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The Daily Reckoning | Thursday, November 24, 2011 Markets plunge as Euro concerns deepen, World to politicians: “Thanks for nothing!” Plus, Bill Bonner with a Thanksgiving Day Classique... ------------------------------------------------------- Special Daily Reckoning Holiday Gift Set: One Ounce of Gold, Ten Ounces of Silver As a special thanks for being a long-suffering Dear Reader, the DR team wants to give you a special Holiday Gift set. It contains an ounce of 99.99% pure gold and ten ounces of pure silver. Go here to see what the catch is as soon as you can...   “Thanks for Nothing!” Lamenting the Consequences of Government Action   Joel Bowman Reporting from Buenos Aires, Argentina... The feds are in a funk. Their fixes are coming unfixed. That’s the good news. In the United States, as in Europe, markets are working diligently, trying to clear away decades of decadence, years of unbridled excess and profligacy. The feds are busy trying to stop them. It’s a fool’s errand, of course, which is precisely why the feds are on the case. We can think of no cadre better suited for the job. The Dow was down more than 200 points yesterday, with a sharp dive into the close. Apparently, nobody wanted to be caught holding the bag over the Thanksgiving Day break. The steep move lower was kicked off, so the papers tell us, by Germany’s failed bond sale. Or was it the threat to France’s AAA credit rating? Or a slowdown in growth reported from China? And from the US? And Europe. So many rainclouds, so few parades. But we’re optimists here at The Daily Reckoning. Well, we’re more “ambiguist” than optimist. Meaning, we have no idea about why things move the way they do. But they always do...move the way the do, that is. Only after the fact can we look around and pretend to have understood what it was that just came to pass. For the most part, we’re just trying to ask the right questions, even if the answers that spring to mind are not always correct. So, what caused yesterday’s big selloff, the second of the shortened week? Is this the tipping point we’ve been waiting for on the continent? Is this to be the 21st Century’s “Archduke Ferdinand” moment? Or is it just another small step in the wrong direction? Again, we have no idea...but the slippage in the German Bund market didn’t look good to us. You’ve read the stories already. East of The Tagus and west of The Danube, nary a stock market advanced, nor did a bond yield retreat yesterday. Maybe investors are catching the drift of the prevailing wind. Or maybe they’re just juggling risk-on, risk-off trades, hoping to benefit from a fickle, here-today, gone-tomorrow zephyr. Europe’s strongest economy had hoped to auction off more than €6 billion ($8 billion) in 10-year Bunds. One third of the sale found no buyers — none — making it the worst showing for a German Bund auction in the Euro-era, and pushing yields on the Bunds to roughly level with comparable British securities. So what gives? Inflation is higher in Britain than in Germany...and so are debt levels. Growth rates are about the same on both lands: anemic, bordering on starving. Ahh...but Britain doesn’t have the Euro hanging around its neck. True, it still suffers much of the bloated, meddlesome “eureaucracy” that comes with union membership, but it retains control over its own printing press and can, therefore, delay its own day of reckoning. Not indefinitely, mind you...but for now, at least. Everywhere we look, the Old Experiment seems to be cracking up. Europe and the US are the most obvious examples. Europe has its Greece and Italy, its Portugal and Ireland. The US has its Illinois and California, its New Jersey and Main...and many other debt-ridden limbs besides. The cure for the situation seems simple enough to us. But the answer is too easy for the politicians to understand. It requires no math, no fancy degree, no secret handshake or award-winning formula. In fact, it requires nothing at all...but it requires lots of it. Lots of nothing. Lots of “leave alone.” Lots of “hands-off-haven’t-you-already-done-enough.” But since “nothing” is not on the average politician’s to-do list, we’ll likely get “something” instead. And because a little “something” rarely satisfies the voting masses, we’ll likely get lots and lots of something. Lots of meddling, planning, dealing... interfering... controlling... steering... super-committeeing... G-20ing...Jackson Hole retreating...Brussels emergency summitting...11th hour handshaking... speeching...politicking... backpatting... announcing...conniving...thieving...debating...voting...flag waving... finger pointing...stimulating... borrowing... easing...printing...printing...printing... Readers will do well to remember that it is the sum of all such past “somethings” that led to this very grave and serious predicament in the first place. Isn’t it about time, therefore, that we gave “nothing” a chance? Yes, Fellow Reckoner. Today, on Thanksgiving Day, we’d be mighty grateful to be able to look our elected and unelected officials in the eye and say, with a full and sincere heart, “Thanks for nothing!” When most people think of Thanksgiving, they think of Pilgrims and Indians, sitting down at the same table to give thanks...but in this DR Classique, first published in these pages on Thanksgiving Day, 1999, Bill Bonner gives us a lesson in the real history behind the holiday...   