The fix is in!
Well…the hacks came through, just like Churchill said they would. At least the hacks in the U.S. Senate. The Senate voted last night to burden the entire nation with Wall Street’s mistakes. Only a handful of Senators dared oppose the measure, among them Bernie Sanders, a socialist from Vermont:
“The masters of the universe, those brilliant Wall Street insiders who have made more money than the average American can even dream of, have brought our financial system to the brink of collapse,” Sanders said, and are demanding that the middle class “pick up the pieces that they broke.”
Sanders must be delighted by the collapse of investment banking. But he says the way they’re going about imposing socialism is unfair to the proletariat. Oh well…you just can’t please everyone!
Over in the House, the hacks are taking up the measure today. They’re sure to want a few more lights on this tree – tax breaks for their big contributors, bridges, schools…an increase in Congressional salaries – but with the media looking so closely, they’ll probably go along with the Senate and pass the thing without further reflection. We say ‘further’ in the spirit of mischief. The whole project has been taken up with remarkably little real reflection of any kind. But we’ll come back to this in a minute…for the moment, the sky is falling…and the whole world turns its weary eyes on the U.S. House of Representatives for protection.
For example, a big chunk of blue hit the auto industry yesterday. Sales were down to levels not seen since 1993. Even the fuel-efficient Japanese models weren’t selling in September; sales at Toyota were down 32%. And those nice F-Series trucks – the most popular vehicles made by Ford – fell 42%. We used to own one. A nice dark-green pickup. We drove it to work. We drove it on vacations. It was roomy, comfortable…even fun to drive. It used a lot of fuel, but back in the early ’90s, gasoline was so cheap, we never thought about it.
But that was then…this is now. Back then, Ford and GM were still going concerns. Now they’re going out of business. Ford’s stock has only $4.55 cents left to go…and there will be nothing left. GM has $9.45 between it and zero.
“Pass this legislation,” said a GM official. It’s the only way to break the “psychological cycle” that keeps people from buying cars and trucks, he believes.
So you see, dear reader, we are back to the ’30s…and we have nothing to fear but fear itself. It’s all in our minds! If people weren’t so ‘negative,’ they’d be more positive. And then, they’d start to buy things again and everything would be all right.
It’s all in our imaginations! We don’t really owe too much money. We didn’t really spend too much money. And those nifty CDOs, MBSs, CDSs…Lehman…Bear Stearns…Fannie, Freddie…Northern Rock – they’re all okay after all.
But bits of sky keep coming down.
Copper has collapsed. So has shipping. Both are telling us that they world’s economy is slowing down. Housing prices are falling faster. Job cuts are accelerating. Local governments are getting hit by lower revenues – they’re having to cut back. Households are cutting back too. Wal-Mart says it’s cutting prices for Christmas toys. Newspapers and magazines are cutting pages.
That leaves the politicians and the bureaucrats – right out in the open.
According to the theory – and here we flatter it, for there is no theory …just wishful thinking – the feds are keeping their heads while everyone else is panicking. The Wall Street boys now say prices for their assets “make no sense.” They say Mr. Market has lost his nerve. That is how stalwart government employees are now supposed to be able to buy up Wall Street products at such large discounts they’re almost sure to make a profit.
It’s the fatal conceit…explained Friedrich Hayek in the ’30s…that somehow public employees are immune to the blandishments of power, money and the madness of crowds…that they alone are above it all, like a politician who is too rich to steal and too dumb to lie, or like a bureaucrat who can’t be bought, because he is priceless, and can’t be outwitted, because he is witless.
It ain’t necessarily so.
But that is the way it goes. Humanity makes progress in science and technology. In politics, love and banking it merely rehearses the same dramas, tragedies and farces – over and over, forever and ever, amen.
*** American Empire – so long, we hardly knew you. But good riddance! We liked the old Republic much better.
Yes, our French editor told us yesterday that she is re-releasing our instant classic – Empire of Debt.
“You were right on target with that one,” said she.
Yesterday’s BBC report told us that the United States was losing its place in the world:
“The financial crisis is likely to diminish the status of the United States as the world’s only superpower. ld’s only superpower.
“On the practical level, the US is already stretched militarily, in Afghanistan and Iraq, and is now stretched financially. On the philosophical level, it will be harder for it to argue in favour of its free market ideas, if its own markets have collapsed.
“The political philosopher John Gray, who recently retired as a professor at the London School of Economics, wrote in the London paper The Observer : ‘Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably.
“‘The era of American global leadership, reaching back to the Second World War, is over… The American free-market creed has self- destructed while countries that retained overall control of markets have been vindicated.’
“In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.
“How symbolic that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.”
Of course, not everyone agrees. The BBC reporter put the question to former UN ambassador John Bolton….
He replied: “If Professor Gray believes this, can he assure us that he is selling his US assets short? If so, where is he placing his money instead? And if he has no US assets, why should we be paying any attention to him?”
Herewith, we give a short list of people who had no U.S. assets, but whom readers might want to listen to: Jesus Christ, Adam Smith, Emmanuel Kant, Marcus Aurelius, William Shakespeare, etc., etc… As to the question of what one should do with his money after selling the U.S. short, Mr. Bolton, similarly mistakes patriotism for thought. It’s a big world. And there are a lot of places you might want to put your money, where it is beyond the reach of U.S. asset prices – including the most obvious one, gold.
The Daily Reckoning Australia