a waste of time, they decided to reform whole societies on the other side of the planet!

The political genius of this move was revealed in a book by John Flynn, written in the 1930s, called ‘As We Go Marching.’ When you spend taxpayers’ money – or borrowed money for that matter – on domestic programs, you quickly run into conservative opposition. And everyone can see that the programs are a waste of money. But if you squander money on an overseas military campaign the conservatives love it.

And so military spending soars…and the nation embarks on a grand design to bring democracy, capitalism and women’s rights to the tribes of the hindu kush, the Mesopotamian desert, and who knows where else.

The history of efforts to make the world a better place – by force – has many chapters. But few make uplifting reading. Few have happy endings. We give you a bit of one of them…another example of something that grubbing for money is better than:

China’s Great Hunger: "No Famine in China"

During the lifetimes of most people reading this…something extraordinary happened. A century and a half after the industrial revolution…three decades after mechanization of agriculture, and long after the use chemical fertilizers and the development of better strains of seed had vastly increased crop yields…the world experienced its worst-ever famine.

"Mao is not a dictator…" wrote Francois Mitterand in the Februrary 23 edition of L’Express, 1961. "The mastery which he exercises is conferred on him by a power over his people which is not produced by the demagogic fanaticism backed by a strong police state of Hitler in Germany nor the cynical energy of Mussolini in Italy…" Mao, said the future president of France, is "humanist…a new type of man…with a vigilant realism."

That may have been true. But what Francois Mitterand wrote next, after spending three weeks touring China, was a sin and a lie. "The people of China have never been near famine…I repeat, in order to be clearly understood: there is no famine in China."

Yet, in the winter of ’59-60…and ’60-’61…Mitterand must have had to watch his step. There were so many corpses of the dead and dying – of starvation – lying around the Chinese countryside he would have tripped over them in almost any direction he took.

"Natural causes," said the doctors’ reports. They died of heart attacks. Or fever. Or something. Doctors had been ordered not to write down the real cause of death. There was no mass-starvation in China. Mao said so.

Mao was a liar too. Historians and researchers believe about 30 million people died during what was known as the ‘Great Hunger’ in China.

"Natural causes," said the press in the West, when the famine could no longer be concealed. Bad weather. Drought. That sort of thing. But Mao had managed to do something mother nature never could – create a famine throughout all of China.

China is a vast country with several different climates. There are lush, semi-tropical areas in the southeast…and high, cold plains in the northwest. In between, is every sort of climate nature can provide – forests, river basins, steppes and mountains. Until 1959, nature had never been able to produce catastrophes in all of them at the same time. Instead, she merely picked her targets. Small, localized famines were common. Famines that brought starvation to the entire nation were unknown. For that you needed more than nature; you needed man. And not just any man, a man with a vision. A man with a sense of purpose. A man who wanted to improve the world. A man like Mao.

"The masses are slaves," explained a communist party official, long before Irving Kristol thought of it. They won’t listen or obey if you don’t beat or curse them or deduct their food rations."

China’s Great Hunger: Losing Hope

"As the famine worsened," Jasper Becker explains in "Hungry Ghosts," the peasants lost hope. The [communist party] cadres also found that they could only keep order by creating more and more terror. According to Fengyang [province] statistics, 12.5 percent of its rural population – 28,926 people – were punished by one means or another. The report lists the punishments; some were buried alive; others were strangled with ropes; many had their noses cut off; about half had their rations cut; 441 died of torture; 383 were permanently disabled; and 2,000 were imprisoned, of whom 383 died in their cells. Sometimes torture was used to force the peasants to give up their food supplies…sometimes to punish them for stealing food…"

As people in villages died, thousands and thousands of orphans were left to fend for themselves. Others were simply abandoned by parents who couldn’t feed them, but didn’t have the strength or heart to eat them. An official report:

"A lot of children were being abandoned and Zhao Yushu [a local political leader] forbade people to pick them up. He said, the more you pick them up, the more children will be abandoned. Once he said that he had seen a landlord abandon his child so he got the idea that anyone who did this was a bad class element; if a cadre rescued an abandoned child, it meant that he was bad too.

"The worst thing that happened during the famine," explained someone who lived through it, "was this: parents would decide to allow the old and the young to die first. They thought they could not afford to let their sons die, but a mother would say to her daughter, "You have to go and see your granny in heaven." They stopped giving the girl children food. They just gave them water. Then they swapped the body of their daughter with that of a neighbor’s. About five to seven women would agree to do this amongst themselves. Then, they boiled the corpses into a kind of soup. People had learned to do this during the famine of the 1930s. People accepted this as it was a kind of hunger culture. They said: "If your stomach is empty, then who can keep face?"

