The Tragedy of Common Politics

“Don’t let anybody tell you,” Hillary Clinton recently told a crowd in Boston, “it’s corporations and businesses that create jobs. You know, that old theory ‘trickle-down economics.’ That has been tried. That has failed. It has failed rather spectacularly.”

I just received my issue of the Laissez Faire Letter by email this morning. My favorite section is one called “They Said What?!”

Hillary Clinton’s quote, while undoubtedly taken out of some wildly rhetorical context, stands out. How can you read it… and not read it again… just for the pleasure of the deep belly laugh it will give you?

Go ahead… read it again. I dare you.

Even if you vote, you have to admit the theatrics are amazing.

This morning, we were parsing the election results with friends and colleagues. Yeah, yeah… we don’t vote, so why bother, right? It’s still great entertainment. Even if you vote, you have to admit the theatrics are amazing.

If you weren’t paying attention, let me give you a quick election breakdown: The Senate majority is now Republican. The GOP picked up seven seats — in Iowa, North Carolina, Montana, Colorado, Arkansas, South Dakota and West Virginia.

The dastardly, old-fart Republicans increased their hold on the House, too. Somehow they managed to get out of their rockers and wrestle away 11 seats from the people-and-peace-loving Democrats. The cranky old elephants can now move those rockers onto the hallowed porches of governor’s mansions in red states like Illinois, Massachusetts and Maryland, too. From the bands playing and the “free” booze flowing here in Baltimore City, you would have thought the Republicans even knew how to throw a party.

As we were discussing the results, we turned to Dave Gonigam, elusive editor of The 5 Min. Forecast.

Daily Reckoning: Maybe we’ll finally get a Senate vote on “Audit the Fed,” eh?

Dave replied: Something watered down, perhaps, for show.

Me: Good point.

Dave: I suspect the pressure will become very intense on Rand Paul to “tone down the foreign policy stuff,” lest he “tear the party apart” at a moment of opportunity and hand 2016 to Hillary. My biggest nightmare is that he somehow pulls it off in 2016, and then the big crisis comes and “libertarianism” is discredited for decades…

I said: You’re probably right. That was the downfall of capitalism after Reagan.

He said: Ever read Rothbard’s “Ronald Reagan: An Autopsy”?

Me: I haven’t…

Dave: He said Reagan was the worst thing that ever happened. The ’70s were the zenith of mistrust of government… Vietnam, Watergate, you actually had CIA dirt uncovered by the Church Committee… then Reagan comes along and restores people’s trust that government can still work.

I thought: Hmmn… good point.

Dave: “So there will be no misunderstanding,” Ronald Reagan said in 1981, in his first inaugural address, “it is not my intention to do away with government. It is rather to make it work — work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”

“Ronald Reagan called himself a conservative,” Bill Bonner commented in the book we co-authored, Empire of Debt. “This part of his inaugural address made us think he really was one. But people come to believe what they must believe in order to play their roles — even conservatives. Reagan’s real revolution lay in redefining conservatism as an activist, imperial creed. First, the neocons took over foreign policy.

“Soon, Americans were stirring up trouble everywhere, from Latin America to Afghanistan. Then, they took over domestic policy. In a few cases, the ghastly remnants of previous improvers — such as 70% top marginal rates — were knocked over. In more cases, new edifices were built up. But the major failure was that the sharp tax cuts of 1981 were not followed by sharp spending cuts. Instead, spending went up. And not just on defense. Reagan had pledged to abolish the Department of Education.

“Instead, he increased its budget by 50%.”

The Reagan revolution transformed the Republican Party. Rather than continuing to fight a rearguard action against leftist activists, Republicans were emboldened to take the lead, becoming activists themselves. This they did by relying on a monumental fraud.

“It’s amazing that Democrats, in particular,” our friend Steve Forbes wrote back in July, alluding to the same fraud, “throw rose petals at Bernanke’s feet for practicing what liberals always — and falsely — accuse Republicans of: trickle-down economics.

“Bernanke wants high stock and bond prices to create a ‘wealth effect’ that will trigger investment, which will, in turn, trickle down to the masses via greater economic growth.”

For fun, let’s recap the way this essay began: “Don’t let anybody tell you,” Hillary Clinton recently told a crowd in Boston, “it’s corporations and businesses that create jobs. You know, that old theory ‘trickle-down economics.’ That has been tried. That has failed. It has failed rather spectacularly.”

What’s fun about politics is how spectacular the politicians are at confounding, conflating, confusing and abusing the “issues” to their own ends.

Let’s break down Hillary’s statement:

“Don’t let anybody tell you it’s corporations and businesses that create jobs.”

Well, one might be tempted to ask, if not whipped up into a crowd frenzy, who does create jobs?

