Cold Day in Hell, Part II

Cold Day in Hell, Part II

This just in.

Fox News reports:

The GDPNow gauge, a widely watched measurement from the Atlanta Federal Reserve Bank, indicated Thursday that real gross domestic product shrank by 1.0% in the second quarter from April through June.

While the official advance estimate of Q2 performance will not be released for another month, this preliminary reading shows the second quarter in a row of negative growth in the economy after GDP contracted 1.6% in Q1.

As forecast, now we have a recession on Main Street as well as a bear market on Wall Street. But what we don’t have yet is any sign of panic from the Fed. It’s committed — for now — to tightening up the money supply in order to combat inflation.

But we’re just at the beginning. Mr Market is correcting the Fed’s mistakes and deflating the economy. And he’s got a long way to go. Investors are still looking for the bottom. Typically, real bear markets don’t end until investors get fed up…give up…and stop looking. Dow 20,000? Dow 15,000? We don’t know, but it’s probably a much smaller number than most investors expect.

Then, we’ll see what kind of stuff the Fed is made of. It will face the ‘Decision of the Century’ — either continue to let Mr Market do his work, cleaning up more than 20 years of irresponsible monetary policies…or go back to printing money and letting inflation rip.

That decision will determine whether we suffer a serious bear market and deep recession now…or a total economic, political, and social breakdown later.

Stay tuned.

Spontaneous order

Meanwhile, we look ahead. And putting the present conversation in historical perspective…

…today’s standards of living…our ability to feed eight billion people…with average lifespans that are twice what they were 150 years ago…air-conditioning…power steering…Facebook…mosquito repellent…

…for good or for evil — the world we live in was created by people who paid little attention to government. Instead, they drilled wells and built refineries…they invented automobiles and produced them by the millions…they hammered steel…and cooked dinners with ingredients that came from all over the planet. Pineapples from Hawaii…palm oil from Malaysia…beef from Texas…strawberries — even in the wintertime!

They did these things without subsidies or tax credits. And not because Congress passed a law, or the president threatened them. They did them to make their lives better.

No Great Transition plan showed them how to go from a muscle-powered world to one with 1,000 times more power — from fossil fuels. No ‘Group of 7’ world leaders got together and decreed a switch to coal, oil, and gas as primary energy sources. No Pete Buttigieg directed people to build gas stations. No think tank showed them the way forward. No regulations guided their feet…nor was there any Department of Energy (not created until 1977) looking over their shoulders.

Often, the biggest innovators — those who added most to our wealth and comfort — worked on their own…unknown to the powers-that-were…with no backing from universities or non-profit foundations or governments. Each one danced to his own tune…followed his own compass…and brought forth the quality of life that we enjoy today.

Good and hard

They gave. They got. Consumers decided what they wanted; the rest was rejected. And thus did the progress of the world take place.

But there are always people who think they know better. They don’t care what ‘the people’ want. They know what ‘the people’ should have!

And when they get control of a government…they give it to them, good and hard.

The Industrial Revolution really got into gear about 1850. At least, that’s the date taken as the ‘baseline’ for today’s greenhouse gasses measurement. The next 150 years were perhaps the most productive in human history.

But then, the know-it-alls grew more strident. ‘Rich’ is relative. Even the paupers of 1999 lived better than kings did 200 years before them. For they had painless dentistry and so much food that obesity killed more of them than hunger. But as the whole world grew richer, more people discovered that they were not among ‘the richest’.

And as the whole society grew wealthier, it could support more parasites…more busy bodies with time on their hands and improvement on their minds.

Karl Marx’s mother came from a rich family that later founded Philips Electronics. Marx’s wife was a minor aristocrat. Friedrich Hegel’s parents were both functionaries for the Duchy of Wurttemberg. Friedrich Engels lived off the wealth of cotton mills. Ho Chi Minh, the son of a scholar, was educated by the French…Che Guevara’s family sent him to medical school.

Growth needed to be controlled, they said. Problems — inequality, alcoholism, poverty — needed to be solved. The economy needed to be rationalised; wealth should be shared out more fairly. Money was wasted, they added, on advertising…and giving ‘the people’ too many choices.

The great spend-a-thon

The first major effort to bring the economy under elite (government) control came in the Soviet Union. Later, Germany, Italy, China, Cuba, Vietnam — all took a stab at it. All failed. And usually, the failures were accompanied by millions of deaths — either ‘liquidated’ by intention…or by accident. The largest ‘accident’ was in China, 1958–62, where the Great Leap Forward so thoroughly wrecked the economy that 50 million people starved.

But the planners, world improvers and controllers don’t give up. Now, they are convinced that unrestrained growth will bring the ‘death of the planet’.

It’s not clear to us that an increase in global temperatures would be a bad thing. Nor is it apparent that the Earth lacks its own feedback loops and counterbalance mechanisms. We’ll leave ‘The Science’ of it — if there is any — to others.

What is apparent to us is that trying to control the weather is likely to produce the same sort of results as every other Great Crusade since 1914. The elite, for all its technocratic pretensions, has botched every major policy initiative and bungled its way into one debacle after another. The First World War, Prohibition, Korea, Vietnam, the War on Poverty, the War on Drugs, Stagflation #1 (in the ‘70s), the War on Terrorism, Iraq, Afghanistan, Libya, Syria, the bailout of Wall Street, the COVID Panic, and the Gimmie-Stimmy spend-a-thon, the sanctions war against Russia, and now Stagflation #2.

They’ll almost certainly make a mess of this Great Transition away from fossil fuels too. But now the stakes are higher. Now, they put the progress of more than 150 years — and the lives of eight billion people — in jeopardy. The rich may miss a latte — a few may swing from lampposts. But the poor? ‘The People’?

Tomorrow, we’ll look at how it might develop.


Dan Denning Signature

Bill Bonner,
For The Daily Reckoning Australia