US stocks got hammered every day since the election... until Friday. Even then, they managed only a weak bounce, 45 points on the Dow.
Investors may be spooked by the US government going over the ‘fiscal cliff’. Or maybe they’re worried that the US economy and the stock market are going over the cliff. Or, heck, maybe they see the whole damned human race is going over the edge.
That’s right, dear reader... we read a news item about a Stanford Professor, Gerald Crabtree, and his theory (about which more detail tomorrow). He says humans were smarter 2,000 years ago. And they’re getting dumber all the time.
We can believe it. Just look at the degradation in US presidents. Compare Jefferson to Obama. Compare Adams to ‘W’.
Or compare economists. How does Paul Krugman stack up against Adam Smith... or Joseph Stiglitz to Joseph Schumpeter?
And read the newspaper. You’ll see that most of our leading thinkers today are imbeciles. Take Jeffrey Sachs, for example.
Mr Sachs was allowed to write in the Financial Times last week. Apparently, the FT editors were out to lunch when they went to press.
‘Obama has four years to fix the economy,’ he begins. Already, we see human intelligence in a death spiral. How can Obama fix the economy? He has no wrench or screw driver...and no idea how to use them. He’s never even run a hotdog stand... so he’s not likely to figure it out.
But let’s keep going.
‘The US election was fought on first principles: should government be strengthened or dismantled?’
What? ‘First principles?’ What does that mean? As for ‘strengthening’ the government, who would oppose it? But what does it mean? Is a government strong when it spends more money... or less? Will it be strengthened by going further into debt? Or by cutting back on spending and paying down debt?
Apparently, these questions never cross Mr Sachs’ mind. He thinks the feds should spend more money. How much? The sky’s the limit!
And that’s this about dismantling government? Neither candidate said anything about dismantling government, so if the election was fought over it, it wasn’t much of a battle.
No matter. He says we got a resounding answer. ‘The public wants better government, not less government.’
Huh again? Obama won with about half the votes cast. The rest went to the other guy. And only about half the eligible voters bothered to vote, so the ‘resounding’ victory came from just slightly more than a quarter of the eligible voters.
It goes downhill from there. Sachs thinks the problem is that the feds don’t take enough of the taxpayers’ money:
‘Low tax revenues continue to leave the US vulnerable. The US government… collected only 32% of gross domestic product in revenues last year, compared with 38% in Canada, 45% in Germany and 49% in Sweden.’
In other words, Sachs thinks that if the feds took more of the nation’s resources, we’d be better off.
Let’s think about that. Imagine a small community with total revenue of $3m. The local government gets $1m. Townsfolk keep $2m. The local government runs a deficit...and is on its way to bankruptcy.
So, along comes a bighead from Columbia University who tells them to increase taxes. Instead of a third of the total, the local government raises taxes so it gets 50%.
How is the community better off? Not a penny of extra wealth has been produced. It has merely been shifted from the people who earned the money to the people who didn’t... from people who know how to increase wealth to people who don’t...from people who invest and produce to people who consume and dissipate.
Which of these groups will do a better job of spending...and investing the money? Which is more likely to use the money to increase output...and expand the tax base? Which is more likely to create more zombies?
The answers are obvious to us. But Mr Sachs hardly cares. He knows that without government his claptrap is just air. Only government employees and other zombies would listen to him.
And get this:
‘The modern president must therefore... be the conductor of deep-seated structural changes.
‘He should be the convener of governors, mayors, university presidents, CEOs, healthcare providers and scientists... to overhaul the US economy.’
Hey, great idea... take charge...get all the meddlers together. Send them all to the moon.
The poor man has no idea of what government is or what it does. The political system is there to protect existing interests. The future doesn’t make campaign contributions, Jeff... the present does. Babies don’t vote; geezers do. The role of government is to try to keep the future from happening.
And the more of the nation’s resources the feds get their hands on, the more the nation becomes ossified...zombified... and self-serving, protecting old industries and taking hacks like Jeffrey Sachs seriously.
for The Daily Reckoning Australia
From the Archives...
Why Australia's Economy is No Economic Wonder
16-11-2012 - Greg Canavan
The Ills of Fractional Reserve Banking
15-11-2012 - Nick Hubble
Avoid the Slaughter: Watch This Key Stock Market Pointer
14-10-2012 - Murray Dawes
13-10-2012 - Dan Denning
Vote for an Honest Election: Democracy on eBay
12-10-2012 - Bill Bonner
If you already subscribe to The Daily Reckoning, or if you simply found what you read here interesting, then feel free to share our views and insights by posting them to your favourite network, blog or news feed:
- Statistically One Vote Doesn’t Make Any Difference
- The US Presidential Election: The other race that stops the other nation…
- Vote for an Honest Election: Democracy on eBay
- How US Government Spending Continues to Add Fuel to the Fire
- U.S. Presidential Election
About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.