Well...blue skies...and almost clear highways.
Things are getting back to normal in the Baltimore-Washington metropolitan area...or, at least back to the way they were before the big storm.
There's nothing really ever 'normal' about what goes on here. It's a government town...the capitol city of a great nation...the citadel of a great empire...
..which only makes us wonder. Shouldn't great nations and great empires have great leaders? And yet, we look around. What do we see? Hacks. Glad-handers. Shills. Suits. Wonks. And of course...imbeciles.
That's the problem with living in the country you come from. Your own people disappoint you. Or at least, those running your government. Living overseas is a pleasure. The imbeciles are fun to watch. But here...we cringe when we hear the news. We turn green when we read the paper. And TV? Can't bear it. These are our people. Our race. Our countrymen. Ay yi yi...
More on that below...
Let's look at the financial news. Wassup?
Well, the Greek story was big this week. 'The Big Fat Greek Meltdown,' as Justice Litle calls it. It pushed stocks and bonds down early in the week. By the end of the week it was pushing them up.
What happened in the meantime? Well, the euro-feds made it appear that they were going to do the same dumb things our own feds did. They said they were going to fix the situation. Just like the US fixed Fannie Mae and AIG!
There are 27 different nations in the European Union. And guess how many languages? Two-hundred and thirty. That surprised us too. Spain alone has 6 official languages.
But without doing any real research on the subject, we have discovered one word which is common to all these languages: bailout. Yes, dear reader, it was 'bailout'...spoken in hundreds of different languages and dialects...that lit a fire under the financial markets late this week. The embers were still hot yesterday; the Dow rose 106 points. Gold had it best day in weeks - up 18 bucks.
But doth a single bailout a real boom make?
Let us rephrase that. Will bailing out the spendthrift Greeks really make American businesses more profitable?
You know the answer. It won't. In fact, it will make them less profitable. What it does is allow the Greeks to continue spending in the style to which they've become accustomed. And if the Greeks are going to do that you can bet that the Irish aren't going to want cut back. Or the Portuguese. To say nothing of the Italians. And what about the English?
Bailing out the Greeks is a big mistake. But it's a mistake everyone seems to want to make. There's probably a Latin dictum for this sort of thing. But since we don't know what it is, we'll have to coin the phrase ourselves: Imbecility begets imbecility; especially when the bankers come out ahead.
What did you think? Who do you think the Greeks owe money to? That's right, the big banks are behind this. They've got hundreds of billions at stake in Greece. If the Greeks can't pay, the banks take a hit. Since no one wants the bankers to take a loss - except for us - once again, the feds are coming to the rescue.
Oh...why does this make US businesses LESS profitable? Well, it's a marginal thing. But what we're witnessing is a shift of economic power away from the private sector towards the public sector. Private businesses no longer borrow like they used to. Now, the feds do the borrowing and the spending. That leaves less capital...and less spending power...in private hands. Ergo, businesses will find it harder to make money.
They'll also find it harder to make money because interest rates will rise. Instead of letting the bad credit risks default, the feds weaken all credit. They're giving debt a bad name, in other words. The risk of default for the particular country goes down; the risk of default of the entire system increases. After all, the debt doesn't disappear. It has to be paid by someone. Sooner or later. Guess who that will be?
We were snowed in Tuesday, Wednesday and Thursday. By Thursday, essential supplies were running short. All we had left was two cases of red wine. Would that be enough to last until Friday? We had our doubts...
Cabin fever had set in. In desperation, we read the paper. Big mistake. The papers in Washington take themselves seriously. They tell us about congressmen, senators, agency heads, lobbyists, crooks, perverts and other politicos. One man has held up a liquor store. Another has waylaid an entire nation. These are the people who could be called the "power elite." They are at the head of our government...they are leading and directing our great empire. Which only makes us wonder about the whole thing. Maybe a country isn't so great after all...but just an accident...one that happens in spite of the dumbbells running it? And maybe an empire comes about not because of the drive and vision of the imperialists, but of its internal momentum...and on its own schedule...no matter what the nincompoops think.
This may seem like a trivial thought to you but it has its roots in a respectable intellectual tradition. Is it men who make history...or history that makes men?
Probably a little of both. But if we're counting on the men (and by that we also refer to the distaff half of the population) in Washington to guide this empire on to greater glory...we're going to be deeply disappointed. They aren't capable of it.
Take the wars in Iraq and Iran...please! Everyone who's ever cracked a history book knows that you don't fight expensive wars in distant places with your own troops and your own money when you have nothing to gain from it. Especially not when you have to borrow the money! You get someone else to fight the war...at his own expense.
But our beat here at The Daily Reckoning is money...not war. Still, our opinions are the same about them both. America is overstretched...overextended...and overdue for a serious correction. Her wages are too high. Her debts are too heavy. Her expenses are too great. And her leaders have no idea what is going on.
As to most of the foregoing list, our opinions are probably no better than anyone else's. But as to the last item, we speak with authority. We are connoisseurs of imbecility. We have watched it for decades. It amuses us. It fascinates us. It intrigues and perplexes us. How come people can drive down the highway at 70mph...making thousands of precise calculations with mortal stakes, but then ask them a question about economic policy or foreign policy or no-shirt, no-service policy...and psssht...their good sense goes out the window? We've studied this question for many years....
In other words, we know an imbecile when we see one. And when we see Ben Bernanke or Tim Geithner our eyes light up. Our nostrils flare. And our chest expands. Before us is a specimen we know very well. Boobus Americanus Economistica. It is a variety of imbecile that has gotten far too little attention from the academic world. Too little research has been done on them, in our opinion. That's why it is left to us amateur imbecile-spotters to keep track of them.
Mr. Bernanke is a standout example. The former head of the Princeton University economics department knows all there is to know about a depression - except the important part. He doesn't understand what causes them. And he completely misunderstands what the role of government should be in dealing with them. But we have already explained all this to you, dear reader, so we won't repeat ourselves here...except to say that any truck driver and hair stylist knows you can't spend your way out of debt. Mr. Bernanke doesn't believe it. That's the very definition of Boobus Americanus Economistica; he has educated himself out of his common sense.
Mr. Geithner, meanwhile, tries to make up for what he lacks in scholarly gravity with one heckuva nice wardrobe and a spiffy haircut. It's definitely a plus to have such a sartorial crackerjack at the head of the Treasury Department, but it would be nice if he had some dim notion of how the bond market works too.
Moody's warned that the US would lose its triple-A rating if it continues borrowing money at the present rate. Our old friend Marc Faber was on TV this week explaining what the consequences would ultimately be: the US will default on its debt, he said.
Mr. Geithner did not even bother with the idea of default. It was beyond his imaginative powers. As to losing the three As, he said that would "never" happen. Which is what set us to thinking about the quality of US leadership. Of course, the US will lose its bond rating...and will default. There is no question about it. No nation has ever existed, except for present company...whose histories have yet to be completed...that didn't default, renege, collapse, go bankrupt, disappear, disintegrate, capitulate, or otherwise fall over and die. The only questions are when and how.
Until next time,
Bill Bonner
for The Daily Reckoning Australia
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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.
