Today is a holiday in much of the world. But not in London. For some reason, the English are celebrating May 1st on May 4th. Go figure.
Here at the Daily Reckoning headquarters, however, we keep our eyes open 24/7 – well, unless we are on vacation…or sleeping…or having dinner…or have something better to do.
What we’ve been watching is a bear market rally. Stocks have bounced…and with them good news is beginning to appear. Commentators keep saying that “maybe the worst is behind us.” Analysts keep claiming they see “signs of a recovery.” Economists think the results are “better than expected.”
All over the world, people are breathing a sigh of relief. The end of the world did not come. Asian economies are still growing. Even with GDP falling at a 6% annual rate in the U.S.A., unemployment seems to be moderating…and house prices are falling not quite as fast as they were a few months ago.
Yesterday, the Dow fell 17 points. Oil traded at $51. The dollar dipped a bit – to trade at $1.32 per euro. And gold gave up $9 – ending the day at $891.
Hallelujah! Things seem to be coming back to ‘normal.’ No more 500- point drops in the Dow. No more oil at $149. No more nerve-shattering bankruptcies.
We will consider whether it is time to stand down or not in future Daily Reckonings. Today, we pause briefly to consider what it cost.
In the news this week, the headlines were dominated by the swine flu. Each day, the death count mounted. Each day, new cases were reported in new places. And each day, the world seemed to come closer to a pandemic that would take millions of walking, talking Homo sapiens and lay them silently under the ground. Almost every day, we were reminded of how much damage the last big pandemic – 1918-1921 – did. Thirty to fifty million was its toll, we were told…along with the additional warning that “major epidemics seem to strike every hundred years or so.” Even math-challenged Americans could figure out that their time might have come…
Included in the panicky chatter were announcements, warnings, and provocations from the various health authorities. The ‘alert level’ was raised to 5 (on a six-point scale)…travelers’ advisories were posted…the World Health Organization pestered member states to beef up their stocks of vaccines and to put in place preventive measures. “Wash your hands,” said one doctor. “Cover your nose and mouth with a mask,” said another. “Run for the hills,” said a joker.
The actual price in lives has been very, very modest. Thousands of people die from flu and colds every year. Still, people go about their business. They sneeze on the subway…they accept change from vendors in bare hands…they sit next to coughing passengers on airplanes. Life goes on.
But this new strain of flu spooked them badly. They feared it might be like the plague…a curse from the gods that could exterminate millions for their wicked ways. Humanity itself seemed at risk.
Yet, in response to the threat of extermination, the Obama government has proposed to spend $1.5 billion. By our calculations, that is approximately 0.0001% of the amount the feds are spending to fight capitalism’s correction.
Why is the threat of death less disagreeable than the threat of letting capitalism do her work? We don’t know.
The feds may be reluctant to spend on the swine flu because they are unsure about how bad it will be…and unsure how much they can do to prevent it. But couldn’t the same thing be said of the swinish financial correction? Of course it could.
The feds have no idea what they are doing. All they have is a crackpot theory…and some guesses. And yet…on the basis of these fantasies…they are spending an amount equal to the nation’s entire annual output. And you, dear reader, will be the one paying the price.
for The Daily Reckoning Australia