We begin today’s reflection with sad news.
James Brown didn’t ‘feel good’ last week. He was hot in the ’60s…but now, he’s as cold as yesterday’s hits. And poor Gerald Ford too. The man seemed like a decent president. We don’t know of anyone arrested on the Ford Act. We don’t remember any pre-emptive wars that Gerald Ford got us into. Nor do we recall any major domestic initiatives – no wars on poverty or drugs started by the man. As near as we can remember, Gerald Ford left the nation no worse off than he found it…something that few presidents could say.
Meanwhile, in the financial world, we continue to wonder how and when the present ‘good times’ will pass away. A boom must die too, like everything. Every period of tranquility and prosperity is followed by a period of doom and gloom…especially when the prosperity is based on a lie or on stealing from the future.
Today’s frothy financial world bubbles on top of both lies and theft. The big lie is that you can create ‘money’ by printing up dollars and other paper currencies. The theft comes from spending the money now and pushing the bill into future years…onto future generations.
We don’t mind using words like “theft” or “lies”, but most economists would regard our way of looking at things as “moralistic.” They imagine that they can just add up columns of numbers…and tinker with the economy as though it were a motor. After all, when a motor begins to malfunction, you don’t wonder what it did wrong or why. You get out a screwdriver and a wrench and go to work on it.
The modern economist is Mr. Goodwrench. If the economy has a problem, he fixes it. Just tighten up on interest rates. Or, unscrew the reserve requirements. Turn that knob. Lift that lever.
If only the machine would do what it’s supposed to do!
But, of course, the economy is not a machine. It is not made up of hard metal parts…but of soft human beings. And human beings do not react like copper and steel. They react like people, which is to say they don’t always do what you want them to do. Instead, they react to their own expectations, their own hopes, their own illusions and prejudices.
For the moment, investors are fat and happy. They have enjoyed the great boom of the last quarter century. Now, they can imagine nothing else. But somehow, sometime…the summer has to give way to the winter. The day has to yield to the night. The good times have to be replaced by bad ones. And people who ‘feel good’ in the ’60s…have to drop dead in the new century.