Congress Caught Red-handed Legally Raiding the Markets With “Insider Trades” Would you ever spend a million dollars to get a job that pays a fraction of that per year? New information proves that’s exactly what your elected “officials” are doing... on a regular basis... and with good reason. Click here to find out more. The Daily Reckoning Presents Thanksgiving   Bill Bonner I turned to my trusty assistant...Beirne White...this morning. “Beirne,” I said gravely, “tell me about Thanksgiving in Mississippi.” Beirne proceeded to tell me about a Mississippi bluesman named “Son” House, who lived to be 102 by doing what bluesmen tended to do...chasing bad luck, bad liquor and bad women. “What has that to do with Thanksgiving?” “Nothing,” he replied...whereupon he drew on the resources generously provided by Britannica.com, formerly of Chicago, lately of cyber space, to get me the research I requested. Beirne hails from Mississippi. And while Mississippians will sit down with the rest of the nation...and tuck into their turkeys with equal relish...perhaps only substituting Bourbon Pecan pie for the sweet potato or pumpkin pie enjoyed in Maryland...it was not always so. Somewhere deep in the most primitive part of his medulla oblongata, the part of the brain where race memories are stored, Beirne resists Thanksgiving. It is, after all, a Yankee holiday. Thanksgiving in France: Commemorating the Northern Victory In the middle of the War Between the States, both sides would proclaim days of “thanksgiving,” following the progress of the war as we now follow the progress of the stock market. After each of the first and second battles of Bull Run — which sent the Yankees fleeing back to Washington — the Confederates proclaimed days of thanksgiving. But it was Lincoln’s day that stuck. Declared after the battle of Gettysburg — the last great Napoleonic charge of military history — Thanksgiving was set for the third Thursday in the month of November, commemorating the Northern victory. Beirne doesn’t say so...but this fact must stick in his craw. It doesn’t help that the original celebration took place in Massachusetts. And that it was hosted by a dour bunch of Puritans, who probably wouldn’t have been able to enjoy a good dinner if their lives depended on it. But they certainly had a lot to be thankful for. As the Wall Street Journal reminds us annually, they nearly exterminated themselves in typical Yankee fashion — by wanting to boss each other around. They had arrived in Massachusetts by accident and bad seamanship, intending to settle in the more hospitable climate of Virginia, which had been colonized more than 10 years before. Once in Massachusetts, they proceeded to set up such a miserable community that surely most of them, had they lived, would have longed to return to England. The Soviets could have learned from their example and spared themselves 70 years of misery. Only after the “witch-burners and infant-damners” abandoned their communal form of organization, and allowed people to work for themselves, did the colony have a prayer of survival. But victors write the history books. And now this precarious celebration by a feeble group of religious zealots has turned into the most American holiday. After Appomattox, the South was helpless. Its natural leaders, the plantation aristocrats, were either dead, bankrupted and/or discredited. Many of them went to Northern cities, like New York or Baltimore, where, Mencken tells us, they “arrived with no baggage, save good manners and empty bellies.” They enriched the North. But back home, they were sorely missed. “First the carpetbaggers,” says Mencken, “ravaged the land...and then it fell into the hands of the native white trash...” Scars of war can take a long time to heal. But 130 years later, the South is the most economically and culturally robust part of the nation. Thanksgiving in France: A Unified, National Myth Thanksgiving was declared a national holiday in 1931. Through the Depression, and then WWII, Thanksgiving grew in importance. In a country where roots meant almost nothing, where people were ready to pick up and move at the drop of a hat, where there were huge differences in what people thought and how they lived, Thanksgiving served to provide a unified, national myth... most popularly expressed in Norman Rockwell’s Thanksgiving cover for the Saturday Evening Post. Roots mean more in Mississippi than they do in California. “No man is himself,” said Oxford, Mississippi’s most celebrated alcoholic, “he is the sum of his past.” Unlike so many other American writers of the 20th century, Faulkner stayed home. The forward to the Encyclopedia of Southern Culture has a passage from Faulkner, saying: “Tell about the South. What’s it like there. What do they do there? Why do they live there? Why do they live at all?” Even in Faulkner’s Mississippi...Thanksgiving