- the source for market opinions


May 5, 2019 | Are We Finally Beaten?

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

YOUGHAL, IRELAND – Sound a recall! Spike the cannon! Haul down the colors!

Sauve qui peut!

Yes, it’s time to turn tail and run. We’re outnumbered. Outgunned. Outfoxed. Outmaneuvered. And outsmarted.


Fighting Claptrap

We’ve been writing this Diary (previously known as the Daily Reckoning) for the entire 21st century… and then some.

Our battle has never been with conservatives or liberals, Democrats or Republicans… Keynesians or monetarists… Chicago boys or Austrians…

…Our fight is with claptrap, whether dressed in a fine Italian suit… or grimy overalls… whether from a Nobel-winning economist, or a neighborhood loudmouth…

…whether from a clown on the street… or a clown in the White House…

And it is a losing battle.

Over the entire time we have been writing, claptrap has increased, growing in power and popularity every year. We see it everywhere, but we confine our analysis to economics and finance, where there is plenty of claptrap to keep us busy.

Not that we know truth or have any better idea of what will happen than the next guy.

Nor have we any plan… or ism… (or hope) for making the world a better place. The best we can do is look for fraud, scam, and flimflam – and laugh at it.

And now we seem to have reached some kind of Maximus Summa… a ne plus ultra… for claptrap.


Just in Case

Over thousands of years, humans survived by following rules… principles… and customs. They could never know for sure what would happen (they couldn’t predict the future any more than we can.)

For all they knew, the next winter would be so mild, it would bring a glorious bounty of fruits and vegetables. But they stuck to the program, drying some meat and storing away some nuts – just in case.

But now, the latest thing – “just in case” is out the window. There’s no need for old-fashioned, time-proven principles; no need to follow the rules of yesteryear; no need for caution or restraint. And no reason to store any nuts!

Now, we can just do what we want and see what happens.

Generations of policymakers believed they could spend no more than they could raise through taxes or honest borrowing. Poor dumb sods. Now, we know… we can just spend, spend, spend… until something bad happens.

Just to recap…

We began writing in the late 1990s. Then, we ridiculed the dot-com bubble. People thought they could get rich because they suddenly had so much information available to them.

But suppose Julius Caesar had had an iPhone or George Armstrong Custer had had an entire set of the Encyclopedia Britannica? The right piece of information at the right time is essential. More than that is just a distraction and a burden.

We guessed that the internet would turn out to be a time-waster, like TV. So far, it looks like we were right. GDP growth rates are lower now than they were when people still used the U.S. Post Office.


Claptrappy War

The next big claptrappy thing was the War on Terror and the invasion of Iraq. Attacking foreign countries is rarely a good idea; this proved no exception.

All we got was $5 trillion more in debt… 35,000 U.S. casualties… an estimated 600,000 dead Iraqis… and more terrorists than ever.

Then came the mortgage bubble… which gave us a few laughs… (people thought they could “take out equity,” spend it, and still have the same house), followed inevitably by the Crisis of 2008-2009.

The problem in ’08 was that people had borrowed too much money. So, what do the geniuses at the Fed do? They panic and lend them more!

“Stimulus” was claptrap from the get-go. If you could make people richer by printing more money, Zimbabwe and Venezuela would be the richest countries in the world. Instead, they’re hellholes.

And now, we see what stimulus has done for the U.S.: $3.6 trillion of quantitative easing (QE) from the Fed… real rates at zero for 10 years… and $11 trillion of fiscal stimulus produced the weakest U.S. recovery ever.

The economy is so fragile that when the Fed took baby steps towards a more normal policy… putting the federal funds rate above the inflation rate, for the first time in 10 years… the stock market started to collapse…

…which, naturally, caused the Fed to panic again and foreswear any pretense of normalizing anything.

And now… none of these imbecilities has been renounced. Tech stocks and “unicorns” are partying again… just like it was 1999.

The warmongers are on the rampage again – targeting Iran for the next unprovoked attack… just like it was 2003.

The Fed is ready to cut rates again – just like it was 2008 (if only it had some rates to cut!) Republicans and Democrats are ready to spend, spend, spend… just as if they didn’t already have a trillion-dollar deficit…

…and now… if this weren’t enough… the jackasses have come up with an idea – Modern Monetary Theory (MMT) – so lame and irresponsible, it erases 5,000 years of painful lessons.

The feds control the money, say the MMTers. So, as long as nothing bad happens, they can print and spend as much as they want. And, since inflation is currently “subdued,” many MMTers say the feds aren’t spending enough!

You can readily see why this claptrap will be popular in Washington – with both parties. And yes, you can print, print, print… and spend, spend, spend… until something bad happens.

But sooner or later, you’ll wish you hadn’t.




STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

May 5th, 2019

Posted In: Bill Bonner's Diary

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.