“You know, that old theory ‘trickle-down economics.’”

Otherwise, known as the political straw dog of the Clintons since ol’ Bill ran for president in 1992. Even though the record most likely shows he was the most laissez faire president in the last 53 years…

“That has been tried. That has failed. It has failed rather spectacularly.”

It hasn’t actually been tried. But why would we want to? Hillary is only arguing out of both sides of her tuchis. Her implication that government — not business — creates jobs and “trickle-down economics” requires you to first believe that all good things come from government.

Far be it from us… a group of ne’er-do-wells with keyboards and frequent-flier status (still, believe it or not)… to disagree.

“Here at home,” our essayist from yesterday, the former congressional stalwart Ron Paul, said on RT, “we don’t have true democracy. We have a monopoly of ideas that are controlled by leaders of two parties. And they call it two parties, but it’s really one philosophy… I think the status quo is pretty strong right now, and I imagine the status quo is going to win the election tonight.”

“Addison,” we quote a reader from Texas who corresponds frequently, “you, like Mencken, are quick to belittle American ideals and offerings, but, I might add, also as quick to plop your ass down, bitch and do little to try to improve our situation.

“Admittedly, the American system has been going to hell, basically from the get-go, but to my knowledge, there has been nothing better offered in the ENTIRE world in my lifetime. Remember that there are millions who fight for the right to vote in the rest of the world. And for that matter, there are thousands who die basically every day trying to get here to share that which you and yours simply bitch about. Nor do you mention that billions of people overseas vote 85-97% in every election. And true, it usually doesn’t improve their lot, but by God, they tried to do something.

“Unlike you, who sit around griping about that which you gleefully partake of, but which you have not improved in any way.”

Allow me to respond with an anecdote. (Brace yourself if you don’t have a little extra time right now.)

In 2006, I had the good fortune to be sitting at dinner, at a beachside cafe in Cannes, with the good doctor Richebacher. If you’re a longtime Daily Reckoning sufferer, as our friend Bill would say, you know Dr. Richebacher by name. And you probably also know… he was kind of a crank.

He was a special kind of crank, though.

Kurt wrote a newsletter for more than 40 years. Not by accident.

After World War II, Kurt had made a name for himself as the best ­known financial journalist in Germany — a razor­-sharp critic of what he saw as the stupid economic and fiscal policies of the post­war German government. By 1957, he’d become one of the top commentators in London on British economic policy.

But it all really began for Kurt Richebacher in 1964. That’s when he took over the post of chief economist and managing director of the massive and world­-famous Dresdner Bank.

Kurt advised billion-­dollar banking clients what to watch for in the unfolding world economy. Kurt didn’t avoid controversy. He just told it like it was, giving the bank’s uber-­rich clients every possible insight they needed to protect and grow their money. The clients couldn’t get enough of it. But German Chancellor Helmut Schmidt wanted it to stop.

So much that he personally begged Jurgen Ponto, then the chairman of the Dresdner Bank, to put Richebacher on a leash. But Ponto knew what Richebacher had to say was too important.

So Ponto defied the chancellor and protected Richebacher’s right to publish his scathing observations. However, on July 30, 1977, Jurgen Ponto was murdered. This tragic turn of events — a kidnapping gone wrong ­– forced the creation of one of the most respected financial advisory letters ever produced, The Richebacher Letter.

Without Ponto, Dr. Richebacher made a clean break from the bank and published his viewpoints entirely on his own.

At his Dresdner farewell party, former Federal Reserve Chairman Paul Volcker was one of the guests. Another was famous Wall Street economist Henry Kaufman.

When I was having dinner with him overlooking the Mediterranean, we had spent several weeks trying to assemble what would then have been the first critique of the Bernanke Fed, even before Bernanke had officially taken his seat behind the googly-eyed Greenspan.

We never finished his manuscript. Within a few months, the octogenarian Richebacher grew ill and passed away. When he died, he willed his library to us. It’s an adjunct to my office in 808 St. Paul Street, here in Baltimore:

The Richebacher Memorial LibraryThe Richebacher Memorial Library

In addition to his books, which still contain margin notes written in German, he left me with a lifelong motivating insight.

At dinner that evening on the beach in Cannes, I had a burning question for Dr. Richebacher.

“After 40 years,” I genuinely wanted to know, “why do you continue to criticize bankers, politicians… corporate leaders? After a while, doesn’t it just get old? Aren’t you successful enough that you don’t have to do it anymore? I mean… look at this place.”

“Addison,” he said in his thick German accent, marveling at our waitress walking by, “what good would it do for me to write about all the things that are going right with the world? We should simply enjoy those things.”

As, we suggest, should you.


Addison Wiggin
for The Daily Reckoning

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