The poor starving Chinese…preoccupied by their own petty affairs, right up ’til the moment they died.


Bill Bonner
for The Daily Reckoning
July 2, 2004

If things continue in same direction, the U.S. Federal government will have to borrow $5 trillion more dollars – mostly from foreigners – over the next 10 years. This amount – $500 billion per year – is not too far from the nation’s current account deficit. It is about the amount by which the country grows poorer each and every year, turning over 1% of its total net worth per annum.

In the great cosmic scheme of things, it makes no difference to us who owns American assets. We are as happy to see a Dutchman or Dervish get rich as a denizen of Detroit.

But as a practical matter, the impoverishment of the U.S. is bound to bring tears. When Americans finally figure out what has happened to them, they are not going to like it.

Whom they will blame, we don’t know. If history is any guide, George W. Bush will be revered as one of America’s greatest presidents – he’s done enough damage to deserve it…and perhaps Alan Greenspan will be remembered as the longest-serving chairman of the Fed, and its greatest. People will remember the good years under Greenspan, look back…and sigh.

But it is George W. Bush who has installed half-a-trillion dollar budget deficits as far as the eye can see. He cut taxes and increased spending; a program worthy of a democrat. Even taking out military spending, discretionary outlays are up 33% – faster than during the ‘liberal’ Clinton years. Every crackpot cause and oozy-interest group gets something from the Bush administration. Every bill gets larded with so many special provisions, you’d think they were trekking up Everest; one House member called the recent export reform bills "an orgy of self-indulgence."

And it is Alan Greenspan who has indulged Americans in a similar orgy.

Fred Sheehan explains:

"A broad measure of the money supply, M-3, rose by $500 billion in the front half of the 1990’s, then accelerated by $2.5 trillion in the back half. To keep the bubble aloft after the stock market debacle, the amount of money issued from 2000 through 2003 exceeded the entire amount of currency printed in the history of the United States, from George Washington’s inauguration to 1980. The baton then passed to the central banks of Japan and China, which have consumed our currency at an astounding rate."

"More money is the platform for more borrowing. Total credit market debt in the U.S. (government, corporate, individual) rose from $4.7 trillion in 1980 to $28.9 trillion by the third quarter of 2001 and hit $33.6 trillion two years later, a period during which Americans acquired more than the total amount of debt borrowed and accumulated from the Constitutional Convention to Ronald Reagan’s inauguration."

These orgies have been great fun for everyone, of course. But as we say here at the Daily Reckoning headquarters:

To everything there is a season…
…and a crime for every purpose under heaven.

In the season of wanton partying, crimes were committed – both petty and great. The season of regret comes next. And punishment. We remind readers that Mother Nature, who will preside over the criminal proceedings, is a hanging judge.

But that is all in the future. Here in present, we have more news from Addison:


Addison Wiggin, from Charm city…

– As your editor walked to work this morning, he happened upon a car thief. The man was eagerly poking and prodding at the window of an American-made luxury sedan of some sort. The thief seemed to be startled by your gentle editor’s presence, although he needn’t have been; we weren’t about to cast aspersions on this man’s chosen career.

– As it happened, we exchanged fleeting, yet knowing, glances with one another, and carried on about our own business. This man was a professional and a good one at that – for he already had a car – the largest SUV your editor had ever seen. It had huge shiny silver rims and blacked-out windows. He hadn’t even bothered to park, choosing, instead, to simply pull up alongside the desired vehicle and use his hazard lights. The thief’s accomplice sat in the driver’s seat, waiting, patiently. Sure enough, before we had even made it to the end of the block, both cars drove gingerly past and continued on into the night. Experts indeed.

– We’re not sure what kind of car was stolen, but we think it was a Chrysler. This is of interest because, yesterday, the report on June auto sales was released. We note that, while sales declined at both Ford and General Motors by 12% and 7.8% respectively, sales at Chrysler increased by 5.2%. We are not sure what to deduce from this rather odd co-incidence, except that Chrysler must make rather a fine, desirable automobile…

– The auto-sector wasn’t the only group to report bad news yesterday. A slew of tech-stock downgrades pushed the Nasdaq down 1.57% or 32 points to 2,016. Yahoo, Intel, Amkor and Emulex all offered disappointing outlooks and were thoroughly sold off. The Dow Jones Industrial Average and the S&P also fell, shedding around 1% each. The Dow lost 101 points to close at 10,334 while the S&P lost 12 to 1,129.

