Reckoning from Normandy, France….
US stocks down another 25 points on the Dow… gold dropped (briefly) below $1,700 an ounce.
If we were you, dear reader, we’d get out of stocks while the getting is good. It’s good right now. Because stocks are expensive. Someday, they’ll be cheap. Then, you can get back in.
Meanwhile, with the US presidential election in just a few days, we thought we’d take a few moments to focus on the candidates. As far as we know, both are intelligent. But neither is very thoughtful. At least, judging from what we’ve seen.
Then again, we give them the benefit of the doubt. A thoughtful man wouldn’t get very far in politics and the two candidates know it. They are likely to hide their thoughts, if they have any.
Of course, it’s easier to hide thoughts when you don’t have any to hide, so our guess is that they really are what they appear to be – busy, smart, ambitious men with little time for reflection… and little appreciation for it.
Honest thought would be disastrous for their careers. When a man presents himself as a candidate for president of the US he mustn’t let on that he’s actually thought about things.
Thoughts lead to complexity…and the public likes to keep things simple. First thoughts also lead to second thoughts…and doubts…and arrière-pensée…which then lead to, yes, humility… which ultimately leads to inaction.
Voters want nothing to do with such a man. They want a president with the courage of his misconceptions… and the convictions of his ignorance. They want a man who believes he can lower unemployment…increase GDP…tame the beasts on Wall Street… and raise the dead from cemeteries all over the nation.
A thoughtful man soon realises that all these promises are vain and moronic, but a good candidate will never stoop to wondering about it. He is in a world of make-believe where every campaign promise is a fantasy…and every problem can be solved with a blunt instrument.
As to Mr Obama, we haven’t been able to take his measure. Either we just haven’t seen enough of him…or what we see evades measurement. Like a ghost on a scale, there doesn’t seem to be any mass to weigh.
So, let us turn to Mr Romney…a man we think we understand.
Mitt Romney is the son of a famous and successful man, George Romney. The latter was successful in the old economy of the ’50s and ’60s. That is to say, he made real things and sold them to real people for real profit. He was the president of American Motors, manufacturers of the now defunct ‘Rambler’, among other things.
The ‘Rambler’ was a junky car. But it was cheap and it got you where you were going. There was nothing subtle or underhanded about it. It was what it appeared to be – a set of wheels.
George Romney ran for president too. He came back from a trip to Vietnam and said he had been ‘brainwashed’ by the military. At the time, we thought it was a fair description of what went on; the Pentagon had tried to convince him that the expense of billions of dollars and thousands of lives in Vietnam was not the disastrous butchery which it actually was.
The press and the pundits, however, declared Romney père unfit to be president. This in itself was a remarkable thing since it hardly seems possible that Romney was more unfit than other occupants of the Oval Office.
Mitt Romney aims to follow in his father’s footsteps, without the trip to Vietnam. He risks no criticism of the military. His proposed spending includes increases to ‘security’ outlays far beyond those of his opponent. Whether he believes this will be good for the nation, we can’t say; he definitely believes it will be good for his election bid.
The younger Romney is a product of his time, as was the older. Where the father made real things, the son made only money. His was the financial economy, not the manufacturing economy. His was the economy described by Keynes himself:
‘Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some… Those to whom the system brings windfalls…become “profiteers” who are the object of the hatred…the process of wealth-getting degenerates into a gamble and a lottery.’
Mitt Romney won the gamble. He got the windfalls. Bain Capital bought companies. They repainted the windows and remodelled the kitchen, paying for everything on credit. Then, they sold the companies back into the stock market.
Romney was in the right place at the right time. Thanks to the feds, total credit market debt in the US rose more than 30 times since the end of the ’60s, as a percentage of GDP it went up from 150% to 350%. Manufacturing declined…wages declined…but US equities rose more than 12 times.
Most of the companies fixed up by Bain Capital went on to underperform the market itself. But a few did much better – at least for Mitt. Ten of the 77 companies reviewed by the Wall Street Journal provided spectacular returns for Mitt & Co.
Unfortunately, Bain had so burdened them by debt that they had been turned into “debt zombies”. In the downturn of the early 2000s…many were unable to survive. Four of them declared bankruptcy.
Romney claims that his success in the financial sector proves that he can make a success in the public sector too. He’s probably right. Both sectors are scammy. But as we told our audience in London, just because you can rob a liquor store doesn’t mean you can run one.
for The Daily Reckoning Australia