Our beef with our own generation is not that it failed, but that it succeeded too well.
It took control of government and used it like an ape uses a rock — to crack open a nut.
But we’ll come back to that in a minute…
The dow takes a dive
First, the Dow Jones dropped 190 points yesterday — or 1%. It is threatening to close below 18,000 for the first time in almost three weeks. We’ll wait to find out.
Yesterday, a London-based magazine and a TV station interviewed us. Both asked if we were ‘pessimistic.’
‘Of course not,’ we replied. ‘We expect today’s financial system to fall apart in a terrible crash and depression. But we’re looking forward to it.’
This was not exactly the answer they were looking for…And there’s not enough time in an interview to explain why this view makes any sense at all. The audience must have thought we had lost our mind.
We also had a meeting with our old friend and editor of the Gloom, Boom & Doom Report Marc Faber yesterday. He helped make sense of our ‘pessimism.’
‘The system is corrupt,’ he said. ‘The government. The banks. The central banks. Big business.’
People always use their wealth and power to try to protect themselves. Sometimes they use it to take wealth and power away from others, too.
Of course, that’s what government was designed for: to allow one group to rob another. If the elite could take no advantage from it, why would they bother with government at all?
We baby boomers took over in the 1980s. We have been in charge ever since.
Since then, we’ve corrupted the economy, the markets, and government.
By the 1970s, some of the dirty work was already done: The Nixon administration had ditched honest money. Now, the coast was clear. We could use this new credit-based money to pervert the whole shebang.
The US government used to be limited. That was the point of the Constitution — to restrict the feds’ power.
Much of the restraint was financial. States were forbidden from making anything but gold and silver legal ‘tender.’
But there was restraint when it came to foreign wars, too. Congress was supposed to bear the sole power not only to put troops in the field, but also to raise the money to pay for them.
Today, the Constitution is in a musty drawer somewhere; not even the Supreme Court justices can find it.
The new money, along with a sans souci attitude toward debt, changed everything. Now, the feds can get away with anything — including murder — if they put the right spin on it.
Pretend to be fighting terrorists, drugs, cancer, racism, global warming, lack of consumer demand, or tobacco use and nobody asks questions.
Capitalism no more
The Reagan administration talked about balanced budgets and fiscal conservatism. But within months of arriving in Washington, the Republican Party rolled over.
Since then, it’s scarcely ever met a zombie it didn’t like — especially if he had a gun in his hand. Wars overseas. Wars at home. Every fight cost money and every one was a loser.
But not for everyone…
And now capitalism is no more — not in the 50 states at least. Now we have cronyism, in which businesses angle for favours from the feds.
Why the switch?
It is more profitable.
Another old friend, Strategic Investment editor Jim Davidson, described the payoff:
‘The Sunlight Foundation reports on research it undertook between 2007 and 2012, tracking 200 of America’s most politically active corporations:
‘“After examining 14 million records, including data on campaign contributions, lobbying expenditures, federal budget allocations and spending, we found that, on average, for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government. The $4.4 trillion total represents two-thirds of the $6.5 trillion that individual taxpayers paid into the federal treasury.”’
‘That translates to a 75,900% rate of return,’ says Jim.
Real capitalism means taking real risks…working hard…getting lucky…and discovering the future.
Cronyism is safer and surer. It favours old, established businesses, the ones that can afford expensive lobbyists.
It doesn’t lead to wealth creation or progress, but it is easier for politicians and central planners to work with. They know where the money is!
And they can plan for the past; it’s the future they have trouble with.
But wait…We came to praise our fellow boomers, not to bury them in scorn.
Have we nothing nice to say about our own generation?
For the Daily Reckoning, Australia