– Crude oil refuses to settle down. Prices are surging once again as traders posture themselves for the long weekend, says Bloomberg. They want to be able to relax this weekend and enjoy the fireworks – those produced in China, not Iraq or Saudi Arabia – and are unwinding their short positions.

– And who can blame them, dear reader? Weekend attacks have caused oil to spike three times since late April. Compounding their fears, Yukos, the giant Russian oil exporter, has threatened to halt production. Apparently court bailiffs have frozen the company’s bank accounts in a tax dispute. Yukos supplies 2% of the world’s oil.

– We continue to be amazed by the propensity for supply-side shocks in the energy market. If it’s not Venezuelan civil unrest or Norwegian labor strikes, it’s Russian corruption and politics. And we see demand-side pressure too…

– "Prices have also increased because of surging oil demand," says the International Energy Agency. "Consumption this year will rise the most since 1980 as economic growth and use accelerate in Brazil, India, China and the U.S." Yesterday, crude was marked up $1.69 a barrel or 4.6%, the largest one-day gain since the first of June. Oil now costs $38.74 a barrel, a two-week high.

– Finally, we delay transmission of the Daily Reckoning to bring you this news, hot off the press…

– The Labor department reports that fewer than half the expected jobs were added in June. 112,000 payroll jobs were added versus the 250,000 that Wall Street had anticipated, more tomorrow…


Bill Bonner, back in Paris…

*** "Critics shout ‘faster’" to Alan Greenspan, says the New York Times. Who doesn’t think the economy is robust and inflation pressures are mounting? Almost no one. Everybody seems convinced that the Fed must raise rates to meet the inflationary challenge. The only real question, in most heads, is whether Greenspan is moving fast enough.

But bonds rose yesterday. If there is inflation coming, they didn’t see it. Bill Gross is buying T-notes too. Inflation may be rising…but as interest rates rise, he says, the economy may be in danger of ‘tipping over.’

*** A young woman stopped us as we were walking down the Quai Voltaire last night.

"Aren’t you Bill Bonner," she wanted to know.

Our first instinct was to deny the charge. We were afraid she might have a warrant. But when we saw how pretty she was we decided to take a chance.


Turns out, she is a Daily Reckoning reader…an investor, living in Paris.

You see, dear reader, our stock is rising. Even here in Paris, we can no longer walk the streets unrecognized. But notoriety comes at a heavy price. Soon, we will be mobbed by fans at airports and stalked by paparazzi photographers. Beautiful women will throw themselves at us as if we were soccer stars. We will be linked to one after the other in the salacious gossip columns…

Oh…the things we bear on your behalf!

*** More budding media stars…our own Addison Wiggin and Eric Fry are both on the air today. Eric will be discussing the Fed boobery on his quarterly roundtable at the CNBCfn studio today at 9 a.m., while you can catch Addison on a webcast interview with Al Korelin, the financial radio guru, tomorrow, Saturday July 3, between 11 a.m. and midday Pacific time.

*** A reader comment:

"…there are times when your ‘logic’ defeats me."

"For example, you present me with the following information:-

‘Compare France with America,’ the Economist invites.
‘Between 1970 and 2000, America’s GDP per hour worked rose by 38% and average hours worked per person rose by
26%, so GDP per person increased 64%. French GDP per hour rose by a more impressive 83%, but hours worked per person fell 23%.’

‘Between 1970 and 2000 jobs in the rest of the euro area grew at exactly the same pace as in America,’ notes the Economist.

‘And since 1997 more jobs have been created in the euro area as a whole; total employment has risen by 8%, compared with 6% in America.’

‘Europeans simply enjoy leisure more,’ the Economist

"And then you wrote this," our reader continues to quote:

‘When I think of all the crazy things that went on here in France during the last century,’ continued our dinner guest, ‘or maybe I should say in Europe. You know, we invented most of the awful ideas back then. Socialism, etc etc.’

"Now, here is my point…

"The USA has a population of appoximately 281,421,906 people (April 1, 2000).

"Approximately one in seven of these are without health insurance.

"Therefore 40,203,129 USA citizens are without health insurance. As a number this is approximately two thirds the population of France.

"Population of France: 60,424,213 (July 2004 estimate). The whole of the French population has access to possibly the best fast-access health care in the world.

"Europe, with its high levels of taxation and other aspects of government intervention, continues to be a socialist-leaning entity when compared to the USA.

"Now, here is the question. Having considered the above facts and figures, just what is it that is so bad about socialism?"

The Daily Reckoning