is now part of everyone. Where Beirne goes...it goes too. And so, all over the world, Americans, gathering in small groups, like pilgrims on distant shores, celebrate the holiday (if not on the actual day...perhaps the weekend following...as we will do.) This can require a little ingenuity. Americans in France have to search for the ingredients. Pumpkins are hard to pronounce-citrouilles-and hard to find. Cranberry sauce is unknown. But my mother discovered a store in Paris specializing in American groceries, named “the Real McCoy.” She hastened thither yesterday, and brought back canned pumpkin, cranberry sauce and peanut butter. Thanks to this outpost of American culinary supplies, we will be able to have a very typical Thanksgiving dinner went we slide our chairs up to the table on Sunday. Art Buchwald has translated the Thanksgiving story for the French, deftly turning Captain Miles Standish into Le Capitaine Kilometre Deboutish. But no one has refashioned American Thanksgiving recipes for the metric measuring cups here in France. My wife, Elizabeth, descendant of the Puritan fathers...former resident of New York...a Yankee, in other words...and my mother — issuing from Southern Maryland tobacco farmers and the French bourgeoisie — will do their best. And we will be thankful. Regards, Bill Bonner for The Daily Reckoning   The Daily Reckoning’s own Eric Fry was recently interviewed on Capital Account with Lauren Lyster, where he discussed, among other things, the impending defaults of various Euro nations. As you might expect, the result was quite enlightening. Check out the entire interview here:   Bill Bonner ECB to the Rescue?   Bill Bonner Reckoning from Baltimore, Maryland... Markets closed today. And not much from us either. We’ve got family chores to attend to. As expected, Europe is falling apart. Yields are rising. France’s debt no longer looks safe. And Germany can’t sell its bonds. The failure of the German bond auction earlier this week was the latest shock. It tells us that pressure on the ECB is mounting. It’s one thing when Greece and even Italy can’t finance their debt. Who cares? But it must surely get German bankers’ attention when nobody wants to buy their bonds. And why should they? Guess how much growth the Eurozone has had over the last 4 years? Zero. Less than zero. The euro economy has shrunk. Not as much as Japan’s 5% decline, but it’s still down. And guess which bank is safer — a solid German bank such as Deutsche Bank...or one of Wall Street’s finest, J.P. Morgan? Grant’s Interest Rate Observer compares the two and finds the American bank ahead by almost every measure. In terms of leverage — measured by assets-to-equity — Deutsche Bank has more than 3 times as much. And Germany has almost as much debt, compared to GDP, as the US. Practically all the rest of Europe has even more. No wonder people don’t want to buy their bonds. So what gives? Our guess is that the ECB — Europe’s answer to the Fed — gives. Here’s the report from The Daily Crux: Statist billionaire George Soros calls for massive euro inflation The European Central Bank (ECB) must pump liquidity into the 17-member financial system to stop a run on bonds and even slap a ceiling on yields to avoid a breakup of the currency zone, says billionaire financier George Soros. Soros writes in a Financial Times column that policymakers should use the European Financial Stability Facility — an emergency assistance fund — to help the European Central Bank flood the economy with liquidity, a move that would aim to curb skyrocketing yields on sovereign bonds issued by indebted southern European nations. “The financial markets are testing the ECB and want to find out what it is allowed to do. It is imperative that the ECB should not fail that test.” Will the ECB fail to inflate? Will its printing presses remain silent...deaf to the cries of so many bankers and rich people? How could it be so hard-hearted? So insensitive? No, dear reader, the best bet is that the ECB will come to the rescue — whether it is legal or not...whether it is sensible or not — and buy the bonds itself. This is classic “monetization” of debt...because the ECB would have to create the money out of thin air to do so. It’s not authorized to counterfeit money like that, but you know what happens in a crisis. People forget the rules. And more thoughts... Just this... You know how we always take the part of the underdog...we always champion the lost cause...and stand up for the die hard. Well, we’re beginning to feel a responsibility to defend the “1%”...the poor people who, through no fault of their own, got rich! More on this...when we pick up our labors...on Friday. Regards, Bill Bonner, for The Daily Reckoning ------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com How China Will Defeat America Cutting Federal Spending...One Way or Another The Economy Has Changed Expect Hopes, Dreams and Lifestyles to Follow Global Growth Hopes Fade Will The ECB Be More Like The Fed? US National Debt Passes $15 Trillion! The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists. 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